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, 1998

                         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                          11788
  (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 5, 1999, is $12,818,705.

 As of March 5, 1999, the registrant had 4,428,609 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.

         Boundless  principally  designs,  assembles,  sells  and  supports  (i)
desktop  computer  display  terminals,  which  generally  do not  have  graphics
capabilities, although some have limited graphics capabilities ("General Display
Terminals");  (ii)  desktop  display  devices  which  enable  simple,  easy  and
cost-effective  access to corporate  computing  environments  ("Windows(R)-based
Terminals" or "WBTs") and supporting software; 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.

         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.


                                       1
<PAGE>


         On March 6, 1998, the Company filed an  Information  Statement with the
Securities and Exchange Commission announcing,  among other items, a one-for-ten
reverse  split (the  "Reverse  Split") of the  Company's  Common  Stock.  As the
Reverse Split was effective as of March 26, 1998,  information  contained within
this Form 10-K has been  presented  to reflect  retroactive  application  of the
Reverse Split.

         Reference  is made to Notes  1, 4, 8,  and 16 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, 1998, the Company had
a tangible net worth of $9,307,000  and total  liabilities of  $29,136,000.  The
Company's cash requirements at December 31, 1998 included repayment to The Chase
Manhattan  Bank  ("Chase")  of a revolving  loan under its bank credit line (the
"Chase Credit Line") of $5,500,000, plus interest; payment of an $8,000,000 note
(the "NCR Note")  requiring  quarterly  interest  payments and 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 with respect to preferred  stock of Boundless  (the  "Boundless
Preferred  Stock") issued to NCR in connection  with the Boundless  Acquisition;
and annual  dividend  payments to NCR with  respect to the  Boundless  Preferred
Stock of  $497,657 in cash or the  Company's  common  stock,  $.01 par value per
share ("Common Stock").  Subsequent to December 31, 1998, the Company negotiated
with NCR an  extension of the NCR Note to April 30, 1999 to allow the Company to
complete the  negotiations  with mortgage  lenders to refinance the NCR Note. In
addition,  during January 1999, by utilizing availability under the Chase Credit
Line, the Company redeemed the Boundless Preferred Stock, thereby satisfying its
obligations  to NCR under the put option and its  obligations  to make  dividend
payments  to NCR on such  stock.  On April  14,  1999,  the  Company  signed  an
agreement  with Chase to  replace  the  existing  Chase  Credit  Line with a new
three-year  $15,000,000  revolving line of credit on terms substantially similar
to those  previously  in effect.  The new credit  facility  also  provides for a
$4,000,000  term  loan,  payable  over a  three-year  period in equal  quarterly
installments  beginning June 1999. 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;  however,  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, 1998, 1997 and 1996
the  Company  recorded  earnings/(loss)  available  to  common  shareholders  of
approximately  $4,411,000,  $4,386,000,  and  ($11,736,000),  respectively.  The
Company  recorded  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 the operations of a subsidiary,  OTW Corp. ("OTW").  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


                                       2
<PAGE>

and  Analysis of  Financial  Condition  and Results of  Operations  - Results of
Operations."

          Strategy.  Approximately 85% of the Company's sales for the year ended
December 31, 1998 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,  Digital  and  NCR  were  the
Company's most significant  customers in 1998, accounting for approximately 15%,
9% 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 June 11, 1998,  Compaq  Computer Corp.  ("Compaq")  consummated  its
acquisition 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
have  employment  contracts  with Mr. J. Gerald  Combs,  its  Chairman and Chief
Executive Officer,  and with Mr. Kenneth East, its Chief Operating Officer.  The
Company does not have employment contracts with any of their other 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


                                       3
<PAGE>

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.

         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 Wong
Electronics Corp.,  Advanced Scientific Corp. and Tonghah  Electronics  SDN.BHD,
which  manufacture   plug-in  logic  boards  in  China,   Taiwan  and  Malaysia,
respectively,  for the Company's General Display Terminals and  Windows(R)-based
Terminals,  accounted for approximately 22%, 17% and 12%,  respectively,  of the
dollar  amount of the Company's  total  purchases in 1998 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."

     Substantial   Control  by  Morgan  Kent  Group.   Morgan  Kent  Group  owns
approximately  42%   (approximately  47%  on  a  fully  diluted  basis)  of  the
outstanding  shares of the  Company's  Common Stock  (including  457,502  shares
underlying  warrants)  and,  accordingly,   has  the  ability  to  significantly
influence  the  election  of all  directors  and to  otherwise  control  Company
policies.    Morgan    Kent   Group's   substantial  ownership position  of  the


                                       4
<PAGE>

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."

         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,"  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 1998, sales to NCR constituted approximately
4% 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  9% of total
General Display Terminal sales for 1998.

         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


                                       5
<PAGE>

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, where the applications execute 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. 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:

               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.


                                       6
<PAGE>

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.

          During 1998 the Company  signed an exclusive  alliance  agreement with
Infinite  Solutions  pertaining to its MultiConsole  Terminals  products.  Under
terms of this alliance Infinite  Solutions assumes  responsibility for sales and
support,  product  development,  maintenance  and  warranty  logistics  for  the
MultiConsole  Product.  Boundless will continue to  manufacture  and service the
MultiConsole product exclusively for Infinite Solutions.  Infinite Solutions has
been a  Boundless  channel  partner  for over a  decade  and  involved  with the
MultiConsole product since the product's development.

          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  PCs  (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.  

          Although the Company is entitled to distributions of between 7% to 12%
of the gross revenue of the GAI Partnership,  no such distributions were made to
the Company during 1998, presumably due to significant operating losses reported
by  GA  as a  result  of  its  economic  difficulties.  The  prospects  for  the
continuation of the GAI Partnership are uncertain. The Company is evaluating its
options  regarding its  relationship  with GA and continues  discussions with GA
regarding payment of the past due amount.

          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 desktop  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.

          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
a material portion of consolidated revenue in any of such years. Information for
the year ended  December 31, 1996 is based upon the  consolidated  operations of
the Company excluding revenue generated by OTW.


                     General                   Windows(R)-
                     Display                     Based
Period              Terminals                  Terminals
------              ---------                  ---------
1998                  84.9%                      9.3%
1997                  83.6%                      3.3%
1996                  80.0%                       -




                                       7
<PAGE>

          Foreign  Sales.  Net  foreign  sales were  approximately  $29,544,000,
$30,911,000 and $47,500,000  for 1998, 1997 and 1996,  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
------              -----               ------

1998                32.8%                28.3%

1997                31.6%                27.0%

1996                33.9%                29.6%



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, 1998  totaled  approximately
$7,145,000  as  compared  to  $7,345,000  at December  31,  1997.  Approximately
$7,051,000 of the Company's backlog at December 31, 1998 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 Wong
Electronics Corp.,  Advanced  Scientific Corp. and Tonghah  Electronics  SDN.BHD
which manufacture in China, Taiwan and Malaysia,  respectively, of plug-in logic
boards  for  the  Company's  General  Display  Terminals  and   Windows(R)-based
Terminals,  accounted for approximately 22%, 17% and 12%,  respectively,  of the
total dollar amount of the Company's  total  purchases in 1998 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



                                       8
<PAGE>

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  ten-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 ten years or can pay for repairs
on a time and materials basis. During 1996, 1997 and 1998, the Company's cost of
warranty repairs was  approximately  2.4%, 2.0% and 2.0%,  respectively,  of the
Company's total revenues. Warranty expense was higher 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 through the Company's evaluation program.

          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 1998,  1997 and 1996,  the Company
expended approximately $3,666,000,  $2,912,000 and $4,855,000,  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  Company's  Windows(R)-based  Terminals.  The Company  has  devoted  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.

          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.



                                       9
<PAGE>

          In 1998 the Company launched the VARiety Access program to address the
emerging   Windows(R)-based   terminal  market.  This  program  is  designed  to
facilitate  the ease with which  Microsoft  Certified  Solutions  Providers  and
Citrix  Solutions  Network  Resellers market and sell WBTs. To date, the Company
has recruited over 250 Value Added Resellers into the program.

          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, Windows 95
and Windows 98. 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 the total
year's revenue,  due to extended vacation periods in Europe,  where sales of the
Company's  VT/Dorio products are strong.  Other  fluctuations in quarterly sales
result from large orders that are unrelated to the time of 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 1999 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' 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.



                                       10
<PAGE>

          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, 1998,  the Company had  approximately  297  full-time
employees  engaged as  follows:  29 in product  design and  engineering,  189 in
manufacturing and repair services,  43 in sales,  systems services and marketing
and 36 in  administration.  None of the  Company's  employees  is  covered  by a
collective  bargaining  agreement.  The  Company  considers  relations  with its
employees to be satisfactory.


ITEM 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 11,743
square  feet of office  space in  Austin,  Texas.  The  lease for this  facility
expires  December 31, 1999.  The  Company's  current  annual rent for the Austin
facility  is  approximately  $241,000.  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
          -----------------

          Not applicable.

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

          No matter was submitted during the fourth quarter of 1998 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
          ---------------------------------------------------------------------

          On March 6, 1998, the Company  delivered to its shareholders and filed
with the Securities and Exchange  Commission an Information  Statement  relating
to, among other matters,  a one-for-ten  reverse split (the "Reverse  Split") of
the Common Stock.  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 24, 1999,  there were  approximately  954
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
for the one-for-ten reverse split.


                                       11
<PAGE>

Year Ended December 31, 1998:                     High         Low
                                                  ----         ---

          First quarter....................     $10.00       $ 6.25
          Second quarter...................     $ 9.09       $ 4.88
          Third quarter....................     $ 6.38       $ 3.06
          Fourth quarter...................     $ 7.13       $ 3.00


Year Ended December 31, 1997:

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

The last sale price of the Company's Common Stock on March 5, 1999 was  $5.00.

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, 1998,  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 year ended  December  31, 1994 set forth
below have been derived from the financial statements of the Company, which have
been audited by  PricewaterhouseCoopers  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.



                                       12
<PAGE>

Consolidated Statement of Operations Data
For the years ended December 31:
      (000's omitted) 
<TABLE>
<CAPTION>
                                            1998     1997        1996      1995       1994
                                          -------   -------   --------   -------    -------
<S>                                       <C>       <C>       <C>        <C>        <C>

Total revenues                            $90,202   $98,271   $138,225   $94,957     $8,344
Gross margin                               25,999    24,766     28,557    25,573      3,455
Operating expenses:
  Sales and marketing                       8,308     7,417     10,433     7,940      1,092
  General and administrative                5,845     6,213      8,120     6,337        992
  Research and development                  3,666     2,912      4,855     4,569        990
  Other nonrecurring charges                  (16)     (255)     1,980       -          -
                                          -------   -------    -------    ------     ------

     Total operating expenses              17,803    16,287     25,388    18,846      3,074
                                          -------   -------    -------    ------     ------
Operating income                            8,196     8,479      3,169     6,727        381
Interest expense                           (2,539)   (3,730)    (3,794)   (1,907)       (97)
Other                                                                        572        (61)
                                          -------   -------    -------    ------     ------
Income (loss) from continuing
  operations                                5,657     4,749       (625)    5,392        223
Income tax expense                            749      (134)       962    (1,323)      (185)
Loss from discontinued operations              -          -     (9,652)     (870)        -
Loss on extinguishment of debt                 -          -        -        (589)        -
                                           ------    ------     ------    ------     ------
Net income (loss)                          $4,908    $4,883   $(11,239)   $2,610        $38
                                           ======    ======   =========   ======        ===
Earnings (loss) per common share from
   continuing operations:
Basic                                        $.90      $.89      $(.44)     $.37      $(.01)
                                             ====      ====      ======     ====      =====
Diluted                                      $.90      $.86      $(.44)     $.35      $(.01)
                                             ====      ====      ======     ====      =====
Earnings (loss) per common share:
Basic                                        $.90      $.89     $(2.50)     $.04      $(.01)
                                             ====      ====     =======     ====      =====
Diluted                                      $.90      $.86     $(2.50)     $.04      $(.01)
                                             ====      ====     =======     ====      =====
Consolidated Balance Sheet Data
At December 31:
(000's omitted)
Working capital                            $9,401    $8,780     $3,172   $15,416     $6,764
Total assets                               49,348    54,548     69,525    75,856     37,171
Revolving credit loan (short-term)              -     7,650     13,950     8,000      4,655
Long-term obligations                       7,129    10,288     14,300    25,492     16,287
Mandatorily redeemable preferred stock      3,555     3,555      3,555     3,555      5,536
Stockholders' equity                      $16,657  $ 15,407     $8,802   $12,837     $2,386

</TABLE>




                                       13
<PAGE>

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

General

         Reference  is made to  Notes  1,4,8  and 16 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.

Years Ended December 31, 1998 and 1997

          Revenues:  Revenues for the year ended December 31, 1998 were $90,202,
as compared to $98,271 for the year ended December 31, 1997.

         Sales of the Company's  General Display  Terminals  declined by 6.8% to
$76,612 for the year ended  December  31,  1998 from  $82,200 for the year ended
December 31, 1997. The decline is primarily attributable to a reduction in sales
of the Company's  VT/Dorio  product line.  Sales to Digital and to the Company's
distribution channel in the United States increased $8,640 offsetting,  in part,
the decline in sales of VT/Dorio products.

         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.  The Company has increased its
market share 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 has leveraged its manufacturing expertise,  installed customer base, and
distribution  networks  and shifted  research  and  development  to software and
hardware  development that delivers Windows applications to the desktop by means
of  Windows(R)-based  Terminals.  Sales of Network  Graphics  Displays  were not
significant  in 1998  and,  due to the  small  customer  base  and  low  margins
associated with Network Graphics Displays and the emergence of WBTs, the Company
announced a discontinuation of this product family in the first quarter of 1998.

          Sales of the Company's  Windows(R)-based  Terminals amounted to $8,409
versus $3,218 for the years 1998 and 1997, respectively. Despite the substantial
increase in 1998 sales over 1997 sales,  the 1998  revenue  levels are below the
Company's  expectations.  1998 was marked, however, by a significant increase in
market acceptance of this computing  technology as well as the release, in July,
of a key enabling server software from Microsoft(R) Corporation.

          Net  sales  from  the  Company's  repairs  and  spare  parts  business
decreased  26%,  or $885,  from $3,350 for the year ended  December  31, 1997 to
$2,465 for the year ended  December 31, 1998.  An increase in the  proportion of
the  Company's  sales to OEMs,  who  generally  provide  their own service,  has
reduced the overall repairs revenue.  Also, spare parts sales to Digital and NCR
decreased  as a result of the  overall  decline in unit sales to each of them in
recent years. In addition, reliability improvements and enhanced product quality
have reduced the Company's  spare parts  revenues.  Due to these factors and new
designs and  engineering  changes  resulting in fewer  components  and increased
reliability,  the Company anticipates reduced repairs and spare parts revenue in
the future.

                                       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%. The Company has  previously  disclosed  that GA is in
default of  material  obligations  under the  partnership  agreement,  including
payment of past due royalties and other fees which totaled $2,468 as of December
31, 1998. The Company reserved against all outstanding  receivables during 1997,
and, since that time, has recorded revenue  attributable to the partnership on a
cash  basis  only.  The  Company  is  evaluating   its  options   regarding  the
relationship with GA and continues  discussions with GA regarding payment of the
past due amount.

          IBM was the most  significant  customer  for the  Company's  products,
accounting  for 15% of revenues for the year ended  December 31, 1998.  Sales to
Digital and NCR accounted for 9% and 4%, respectively,  of revenues in 1998. 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, 1998 was
$25,999  (28.8% of  revenue),  as  compared  to gross  margin for the year ended
December 31, 1997 of $24,766 (25.2% of revenue).  Cost  reduction  activities in
the Company's General Displays Terminals product line increased the gross margin
percent  6.4  points  from 1997 to 1998.  In  addition,  sales of the  Company's
discontinued Network Graphics Displays accounted for a smaller percentage of the
Company's total revenues in 1998 as compared to 1997. 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.

          The Company  anticipates  that increased sales of WBTs will negatively
affect gross margins due to the software  license fees  associated with the sale
of this  product.  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 1998 or 1997. In a continuing  effort to maintain
and improve margins in an industry otherwise characterized by commodity pricing,
management has focused on quality, flexibility, and product cost reductions.

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

          Total  Operating  Expenses.  For the year  ended  December  31,  1998,
operating  expenses  were $17,803  (19.7% of revenue),  compared to expenses for
1997 of $16,287 (16.6% of revenue).

          Sales and Marketing  Expenses.  Sales and marketing expenses increased
12.0% from $7,417  (7.5% of revenue)  for the year ended 1997 to $8,308 (9.2% of
revenue) for the year ended December 31, 1998. The increase is  attributable  to
spending to develop the  Windows(R)-based  Terminal market,  including increased
participation  at  important  tradeshows  throughout  1998,  as well as expenses
relating to the introduction of the Company's new Capio WBT.

          The Company  promotes its products by means of a balanced 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 Company's  Viewpoint(R) and
Capio WBTs.  The  Company's  plan to reach this market is based on direct  mail,
telemarketing and advertising and participating in events with its key partners,
including Microsoft.



                                       15
<PAGE>

          Recognizing the need to accelerate acceptance of WBTs, as well as spur
increased  demand,  the Company  developed and  implemented  the VARiety  Access
program in 1998.  This program is intended to forge key  alliances  with many of
the  MicroSoft  Certified  Solutions  Providers  and  Citrix  Solutions  Network
Resellers  who  actively   participate  in  this  emerging  market.   Since  its
initiation, the Company has signed over 250 new VARs to this program.

          General  and  Administrative  Expenses.   General  and  administrative
expenses  decreased  5.9% from  $6,213  (6.3% of  revenue),  to $5,845  (6.5% of
revenue) for the periods ending  December 31, 1997 and 1998,  respectively.  The
decline stems from reductions in spending for  professional  services  including
legal and audit fees.

          Research and Development  Expenses.  Research and development expenses
increased to $3,666 in 1998 from $2,912 in 1997. The increase is attributable to
the development efforts in software related to WBTs.

          Research and  development  expenses will continue to shift 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 WBTs
are  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 Charges.  Interest  expense (net of interest income) amounted to
$2,539 for the year ended  December  31, 1998  compared to $3,730 for 1997.  The
decline  in  interest  expense  stems  from a  reduction  in the  amount  of the
Company's outstanding debt as well as a slight reduction in the rate of interest
applicable to the Company's debt obligations.

          Income Tax Credit/Expense.  The Company recorded income tax expense of
$749 for the year ended  December  31, 1998  compared to an income tax credit of
$134 for the year ended  December 31, 1997. In 1998 the Company  released all of
the valuation  allowance reserved against its net deferred tax asset,  resulting
in an  effective  tax rate below the  federal  statutory  rate.  In 1997 the tax
credit resulted 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. At December 31, 1998, the Company had no net operating loss  carryforward
credits remaining.

          Net  Income.  For the year ended  December  31,  1998,  net income was
$4,908 (5.4% of  revenue),  compared to a net income of $4,883 (5.0% of revenue)
for the year ended December 31, 1997.


Years Ended December 31, 1997 and 1996

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.




                                       16
<PAGE>

          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 break-up of AT&TCorporation
and NCR's change in focus from Unix to NT-based servers.

          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.

          Sales of the Company's  Windows(R)-based  Terminals amounted to $3,218
in 1997  versus  $747 in 1996.  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.

          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
spare parts  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.

          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 at the end of 1997.  During the fourth  quarter  of 1997,  the  Company
began to record GAI Partnership revenue 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.

          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 by 1.8 points.
However,  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 a 1.3 point increase in the 1997 gross margin percentage.



                                       17
<PAGE>

          Changes in retail  pricing did not have a material  adverse  effect on
the Company's gross margin in 1997 or 1996.

          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.

          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   related  to  the  Company's   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  include  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.


          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.

          Other Charges.  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.  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.

          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.

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.



                                       18
<PAGE>

Year 2000 Compliance

          Computers, software and other equipment utilizing microprocessors that
use only two digits to  identify a year in a date field may be unable to process
accurately  certain  date-based  information  referencing the year 2000. This is
commonly  referred to as the "Year 2000 issue." The Company is  addressing  this
issue on several different  fronts.  With respect to products the Company offers
for sale, either to OEMs or through  distribution,  the Company has verified the
products  are Year 2000  compliant.  The Company has  assigned a team to monitor
Year 2000  compliance.  This team is charged with ensuring Year 2000  compliance
for all hardware and software products through its purchasing  process,  as well
as  assessing  Year 2000  readiness  and risk to the Company with repsect to the
compliance of its critical  vendors and  suppliers.  Finally,  the Company has a
team assigned to coordinate  the Year 2000 program for its internal  systems and
devices. At present,  Year 2000 compliance of the Company's internal systems and
devices  is  scheduled  to be  substantially  complete  by  July of  1999,  with
continued testing of compliance  throughout 1999. The total costs related to the
Company's  Year 2000 program are not  estimated to be material to the  Company's
financial  position  or results  of  operations,  and are  charged to expense as
incurred.  The total cost estimate does not include  potential  costs related to
any  customer or other  claims or the cost of  internal  software  and  hardware
replaced in the normal  course of business.  The total cost estimate is based on
the current  assessment  of the  Company's  Year 2000  program and is subject to
change as it  progresses.  Based on  current  information  and  assessment,  the
Company does not believe that the Year 2000 issue discussed above, as it relates
to products sold to customers or the Company's internal systems will be material
to its financial  position or results of operations or that its business will be
adversely  affected in any material respect.  Nevertheless,  achieving Year 2000
compliance is dependent on many factors, some of which are not completely within
the Company's  control.  Should either the Company's  internal systems or one or
more critical  vendors or suppliers fail due to Year 2000 issues,  the Company's
business and its results of operations could be adversely affected.

Liquidity and Capital Resources

          The discussion below regarding  liquidity and capital resources should
be read together with the information  included under Notes 5, 8 and 17 of Notes
to Consolidated Financial Statements.

          Working  capital was  approximately  $9,401 as of December  31,  1998,
compared to $8,780 as of December 31, 1997. Historically, the Company has relied
on cash flow from  operations,  bank borrowings and sales of its common stock to
finance its working capital, capital expenditures and acquisitions.

          The Company  currently has a bank credit  facility that is provided by
Chase.  At December  31,  1998,  the Chase  Credit Line  consisted  of a $15,000
revolving line of credit ("Revolving 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.  At December 31, 1998, up to $7,500 was available under the Revolving
Loan for letters of credit.  At December 31, 1998, the Company owed Chase $5,500
and had  availability  of $6,045 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.

          The existing Revolving Loan with Chase, originally scheduled to expire
December 31, 1998,  had been extended to April 15, 1999. On April 14, 1999,  the
Company signed an agreement with Chase to replace the existing Chase Credit Line
with a new three-year  $15,000  revolving line of credit on terms  substantially
similar to those previously in effect. The new credit facility also provides for
a $4,000  term  loan,  payable  over a  three-year  period  in  equal  quarterly
installments beginning June 1999.



                                       19
<PAGE>

          Net cash  provided  by  operating  activities  related  to  continuing
operations  during the year ended  December  31,  1998 was  $7,461,  principally
related to net income of $4,908 and non-cash expenses,  principally depreciation
and amortization, of $3,293. These increases were partially offset by reductions
in accounts  payable and other accrued expenses of $1,050 as well as a change in
the  Company's  deferred  tax  position  of $1,338.  Net cash used in  investing
activities  was  comprised  of capital  expenditures  of $754.  Net cash used in
financing  activities  was  principally  comprised of repayments of  outstanding
obligations  under the Chase Credit Line of $5,400 and the  repurchase of $3,500
of the Company's outstanding Common Stock.

          In addition to obligations  previously  discussed,  long-term  capital
requirements at December 31, 1998 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 and  secured  by the  Company's
facility in  Hauppauge,  New York;  (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),  which if exercised  would require the Company to redeem
the Boundless  Preferred  Stock;  and (iii) a lease  commitment of $241 per year
through December 31, 1999 for the Company's Austin, Texas facility.

          The Company negotiated an extension of the due date of the NCR Note to
April 30, 1999. Terms of the extension included an interest rate of 8% per annum
from the  period  January  1, 1999  through  March 26,  1999,  and 12% per annum
thereafter  until  the due  date of the  NCR  Note.  The  Company  is  currently
negotiating  with  mortgage  lenders to refinance  the NCR Note.  The Company is
presently  evaluating several  proposals,  and believes that it is likely that a
refinancing agreement will be negotiated by April 30, 1999 or that an additional
extension could be obtained to allow such negotiations to be finalized.

          During January 1999, by utilizing  availability under the Chase Credit
Line, the Company redeemed the Boundless Preferred Stock, thereby satisfying its
obligations  to NCR under the put option and its  obligations  to make  dividend
payments to NCR on such stock.

          At December 31, 1998, the Company's total long-term  liabilities  were
approximately $7,129 and its current portion of long-term debt was approximately
$8,000.  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 April 30, 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.

          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 should 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.



                                       20
<PAGE>

          Inventory  turnover was 4.2 times in 1996 and 1997 versus 4.4 times in
1998.  Inventory  reserves at December  31, 1997 were $3,389 and were $3,273 for
the year ended December 31, 1998.

          Accounts Receivable.  The Company sells its products on prepayment and
net 30 day terms.  Receivable  turnover was 7.4 in 1996,  6.0 in 1997 and 6.2 in
1998.

New Accounting Pronouncement

          Statement of Financial  Accounting  Standard  No.133,  "Accounting for
Derivative  Instruments  and Hedging  Activities"  ("SFAS No. 133")  establishes
accounting  and  reporting  standards  for  derivative  instruments  and hedging
activities.  SFAS No. 133 requires that an entity  recognize all  derivatives as
either assets or liabilities in the statement of financial  position and measure
those  instruments  at fair  value.  SFAS No.  133 is  effective  for all fiscal
quarters of fiscal years beginning after June 15, 1999. The Company is assessing
the  impact  that  the  adoption  of SFAS  No.  133 will  have,  if any,  on its
consolidated financial statements.

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

          The  Company's  exposure to market risk for changes in interest  rates
relates primarily to the Company's  revolving credit facility and long-term debt
obligations.  In the past, the Company managed this risk through  utilization of
interest rate swap  agreements in amounts not exceeding the principal  amount of
its  outstanding  obligations.  At December 31, 1998 there were no interest rate
swap agreements in place.

          The Company places its  investments  with high credit quality  issuers
and,  by  policy,  is  averse to  principal  loss and  ensures  the  safety  and
preservation  of its invested  funds by limiting  default risk,  market risk and
reinvestment risk. As of December 31, 1998 the Company's  investments  consisted
of the investment of excess cash balances in overnight time deposits  offered by
Chase Manhattan Bank in London.

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

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

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

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

          None.



                                       21
<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    49    Chairman of the Board of Directors,  Chief
                         Executive Officer

Kenneth East       40    Chief Operating Officer

Jeffrey K. Moore   29    Vice President- Corporate Development, Director

Joseph Gardner     39    Vice President - Finance, Chief Financial Officer

Stephen Maysonave  52    Director

Gary Wood          55    Director

Daniel Matheson    49    Director


          J. Gerald Combs has served as Chairman and Chief Executive  Officer of
the  Company  and its  subsidiaries  since May 9, 1997.  Mr.  Combs has been the
Chairman and CEO of Morgan Kent Group,  the largest  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.

          Kenneth  East has served as Chief  Operating  Officer  of the  Company
since  September  1998.  Mr. East  joined the Company in February  1998 as Chief
Technology  Officer.  Prior to that time,  from 1990 to 1998, Mr. East served as
Director of Software  Development-Integrated  Network  Management Systems at NEC
America,  Inc.,  a worldwide  leader in high  technology  offering  products and
systems in semiconductors,  communications,  computer peripherals,  imaging, and
computers.

          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 served as President and
Chairman of the Board, and since February 1999 has served as Assistant Secretary
and as a director, of Morgan Kent Group.

          Joseph  Gardner  has  served  as Vice  President-  Finance  and  Chief
Financial  Officer of the Company since 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.

          Stephen  Maysonave  has  been a  member  of  the  Company's  Board  of
Directors since September 1998. Mr.  Maysonave has thirty years of experience in
the high technology business,  including twenty years of international  business
experience.  Mr. Maysonave is currently the principal of Maysonave & Associates,
a consulting group specializing in high technology companies.  Prior thereto Mr.
Maysonave was employed as Vice President, Global Partners, by Informix Software,
a worldwide supplier of database solutions.  Mr. Maysonave is the voting trustee
of  3,330,000  shares of Series B Preferred  Stock of Morgan  Kent  Group,  Inc.
pursuant to a voting trust expiring April 30, 2000. (See Item 12).

                                       22
<PAGE>
          Gary E. Wood has been a member  of the  Company's  Board of  Directors
since  November 1996 and has been serving  since  September 1, 1997 as Executive
Vice President and Chief Operating Officer of Collins Financial  Services,  Inc.
Collins purchases  nationwide  portfolios of consumer debt and either resells or
collects the accounts.  He serves on the Board of Mental Health  Association  in
Texas,  and has  previously  served on the Board of the Federal  Reserve Bank of
Dallas and the Harry S. Truman Scholarship Foundation. From 1980 to 1982, he was
the Chief  Economist of the  Republican  Policy  Committee of the United  States
Senate.  From April 1988 to December  1995 he served as  President  of the 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.

          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:

          James  Tillinghast  has  been  serving  as Vice  President,  Sales  of
Boundless since January 1999.  Prior to joining the Company Mr.  Tillinghast was
employed  by  Informix  Software  and served as  executive  director  for Global
Partners, responsible for managing sales and business development activities for
Informix's strategic software partners.

          Brian L. Hann has been  serving as Vice  President  of  Operations  of
Boundless since 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.

          Non-employee  members  of the  Company's  Board of  Directors  receive
$12,000  annually,  and $500 for each Board of  Director  meeting  attended,  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.  These  options were  subsequently  repriced on May 18, 1998 to $5.63 per
share of Common  Stock.  Mr.  Maysonave was granted  15,000 and 35,000  options,
respectively  in October,  1998 to purchase  shares of Common Stock at $3.00 per
share that expire  October,  2003.  The 15,000 options were granted for services
Mr.  Maysonave  provided  as a  member  of  the  Board  of  Directors  and  vest
immediately. The 35,000 options were granted for services Mr. Maysonave provided
as a consultant to the Company and vest December,  1999. The Company recorded an
expense of $39,200 relating to the grant of the 35,000 options.

Section 16(a) Beneficial Ownership Reporting Compliance

          A review  of the  Forms 3 and 4 filed or due in 1998  relating  to the
Company's  securities  indicates  that  the  following  filings  made  with  the
Commission were not timely:  a Form 4 relating to Mr.  Maysonave's  purchases of
5,000  shares  of  Common  Stock in  November  1998;  a Form 4  relating  to the
Company's purchase of 600,000 shares of Common Stock from Morgan Kent Group; and
a Form 4 relating to Jeffrey Moore's  purchases of 15,000 shares of Common Stock
upon  exercise  of stock  options  and sales of 14,920 of such shares in October
1997.  The Company has been  advised  that the  tardiness  of these  filings was
inadvertent.

ITEM 11.      EXECUTIVE COMPENSATION

          The table below discloses all cash compensation  awarded to, earned by
or paid to the Company's Chief Executive Officer,  the executive officers 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, 1998, 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, 1998  (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 1997 and 1996.


                                       23
<PAGE>

<TABLE>
                                                Summary Compensation Table
                                                    Annual Compensation                    Long-Term
                                                ---------------------------
<CAPTION>
                                                                                         Compensation
Name and Principal                                                         Other Annual                          All Other
Position                       Year            Salary          Bonus       Compensation   Options(#) (4)      Compensation
-----------                    ----            ------          -----       ------------   -----------         ------------
<S>                         <C>              <C>            <C>            <C>            <C>                 <C>          
J. Gerald Combs(1)          12/31/98         $291,462       $150,000                 -       150,000                     -
CEO and Chairman            12/31/97         $123,436              -             $8,497       65,000                     -
                            12/31/96                -              -                  -            -                11,546

Michael Stebel(2)           12/31/98         $126,557        $25,000             $2,706            -                     -
Vice President,             12/31/97          $95,000              -             $8,259       10,000                     -
Marketing                   12/31/96          $93,654        $11,849                  -            -                     -

Kenneth East(3)             12/31/98         $137,489        $35,000            $17,130       30,000                     -
Chief Operating Officer                                                                                                  -
                                                                                                                         -
Joseph Gardner              12/31/98         $140,962        $25,000                  -            -                     -
Vice President-Finance      12/31/97         $100,000        $25,000                  -       10,000                     -
Chief Financial Officer     12/31/97          $99,673        $23,440                  -        1,500                     -

Brian Hann                  12/31/98         $131,664        $25,000                  -            -                     -
Vice President              12/31/97         $119,788              -                  -       12,500                     -
Operations                  12/31/96         $111,577        $34,511                  -        3,000                     -
</TABLE>

(1)  Other annual  compensation for 1997 includes taxable fringe benefits.  "All
     Other  Compensation" for 1996 consists of stock awards of registered shares
     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.

(3)  Other annual compensation consisted of relocation expense reimbursement.

(4)  With the  exception  of the 150,000  options  granted to Mr. Combs in 1998,
     which have a strike price of $4.88 per share of Common  Stock,  the Company
     repriced the exercise price of all outstanding  employee options on May 18,
     1998 to $5.63 per share of Common Stock.


Employment Agreements and Change-in-Control Arrangements

          The Company has entered into employment agreements with Mr. Combs, the
Company's Chairman of the Board and Chief Executive  Officer,  and Mr. East, the
Company's Chief Operating  Officer.  The term of these agreements,  as described
below,  may be extended  beyond the initial term by the mutual  agreement of Mr.
Combs and Mr. East, respectively, and the Company and on such basis as Mr. Combs
and Mr. East,  respectively,  and the Company shall agree.  Each such extension,
unless  expressly  agreed  otherwise,  will be for one year  commencing the year
following  the  expiration  of the  initial  term  or  any  renewal  term.  Both
agreements  may be terminated at any time by the written  mutual  consent of the
Company  and Mr.  Combs  and Mr.  East,  respectively.  Both  agreements  may be
terminated by the Company for cause,  as defined in the  employment  agreements,
and, in such event, the employee will be entitled to such salary and benefits as
have  accrued  under  the  employment  agreements,   respectively,  through  the
effective date of the termination.



                                       24
<PAGE>

          With respect to Mr. Combs, the agreement was entered into June 1, 1998
and expires May 31, 2001. The agreement  calls for an annual salary of $325,000,
subject  to an  annual  review  by the  Compensation  Committee  of the Board of
Directors;  as well as the grant of 150,000  options to  purchase  shares of the
Company's  Common Stock,  such shares to vest pro rata on an annual basis over a
three-year  period.  Should Mr. Combs' employment with the Company be terminated
without  cause,  Mr. Combs would be entitled to deferred  payments  totaling two
years salary. In the event of a change-in-control,  as defined in the agreement,
Mr. Combs would be entitled to deferred  payments  totaling two years salary, as
well as immediate vesting of all options.

          Mr. East's employment  agreement was entered into February 9, 1998 and
expires  February 8, 2000. The agreement calls for an annual salary of $150,000,
subject to an annual review by the Chairman and Chief  Executive of the Company;
as well as the grant of  30,000  options  to  purchase  shares of the  Company's
Common Stock, such shares to vest pro rata over a four-year  period.  Should Mr.
East's  employment with the Company be terminated  without cause, Mr. East would
be entitled to deferred payments totaling six-month's salary.

Compensation Committee Interlocks and Insider Participation

          Mr. Combs and Mr.  Jeffrey Moore,  who were executive  officers of the
Company  during  1998,  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. Mr. Combs and Mr. Moore are also members of
the Board and officers of Morgan Kent Group which had certain relationships, and
entered into  certain  transactions,  with the Company  during 1998 as described
below under "Item 13- Certain Relationships and Related Transactions."

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, 1998,
regarding the outstanding options to purchase the Company's Common Stock granted
in 1998 under the  Company's  1997  Incentive  Plan ("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 (#)         1997 Plan         ($/Sh)        Date             Option Term
          ----              ------------    ----------------   -----------   ----------    -----------------------
<S>                         <C>             <C>                <C>           <C>           <C>          
                                                                                              5% ($)       10% ($)
                                                                                             --------     --------
J.Gerald Combs (1)            150,000            21.6%           $ 4.88      6/01/03          202,238      446,893

Kenneth East(2)                30,000             4.3%           $ 5.63      2/16/03           46,664      103,115
</TABLE>

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

         (1) Options were granted  6/01/98 and vest at 50,000  options per year,
on the anniversary of the date of grant, over a three year period.

         (2) Options were granted  2/16/98 and vest 25% one year  following  the
grant date and the  remainder  on a pro rata monthly  basis over the  subsequent
three years.



                                       25
<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, 1998.

<TABLE>
<CAPTION>
                                                                             Value of Unexercised
                                           Number of Unexercised Options  In-the-Money Options at
                                              at December 31, 1998 (#)    December 31, 1998 ($)(1)
                                           -----------------------------  ------------------------
                       Shares
                     Acquired on   Value
         Name        Exercise(#) Realized  Exercisable  Unexercisable     Exercisable  Unexercisable
         ----        ----------- --------  -----------  -------------     -----------  -------------

<S>                      <C>       <C>       <C>           <C>               <C>          <C>    
J. Gerald Combs          $0        $0        142,500       162,500           $0           $18,000
Kenneth East              0         0              0        30,000            0                 0
Michael Stebel            0         0         10,055         4,845            0                 0
Joseph Gardner            0         0         10,717         5,283            0                 0
Brian Hann                0         0         15,300         6,700            0                 0

</TABLE>

(1)  The last sale price of the Company's  Common Stock on December 31, 1998, as
     reported by The Nasdaq SmallCap Market, was $ 5.00.


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,
1999, 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,  Fifth  Floor,  New York,  NY
10022.  The address of Stephen  Maysonave is 3300 Bee Cave Road,  Suite 650-221,
Austin, Texas 78746.

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

Morgan Kent Group, Inc.                 2,317,370(1)                47.4%
Stephen Maysonave, Voting Trustee       2,317,370(1)(2)             47.4%
Stephen Maysonave                          20,000(3)                    *
J. Gerald Combs                           142,500(3)                 3.1%
Gary Wood                                  15,000(3)                    *
Daniel Matheson                            25,000(3)                    *
Jeffrey Moore                              37,500(2)(3)                 *
Joseph Gardner                             12,106(3)                    *
Kenneth East                                7,500(3)                    *
Michael Stebel                             11,288(3)                    *
Brian Hann                                 20,986(3)                    *
All current directors and executive
 officers as a group
 (seven individuals)                    2,576,976(1)(3)             52.7%
--------------------------------

*    Less than 1%.



                                       26
<PAGE>

(1)  Includes  457,502 shares  underlying the warrants held by Morgan Kent Group
     (the "Morgan Kent Group Warrants") to purchase shares of Common Stock at an
     exercise price of $7.50 per share as to a warrant for 307,502 shares and at
     an exercise price of $5.82 as to a warrant for 150,000 shares.

(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 April 30, 2000.  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 be 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 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:  142,500;  Mr. Wood:  15,000; Mr. Matheson:
     25,000; Mr. Moore: 37,500; Mr. Maysonave:  15,000; Mr. Gardner: 12,106; Mr.
     East: 7,500; Mr. Stebel: 11,288; and Mr. Hann: 16,986.


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

          In 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  1997 the Company  prepaid this fee in the
amount of $380,000 and for 1998 recorded an expense of $240,000.

          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 such  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 and  considering  the expense of preparing and delivering
an information  statement to  shareholders  prior to issuing 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
1998 such fees amounted to $210,000.  The Pledge to Chase was cancelled December
1997. The Pledge to NCR remained in effect as of December 31, 1998.

                                       27
<PAGE>

          In May 1998 the Company  repurchased  600,000  shares of the Company's
then  outstanding  Common  Stock from Morgan  Kent Group at $5.00 per share,  or
approximately  14% below the closing market price on May 15, 1998 as reported on
the NASDAQ SmallCap Market.  The Company  repurchased these shares to reduce the
voting power of Morgan Kent Group from approximately 51% to 45% and to set aside
shares enabling the Company to issue up to 600,000 shares of its Common Stock in
acquisitive transactions without diluting public shareholders.  As an inducement
to the repurchase transaction, the Company issued a warrant to Morgan Kent Group
to purchase 150,000 shares of the Company's Common Stock at an exercise price of
$5.80 per common share. The warrant is exercisable immediately and has a term of
seven  years.  The  Company  recorded  an expense of  $300,000  relating  to the
issuance of the warrant.

          Mr. Maysonave, a member of the Board of Directors,  was granted 35,000
options in October  1998 to purchase  shares of Common  Stock at $3.00 per share
that expire October 2003.  These options were granted for services Mr. Maysonave
provided as a  consultant  to the Company and vest  December  1999.  The Company
recorded an expense of $39,200  relating to the grant of the 35,000 options.  In
addition,  the Company paid Mr.  Maysonave  $64,000  during 1998 relating to Mr.
Maysonave's consulting services to the Company.

          In  December  1998  the  Company  repurchased  110,620  shares  of the
Company's  then  outstanding  Common  Stock from  Morgan Kent Group at $4.52 per
share, or approximately  20% below the average of the preceding five day trading
close as reported on the NASDAQ SmallCap Market.

          In 1998, Morgan Kent paid the Company $4,000 in interest accruing on a
$50,000 loan from the Company to Morgan Kent.




                                       28
<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                             F-1

         All other  financial  statements  and  schedules  not listed  have been
         omitted  since  the  required  information  is either  included  in the
         Financial Statements and the Notes thereto as included in the Company's
         Annual  Report on Form 10-K for the Year ended  December 31, 1998 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 1998.

                                   SIGNATURES

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

Date:  April 15, 1999

                                             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,     April 15, 1999
-----------------------  Chief Executive Officer
J. Gerald Combs          

/s/                      Vice President - Finance, Chief         April 15, 1999
-----------------------  Financial Officer (Principal Accounting
Joseph Gardner           Officer)

/s/                      Vice President, Director                April 15, 1999
-----------------------
Jeffrey K. Moore

/s/                      Director                                April 15, 1999
-----------------------
Daniel Matheson

/s/                      Director                                April 15, 1999
-----------------------
Gary Wood

/s/                      Director                                April 15, 1999
-----------------------
Stephen Maysonave

                                       29
<PAGE>


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


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

3.1[7]         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)[7]      Amendments 1 through 6, 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).)


                                      E-1
<PAGE>



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).)

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).)

10(aa)**      Employment Agreement, dated June 1, 1998, among the Registrant,
                    Boundless Technologies, Inc. and J. Gerald Combs.

10(bb)**      Employment  Agreement,  dated February 9, 1998, between Boundless
                    Technologies, Inc. and Kenneth East.

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


                                      E-2
<PAGE>



21[7]         List of Subsidiaries

23**          Consent of BDO Seidman, LLP.

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.

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


                                      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, 1998 and 1997                 F-3

Consolidated Statements of Operations
  for the years ended December 31, 1998, 1997 and 1996                       F-4

Consolidated Statements of Changes in Stockholders' Equity
  for the years ended December 31, 1998, 1997 and 1996                       F-5

Consolidated Statements of Cash Flows
  for the years ended December 31, 1998, 1997 and 1996                       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, 1998 and 1997                  S-1

  Condensed Statements of Operations
     for the years ended December 31, 1998, 1997 and 1996                    S-2

  Condensed Statements of Cash Flows
     for the years ended December 31, 1998, 1997 and 1996                    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, 1998 and 1997 and the related
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period  ended  December  31,  1998.  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,  1998  and  1997  and  the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended  December 31, 1998 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


Melville, New York
February 12, 1999, except for Note 17
  as to which the date is April 14, 1999


                                      F-2
<PAGE>

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


                                                       ASSETS
<TABLE>
<CAPTION>
                                                                               December 31,
                                                                    ---------------------------------
                                                                          1998             1997
                                                                    ---------------------------------

<S>                                                                       <C>              <C>       
Current assets:
  Cash and cash equivalents                                                   $ 732          $ 2,929
  Trade accounts receivable (including $232 and $224
    from related parties), net (Notes 2, 8 and 17)                           13,274           14,395
  Income tax refunds                                                          1,905              800
  Inventories (Notes 5, 8 and 17)                                            12,565           13,682
  Deferred income taxes (Note 7)                                              2,470            1,561
  Prepaid expenses and other current assets                                     462              711
                                                                    ---------------- ----------------
     Total current assets                                                    31,408           34,078
Property and equipment, net (Note 6 and 8)                                   10,251           10,614
Goodwill, net (Note 2)                                                        7,350            8,428
Other assets                                                                    339            1,428
                                                                    ---------------- ----------------
                                                                           $ 49,348         $ 54,548
                                                                    ================ ================
</TABLE>

          LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY

<TABLE>
<S>                                                                       <C>              <C>
Current liabilities:
  Note payable (Note 8)                                                    $      -          $ 7,650
  Current portion of long-term debt (including   $8,000 to
    related party in 1998) (Notes 8 and 17)                                   8,000            3,250
  Accounts payable                                                            6,817            8,840
  Accrued expenses                                                            7,074            5,378
  Deferred revenue                                                              116              180
                                                                    ---------------- ----------------
     Total current liabilities                                               22,007           25,298
                                                                    ---------------- ----------------
Long-term liabilities:
  Long-term debt, less current maturities (including $8,000 to a
    related party in 1997)  (Notes 8 and 17)                                  5,500            8,000
  Deferred income taxes (Note 7)                                              1,002            1,561
  Other                                                                         627              727
                                                                    ---------------- ----------------
     Total long-term liabilities                                              7,129           10,288
                                                                    ---------------- ----------------

         Total liabilities                                                   29,136           35,586
                                                                    ---------------- ----------------

Commitments and contingencies (Notes 1, 12 and 13)                                -                -
Mandatorily redeemable preferred stock of subsidiary (Note 17)                3,555            3,555
                                                                    ---------------- ---------------
Stockholders' equity (Note 9):
  Preferred stock
  Common stock                                                                   44               51
  Additional paid-in capital                                                 30,940           34,094
  Accumulated deficit                                                       (14,327)         (18,738)
                                                                    ---------------- ----------------
     Total stockholders' equity                                              16,657           15,407
                                                                    ---------------- ----------------
                                                                           $ 49,348         $ 54,548
                                                                    ---------------- ----------------

</TABLE>

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


                                      F-3
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                              For the Years ended
                     (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                              December 31,
                                                      -------------- -----------------------------
                                                             1998           1997           1996
                                                      -------------- --------------- -------------
<S>                                                   <C>            <C>             <C>
Revenue:
  Product sales (including sales to related
    parties of $3,760, $6,476 and $21,855)                $ 87,774        $ 94,607     $ 130,733
  Services                                                   2,428           3,664         7,492
                                                      -------------- --------------- -------------
     Total revenue                                          90,202          98,271       138,225 
                                                      -------------- --------------- -------------
Cost of revenue:
  Product sales                                             62,267          71,477       107,029
  Services                                                   1,936           2,028         2,639
                                                      -------------- --------------- -------------
     Total cost of revenue                                  64,203          73,505       109,668
                                                      -------------- --------------- -------------
       Gross margin                                         25,999          24,766        28,557 
                                                      -------------- --------------- -------------
Operating expenses:
  Sales and marketing                                        8,308           7,417        10,433
  General and administrative                                 5,845           6,213         8,120
  Research and development                                   3,666           2,912         4,855
  Other charges (credits)                                      (16)           (255)        1,980
                                                       -------------- --------------- -------------
     Total operating expenses                               17,803          16,287        25,388
                                                       -------------- --------------- -------------
       Operating income                                      8,196           8,479         3,169
  Interest expense, net                                      2,539           3,730         3,794
                                                       -------------- --------------- -------------
Income (loss) before income taxes
  and discontinued operations                                5,657           4,749          (625)
Income tax expense (recovery)                                  749            (134)          962
                                                    -------------- --------------- -------------
Income (loss) from continuing operations                     4,908           4,883        (1,587)
Loss from discontinued operations                                -               -        (9,652)
                                                    -------------- --------------- -------------
Net income (loss)                                            4,908           4,883       (11,239)
Dividend on preferred stock of subsidiary                      497             497           497
                                                    -------------- --------------- -------------
Earnings (loss) available for common stockholders          $ 4,411         $ 4,386     $ (11,736)
                                                    ============== =============== =============
Weighted average common shares outstanding                   4,893           4,925         4,702
                                                    ============== =============== =============
Earnings (loss) per common share from:
  Continuing operations                                     $ 0.90          $ 0.89       $ (0.44)
  Discontinued operations                                     0.00            0.00         (2.06)
                                                    -------------- --------------- -------------
Basic earnings (loss) per common share                      $ 0.90          $ 0.89       $ (2.50)
                                                    ============== =============== =============
Earnings (loss) available for common stockholders
 adjusted for impact of assumed conversions                $ 4,411         $ 4,426     $ (11,736)
                                                    ============== =============== =============
Weighted average dilutive shares outstanding                 4,926           5,103         4,702
                                                    ============== =============== =============
Diluted earnings (loss) per common share                    $ 0.90          $ 0.86       $ (2.50)
                                                    ============== =============== =============
</TABLE>

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)


<TABLE>
<CAPTION>
                                                      Common Stock        Additional
                                                  ----------------------   Paid-in     Accumulated
                                                    Shares     Amount      Capital       Deficit          Total
                                                  ---------------------- ------------ --------------  --------------
<S>                                                    <C>         <C>       <C>           <C>              <C>

Balance, January 1, 1996                                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
Common stock repurchased and retired                     (710)       (7)      (3,493)                        (3,500)
Options and warrants issued for
  services to non-employees                                                      339                            339
Dividend on preferred stock of subsidiary                                                      (497)           (497)
Net income                                                                                    4,908           4,908
                                                  ------------------------------------------------------------------
Balance, December 31, 1998                              4,429      $ 44     $ 30,940      $ (14,327)       $ 16,657
                                                  ==================================================================

</TABLE>

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)


<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                     ----------- ----------------------------
                                                                        1998         1997           1996
                                                                     ----------- ------------- --------------
<S>                                                                     <C>           <C>          <C>

Cash flows from operating activities:
  Net income (loss)                                                     $ 4,908       $ 4,883      $ (11,239)
  Adjustments to reconcile net income (loss) to net cash
       provided by operating activities:
    Loss from discontinued operations                                       -             -            9,652
    Depreciation and amortization                                         3,293         3,725          3,957
    Loss from disposal of assets                                            160             -            133
    Deferred revenues                                                       (64)            -           (647)
    Provision (credits) for doubtful accounts                               216           (20)           180
    Provision (credit) for excess and obsolete inventory                    808          (595)         3,845
    Options and warrants issued for services                                339             -              -
    Deferred taxes                                                       (1,338)            -            358
    Changes in assets and liabilities:
      Trade accounts receivable                                            (201)        6,872         (3,548)
      Inventories                                                           310         5,438          3,388
      Other assets                                                           80          (470)         1,592
      Accounts payable and accrued expenses                                (553)       (3,145)           (76)
                                                                     ----------- ------------- --------------
Net cash:
  Provided by continuing operations                                       7,958        16,688          7,595
  Used in discontinued operations                                            (4)       (3,492)        (6,160)
                                                                     ----------- ------------- --------------
Net cash provided by operating activities                                 7,954        13,196          1,435
Cash flows from investing activities:
  Capital expenditures                                                     (754)         (247)        (1,384)
                                                                     ----------- ------------- --------------
Net cash used in investing activities                                      (754)         (247)        (1,384)
                                                                     ----------- ------------- --------------
Cash flows from financing activities:
  Net proceeds from issuance of common stock                                  -           136          5,177
  Proceeds from debt issuance                                                 -         1,700          1,500
  Purchase and retirement of common stock                                (3,500)            -         (1,305)
  Advances on loans payable                                                   -             -          5,950
  Payments on loans payable                                              (5,400)      (16,423)        (6,526)
  Costs associated with issuance of debt                                   (497)         (637)             -
  Payments on capital leases                                                  -            (9)            (3)
                                                                     ----------- ------------- --------------
Net cash provided by (used in) financing activities                      (9,397)      (15,233)         4,793
                                                                     ----------- ------------- --------------
Net increase (decrease) in cash and cash equivalents                     (2,197)       (2,284)         4,844
Cash and cash equivalents at beginning of period                          2,929         5,213            369
                                                                     ----------- ------------- --------------
Cash and cash equivalents at end of period                                $ 732       $ 2,929        $ 5,213
                                                                     =========== ============= ==============
</TABLE>

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)


<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                     ----------------------------------------
                                                                        1998         1997           1996
                                                                     ----------- ------------- --------------
<S>                                                                   <C>           <C>          <C>
Non-cash transactions:
  Dividend on Preferred Stock of Subsidiary                           $       -     $    497      $    497
  Conversion of notes payable to common stock                                 -        1,700         1,500
  Issuance of common stock for Note Payment                                   -            -           300
  Options, warrants and common stock issued for services                    339           63         1,424
  Equipment acquisitions funded through capital leases                        -            -           107
Cash paid for:
  Interest                                                                2,200        2,742         4,293
  Taxes                                                                   1,194          634          (794)

</TABLE>

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 per share data)

1.       Background

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,  Boundless  Acquisition  Corp.  ("Acquisition"),  purchased  Applied
Digital  Data  Systems,   Inc.  ("ADDS")  from  NCR  Corporation  ("NCR"),  (the
"Boundless Acquisition").  ADDS, renamed in 1996 to Boundless Technologies, Inc.
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 ( the "Digital Acquisition") 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).

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' and
GA's version of the database system  licensed from Pick Systems.

In April 1995, the Company, through OTW Corporation ("OTW"),  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 16).

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.


                                      F-8
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)


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  considers   undiscounted  cash  flows  for  each  product  that  has
significant  long-lived or  intangible  asset values  associated  with it. As of
December  31,  1998,  management  does not believe  there is any  indication  of
impairment.

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.

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 $489 and $284 as of December  31, 1998 and
1997,  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 15% and 16% of total revenues in 1998 and
1997,  respectively.  Two customers represented 16% and 14% of total revenues in
1996.

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.


                                      F-9
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)


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

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense was $2,476,  $1,826 and $1,631 for the years ended  December  31,  1998,
1997 and 1996.

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,  $1,078 and $1,117 for the years ended December 31,
1998, 1997 and 1996.

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

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

SFAS No. 128,  "Earnings Per Share"  ("EPS")  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
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                      For the Year Ended December 31, 1998
                                            ---------------------------------------------------------
                                                 Income              Shares             Per Share
                                               (Numerator)        (Denominator)          Amount
                                            -----------------   -----------------   -----------------
<S>                                                   <C>                <C>                 <C>

Net income                                            $4,908
Preferred stock dividends                               (497)
                                            -----------------
 Basic earnings per share:
 Income available to common stockholders               4,411               4,893                $0.90
                                                                                    =================
 Effect of dilutive securities:
 Options and warrants                                      -                  33
                                             ---------------    ---------------- 

 Diluted earnings per share:
 Income available to common stockholders
    plus assumed conversions                          $4,411               4,926               $0.90
                                           =================   =================   =================

                                                        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 stockholders               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 stockholders
    plus assumed conversions                          $4,426               5,103                $0.86
                                            =================   =================   =================

                                                        For the Year Ended December 31, 1996
                                            ---------------------------------------------------------
                                                 Loss                 Shares           Per Share
                                               (Numerator)        (Denominator)          Amount
                                            -----------------   -----------------   -----------------
Loss from continuing operations                      ($1,587)
Discontinued operations                               (9,652)
Preferred stock dividends                               (497)
                                            -----------------

 Basic and diluted loss per share                   ($11,736)              4,702               ($2.50)
                                            =================   =================   =================



</TABLE>

                                      F-11
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)


Options to purchase  879,628 shares of common stock at a weighted  average price
of $13.01 per share were not included in the computation of diluted earnings per
share in 1998 because the options'  exercise  price was greater than the average
market price of the common shares.  The options,  which range in expiration date
from January 1999 to December 2004, were still outstanding at December 31, 1998.

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 7, 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 Standard
------------------------

SFAS No. 133,  "Accounting for Derivative  Instruments  and Hedging  Activities"
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  SFAS  No.  133  requires  that  an  entity  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those  instruments at fair value. SFAS No. 133 is effective
for all fiscal  quarters of fiscal  years  beginning  after June 15,  1999.  The
Company is assessing  the impact that the adoption of SFAS No. 133 will have, if
any, on its consolidated financial statements.


3.     Comprehensive Income

The Company adopted  Statement of Financial  Accounting  Standards  ("SFAS") No.
130,  "Reporting   Comprehensive  Income"  during  fiscal  1998.  SFAS  No.  130
establishes new rules for the reporting and presentation of comprehensive income
and its components.  The Company has no material items of  comprehensive  income
adjustments.  Comprehensive income (loss) for the years ended December 31, 1998,
1997 and 1996 was equal to reported net income (loss).


                                      F-12
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)


4.     GAI Partnership

Effective  May 1995,  Boundless and GA formed a limited  liability  company (the
"GAI  Partnership") with GA owning 51% and Boundless owning 49%. 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.

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  or fails 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.

Boundless  received  cash  distributions  of $0, $1,459 and $2,473 for the years
ended December 31, 1998,  1997 and 1996,  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,  1998,  the  Company was owed $2,468  under the terms of the
Agreement and had not received  required payments since 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  Operating  Agreement,  may  assume  the
management  responsibilities  of the  GAI  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-13
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)

5.     Inventories

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

The major components of inventories are as follows:

<TABLE>
<CAPTION>
                                                                          December 31,             
                                                             ---------------------------------------
                                                                    1998                1997        
                                                             ------------------   ----------------- 
<S>                                                          <C>                  <C>

Raw materials and purchased components                                $ 10,264            $ 10,723  
Finished goods                                                           1,915               2,477  
Demonstration equipment                                                     71                 135  
Service parts                                                              315                 347  
                                                             -----------------    -----------------
                                                                      $ 12,565            $ 13,682  
                                                             ==================   ================= 
</TABLE>

6.   Property and Equipment

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                             -------------------------------------- 
                                                                    1998                1997        
                                                             ------------------   ----------------- 

<S>                                                          <C>                  <C>      
Land                                                                  $  3,780             $ 3,780  
Buildings and improvements                                               6,271               6,193  
Machinery and equipment                                                  5,470               5,058  
                                                             ------------------   ----------------- 
                                                                        15,521              15,031  
Less accumulated depreciation and amortization                           5,270               4,417  
                                                             ==================   ==================
                                                                      $ 10,251            $ 10,614  
                                                             ==================   ==================
</TABLE>

7.     Income Taxes

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

<TABLE>
<CAPTION>
                                                         1998                1997                1996

                                                  ------------------  ------------------   -----------------
<S>                                                         <C>                 <C>                  <C> 
Current:
  Federal                                                   $ 1,599              $ (347)             $ (340)
  State                                                         618                 213                 413
                                                  ------------------  ------------------   -----------------
                                                              2,217                (134)                 73
                                                  ------------------  ------------------   -----------------
Deferred:
  Federal                                                    (1,248)                  -                 889
  State                                                        (220)                  -                   -
                                                  ------------------  ------------------   -----------------
                                                             (1,468)                  -                 889
                                                  ------------------  ------------------   -----------------

                                                              $ 749              $ (134)              $ 962
                                                  ==================  ==================   =================
</TABLE>


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

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:

<TABLE>
<CAPTION>
                                                         1998                1997                1996
                                                  ------------------  ------------------   -----------------
<S>                                                         <C>                 <C>                <C>
Federal income tax at statutory rate                        $ 1,923             $ 1,615            $ (3,760)
Utilization of prior year net operating
  loss carryforwards                                           (531)             (1,481)                  -
State income taxes, net of federal                              379                 278                 273
   income tax benefit
Other, net                                                       37                754                 609
Change in valuation allowance                                (1,059)             (1,300)              3,840
  on deferred tax assets
                                                  ------------------  ------------------   -----------------
     Income tax expense (benefit)                             $ 749              $ (134)              $ 962
                                                  ------------------  ------------------   -----------------
</TABLE>



                                      F-15
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)


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

<TABLE>

<CAPTION>

                                                               December 31,
                                                  --------------------------------------
                                                         1998                1997
                                                  ------------------  ------------------
<S>                                               <C>                 <C>
Current deferred tax assets:
  Inventory                                                 $ 1,340             $ 1,759
  Accounts receivable                                           186                 108
  Warranties                                                    814                 753
  Other                                                         130                   -
                                                  ------------------  ------------------
     Total current deferred tax assets                        2,470               2,620 
                                                  ------------------  ------------------

Noncurrent deferred tax assets - Other                          448                 307
Noncurrent deferred tax liabilities - Property
   and equipment                                             (1,450)             (1,868)
                                                  ------------------  ------------------
     Net noncurrent deferred tax liabilities                 (1,002)             (1,561)
                                                  ------------------  ------------------
       Net deferred tax assets                                1,468               1,059
       Less valuation allowance                                   -              (1,059)
                                                  ------------------  ------------------
                                                            $ 1,468             $    -
                                                  ==================  ==================

</TABLE>


At December 31, 1997, the Company recorded a 100% valuation allowance on the net
deferred tax asset since it could not be determined if the asset was realizable.
At December  31, 1998,  the  valuation  allowance  was  eliminated  based on the
Company's  improvements in operating results and its determination  that the net
deferred tax assets are likely to be realized.  The Company files a consolidated
federal  income tax return.  As of December 31, 1998 there are no remaining  net
operating loss carryforwards.

8.     Debt

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

Notes payable were $5,500 and $7,650 at December 31, 1998 and 1997 respectively,
under a $15,000  revolving  credit agreement with Chase Manhattan Bank for loans
and letters of credit. There was a letter of credit outstanding totalling $1,000
at December 31, 1998 and 1997. The maximum amount of additional credit available
under the  revolving  loan at December 31, 1998 and December 31, 1997 was $6,045
and $1,094.

At the option of the  Company,  the  interest  rate is prime plus 1.25% or LIBOR
plus 2.5% (9.0% at December 31, 1998). See also Note 17.

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 9.1%,  10.25% and
9.5% for the years ended December 31, 1998, 1997 and 1996, respectively.


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

Long-term Debt
--------------

Long-term debt at December 31, 1998 and 1997 consisted of the following:

<TABLE>
<CAPTION>
                                                                             1998                1997
                                                                      ------------------   -----------------
<S>                                                                   <C>                  <C>

Note payable to NCR, bearing interest at  8% payable
  quarterly, principal due on or before April 30, 1999,
  collateralized by land and building                                           $ 8,000             $ 8,000
Term loan                                                                             -               3,250
Revolving loan                                                                    5,500                   -
                                                                      ------------------   -----------------
                                                                                 13,500              11,250
Less current maturities on long-term debt                                         8,000               3,250
                                                                      ------------------   -----------------
                                                                                $ 5,500             $ 8,000
                                                                      ==================   =================
</TABLE>



                                      F-17
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)

Acquisition is the legal obligor of the note payable to NCR. The note is payable
on or before  April 30,  1999.  (See Note  17).  However,  the note and  accrued
interest are 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  without  obtaining  bank approval.  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.

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, 1998 were as follows:

1999                $    8,000
2002                     5,500
                    ----------
                    $   13,500
                    ==========

9.     Equity

At December 31, 1998 and 1997, stockholders' equity consisted of the following:

<TABLE>
<CAPTION>
                                                                             1998                1997
                                                                      ------------------   -----------------
<S>                                                                   <C>                  <C>

Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                                                      $    -              $     -
Common stock, $0.01 par value, 25,000,000 shares
  authorized, 4,428,609 and 5,139,228 shares issued
  at December 31, 1998 and 1997, respectively                                        44                  51
Additional paid-in capital                                                       30,940              34,094
Accumulated deficit                                                             (14,327)            (18,738)
                                                                      ==================   =================
     Total stockholders' equity                                                $ 16,657            $ 15,407
                                                                      ==================   =================
</TABLE>


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

During 1998 the Company repurchased from a stockholder shares of its outstanding
Common Stock as follows:

1.   In May 1998 the Company  repurchased  600,000  shares of the Company's then
     outstanding  Common  Stock from  Morgan  Kent Group at $5.00 per share,  or
     approximately  14%  below  the  closing  market  price  on May 15,  1998 as
     reported  on the NASDAQ  SmallCap  Market.  The Company  repurchased  these
     shares to reduce the voting  power of Morgan Kent Group from  approximately
     51% to 45% and to set aside  shares  enabling  the  Company  to issue up to
     600,000  shares of its Common  Stock in  acquisitive  transactions  without
     diluting   public   stockholders.   As  an  inducement  to  the  repurchase
     transaction,  the Company issued a warrant to Morgan Kent Group to purchase
     150,000 shares of the Company's  Common Stock at an exercise price of $5.80
     per common share. The warrant is exercisable  immediately and has a term of
     seven  years.  The  Company  recorded  an expense of $300  relating  to the
     issuance of the warrant.

2.   In December 1998 the Company  repurchased  110,620  shares of the Company's
     then outstanding Common Stock from Morgan Kent Group at $4.52 per share, or
     approximately 20% below the average of the preceding five day trading close
     as reported on the NASDAQ SmallCap Market.

In October 1998 the Company  granted to Mr. Stephen  Maysonave,  a member of the
Board of Directors,  35,000 options to purchase  shares of Common Stock at $3.00
per share that expire October 2003.  These options were granted for services Mr.
Maysonave  provided as a consultant to the Company and vest December  1999.  The
Company recorded an expense of $39 relating to the grant of the 35,000 options.


10.    Options and Warrants

On March 6, 1998,  the Company  filed an  Information  Statement on Schedule 14C
with the Securities and Exchange  Commission in connection  with,  amongst other
items,  the Board of  Directors  of the Company  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.

The Company had previously adopted its 1995 Incentive Plan which permitted up to
600,000  shares of Common Stock to be issued  thereunder.  As additional  shares
were no longer  available to be issued under the 1995 Incentive  Plan, the Board
adopted the 1997 Incentive Plan. The maximum number of shares to be issued under
the 1997 Incentive Plan is not to exceed  1,000,000.  The exercise price of each
option  granted  is to be  equal to or  greater  than  the  market  price of the
Company's  stock on the date of grant.  The terms of the options  are  generally
over five years with vesting  occurring  in 25%  increments  beginning  one year
after the grant date.

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, 1998 there were 115,100  fully vested  options
under the 1991 Plan 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,  1998 and 1997,  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 earnings (loss) applicable to common stockholders and
earnings  (loss) per share as if  compensation  cost for the Company's  employee




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

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 1998
and 1997 as follows:

         1.    Dividend yield of 0% for all years

         2.    Expected volatility ranging from .59 to .78

         3.    Risk-free interest rates ranging from 4.58% to 5.83%

         4.    Expected terms ranging from 1 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:

<TABLE>
<CAPTION>

                                                              1998                1997                1996
                                                       ------------------  ------------------   -----------------
<S>                                                              <C>                 <C>               <C> 

Net earnings (loss) applicable to common stockholders
  As reported                                                    $ 4,411             $ 4,386           $(11,736)
  Under SFAS No. 123                                               3,394               2,269            (13,263)

Earnings (loss) per share
  As reported - basic                                            $  0.90             $  0.89           $  (2.50)
  As reported - diluted                                             0.90                0.86              (2.50)
  Under SFAS No. 123-basic                                          0.69                0.46              (2.82) 
  Under SFAS No. 123-diluted                                        0.69                0.44              (2.82)
</TABLE>


A summary  of the status of the  Company's  stock  options  and  warrants  as of
December 31, 1998 and 1997,  and changes  during the years ending on those dates
is presented below:



                                      F-20
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)

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

<TABLE>
<CAPTION>
Options                                                     1998                                1997
-------                                    ------------------------------------- --------------------------------------
                                           ------------------- ----------------- ----------------  -----------------
                                                                  Weighted                               Weighted
                                                                  Average                                Average
                                                                  Exercise                               Exercise
                                                 Shares            Price              Shares               Price
                                           ------------------- ----------------- ----------------  -----------------
<S>                                        <C>                  <C>               <C>               <C>  


Outstanding at beginning of year                      698,798           $ 11.98          526,515          $ 16.80
  Granted                                             723,885              5.51          536,875             8.90
  Exercised                                                 -              -             (16,529)           (6.90)
  Forfeited                                          (498,967)            (9.53)        (348,063)          (14.70)
                                           ------------------- ----------------- ----------------  -----------------
Outstanding at end of year                            923,716            $ 8.26          698,798          $ 11.98
                                           =================== ================= ================  =================
Options exercisable at end of year                    617,131            $ 9.80          519,344          $ 12.26
                                           =================== ================= ================  =================

Weighted average fair value
  of options granted during the year                                     $ 2.51                            $ 4.86
                                                               =================                   =================

</TABLE>
<TABLE>
<CAPTION>
Warrants                                                  1998                                 1997
--------                                    ------------------------------------ --------------------------------------
                                                                     Weighted                              Weighted
                                                                      Average                               Average
                                                                      Exercise                             Exercise 
                                                  Shares               Price            Shares              Price  
                                           ------------------- ----------------- -------------------  -----------------
<S>                                        <C>                 <C>               <C>                  <C>    
Outstanding at beginning of year                      475,609           $ 14.56          667,062               $ 24.40
  Granted                                             150,826              5.82          397,017                  8.60
  Exercised                                                 -              -             (23,094)                (7.50)
  Forfeited                                           (91,943)           (36.75)        (565,376)               (22.40)
                                           ------------------- ----------------- -------------------  -----------------
Outstanding at end of year                            534,492            $ 8.27          475,609               $ 14.56
                                           =================== ================= ===================  =================
Options exercisable at end of year                    534,492            $ 8.27          475,609               $ 14.56
                                           =================== ================= ===================  =================

Weighted average fair value
  of warrants granted during the year                                    $ 1.86                                 $ 6.14
                                                               =================                      =================

</TABLE>


                                      F-21
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)



The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                                                  Weighted        
                       Number                      Average           Number
                   Outstanding at                 Remaining       Exercisable at
                    December 31,    Exercise   Contractual Life    December 31,
    Options             1998          Price        (Years)             1998    
                  ---------------  ----------  -----------------  --------------
<S>               <C>              <C>         <C>                <C>   
                          58,220      $ 3.00               4.81           15,000
                         151,920        4.88               4.42              -
                         438,329        5.63               3.14          338,153
                           5,000        6.00               4.89            5,000
                          20,000       10.00               3.43           11,666
                          75,000       10.30               3.25           75,000
                          47,370       13.50               0.94           46,186
                          25,000       15.70               3.97           25,000
                          13,100       16.30               0.19           13,100
                           1,250       17.50               0.20            1,250
                           5,500       20.60               0.59            5,500
                          64,000       21.30               0.93           62,833
                          15,000       25.60               0.84           15,000
                           4,027       28.20               1.47            3,443
                    -------------  ----------  -----------------  --------------
                         923,716      $ 8.26               3.13          617,131
                    =============  ==========  =================  ==============


                                                  Weighted        
                       Number                      Average           Number
                   Outstanding at                 Remaining       Exercisable at
                    December 31,    Exercise   Contractual Life    December 31,
    Warrants           1998          Price        (Years)             1998    
                  ---------------  ----------  -----------------  --------------
                         150,000      $ 5.80               6.38          150,000
                         307,502        7.50               5.95          307,502
                             731        8.63               0.46              731
                          31,375       10.00               1.80           31,375
                           1,134       13.75               1.44            1,134
                           2,500       18.40               5.59            2,500
                          30,000       18.60               3.39           30,000
                           3,750       26.88               0.10            3,750
                           7,500       26.90               0.14            7,500
                   --------------  ----------  -----------------  --------------
                         534,492      $ 8.27               5.54          534,492
                   --------------  ----------  -----------------  --------------
</TABLE>

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

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,



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

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.

A warrant to purchase  150,000  shares of Common  Stock at an exercise  price of
$5.80 per share,  exercisable  through May 18, 2005 was granted to a stockholder
as an  inducement  to allow the Company to purchase  shares of Common Stock from
the stockholder thereby reducing the stockholder's  percentage  ownership in the
Company below 50%. This warrant was valued at $300. (See Note 11).

An option to purchase  35,000  shares of Common  Stock at an  exercise  price of
$3.00 per share,  exercisable  through  October  21, 2003 was granted in October
1998  in  consideration  for  consulting  services.  The  option  is  valued  at
approximately $39.

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.

11.    Related Party Transactions

NCR is the holder of Boundless'  mandatorily  redeemable  preferred  stock.  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 $3,760,
$5,858, and $15,454 for 1998, 1997 and 1996 respectively. Purchases from NCR and
its subsidiaries were $73, $87, and $2,440 for those same periods, respectively.
The Company had accounts receivable outstanding from NCR and its subsidiaries of
approximately  $232 and $224 at  December  31, 1998 and 1997,  respectively.  In
addition,  the Company  received cash  distributions  from GAI of $0, $1,459 and
$2,473 for the years ended December 31, 1998, 1997 and 1996.

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 1998 such fees amounted to $210. At
December  31,  1998,  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 1998 under this agreement were $240.

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



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

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 8) 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 the
Company's  Board  upon  consideration  of the cost to the  Company to effect the
issuance of such warrant.

In May 1998  the  Company  repurchased  600,000  shares  of the  Company's  then
outstanding  Common  Stock  from  Morgan  Kent  Group at  $5.00  per  share,  or
approximately  14% below the closing market price on May 15, 1998 as reported on
the NASDAQ SmallCap Market.  The Company  repurchased these shares to reduce the
voting power of Morgan Kent Group from approximately 51% to 45% and to set aside
shares enabling the Company to issue up to 600,000 shares of its Common Stock in
acquisitive transactions without diluting public stockholders.  As an inducement
to the repurchase transaction, the Company issued a warrant to Morgan Kent Group
to purchase 150,000 shares of the Company's Common Stock at an exercise price of
$5.80 per common share. The warrant is exercisable immediately and has a term of
seven years. The Company recorded an expense of $300 relating to the issuance of
the warrant.

In December 1998 the Company  repurchased  110,620  shares of the Company's then
outstanding  Common  Stock  from  Morgan  Kent  Group at  $4.52  per  share,  or
approximately  20% below the average of the preceding  five day trading close as
reported on the NASDAQ SmallCap Market.

In October 1998 the Company  granted to Mr. Stephen  Maysonave,  a member of the
Board of Directors,  35,000 options to purchase  shares of Common Stock at $3.00
per share that expire October 2003.  These options were granted for services Mr.
Maysonave  provided as a consultant to the Company and vest December  1999.  The
Company  recorded an expense of $39 relating to the grant of the 35,000 options.
In addition,  the Company  paid Mr.  Maysonave  $64 during 1998  relating to Mr.
Maysonave's consulting efforts.

12.    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 $680,  $572,  and $636 in 1998,  1997 and 1996,
respectively.

Future minimum rental commitments as of December 31, 1998 were as follows:

1999                          $    466
2000                               106
2001                                40
2002                                11
                              --------
                              $    623
                              ========




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

13.    Contingencies

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

14.    Segment Reporting and Geographic Information

The  Company  has  adopted  SFAS No.  131,  "Disclosures  about  Segments  of an
Enterprise and Related Information," in the fiscal year ended December 31, 1998.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial  statements and requires  selected  information for
those segments to be presented in financial reports issued to stockholders. SFAS
No. 131 also establishes  standards for related  disclosures  about products and
services and geographic areas.  Operating  segments are identified as components
of an enterprise  about which  separate  financial  information is available for
evaluation  by its decision  making group.  To date,  the Company has viewed its
operations and manages its business in principally  one segment,  hardware sales
of computer  terminals  and  associated  services.  As a result , the  financial
information disclosed  herein represents all of the material information related
to the Company's principal operating segment.

Foreign sales were approximately $29,544, $30,911 and $47,500 for 1998, 1997 and
1996,  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:

                                   1998           1997           1996
                              --------------------------------------------

     United Kingdom                     11%            12%            9%
     Other European countries           17%            15%           21%
     Other foreign countries             5%`            5%            4%
                              --------------------------------------------
          Total foreign sales           33%            32%            34%
                              ============================================

15.    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, 1998, 1997 and 1996 the Company made  contributions
of $69, $33 and $17 to the plan.

16.    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.

17.    Subsequent Events- Credit Facilities/Debt Agreements

On January 22, 1999,  Boundless  Technologies entered into an agreement with the
Chase  Manhattan Bank  extending,  to April 15, 1999, a revolving line of credit
which expired December 31, 1998. On April 14, 1999,  Boundless  Technologies and
Chase  signed an  agreement  for a new,  three-year,  $15,000  revolving  credit
facility.  Terms of the new revolving credit agreement are substantially similar
to terms of the  expired  agreement,  allowing  for loans and letters of credit,



                                      F-25
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                      (In thousands, except per share data)

based upon the  availability of collateral,  generally a percentage of inventory
and accounts receivable as specified in the agreement.  The interest rate is the
prime rate or LIBOR plus 2.0%.  Borrowings  outstanding  as of December 31, 1998
under the  revolving  loan have  been  classified  as  long-term  debt  based on
management's  ability and intent to  refinance  such  borrowings  on a long-term
basis.

The revised credit  agreement  also provides for a $4,000 term loan,  payable in
equal quarterly  installments plus accrued interest  beginning June 1999, over a
three-year  period.  The interest rate applicable to the term loan is LIBOR plus
300  basis  points.  Proceeds  from the term  loan  will be used to  reduce  the
outstanding balance of Boundless Technologies revolving credit line.

Under the terms of a related interest rate swap agreement, the Company fixed its
interest rate as to $4,200 under the  revolving  credit line and the entire term
loan at 7.64% and 8.68%, respectively.

On January 26, 1999 Boundless  Technologies  retired the mandatorily  redeemable
preferred stock,  payable to NCR Corp. in an amount of approximately  $3,600 due
January 31, 1999,  through  utilization  of borrowing  available to it under its
then existing revolving line of credit. Proceeds from the term loan, referred to
above, will be used to reduce the balance of the revolving line of credit.

On  January  31,  1999 the  Company  and NCR  Corporation  agreed to extend  the
maturity date of an existing $8,000 note (the "NCR Note") originally due January
31, 1999, to April 30, 1999, to allow the Company to complete  negotiations with
mortgage lenders to refinance the NCR Note. The Company is presently  evaluating
several proposals,  and believes that it is likely that a refinancing  agreement
will be negotiated by April 30, 1999 or that an  additional  extension  could be
obtained  to allow  such  negotiations  to be  finalized.  The rate of  interest
applicable  to the NCR Note is 8% per annum from January 1, 1999  through  March
26, 1999 and 12% per annum thereafter until April 30, 1999.



                                      F-26
<PAGE>

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

<TABLE>
<CAPTION>
                                                             December 31,
                                                       -------------------------
                              ASSETS                     1998            1997
                                                       -------------------------
<S>                                                    <C>          <C>
Current assets:
  Cash and cash equivalents                            $         -   $        -
  Accounts receivable                                           50           50
  Other current assets                                         130          403
                                                       -------------------------
   Total current assets                                        180          453

Investments in and advances to subsidiaries
   (eliminated in consolidation)                           17,300        15,750
Other assets                                                    6            45
                                                       -------------------------
                                                        $  17,486    $   16,248 
                                                       =========================

              LIABILITIES AND STOCKHOLDER'S EQUITY    
Current liabilities:
  Accounts payable and accrued expenses                 $     829    $      841
                                                       -------------------------
   Total current liabilities                                  829           841
                                                       -------------------------
   Total liabilities                                          829           841
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, 4,428,609 and 5,139,228 shares issued
 at December 31, 1998 and 1997, respectively                   44            51
 Additional paid-in capital                                30,940        34,094
 Accumulated deficit                                      (14,327)      (18,738)
                                                       -------------------------
  Total stockholder's equity                               16,657        15,407  
                                                       -------------------------
                                                        $  17,486    $   16,248
                                                       -------------------------
</TABLE>


                                      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)

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                        ----------------------------------------
                                                                             1998          1997       1996
                                                                        ------------   ----------- -------------
<S>                                                                      <C>           <C>          <C>
Sales                                                                    $       -     $       -    $        - 
Cost of sales                                                                    -             -             -
                                                                        ------------   ----------- -------------
 Gross margin                                                                    -             -             -
Expenses:
  Operating                                                                     684           234         2,367
  Interest                                                                       32            98            52
  Other (income) and expenses                                                   510           250          (323)
                                                                        ------------   ----------- -------------
                                                                              1,226           582         2,096   
                                                                        ------------   ----------- -------------
Loss before benefit for income taxes and other items below                   (1,226)         (582)       (2,096)
Benefit (provision) for income taxes                                            162           198          (191)
                                                                        ------------   ----------- -------------
Loss before equity in income of consolidated subsidiaries                    (1,064)         (384)       (2,287)

Equity in income of consolidated subsidiaries, net of preferred stock              
   dividend of $497 in 1998, 1997 and 1996                                    5,475         4,770           203
                                                                        ------------   ----------- -------------

Income (loss) from continuing operations                                      4,411         4,386        (2,084)
Equity in loss from discontinued operations                                       -             -        (9,652)
                                                                        -------------  ----------- -------------

Earnings (loss) available for common stockholders                        $    4,411    $    4,386   $    (11,736)
                                                                        =============  =========== =============
</TABLE>




                                      S-2
<PAGE>


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

<CAPTION>
                                                                                              December 31,
                                                                        ---------------------------------------
                                                                             1998          1997       1996
                                                                        --------------------------  -----------
<S>                                                                     <C>           <C>           <C>
Net cash flows provided by operating activities                         $     5,050   $     5,497   $  (10,747)
                                                                        ------------  ------------  -----------
Cash flows from investing activities:
 Decrease (increase) in investments in subsidiaries                          (1,550)       (7,152)       5,211
 Payments for other assets                                                       -             -           (44)
                                                                        ------------  ------------  -----------
 Net cash provided by (used in )investing activities                         (1,550)       (7,152)       5,167
                                                                        ------------  ------------  -----------
Cash flows from financing activities:
 Proceeds from sale of convertible notes                                         -          1,700        1,500
 Costs associated with issuance of debt                                          -           (187)          -
 Purchase and retirement of common stock                                     (3,500)           -            -
 Proceeds from issuance of common stock                                          -            136        3,980
                                                                        --------------------------  -----------
  Net cash provided by (used in) financing activities                        (3,500)        1,649        5,480
                                                                        --------------------------  -----------
Net decrease in cash and cash equivalents                                        -            (6)         (100)
Cash and cash equivalents at beginning of year                                   -             6           106
                                                                        --------------------------  -----------
Cash and cash equivalents at end of year                                $        -    $       -     $        6
                                                                        ==========================  ===========
Non-cash transactions:
 Conversion of convertible notes into common stock                      $        -   $     1,700   $     1,500
 Options, warrants and common stock issued for services                        339            63         1,424
 Issuance of common stock for preferred dividend of subsidiary                   -           497           497
 Issuance of common stock for TradeWave obligation                               -             -           300
</TABLE>


                                      S-3
<PAGE>

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

                        Balance at                                   Balance at
                       Beginning of                                    End of
     Description          Period        Additions     Deductions       Period   
-------------------  ----------------  -----------  --------------  ------------
Allowances:
 Doubtful accounts:
       1998            $         284    $     209    $       4 (A)   $      489
       1997                    1,227          (20)         923 (A)          284
       1996                    1,407          150          330 (A)        1,227
Inventory reserves:
       1998            $       3,996    $     808    $   1,531 (B)   $    3,273
       1997                    5,853         (595)       1,262 (B)        3,996
       1996                    3,032        3,845        1,024 (B)        5,853

(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
-----------                   -----------------------

    10(aa)                    Employment Agreement, dated June 1, 1998, among
                              the Registrant, Boundless Technologies, Inc.
                              and J. Gerald Combs.

    10(bb)                    Employment  Agreement,  dated  February  9,  1998,
                              between Boundless Technologies, Inc. 
                              and Kenneth East.

    23                        Consent of BDO Seidman, LLP

    27                        Financial Data Schedule