________________________________________________________________________________
                                    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, 1996

                         Commission File Number 0-17977

                              SUNRIVER 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.)

    Echelon IV, Suite 200,
 9430 Research Blvd, Austin, TX                          78759-6543
(Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (512) 349-5800

           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. [X]

             The aggregate market value of the voting stock held by
 non-affiliates of the registrant, computed by reference to the last sale price
      of the registrant's Common Stock on March 21, 1997, is $24,637,588.

     As of March 21, 1997, the registrant had 49,631,398 shares of Common Stock,
$.01 par value per share, outstanding.

________________________________________________________________________________
<PAGE>

                                     PART I


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

General

         SunRiver   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  access  to  corporate   computing
environments, including mainframes, LANS, WANS, intranets and the Internet.

         The 1996 fiscal year has been a year of transition for the Company that
culminated  in senior  management  changes and internal  restructuring  programs
designed to refocus the Company on its core business while achieving significant
cost savings.  These  programs  included a work force  reduction at Boundless of
approximately  130 (35%) of  Boundless  employees  worldwide  and  resulted in a
non-recurring  charge of approximately  $1.8 million.  In addition,  the Company
decided to discontinue the operations of its subsidiary,  TradeWave  Corporation
("TradeWave"),  which resulted in a charge of approximately $6.6 million.  Since
April 1995,  TradeWave had been in the process of transitioning  from a research
and  development  enterprise  to a  commercial  provider of software  for secure
business communications over TCP-IP-based networks. TradeWave had been consuming
substantial amounts of the Company's cash resources and was materially adversely
affecting the Company's profitability. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Results of Operations."

         Also during 1996,  the Company  introduced a network  computer  product
line ("Network Computers") aimed at businesses desiring to replace terminals and
older networked personal computers ("PCs") with a lower-cost  alternative to PCs
that will have the advantages of terminals and the functionality and performance
that businesses generally expect from PCs.

         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) Network Computers; and (iii) other terminal products that are
used in  multi-user,  personal  computer  and  mini-computer-based  environments
("MultiConsole  Terminals").  The Company  receives a royalty from a partnership
(the "GAI Partnership") formed by Boundless and General Automation, Inc. ("GAI")
and managed by GAI. The GAI Partnership designs,  integrates, sells and supports
multi-user  computer  systems  that can manage  large  volumes  of data  running
Boundless' and GAI'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 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 a result,  based on 1994 published industry data, the Company
believes that Boundless is the second largest  manufacturer  of General  Display
Terminals in the world with an installed user base of more than 5,000,000 units.
As no manufacturing facilities were included in this acquisition,  Boundless has
transferred  all  production of the VT and Dorio  product  lines from  Digital's
facilities in the Far East to the Boundless' plant in Hauppauge, New York.


<PAGE>
         Boundless  offers  standard  and custom  models of its General  Display
Terminals  primarily  to retail,  financial,  telecommunications  and  wholesale
distribution  businesses  requiring  them  for  data  entry  and  point  of sale
activities.  Standard and custom model Network  Computers are being  marketed by
Boundless primarily to  telecommunications,  retail,  financial,  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.

         Reference  is made to  Notes  1,  3,  4,  5, 6, 10 and 19 of  Notes  to
Consolidated  Financial  Statements for definitions of certain capitalized terms
and information  regarding  acquisitions  and  dispositions by the Company since
December 1994 and the GAI Partnership.

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.  The Company is highly  leveraged.  As of
December 31, 1996, the Company had a negative tangible net worth of $703,000 and
total  liabilities of $57,168,000.  The Company's cash  requirements at December
31, 1996  included  repayment  of the  remaining  balance of  $13,382,000,  plus
interest, of the original $20,000,000 term loan, under its bank credit line with
The Chase  Manhattan  Bank,  N.A. (the "Chase Credit Line"),  in seven quarterly
installments;  repayment  of a revolving  loan,  under the Chase  Credit Line of
$13,950,000,  plus interest;  payment of an $8,000,000 note (requiring quarterly
interest  payments) payable to NCR on January 31, 1999; payment of $3,554,692 to
NCR if it exercises a put option at any time in 1999; and annual payments to NCR
of $497,657 in cash or the Company's  Common Stock.  While the Company  believes
that cash  generated from  operations and available  under the Chase Credit Line
will be sufficient to pay its other obligations as they become due, in the event
there is a decline in the  Company's  sales and  earnings  and/or a decrease  in
availability  under the Chase  Credit  Line,  the  Company's  cash flow would be
adversely affected.  Accordingly, the Company may not have the necessary cash to
fund all of its obligations. The Company's ability to obtain equity financing to
reduce its debt and increase its stockholders'  equity is adversely  affected by
such leverage and other risks described below. See "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital Resources."

         Operating History.  As a wholly-owned  subsidiary of NCR, Boundless had
net losses of $2,940,336,  $9,709,549 and $3,288,634 in the years ended December
31, 1992 and 1993 and the period from January 1, 1994 to December 9, 1994. Prior
to the  Company's  acquisition  of the assets and  business of  SunRiver  Group,
SunRiver  Group had net income of $302,057 for the year ended December 31, 1992,
a net loss of $70,168  for the year ended  December  31,  1993 and net income of
$37,618 for the year ended December 31, 1994,  inclusive of the results for ADDS
for the period  December 10 through  December  31,  1994.  The Company  recorded
nonrecurring  charges of approximately  $2,207,000 in the quarter ended December
31, 1995 relating to the  acquisition of in-process  technology by TradeWave and
the  refinancing  of debt in  connection  with the  acquisition  of assets  from
Digital and non-recurring  changes of approximately  $8.4 million in the quarter
ended  December 31, 1996  relating to the  restructuring  of the Company and the
discontinuance of TradeWave's operations. The Company believes that a comparison
of the Company's  operating  results since  December 9, 1994 to prior results of
ADDS and SunRiver Group is not  meaningful  because of the  substantial  changes
that have been effected by management of the Company since December 9, 1994, the
date the Company  acquired  ADDS and the assets and business of SunRiver  Group.
However, it will be necessary for the Company to have a longer operating history
as a  basis  for  comparison  and  a  meaningful  evaluation  of  the  Company's
performance.  See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations - Results of Operations."


                                        2

<PAGE>

         Strategy.  Approximately  80% of the Company's sales for the year ended
December 31, 1996 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 Network  Computers.  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 Network  Computers.  There can be no assurance that the
Company's strategy is valid. See "-Products and Services - Network Computers."

         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.  Digital and NCR were the  Company's
most significant  customers in 1996,  accounting for  approximately 16% and 14%,
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. The
loss of Digital or NCR as a customer would have a material adverse effect on the
Company's  results of operations and liquidity.  See "- Sales and Marketing" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

         Dependence Upon Key Personnel.  The Company's  success will depend upon
its key management,  sales and technical personnel. The Company and Boundless do
not have  employment  contracts  with any of its  employees.  In  addition,  the
Company believes that, to succeed in the future, it will be required to continue
to attract, retain and motivate additional skilled executive and technical sales
and  engineering  employees  who are in short  supply  because  of great  demand
throughout the industry for their services.  The loss of any of its existing key
personnel  or the  inability  to attract and retain key  employees in the future
could  have a  material  adverse  effect  on the  Company.  See  "Directors  and
Executive Officers of the Registrant."

         New  Products  and  Technological  Change.  The  computer  industry  is
characterized by a rapid rate of product  improvement,  technological change and
product  obsolescence.  As a result,  the Company's product lines are subject to
short life cycles.  While the Company is engaged in research and  development of
new  products,  no assurance can be given that the Company will be able to bring
any new products to market to replace  existing  products  rendered  obsolete by
technological  change.  The failure of the  Company to market new  products on a
timely basis could  materially  and  adversely  affect the  Company's  business.
Furthermore,  inventory  management is critical to decreasing  the risk of being
adversely  affected by obsolescence and there is no assurance that the Company's
inventory management and flexible  manufacturing systems will adequately protect
against this risk. The Company  recorded  nonrecurring  charges of approximately
$1,225,000 during the quarter ended December 31, 1995 when management recognized
that the pricing practices of bundling browser software by TradeWave's  Internet
competitors  had impaired the revenue  potential  of the  in-process  technology
acquired by TradeWave.  In addition,  approximately  $6.6 million was charged to
operations  during the quarter ended December 31, 1996, when the Company decided
to  discontinue  TradeWave's  business  because  the  Company  decided  that the
resources  necessary to bring  TradeWave's  products to market should instead be
allocated to the Company's core business conducted by Boundless.

                                        3
<PAGE>

Furthermore,  Boundless  established  inventory  reserves of approximately  $2.2
million 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
Advanced  Scientific Corp. and Wong Electronics Corp., which manufacture plug-in
logic  boards in Taiwan  and  China,  respectively,  for the  Company's  General
Display Terminals, accounted for approximately 22% and 13%, respectively, of the
dollar  amount of the Company's  total  purchases in 1996 of  subassemblies  and
components.  No other supplier  accounted for 10% or more of such amount.  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 affect on the Company's business.

         Research and  Development.  There has been  substantial  investment  in
research and development of the Company's  existing  products by SunRiver 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 "-Products and Services - Research and Development and Financial
Statements and Pro Forma Information".

         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,"  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations - Results of Operations."

         Control by SunRiver  Group.  SunRiver  Group owns  approximately  56.9%
(approximately  49.4% on a fully diluted basis) of the outstanding shares of the
Company's Common Stock (including  4,174,704  shares  underlying  warrants) and,
accordingly,  has  the  ability  to  elect  all  directors,   authorize  certain
transactions  that require  stockholder  approval and otherwise  control Company
policies,  without concurrence of the Company's minority stockholders.  SunRiver
Group's control of the Company may have an adverse affect 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  would be
difficult or the perception  that public sales of significant  amounts of Common
Stock by SunRiver  Group is likely.  Such  control  could also make the possible
takeover of the Company or the removal of Management more difficult,  discourage
hostile  bids for  control of the  Company  in which  stockholders  may  receive
premiums  for their shares of Common Stock and  otherwise  adversely  affect the
market price of the Common Stock. See "Security  Ownership of Certain Beneficial
Owners and Management" and "Certain  Relationships and Related Transactions" 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 the businesses  similar to the Company's
business. Various factors and events may have a significant impact on the market


                                        4

<PAGE>
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 network graphics
display  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 1996,  sales to NCR
constituted approximately 14% 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 and at least 80,000
General  Display  Terminals  during the first year of such  agreement.  However,
Digital can  terminate  the  agreement  for cause  without  compensation  to the
Company. Sales of General Display Terminals to Digital constituted approximately
16% of total General Display Terminal sales for 1996.

         The  Company  does not  anticipate  that sales to NCR or Digital  will
reach comparable  levels in 1997. See "- "Marketing and Sales" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

         Network Computers. The Company's Network Computers have no applications
storage,  depend  almost  entirely  on network  servers for  processing  and are
significantly   smaller   than  a  general   purpose  PC.  They  use  Intel  and
Intel-compatible  processors.  They 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.  Since August 1996, the Company has introduced  three Network Computer
models,  the XL,  XLC  and TC.  The XL and XLC  are  based  on and  replace  the
Company's line of Network  Graphics  Displays.  The TC is a new design. A second
generation  Network Computer is expected to be released in the second quarter of
1997 and will provide terminal users with a text terminal replacement,  that has
the look and feel of their  current  application,  yet  provides  the ability to
transition  to  Windows,  intranet,  Internet  and  Java  applications  with the
addition of Boundless'  software that is downloaded from the network server. The


                                        5

<PAGE>

Company  believes that for the following  primary  reasons,  network  computers,
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 Network  computers  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 Network  computers  are more  easily  administered  because  of their
dependence upon centrally-located servers.

         o  Network  computers  have  the  functionality  and  performance  that
businesses generally expect from PCs.

         o Network  computers 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    Network   Computers   include
telecommunications,  retail, financial, 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.  The  Company's  MultiConsole  Terminals  were
developed by SunRiver 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 Company's  MultiConsole  Terminals principally consist of two
components,  a host  adapter  which plugs into a PC, and a logic box.  Each host
adapter  permits  up to eight  MultiConsole  Terminals  to access  the same host
computer and up to 32  terminals  can access the same host  computer  using four
host  adapters.  The  MultiConsole  Terminal has the same look and feel as a PC.
Nevertheless,  MultiConsole  Terminals do not have CPUs since they share the CPU
of the host  computer.  MultiConsole  Terminals  are best  suited  for  small to
medium-sized    businesses    requiring    predominantly    transaction-oriented
applications. Typical users include financial branch offices, hospitals, hotels,
retailers,  pharmacies  and  professional  offices,  such as  accounting  firms,
doctors' and dentists' offices and law firms.

         GAI  Partnership.  Effective  May 22, 1995,  Boundless  entered into an
Operating Agreement with GAI covering Boundless' and GAI's participation in, and
management  of,  a  newly-formed  company  (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 GAI's  version of the Pick  system on various  hardware
platforms.  Boundless'  systems  consist of Unix  software  with NCR System 3000
hardware and operating system software under the Mentor(R) Operating Environment
brand name,  as well as a lower cost system  under the Mentor PRO brand name for
use with standard PC's (collectively, "Mentor Systems"). Mentor Systems are used
to  manage  large  volumes  of  data.  Users of  Mentor  Systems  include  large
distribution centers,  retail establishments,  manufacturers,  local governments
and data bases for credit and  collections.  The business and affairs of the GAI
Partnership are managed exclusively by GAI, subject to consultation from time to

                                        6


<PAGE>
time with  Boundless.  See "Directors and Executive  Officers of the Registrant"
for  information  regarding the  affiliation  of the Company's  Chief  Executive
Officer with GAI.

         In addition,  Boundless has  subcontracted  to the GAI  Partnership all
services  required  by  Boundless  under  its  existing  maintenance   contracts
(including with respect to its Mentor Systems). The GAI Partnership is providing
maintenance  service by telephone to Boundless  customers and dispatches on-site
maintenance   services  pursuant  to  a  maintenance   agreement  that  the  GAI
Partnership has entered into with NCR.

         Boundless decided to substantially  reduce its active  participation in
the Pick  systems  business  in  order  to  devote  more  resources  to its core
business.  Boundless  believes  that,  in  the  declining  Pick  market,  it  is
beneficial to create a more significant  market presence by partnering with GAI.
As a result,  the GAI  Partnership  is one of the largest  providers in the Pick
marketplace.  For its  contribution,  Boundless  receives a royalty from the GAI
Partnership.  See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations Results of Operations."

         Professional Services. Prior to the formation of the GAI Partnership, a
material portion of the Company's  revenues was derived from its activities as a
provider  of  consulting,   installation,  software  and  hardware  maintenance,
software upgrade and tuning,  disaster backup and other  professional  services.
These  services were provided  almost  exclusively  to Mentor  Systems users and
value added resellers  ("VARs") of systems purchased from the Company as well as
to users of the Company's other products  desiring more service and support than
the basic warranty provides. The Company is continuing to provide these services
with respect to its desk top  terminals  and Network  Computers.  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 and for the period  December 9 through
December 31, 1994, the percentage of total revenue  contributed by those classes
of similar  products  or  services  which  accounted  for ten percent or more of
consolidated revenue in either of the last three calendar years. The information
presented in the  following  table,  for periods  prior to December 9, 1994,  is
based upon the operations of SunRiver  Group.  Such  information  for the period
December 9, 1994 through  December 31, 1994 and for the years ended December 31,
1995 and 1996 is based  upon the  consolidated  operations  of the  Company  and
excludes revenue generated by TradeWave.


<TABLE>
<CAPTION>

                                      General                                   Network
                                      Display             Mentor               Graphics            Professional         MultiConsole
Period                               Terminals            Systems              Displays              Services             Terminals
------                               ---------            -------              --------              --------             ---------
<S>                                    <C>                  <C>                   <C>                   <C>                   <C>

1994                                   26.3%               10.3%                 9.4%                  14.0%                40.0%

1994 (December 12-31)                  42.6%               16.6%                 15.1%                 22.7%                  3%

1995                                   49.8%               4.7%                  28.5%                 13.5%                 3.5%

1996                                   80.1%               2.6%                  9.2%                  5.0%                  3.2%
</TABLE>

         The following  information  (which is pro forma for 1994)  presents the
consolidated  results of  operations  as though the  Boundless  Acquisition  had
occurred on January 1, 1994.  It does not purport to be indicative of what would
have occurred had the Boundless  Acquisition  occurred as of January 1, 1994, or
of the  results  which  may  occur in the  future.  Such pro  forma  information
excludes TradeWave revenue and the effects relating to the Digital Acquisition.


                                        7

<PAGE>
<TABLE>
<CAPTION>
                                      General                                   Network
                                      Display             Mentor               Graphics            Professional         MultiConsole
Period                               Terminals            Systems              Displays              Services             Terminals
------                               ---------            -------              --------              --------             ---------
<S>                                     <C>                  <C>                  <C>                  <C>                    <C>

1994                                   41.5%               13.3%                 19.9%                 21.3%                 4.0%

1995                                   49.8%               4.7%                  28.5%                 13.5%                 3.5%

1996                                   80.1%               2.6%                  9.2%                  5.0%                  3.2%
</TABLE>

         See  Management's  Discussion  and Analysis of Financial  Condition and
Results of  Operation -- Results of  Operations - Years Ended  December 31, 1995
and 1994.

         Foreign  Sales.  Net  foreign  sales  were  approximately   $1,127,000,
$15,912,000  and $47,500,000  for 1994,  1995 and 1996,  respectively.  On a pro
forma  basis,  net foreign  sales for 1994 were  approximately  $8,020,000.  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 in the
regions set forth in the table.

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

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

1994                    13.5%               5.2%                6.1%

1995                    16.6%               13.0%               1.2%

1996                    33.9%               29.6%               0.8%



                                     % of Total Revenue
                                         (Pro forma)
                ----------------------------------------------------------------

Period          Total           Europe          Far East             Middle East
------          -----           ------          --------             -----------

1994            10.0%            5.3%              1.0%                 1.1%

1995            16.6%           13.0%              0.7%                 0.3%

1996            33.9%           29.6%              2.0%                 1.0%


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

Manufacturing

             Assembly  Operations.  The Company's  manufacturing  operations are
located at its main facility in Hauppauge,  New York and include  procurement of
components  and the assembly and testing of its  products.  The Company does not
manufacture any of the  subassemblies  or components used in the assembly of its
products.  Investment in  production  equipment is not material to the Company's
manufacturing  operations.  Semi-skilled and skilled workers  assemble  products
using a  cell-based  manufacturing  process  that allows the Company to assemble
various models at mass production costs. The Company generally  cross-trains its


                                        8

<PAGE>

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, 1996  totaled  approximately
$9,048,000  as  compared  to  $7,699,00  at  December  31,  1995.  Approximately
$7,165,000 of the Company's backlog at December 31, 1996 was for General Display
Terminals.

             The Company is using  approximately  90,000 of its  155,000  square
feet  of  space  for   manufacturing   and  has  the  capacity  to   manufacture
approximately  1,000,000 units per year. In order to meet anticipated demand for
General  Display  Terminals  resulting from the Digital  Acquisition,  Boundless
increased  the  manufacturing  square  footage  from  80,000 to 90,000 and added
tooling and equipment,  at a cost of approximately  $800,000,  at its Hauppauge,
New York  facility,  increased  the  number of its  manufacturing  employees  by
approximately  100 and added a second shift in 1996. In January 1997,  Boundless
reduced by 60 the number of its  manufacturing  employees  after  completing the
fulfillment  of the  Digital  commitment  to  purchase  80,000  General  Display
Terminals in 1996.

             Suppliers.  The Company purchases  subassemblies and components for
its products  almost  entirely  from more than 40 domestic and Far East sources.
Purchases from Advanced  Scientific  Corp.  and Wong  Electronics  Corp.,  which
manufacture  in Taiwan and China,  respectively,  plug-in  logic  boards for the
Company's  General Display  Terminals,  accounted for approximately 22% and 13%,
respectively,  of the total dollar  amount of the Company's  total  purchases in
1996 of  subassemblies  and components.  No other supplier  accounted for 10% or
more of such amount.  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. To date, such shortages have not had a
material adverse effect on its business.

             Warranties and Returns.  The Company  provides a one- to three-year
warranty covering  defective  materials and workmanship.  The Company's products
are serviced at depots that are geographically  dispersed  throughout the world.
Users  can  purchase  extended  warranties  of up to three  years or can pay for
repairs on a time and materials  basis. On a pro forma basis,  during 1994, 1995
and 1996, the Company's cost of warranty  repairs was  approximately  1.1%, 1.2%
and 2.4%,  respectively,  of the  Company's  total  revenues.  Warranty  expense
increased in 1996 as a result of the  Company's  Maintenance  Service  Agreement
with  Digital.  Software is not warranted by the Company but users are permitted
to return  software  for a refund  within 30 days after  purchase.  Accordingly,
customers are afforded the opportunity to use software on a trial basis.

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


                                        9

<PAGE>

             Research and  Development.  During 1994, 1995 and 1996, the Company
expended approximately  $990,000,  $4,569,000 and $4,855,000,  respectively,  on
research and development activities.  Not included in the foregoing are research
and  development  expenses  incurred  by  TradeWave.   Boundless'  research  and
development activities have historically related primarily to the enhancement of
existing products. As a part of the Company's 1996 restructuring  programs,  the
Company  consolidated  its research and  development  activities  by closing its
Orlando,  Florida  facility and reducing its research and development  personnel
from 55 to 24. The Company  intends to devote  more  efforts to  developing  and
acquiring new products and  technologies  that can shorten the  time-tomarket of
the  Company's  products.  For  additional  information  regarding  research and
development  expenditures 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, who
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  dispensed  locations  in the United
States and a European office in The  Netherlands.  The Company has recently been
expanding its marketing  efforts to include South America,  Asia,  Australia and
New Zealand.

             As a result of the Digital  Acquisition,  the Company has  expanded
its OEM  relationships and worldwide  channels of distribution,  particularly in
Europe.  The Company  reached  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.

             Sales to Digital  constituted  approximately  16% of the  Company's
total  revenue  in  1996.  Although  Digital's  contracts  with  its  customers,
distributors  and resellers  were not assigned to Boundless,  Boundless has been
able  to  maintain  substantially  all  of  Digital's  prior  relationships  and
arrangements with them. In addition, under the Digital Supply Agreement, Digital
agreed  to  purchase  from  Boundless  at  least  95%  of  Digital's   worldwide
requirements  for  VT  General  Display  Terminals,  and  related  parts,  for a
four-year  period  ending  October  1999 and at  least  80,000  General  Display
Terminals during the first year of such agreement.  In 1996,  Digital  purchased
more General Display Terminals than it required in order to satisfy such minimum
commitment.  Digital may terminate its agreement for cause without  compensation
to the  Company.  Digital is  expected  to  continue  to be the  Company's  most
significant  customer in 1997,  although  the Company  does not expect  sales to
Digital will reach a comparable level in 1997. The loss of Digital as a customer
would have a material adverse affect on the Company's  results of operations and
liquidity.

             In 1996,  approximately  14% of the Company's  total  revenues were
sales to NCR.  Product sales to NCR are not expected to reach a comparable level
in 1997. Although NCR is contractually committed to purchase 90% of its terminal
requirements  from the Company  through  December  1999,  it may,  under certain
conditions,  cancel its agreement without  compensation to the Company. The loss
of NCR as a  customer  would  have a material  adverse  effect on the  Company's
results of operations and liquidity.

             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 Network  Computers,  the
Company emphasizes total cost of ownership, ease of administration, security and
the ability to access numerous applications. The Company's Network Computers can


                                       10

<PAGE>



access over 100,000  applications  that run under Microsoft  Windows,  including
Windows NT and Windows 95. The Company's  Network  Computers also provide access
to  UNIX  and  legacy  applications.  The  Company  believes  its  expertise  in
integrating  Network  Computers  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  units is the  primary  target  market  for its new
Network  Computer.  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. Accordingly,  significant direct mail/telemarketing and
public relations programs are planned for 1997.  Additionally,  the Company will
participate in a limited number of highly targeted trade shows during 1997.

             The Company's  business is not seasonal.  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  network  computers  are Wyse,  HDS Network  Systems,  Network  Computing
Devices and IBM. The Company  anticipates  additional  competitors,  such as Sun
Microsystems, will enter the network computer market in 1997 and thereafter. The
Company's  Network  Computers  also  compete with  low-cost PCs and  traditional
higher-cost PCs.  Customer purchase criteria for Network Computers are primarily
based upon the total cost of  ownership,  ease of  administration,  reliability,
security and the breadth of applications access.

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

Patents, Trademarks and Licensing

             While the Company owns over 30 patents  issued in the United States
and various foreign countries, only three patents are believed to be material to
its  business.  The  first  patent is for  technology  called  Multiconsole  Bus
Extension  Serial  Interface (the "BESI Patent") and was issued in Canada on May
7, 1991 and in the United  States on October 29, 1991.  The BESI Patent  expires
October  28,  2008 in the United  States and on May 6, 2005 in Canada.  The BESI
Patent is currently being examined by the European Patent Office with respect to
Austria,  Belgium, France, Germany, Greece, Italy,  Netherlands,  Spain, Sweden,
Switzerland and the United Kingdom.  While the BESI Patent prevents  competitors
from having certain features in their MultiConsole Terminals,  which the Company
believes  provide  the  Company  with a  competitive  advantage,  the  Company's
competitors  can  nevertheless  produce  MultiConsole  Terminals,   using  other
technological approaches, that compete with the Company's products.

             The other two patents were acquired  from  Digital.  One relates to
Image  Rotation  (the "Image  Rotation  Patent") and the other to a protocol for
allowing  multiple user sessions on a single line (the  "Multisession  Patent").
The  Multisession  Patent is important to users whose  terminals are attached to
Digital computers.  While it allows for differentiation of Boundless'  products,
Wyse  Technology,  Inc.  offers a similar  feature.  The Image  Rotation  Patent
protects  a  feature  of the VT and Dorio  terminals  (and can be used for other
Boundless  terminals)  that  is  useful  for  product  differentiation,  but not
essential to users. The Company is currently  pursuing  licensing one or both of
these two  patents to several  other  companies.  Digital  has  retained a fully


                                       11

<PAGE>



paid-up,  non-exclusive,  assignable,  irrevocable,  world-wide  license  of the
patents which the Company  acquired from Digital.  The United States  expiration
dates for the Image Rotation and  Multisession  Patents are February 6, 2007 and
December 13, 2005,  respectively.  The Image Rotation and  Multisession  Patents
have also issued internationally.

             The Company  believes  that the  knowledge  and  experience  of its
management  and personnel and their ability to develop,  manufacture  and market
the  Company's   products  in  response  to  specific  customer  needs  is  more
significant than its patent rights.

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

Environmental Regulation

             Boundless  complies  with  federal,  state  and  local  legislation
pertaining to protection of the environment.  Amounts incurred in complying with
these  regulations  during the past three  years did not have a material  affect
upon capital  expenditures or the financial  condition of the Company.  However,
any change in federal,  state or local  environmental  regulations  could have a
material adverse affect on the Company.

Employees

             At March 15,  1997,  the Company had  approximately  313  full-time
employees  engaged as  follows:  24 in product  design and  engineering,  205 in
manufacturing,  42 in sales and marketing and 42 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.   Subsequent   to  the  SunRiver   Group
Acquisition,  on December  12,  1994,  the  Company  established  its  corporate
headquarters at Echelon IV, Suite 200, 9430 Research Boulevard,  Austin,  Texas,
where  the  Company  leases  approximately  8,303  square  feet of  space  for a
four-year  period  expiring in 1998.  The Company's  current annual rent for the
Austin facility is approximately  $124,548.  Although the Company has closed its
Orlando,  Florida  facility,  the Company is obligated  under a lease for 17,837
square  feet of space in  Orlando.  This  lease is at a current  annual  rent of
approximately $248,113 and expires in November, 1997. Approximately 3,800 square
feet of the Orlando space has been subleased for an annual rent of approximately
$53,000.


ITEM 3.     LEGAL PROCEEDINGS

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


                                       12

<PAGE>
         In January, 1995, an action was commenced against the Company,  certain
officers of Capital,  and certain  other  defendants in the Supreme Court of the
State of New York,  County of New York,  entitled  "George Zakar USA Securities,
Inc., et al. v. All-Quotes,  Inc., et al.," Index No. 100577/95  ("Zakar").  The
complaint in the above-referenced  action asserts seven causes of action against
the Company and  certain  other  defendants  for breach of  contract,  fraud and
interference with plaintiffs' business  relationships arising out of a series of
alleged  communications  between  plaintiffs and  representatives of the Company
regarding  certain new business ventures  allegedly to be undertaken  jointly by
plaintiffs and the Company. The complaint in the  above-referenced  action seeks
damages in the amount of $2,000,000 with respect to each cause of action alleged
against the Company and certain of Capital's  officers and specific  performance
of the alleged oral contract  between  plaintiffs  and the Company.  On or about
March 17, 1995,  the Company and the named officers of Capital served a verified
answer  denying the material  allegations  of the  complaint  and  asserting six
affirmative  defenses.  This litigation is in the discovery  stage.  The Company
intends to vigorously defend this litigation.

         Capital has agreed to indemnify  the Company for any losses the Company
may incur in  connection  with the  claims of Marsala  and Zakar and,  to secure
Capital's indemnification,  there is being held in escrow approximately $165,000
(as of March 21,  1997) of the  proceeds of the sale of the Quote  Business  and
1,000,000  shares of the common stock of All-Quotes  Data, Ltd. (now named AmCan
Minerals  Ltd.) which common  stock is traded on the  Vancouver  Stock  Exchange
(symbol:  AMF.V;  last sale  price on March 26,  1997 was $0.56 CDN per  share).
There can be no assurance that the Company will be fully  indemnified for losses
it may incur in connection with these pending litigations.


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

         No matter was submitted  during the fourth quarter of 1996 to a vote of
stockholders of the Company through the solicitation of proxies or otherwise.

                                                          PART II

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

         The  Company's  Common  Stock is quoted on The Nasdaq  SmallCap  Market
under the  symbol  SRVC.  As of March 21,  1997,  there were  approximately  943
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.


Year Ended December 31, 1995:                               High         Low
                                                            -----        ----

             First quarter............................     $2-3/4        $1-1/8
             Second quarter............................    $2-1/6        $1-3/16
             Third quarter.............................    $3-15/16      $1-1/16
             Fourth quarter.............................   $3-11/16      $2-1/2

Year Ended December 31, 1996:

             First quarter............................     $3            $2-1/4
             Second quarter...........................     $9-3/8        $2
             Third quarter............................     $8-3/8        $3-1/8
             Fourth quarter.....  ....................     $3-5/8        $1-5/16

The last sale price of the Company's Common Stock on March 21, 1997 was  $1-1/16

                                       13

<PAGE>

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."

Recent Sales of Unregistered Securities

             In a sale completed on March 14, 1997 ("Original Date") pursuant to
Section  903(c)(2) of Regulation S ("Reg.  S") under the Securities Act of 1933,
the  Company  received  total  gross  proceeds  of  $400,000  by  issuing to two
non-"U.S. Persons" (the "Holders"), as defined in Reg. S, convertible notes (the
"Notes")  bearing interest at 8% per annum (or 16% per annum upon the occurrence
of certain events of default) payable, with principal, on December 31, 1998 (the
"Maturity  Date").  The Holder has the right to convert  all or part of its Note
during the period  beginning on the 90th day  following  the Original Date until
the  later of the  Maturity  Date or the date the Note is paid in full into that
number  of shares  of  Common  Stock  determined  by  dividing  the  outstanding
principal  of and accrued and unpaid  interest on the Note by (i) 82-1/2% of the
average  closing bid price  ("Average  Bid  Price") for the Common  Stock on The
Nasdaq  SmallCap  Market for the five trading  days  immediately  preceding  the
conversion  date; or (ii), if the Holder delivers  written notice to the Company
between  the 60th and 90th days  after the  Original  Date that the  Holder  has
elected the alternate conversion price, 82-1/2% of the Average Bid Price for the
five trading days immediately  preceding the date of such notice,  in which case
the Holder is obligated to convert the entire balance of the Note on or prior to
the Maturity Date.  The Company may compel  conversion of the Notes if they have
not been  converted into shares of Common Stock before the Maturity Date and the
Company may redeem the Notes if the  Average Bid Price for any five  trading day
period is less than $1.25. In connection with this offering,  the Company paid a
commission of 10% of the gross proceeds and agreed to issue to another  non-U.S.
Person  warrants to purchase  33,000 shares of Common Stock at an exercise price
of $1.375 per share.

             On February 28, 1997, the Company sold $1,000,000  principal amount
of convertible notes on terms  substantially  similar to the terms of the Notes,
as  described  in the  Company's  Current  Report  on Form  8-K  filed  with the
Commission on March 17, 1997.

             In February  1996,  the Company  issued to a company  which  leased
equipment  to  TradeWave a warrant to purchase  75,000  shares of Common  Stock,
exercisable at $2.69 per share until February 1999.


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 year ended  December  31,  1996 set forth below have
been  derived  from the  financial  statements  of the  Company  which have been
audited  by BDO  Seidman,  LLP,  independent  certified  public  accountants  as
indicated  in  their  report  included  in this  Form  10-K.  The  statement  of
operations  data for the years ended  December 31,  1993,  1994 and 1995 and the
balance  sheet data for the year ended  December  31,  1995 set forth below have
been  derived from the  financial  statements  of the  Company,  which have been
audited by Coopers & Lybrand L.L.P.,  independent  certified public accountants.
The  selected  financial  data  should  be read  in  conjunction  with,  and are
qualified in their  entirety by, the  Consolidated  Financial  Statements of the
Company and related Notes and other  financial  information  included  elsewhere
herein.

                                       14

<PAGE>
<TABLE>
<CAPTION>

Consolidated Statement of Operations Data:
      (000's omitted)

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

Total revenues                                   $2,584        $2,814        $8,344      $94,957           $138,225
Gross margin                                      1,093         1,177         3,455       25,573             28,557
Operating expenses:
     Sales and marketing                            278           321         1,092        7,940             10,433
     General and administrative                     248           409           992        6,337              8,120
     Research and development                       291           493           990        4,569              4,855
                                                 -------       -------       -------     --------          ---------

          Total operating expenses                  817         1,223         3,074       18,846             23,408
                                                 -------       -------       -------     --------          ---------
     Operating income (loss)                        276           (46)          381        6,727              5,149
     Interest expense                               (41)          (35)          (97)      (1,907)            (3,794)
     Other                                            7            11           (61)         572             (1,980)
                                                 -------       -------       -------     --------          ---------
     Income (loss) from continuing
       operations                                   242           (70)          223        5,392               (625)
     Income tax expense                               -             -          (185)      (1,323)               962
     Income from discontinued operations              -             -             -         (870)            (9,652)
     Gain (loss) on extinguishment of debt           60             -             -         (589)                  -
                                                 -------       -------       -------     --------          ---------
     Net income (loss)                             $302        $  (70)          $38       $2,610           ($11,239)
                                                 =======       =======       =======     ========          =========

     Earnings (loss) per common share              $.01            $0            $0           $0             $(0.25)
                                                 =======       =======       =======     ========          =========

Consolidated Balance Sheet Data:
   (000's omitted)
Working capital                                    $338          $(63)      $ 6,764      $15,416             $3,172
Total assets                                        902           940        37,171       75,856             69,525
Revolving credit loan                                 -             -         4,655        8,000             13,950
Long-term obligations                               134           119        16,287       25,492             14,300
Mandatorily redeemable preferred stock                -             -         5,536        3,555              3,555
Total long-term obligations                         134           119        21,823       29,047             17,855
Stockholders' equity (deficit)                    $ 113          $ 39       $ 2,386      $12,837             $8,802




                                       15

</TABLE>
<PAGE>

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

General

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

         For accounting purposes the SunRiver Group Acquisition has been treated
as a  recapitalization  of the Company with  SunRiver  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 SunRiver Group.  Financial  information  presented for periods ended on
December 31, 1994 include the consolidated  operations of SunRiver 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.

Results of Operations

         As used in this "Results of Operations"  section,  the term "pro forma"
refers to the results of  operations  that include the effects of the  Boundless
Acquisition  but exclude the effects of the TradeWave  and Digital  Acquisitions
prior to the date of  their  respective  acquisitions.  The  Company  is able to
discuss the pro forma  results of  operations  taking into account the Boundless
Acquisition,  because key management personnel of ADDS remained with the Company
following  the  Boundless  Acquisition.  The  Company is not able to discuss pro
forma  results of  operations  which take into  account the Digital  Acquisition
because  the  requisite   management  personnel  did  not  become  employees  of
Boundless.

Charges Made in Quarters Ended December 31, 1995 and 1996

         The Company recorded  nonrecurring charges of approximately  $2,382,000
in the quarter ended December 31, 1995, as follows:

1. $1,225,000 relating to TradeWave's  acquisition of in-process technology from
MCC;

2. $982,000  relating to the  prepayment of the Congress debt facility using the
Chase Credit Line consisting of a $700,000 early termination fee and $282,000 of
unamortized debt issuance costs; and

3.  $175,000 for a portion of the costs  relating to the  registration,  in July
1996, of 14,444,210  shares of Common Stock on Form S-1, of which  approximately
11,944,210  shares were registered for resale by selling  stockholders from time
to time and 2,500,000  shares were  registered for sale by the Company from time
to time.

         The Company recorded  nonrecurring charges of approximately  $8,915,000
in the quarter ended December 31, 1996 as follows:

1. $1,473,000  relating to severance costs associated with a  reduction-in-force
affecting approximately 130 employees at Boundless in December 1996;

2. $331,000 relating to the closing of Boundless'  Orlando,  Florida,  facility;
and

3. $7,111,000 relating to the discontinuation of operations,  in December, 1996,
of TradeWave. See Note 18 of Notes to Consolidated Financial Statements.

                                       16

<PAGE>
Years Ended December 31, 1996 and 1995

         Revenues:   Revenues  for  the  year  ended   December  31,  1996  were
$138,225,000,  as compared to $94,957,000  for the year ended December 31, 1995.
The increase is wholly  attributable  to  increases in sales of General  Display
Terminals.

         Sales of the Company's General Display Terminals more than doubled from
approximately  $47,274,000 for the year ended December 31, 1995 to approximately
$110,671,000  for the year ended December 31, 1996.  This increase is due to the
Digital  Acquisition,  with  increases  in  sales to other  OEM's  offsetting  a
$6,500,000 decline in sales to NCR. The decline in sales to NCR was expected and
relates to the disruption caused by the break-up of AT&T.

         Sales of General  Display  Terminals for 1997 are not expected to reach
the 1996  levels for a number of  reasons.  The  Digital  Acquisition  agreement
required  Digital to purchase  80,000 units in the first year. As a result,  the
Company  believes that the  significant  purchases by Digital  during the fourth
quarter to meet this volume  commitment  leaves  Digital with  inventory  levels
sufficient  to meet its  terminal  needs for the first half of 1997.  The VT and
Dorio terminals are based on a proprietary  architecture  and, as a result,  its
users  requiring  flexibility  are  prone to more  quickly  move to  alternative
platforms.  Finally,  demand for the  General  Display  Terminals  continues  to
decline as competing  technologies,  including  Network  Computers,  are gaining
market share.

         In  response  to  this  trend,   that  began   several  years  ago,  of
industry-wide  declines in unit sales of General  Display  Terminals  and, until
1995,  average  selling  prices per unit,  the Company has been  increasing  its
General Display Terminals market share and either  maintaining or increasing its
General  Display  Terminal  margins  by  purchasing  the  Digital  Assets and by
promoting the quality of its terminals and the  flexibility of its  just-in-time
manufacturing  capabilities.  The Company has also  positioned its  MultiConsole
product as a low-cost  alternative to serial character  terminals in multi-user,
microcomputer  and  personal  computer  environments   emphasizing  transaction-
oriented processing. The Company is developing a line of Network Computers which
offer easy and cost-effective access to current Unix-based and emerging NT-based
computing environments.

         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,  in part because of
enhanced  performance,  and  additional  features,  including  MS Windows NT and
Internet support, that allow General Display Terminals to compete favorably,  in
terms of price and performance,  with low-cost personal computers.  To this end,
the Company is leveraging its manufacturing  expertise installed custom base and
distribution  networks while shifting  research and  development to software and
hardware development that will deliver Windows-based applications to the desktop
by means of terminals and Network Computers.

         Sales of Network Graphic Displays declined approximately $14,425,000 to
$12,643,000 for the year ended December 31, 1996, from approximately $27,068,000
for the year ended December 31, 1995.  This decline was  anticipated and relates
to specific  projects  undertaken by NCR during 1995. The Company  believes that
sales of Network Graphics Displays will continue to decline for the same reasons
demand for General Display Terminals is declining.

         Net sales from the Company's repairs and spare parts business increased
approximately  71%, or $2,861,000,  from  $4,006,000 for the year ended December
31, 1995 to  approximately  $6,867,000 for the year ended December 31, 1996. The
increase was due to increased  spares sales to NCR and start-up  spares sales to
Digital under a maintenance  service  agreement  entered into in connection with
the Digital  Acquisition.  Ongoing  spares  sales to Digital are not expected to
reach the 1996 volume levels as Digital's  start-up  stocking  requirements  are
substantially complete.


                                       17

<PAGE>

         GAI  Partnership  royalties for the year ending December 31, 1996, were
approximately  $2,917,000  versus  $1,383,000 for 1995  (May-December).  The GAI
Partnership  agreement provides for the payment of royalties to the Company as a
percentage of partnership revenues,commencing May 1995, as follows: months 1-12,
12%; months 13-24,  10%; months 25-36,  9%; months 37-48,  8%; and months 49-60,
7%.

          Digital was the most significant  customer for the Company's products,
accounting for 15.7% of revenues for the year ended December 31, 1996.  Sales to
NCR accounted  for 13.7% of revenues in 1996.  Although both Digital and NCR are
expected to remain significant customers for the Company's products,  neither is
expected to account for revenues of the Company  comparable to 1996. The loss of
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, 1996 was
$28,557,000  (20.7% of revenue),  as compared to gross margin for the year ended
December  31, 1995 of  $25,573,000  (26.9% of  revenue).  This  decline in gross
margin as a percent of revenue stems  primarily from a shift in revenue mix from
sales of the Company's higher margin Pick systems (until May, 1995, when the GAI
partnership  was formed) and post-sale  support  business to the Company's lower
margin Network  Graphics  Displays and General Display  Terminals.  In addition,
during the fourth quarter of 1996, the Company recorded  inventory  reserves and
write-offs  of  approximately  $2,241,000  representing  an  estimate  of excess
material on hand as of the end of the year; and wrote-off approximately $284,000
of  previously  capitalized  research  and  development  cost as a result of the
cancellation  of certain  programs.  The combined  effect of these  reserves and
write-offs  was to reduce gross margin by 1.8%.  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.

          In a continuing  effort to maintain and improve margins in an industry
otherwise characterized by commodity pricing, management has focused on quality,
flexibility,  and product cost reductions.  In addition,  sales of the Company's
Network  Computers,  which  carry  margins  greater  than  its  General  Display
Terminals,  are  expected  to  positively  impact the  Company's  gross  margin.
However,  there can be no assurance,  given the recent  introduction of this new
technology, that the Company's Network Computers will improve gross margin.

          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,  1996,
operating expenses were approximately  $23,408,000 (16.9% of revenue),  compared
to expenses  for 1995 of  approximately  $18,846,000  (19.8% of  revenue).  As a
result  of a  reorganization  of the  Company,  including  a  reduction-in-force
effecting  130  employees  at  Boundless,   management  expects  that  operating
expenses, in amount and as a percent of revenue, will decline in 1997.

         Sales and Marketing  Expenses.  Sales and marketing  expenses increased
31.4% from  approximately  $7,940,000  for the year ended 1995 to  approximately
$10,433,000  for the year ended 1996.  The  increase  relates to  marketing  and
advertising  efforts  focused  on the  new  name  for  the  Company's  Boundless
subsidiary as well as public relations  activities to develop channel  partners,
launch the  Company's  Network  Computer  product line and  integrate the VT and
Dorio product line into Boundless' product family.

         General  and  Administrative   Expenses.   General  and  administrative
expenses  increased 28.1% from  approximately  $6,337,000 (6.7% of revenue),  to
$8,120,000  (5.9% of revenue) for the periods ending December 31, 1995 and 1996,
respectively. Amortization of goodwill associated with the Boundless Acquisition
and Digital Acquisition increased approximately $860,000, offsetting declines in
legal and audit expenses.


                                       18

<PAGE>
         Research and Development  Expenses.  Research and development  expenses
increased from approximately  $4,569,000 in 1995 to $4,855,000 in 1996. Research
and development expenses for 1996 include a write-off of approximately  $649,000
for  previously  capitalized  expenses  associated  with  research  projects the
Company has abandoned.

         Research  and  development  expenses  are  expected to decline due to a
consolidation  of research  activities  including  the closing of the  Company's
Orlando, Florida,  facility.  Research and development expenses within Boundless
are   shifting  to  software  and   hardware   development   that  will  deliver
user-friendly  Windows-based  applications  to  the  desktop  while  maintaining
current  cost and  administrative  benefits of the shared  resource  multi- user
computing model. The Company's Network Computers 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.  Since August,  1996, the Company has released three
Network Computer models, and is expecting to release a second generation Network
Computer in the second quarter of 1997.

         Other Charges.  Other expenses for 1996 were  approximately  $5,774,000
compared to  $1,335,000  for 1995.  Interest  expense  (net of interest  income)
amounted  to  $3,794,000  for the year  ended  December  31,  1996  compared  to
$1,907,000 for 1995. The increase is  attributable  to the Digital  Acquisition,
which was  financed,  in part,  with the Chase  Credit  Line.  During the fourth
quarter of 1996 Boundless recorded reserves of approximately $1,804,000 relating
to the reduction-in-force discussed above. Of this amount, $1,473,000 related to
severance payments and $331,000 related to the closing of the Orlando,  Florida,
facility.

         Income Tax Expense.  Income tax expense for the year ended December 31,
1996 was approximately  $962,000 compared to $1,538,000 for the year ended 1995.
During the fourth quarter of 1995, the Company recorded a reversal of a deferred
tax valuation allowance resulting in a reduction in tax expense of approximately
$1,100,000.   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. For the year ended December 31, 1995
the  Company  recorded a loss of  $223,442  relating  to its  disposition  of an
investment in a diamond mining property  located in Sierra Leone.  Additionally,
for the year  ended  December  31,  1995,  the  Company  realized a gain (net of
applicable taxes) of $1,372,239 from the sale, in January 1995, of a business in
which it was previously engaged and which was unrelated to the Company's current
business.

         The Company also  recorded a loss  relating to the  discontinuation  of
TradeWave of  approximately  $9,652,000  and  $2,019,000  for the periods  ended
December  31, 1996 and 1995,  respectively.  Since  commencing  business in 1995
TradeWave incurred net losses; and TradeWave's  predecessor  incurred net losses
of  approximately  $645,000  in 1993 and  $285,000 in 1994.  TradeWave  recorded
revenues of $1,900,000 for 1996 but was not able to generate  material  revenues
from TradeVPI.  The discontinuation of TradeWave 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.

         Extraordinary  Loss on Early  Extinguishment  of Debt.  During  October
1995,  the Company  incurred  expenses of  approximately  $589,000 (net of a tax
benefit of approximately  $393,000) in connection with the Digital  Acquisition.
The total charge was composed of an early  termination  fee under the  Company's
previous  revolving  line-of-credit  and related costs that had been capitalized
when the previous line-of-credit was originally obtained.

          Net Loss.  For the year  ended  December  31,  1996,  the net loss was
$(11,736,000) (8.5% of revenue), compared to net income of $168,000 for the year
ended December 31, 1995. Despite an anticipated decline in revenues in 1997, the

                                       19

<PAGE>

Company  believes  that it  will  be  profitable  in  1997  as a  result  of its
restructuring programs and introduction of its Network Computers.

Years ended December 31, 1995 and 1994

The following comparison of unaudited summary data presents the consolidated pro
forma  results of  operations  for the year ended  December  31,  1994 as if the
Boundless Acquisition had occurred on January 1, 1994 and reflects the impact of
certain  adjustments  such as:  amortization  of  goodwill,  increased  interest
expense,  increased  depreciation  expense  and  decreased  allocated  corporate
overhead  charges.  It does not  purport  to be  indicative  of what  would have
occurred had the  acquisition  occurred as of January 1, 1994, or of the results
which may occur in the future.

                                                     Year Ended December 31,

                                                     1995                1994
                                                                     (Pro Forma)
                                                 ------------       ------------

Net sales                                        $94,957,000        $80,091,000

Net income/(loss)                                 $2,610,000        $(4,282,000)

Earnings/(loss) available for common
 shareholders                                        168,000        $(5,220,000)

Earnings/(loss) per share                               $.00              $(.18)


         Net  Sales:  Net  sales  for the year  ended  December  31,  1995  were
$94,957,000  as compared to $8,344,000 for the year ended December 31, 1994. The
increase is wholly  attributable to the acquisition of Boundless  ($86,613,000).
On a pro forma basis, net sales increased  approximately  19% for the year ended
December  31,  1995,  compared  to 1994.  Pro forma net sales for the year ended
December 31, 1994 were approximately $80,091,000.

         Sales of the  Company's  Network  Graphics  Displays for the year ended
December 31, 1995 increased  $11,400,000 over pro forma sales for the year ended
December 31, 1994. Substantially, all of these sales were to NCR and represented
the roll-out of the Company's  "Chameleon" product.  Additionally,  sales of the
Company's General Display  Terminals  increased  $14,500,000,  or 44.3%, for the
year  ended  December  31,  1995  over the pro forma  sales  for the year  ended
December 31, 1994 because the Company  began  shipping VT and Dorio  products as
well as General Display Terminals to IBM.

         Net sales of the Company's  Pick-based  computer  systems and post-sale
support  businesses  declined   approximately   $10,000,000  from  approximately
$27,300,000 to  approximately  $17,300,000  for the year ended December 31, 1995
compared to 1994,  principally because the Company contributed its Pick business
to the GAI  Partnership  in May 1995. The decline was also caused by significant
industry-wide  decreases  in the average  selling  price of  computer  hardware,
particularly  PC-based  systems,  as well as a movement  in the Pick market away
from proprietary  operating systems towards more "open" computing  environments.
Post  support   revenues  were  adversely   affected  due  to  the   competitive
requirements of offering increased warranty periods, up from one to three years,
and due to the decline in Pick-based hardware unit sales.


                                       20

<PAGE>

         In response to the developments in the Pick market, the Company formed,
in May 1995, the GAI  Partnership.  The GAI  Partnership  allowed the Company to
reduce its active  participation in the Pick systems business in order to devote
more  time to its  core  businesses.  Royalties  from the GAI  Partnership  were
$1,383,000 for the year ended December 31, 1995.

         NCR was the  most  significant  customer  for the  Company's  products,
accounting for 41.2% of revenues for the year ended December 31, 1995.  Sales to
NCR grew  approximately  $4,100,000,  from  $35,500,000 to $39,600,000,  for the
years ended December 31, 1994 and 1995  respectively.  Sales to IBM  represented
9.7% and 19.8%, respectively, of the Company's total revenue and General Display
Terminal revenue for 1995.

         Gross  Margin.  Gross  margin for the year ended  December  31, 1995 is
$25,573,000 (26.9% of revenue), as compared to gross margin of $3,455,000 (41.4%
of revenue) for the year ended  December 31, 1994.  On a pro forma basis,  gross
margin for the year ended December 31, 1994 was approximately $22,784,000 (28.4%
of revenue),  exclusive of inventory reserves of approximately  $3,978,000 (5.0%
of revenue).  The 1994 inventory reserve resulted from a revision in the formula
to  estimate  inventory  utilization.  The 1994  gross  profit of 41.4% of sales
excluded  the results of  operations  of ADDS prior to  December 9, 1994,  while
including  the full year of sales of the  Company's  high  margin,  MultiConsole
products.   The  inventory   reserve  in  1995  was  $213,000,   which  is  more
representative of the annual reserve requirement. The decline in gross margin in
1995,  as compared to pro forma gross margin for 1994,  stems  primarily  from a
shift in  revenue  mix  among the  Company's  higher  margin  Pick  systems  and
post-sale  support  business and the  Company's  lower margin  Network  Graphics
Displays and General Display Terminal products.

         Total  Operating  Expenses.  For the  year  ended  December  31,  1995,
operating  expenses were $18,846,000  (19.8% of revenue),  compared to pro forma
expenses  of  approximately  $21,746,382  (27.2% of  revenue)  for 1994.  During
December,  1994,  the Company,  in conjunction  with the Boundless  Acquisition,
implemented  reduction-in-  force actions  affecting 39 of the then existing 385
employees.

         Sales and Marketing  Expenses.  Pro forma sales and marketing  expenses
declined 9.3% from approximately $8,758,000 ( 10.9% of revenue) to approximately
$7,940,000   (8.4%  of   revenue).   The   decrease  is   attributable   to  the
reduction-in-force described above.

         General  and  Administrative   Expenses.   General  and  administrative
expenses increased, on a pro forma basis, approximately $2,998,000 to $6,337,000
(6.7% of revenue) for the period ended December 31, 1995 from $3,338,502 for the
period ending  December 31, 1994.  The increase  stems from expenses  associated
with the Company's Boundless Acquisition and Digital Acquisition.

         Research and Development  Expenses.  Pro forma research and development
expenses  declined  from  $9,650,000  for the year ended  December 31, 1994,  to
$4,569,000   for  the  year  ended   December  31,  1995.  In  addition  to  the
reduction-in-force   previously  discussed,  1994  was  a  year  of  significant
expenditures to develop a new Network Graphics Display architecture.

         Other Charges.  Interest  expense (net of interest  income) amounted to
$1,907,000  for the year ended  December 31, 1995  compared to $97,000 for 1994.
The acquisition of Boundless was, in part, financed by the Company's issuance of
the NCR note. In addition, the Company financed its working capital requirements
from  December  9, 1994  through  October  23,  1995  under a credit  line which
required payment of interest of 2% over the prime rate.


                                       21
<PAGE>
         Income Tax.  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  approximately  $1,100,000.  This  reversal  was due to  management's
reassessment of the realizability of the deferred tax asset.

         Income From  Discontinued  Operations.  For the year ended December 31,
1995 the Company  recorded a loss of $223,442  relating to its disposition of an
investment in a diamond mining property  located in Sierra Leone.  Additionally,
for the year  ended  December  31,  1995,  the  Company  realized a gain (net of
applicable taxes) of $1,372,239 from the sale, in January 1995, of a business in
which it was previously engaged and which was unrelated to the Company's current
business.

         For the period ended  December 31,  1995,  the Company also  recorded a
loss relating to the discontinuation of TradeWave's  operations of approximately
$2,019,000.  This loss related to the net  operations  of TradeWave for the year
ended December 31, 1995.

         Extraordinary Loss on Early Extinguishment of Debt. During October 1995
the Company incurred expenses of approximately $589,000 (net of a tax benefit of
approximately  $393,000) in  connection  with the  financing for the purchase of
certain assets  relating to Digital's  general purpose  display  terminals.  The
total  charge  was  composed  of an early  termination  fee under the  Company's
previous  revolving  line-of-credit  and related costs that had been capitalized
when the previous line-of-credit was originally obtained.

         Net  Income.  For the year  ended  December  31,  1995,  net income was
$2,610,000  (2.7% of  revenue),  compared  to net income of $38,000 for the year
ended December 31, 1994.  Income from  continuing  operations for the year ended
December 31, 1995 was $4,069,000. On a pro forma basis, the net income increased
approximately  $8,351,000  for fiscal  year 1995  versus a pro forma net loss of
approximately $4,282,000 for the year ended December 31, 1994.

Impact of Inflation

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

Liquidity and Capital Resources

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

         Working capital was  approximately  $3,172,000 as of December 31, 1996.
Historically,   the  Company  has  relied  on  cashflow  from  operations,  bank
borrowings and sales of its common stock to finance its working capital, capital
expenditures and acquisitions.

         The Company  currently  has a bank credit  facility that is provided by
the Chase  Manhattan Bank (the "Chase Credit  Line").  At December 31, 1996, the
Chase  Credit  Line  consisted  of  a  $20,000,000   revolving  line  of  credit
("Revolving  Loan") and a $20,000,000  term loan ("Term Loan").  Borrowing under
the Revolving Loan is based on a borrowing base formula of up to 80% of eligible
receivables,   plus  50%  of  delineated   eligible   inventory,   plus  30%  of
non-delineated  eligible  inventory.  Up to  $7,500,000  is available  under the
Revolving  Loan for letters of credit.  At December 31,  1996,  the Company owed
Chase  $27,332,000,  of which  $13,950,000 was owed under the Revolving Loan and
$13,382,000  was owed  under  the Term  Loan.  The  balance  of the Term Loan is
repayable in six quarterly installments of $2,000,000 with the remaining balance
due September 30, 1998, the same day the Revolving Loan terminates.  At December
31, 1996, the Company had availability of $4,607,000 under the Revolving Loan.

                                       22

<PAGE>

As a result of the borrowing-base  formula,  the credit available to the Company
could be adversely restricted in the event the Company's sales decline.

         During 1996, the Company violated certain covenants of the Chase Credit
Line. Prior to the fourth quarter covenant  violations,  Chase, as agent for the
bank syndicate,  had been granting waivers of these covenant  violations without
requiring  any material  change in the governing  documents.  As a result of the
fourth quarter  violations,  the Company entered into negotiations with the bank
syndicate to revise the covenants  and to obtain a waiver of the fourth  quarter
violations.  During March 1997, the Company completed negotiations with the bank
syndicate  and obtained  both the  requested  revisions to the covenants and the
waiver of the fourth quarter  violations,  principally in exchange for a payment
of  $500,000  by the  Company.  While  the  Company  believes  it will  maintain
compliance with the revised covenants, there can be no assurance that it will be
able to comply.

          Net cash  provided  by  operating  activities  during  the year  ended
December 31, 1996 was  $1,435,000.  Cash provided by continuing  operations  was
$7,595,000  which was  principally  attributable to reductions in inventories of
$3,388,000  and other assets of  $1,592,000.  These  reductions  were  partially
offset  by  an  increase  in  receivables  of  $3,548,000.   Net  cash  used  in
discontinued  operations was a result of the discontinued operation of TradeWave
which had a loss from discontinued operations of $9,652,000.  The effect of this
loss on operating cash flows was offset by its outstanding  payables at December
31, 1996 of $3,492,000.  Net cash used in investing  activities was comprised of
capital  expenditures of $1,384,000.  Net cash provided by financing  activities
was  principally  comprised  of net  offering  proceeds  of  $2,870,000  and the
exercise of options and  warrants  which  provided  net cash of  $2,277,000.  In
addition,  the  Company  issued  $1,500,000  in  convertible  notes  which  were
subsequently  converted  to Common  Stock and  received  net  proceeds  from its
revolving  line of credit in the amount of  $5,950,000.  Cash used in  investing
activities  was  comprised of $1,305,000 to purchase and retire Common Stock and
$6,496,000 to meet the current  obligations  related to the Company's  term note
payable to Chase.

         In addition to  obligations  previously  discussed,  long-term  capital
requirements at December 31, 1996 included: (1) a secured note payable to NCR of
$8,000,000 (the "NCR Note") bearing  interest at 8% per annum payable  quarterly
with principal due on or before January 31, 1999; (ii)  $3,554,692  payable upon
exercise of the Amended Put Option  (defined in Note 3 of Notes to  Consolidated
Financial  Statements);  (iii)  a lease  commitment  of  approximately  $180,000
through  November  1997 for the  Company's  Orlando,  Florida  facility,  net of
$50,000  receivable from a sublessee;  (iv)  obligations of TradeWave  discussed
below; and (v) a lease commitment of $130,000 per year through December 1998 for
the Austin, Texas headquarters facility.

          The  terms of the NCR Note and the Put  Option  were  restructured  in
October  1995,  in  connection  with the Digital  Acquisition.  As a part of the
restructuring,  the Company  agreed to pay NCR $497,657 in cash or the Company's
Common  Stock on each  October 20 until the  Amended  Call Option or Amended Put
Option is exercised.  The October 1996  obligation was satisfied by the delivery
of common  stock to NCR.  In  addition,  the  maturity  date of the NCR Note was
extended to January 31, 1999 from the earlier of December 9, 1997 or the closing
of a public offering by Boundless or the Company.

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

         At  February  28,  1997,  the  Company's   total   long-term  debt  was
approximately  $24,132,000  and the current  portion of the  long-term  debt was
approximately $8,000,000. 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
January 31, 1999 due date.

     As of December 31, 1996, the Company and Boundless had advanced  $6,605,000
to TradeWave as intercompany  transfers.  Funding  TradeWave's cash requirements
has adversely  affected  liquidity  since its  acquisition  in April,  1995. The


                                       23

<PAGE>

Company  will not be  reimbursed  for the  intercompany  transfers.  The Company
believes  its  liquidity  will  improve  as a result of the  discontinuation  of
TradeWave's  operations.   See  Note  18  of  Notes  to  Consolidated  Financial
Statements.

         In March  1997,  MCC and  TradeWave,  the Company  and  SunRiver  Group
entered into  agreements  whereby all  obligations  of the parties in connection
with the Technology  Agreement and the transfer of the TradeWave Technology were
discharged and TradeWave's  membership in MCC was  terminated.  The Company paid
MCC  $500,000,  granted  MCC a  non-exclusive  license  to  use  the  TradeVPI's
operations  and  assigned  to a  designee  off  MCC  TradeWave's  rights  in the
Infosleuth  Project.  At the time of this  settlement,  MCC was owed  $1,250,000
through  December  31, 1997 and had  disputed  the  adequacy of the  delivery of
60,000 shares of common stock to satisfy a $250,000 payment due in 1996.

Asset Management

         Inventory.   Management  has  instituted  policies  and  procedures  to
maximize product  availability and delivery while minimizing inventory levels so
as to lessen  the risk of  product  obsolescence  and price  fluctuations.  Most
components and sub-assemblies are stocked to provide for an order-to-ship  cycle
of seven days.  The Company  follows an  inventory  cycle  count  program  which
dictates either monthly,  quarterly,  or semi-annual  physical  inventory counts
depending  upon product  cost and usage.  Additionally,  an annual  wall-to-wall
physical count is conducted and results are compared to the Company's  perpetual
inventory records.

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

          On a pro forma basis,  inventory turnover was 4.5 times in 1994 versus
3.2 times in 1995, and 4.2 times in 1996. The inventory  turnover rate increased
from 1995 to 1996  primarily  due to a  significant  decline in the net  average
inventory  position of the Company from  $25,758,000 for 1995 to $18,525,000 for
1996. The inventory  turnover  decline from 1994 to 1995 is  attributable to the
inventory  increases  necessary  to support the Digital  Acquisition  during the
transition  of production to the  Company's  Hauppauge  manufacturing  facility.
Management  created  inventory  reserves  of  $3,977,578  for  1994  based  on a
revision, in July 1994, in the formula to estimate inventory utilization.  Prior
to July,  1994,  the formula  was based on  forecasts  of product  sales and, as
revised, the formula is based on historical inventory usage.  Inventory reserves
at  December  31,  1995 were  $303,200  and were  $5,853,000  for the year ended
December 31, 1996.

         Accounts  Receivable.  The Company sells its products on prepayment and
net 30 day terms. Prior to the Boundless  Acquisition,  the Company  experienced
minimal  write-offs  of accounts  receivable.  On a pro forma basis,  receivable
turnover was 7.8 in 1994, 7.6 in 1995 and 7.4 in 1996.


                                       24

<PAGE>
New Accounting Standards

         In  October  1995,  the FASB  issued  Statement  123,  "Accounting  for
Stock-Based  Compensation" ("Statement 123"), which establishes fair value-based
accounting  and  reporting  standards  for all  transactions  in which a company
acquires  goods or  services  by issuing its equity  securities,  including  all
arrangements under which employees receive stock based  compensation.  Statement
123 encourages,  but does not require,  employers to adopt fair value accounting
to  recognize  compensation  expense for grants under  stock-based  compensation
plans. However, companies must comply with the disclosure requirements set forth
in statement 123 which is effective for fiscal years  beginning  after  December
31, 1995. The Company adopted only the disclosure  requirements of Statement 123
in 1996.

         In March  1995,  the FASB issued  Statement  121,  "Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of"
("Statement  121"),  which  addresses  the  accounting  for  the  impairment  of
long-lived  assets,  certain  identifiable  intangibles and goodwill  related to
those  assets  to be  held  and  used.  It also  addresses  the  accounting  for
long-lived  assets and  certain  identifiable  intangibles  to be  disposed  of.
Statement  121 has an  effective  date of January 1, 1996.  The  application  of
Statement 121 had no significant impact upon the Company's financial statements.

         In March 1997,  the FASB issued  Statement  128,  "Earnings  Per Share"
("Statement  128"),  which  requires  a  calculation  of "Basic"  and  "Diluted"
earnings per share.  Basic  earnings per share include no dilution.  The Company
does not expect Statement 128 to have a significant impact on its calculation of
earnings per share.


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

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

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

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

         During the Reporting  Period,  the Company was not advised by Coopers &
Lybrand (1) that internal controls necessary for the Company to develop reliable
financial  statements did not exist;  (2) that Coopers & Lybrand would no longer
be able to rely on management's  representations  or that it was unwilling to be
associated  with the  financial  statements  prepared  by  management;  (3) that
Coopers & Lybrand  needed to expand  significantly  the scope of its audit;  (4)
that Coopers & Lybrand had received  information  which did, or which might,  if
further  investigated,  impact  the  fairness  or  reliability  of a  report  or
financial  statement  previously  issued  or to be  issued or which did or might
cause Coopers & Lybrand to be unwilling to rely on  management's  representation
or be associated with the Company's financial  statements;  or (5) that Cooper &
Lybrand did not conduct such further investigation or expanded audit, or was not
able  to  resolve  its  concerns  about  the  Company,  because  of its  pending
resignation as the Company's accountant or any other reason.

         On January 7, 1997,  BDO Seidman,  LLP was  appointed by the Company as
its independent accountant.

                                       25

<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

Leonard Mackenzie          59        Chairman of the Board of Directors,
                                     President and Chief Executive Officer

Wayne Schroeder            54        Vice-President - Finance, Chief Financial
                                     Officer and Secretary and Director

Bob James                  56        President and Chief Executive Officer of
                                     Boundless

Thomas Upton               40        President of the Boundless Global
                                     Distribution Division

Gary Wood                  53        Director

Daniel Matheson            47        Director

Jeffrey K. Moore           27        Director

         Leonard  Mackenzie  has been the  Company's  Chairman  of the Board and
acting President and Chief Executive  Officer since November 1996. He has been a
Board  member since 1980 and was,  from 1980 to 1992,  Chairman,  President  and
Chief Executive Officer of GAI, a provider of computer system services, products
and components and the managing member of the GAI Partnership.  He co-founded in
1987 and has been a director  since 1987 of U.S.  Gas  Transportation,  Inc.,  a
privately-held   natural  gas  asset  management  company.  Mr.  Mackenzie  also
co-founded in 1993 and has been a director of Vineyard Engine  Systems,  Inc., a
privately-held developer of conversion technology for alternative fuels.

         Wayne Schroeder has served as Vice  President-Finance,  Chief Financial
Officer and Secretary of the Company and Boundless  since December 1996 and as a
Director  of the  Company  since  January,  1997.  He joined the  Company as its
Controller  in  November  1996 and was a financial  consultant  from May 1994 to
November 1996, with the Company as one of his primary clients. From July 1987 to
May 1994, he was Chief Operating Officer, Chief Financial Officer and a Director
of Arrhythmia  Research  Technology,  Inc., a company whose shares are traded on
the American Stock Exchange.

         Bob James has  served as  President  and  Chief  Executive  Officer  of
Boundless since March 1997 and has been an employee of the Company since January
1997. Since 1982, he has been President and Chief Executive  Officer of ABM Data
Systems,  Inc.  ("ABM"),  a  privately-held  company that is a leading  provider
worldwide  of security  software and a customer of  Boundless.  He is devoting a
limited portion of his business time to ABM. Prior thereto, he was President and
Chief  Executive  Officer for  approximately  two years of Racal-Chubb  Security
Systems USA  ("Racal-Chubb"),  a leading worldwide provider of complete security
systems.  Mr. James became President and Chief Executive  Officer of Racal-Chubb
when it purchased Texas Tele Systems, a security systems provider that Mr. James
founded in 1972.


                                       26
<PAGE>
         Tom Upton has served as President of the Global  Distribution  Division
at Boundless  since  January 1997 and has been employed by Boundless or ADDS for
fifteen  years.  In 1991,  Mr.  Upton became  manager of major  accounts for the
Systems Division at ADDS. He became Director of World Wide Systems Sales in late
1994 and,  in May 1995,  Vice  President  of World  Wide  Sales for a  six-month
transitional  period in connection with the  commencement of business of the GAI
Partnership.  After such transitional period, he became Senior Director of World
Wide Sales at Boundless.

         Gray Wood has been a member of the Company's  Board of Directors  since
November  1996 and has been serving  since January 1, 1996 as President of Texas
Taxpayers and Research Association  Research  Foundation,  a 500 member business
sponsored  organization that researches state fiscal policy.  From April 1988 to
December 1995, he served as President of Texas Research League.

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

         Jeffrey 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. Since September 1996, he has been President and Chairman of the Board
of SunRiver  Group.  From February 1994 to August 1995,  he  participated  in an
executive  training program with Sewell Lexus,  Inc. Prior to February 1994, Mr.
Moore attended Baylor University where he received a BBA in Finance.

         The  following  individual,   although  not  an  executive  officer  or
director, is a key employee and is expected to make significant contributions to
the business of the Company:

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

         In  addition,  Stephen  Maysonave  was  appointed  as an advisor to the
Company's  Board in November 1996. On September 17, 1996, Mr.  Maysonave  became
the voting trustee of a majority of the outstanding shares of Series B Preferred
Stock of SunRiver Group, the beneficial  holder of a majority of the outstanding
shares of the Company's Common Stock.

         Members  of the  Company's  Board of  Directors  ("Board"  or "Board of
Directors") do not receive any compensation for services rendered to the Company
in their  capacity as directors of the  Company.  However,  Gary Wood and Daniel
Matheson were each granted options in 1996 to purchase  100,000 shares of Common
Stock at $1.57 per share that expire in December 2002 and vest  according to the
following schedule: 33.3% on January 1, 1998 and, as to the remaining 66.7%, pro
rata on a  monthly  basis on the  final  day of each  month  during  the  period
commencing February 1, 1998 and ending December 1, 1999.

         Article Twelfth of the Company's Certificate of Incorporation  provides
that, to the fullest extent permitted by Section 102 of the General  Corporation
Law of the State of Delaware,  no director of the Company shall be liable to the
Company  for  damages  for breach of his or her  fiduciary  duty as a  director.
Article Eleventh of the Company's Certificate of Incorporation provides that, to
the fullest extent  permitted by Section 145 of the General  Corporation  Law of
the State of Delaware,  the Company shall  indemnify any and all persons whom it


                                       27

<PAGE>
shall have the power to indemnify (which include directors,  officers, employees
or agents of the Company) against liability for certain of their acts.


Change in Management

         Effective  November 1, 1996,  the following  persons (the  "Resigners")
resigned,  at the  request of  SunRiver  Group,  from all  management  and Board
positions  which  they had with the  Company  and/or  its  subsidiaries:  Gerald
Youngblood,  Chairman and President; Roger Hughes, Chief Financial Officer; John
Osborne,  a member of the  Board and Vice  President  of  Sales,  Marketing  and
Service of the  Company and Chief  Executive  Officer of  Boundless;  Roy Smith,
Vice-Chairman of TradeWave;  Ron Brittian,  a member of the Board of the Company
and Chairman of the Board of TradeWave; and Sam Smith, a member of the Board.

         The Company, Boundless and TradeWave entered into separation agreements
with each of the Resigners  pursuant to which severance  payments were agreed to
be made in the following  amounts:  Gerald Youngblood,  $200,000;  Roger Hughes,
$180,000;  John Osborne,  $190,000; and Roy Smith,  $150,000. In addition,  each
Resigner's  previously  granted  options to purchase Common Stock of the Company
and TradeWave  became fully and  immediately  vested and  exercisable  for three
years, subject to each Resigner's agreement not to sell 50% of his option shares
until May 1, 1997.

         Unrelated  to the  changes in  management  of  November  1, 1996,  Toni
McElroy,  a former  Vice-President of Finance of the Company,  resigned from the
Company in December 1996 at the request of the Company, Tony Giovaniello, former
Chief Operating Officer of Boundless,  resigned from Boundless in March 1997 and
Bill Long, a former  Executive Vice President of the Company,  resigned from the
Company in January 1997.

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

         The table below discloses all cash  compensation  awarded to, earned by
or paid to the  present or former  Chief  Executive  Officer  and the  executive
officers of the Company who earned $100,000 or more for services rendered in all
capacities  to the  Company  during the fiscal  year ended  December  31,  1996,
including the two highest paid  individuals who were executive  officers in 1996
but not at year end (the "named executive  officers").  In addition, it provides
information with respect to the compensation of the named executive officers for
1995 and 1994.



                                       28

<PAGE>
<TABLE>
<CAPTION>
                                               Summary Compensation Table
                                                --------------------------

                                                                                                   Long-Term
                                                         Annual Compensation                      Compensation
                                            ------------------------------------------------      ------------

Name and Principal                                                              Other Annual                            Other Annual
Position                         Year        Salary          Bonus              Compensation        Options(#)          Compensation
-------------------             ------       ------          -----              ------------        ----------          ------------
<S>                              <C>          <C>              <C>                <C>                 <C>                  <C>

Leonard MacKenzie              12/31/96      $     -          $     -                   -             500,000                    -
Chief Executive                12/31/95            -                -                   -                   -                    -
Officer since 11/96            12/31/94            -                -                   -                   -                    -

Gerald Youngblood(1)           12/31/96      $171,539        $122,680                   -             150,000                    -
Former CEO                     12/31/95      $157,057        $128,600                   -             300,000                    -
                               12/31/94      $ 80,985        $ 75,000                   -                   -                    -

Tom Upton(2)(3)                12/31/96      $ 95,733        $  1,031            $ 35,227              55,000                    -
President, Boundless           12/31/95      $ 75,610               -            $117,451              10,000                    -
Global Distribution            12/31/94      $ 73,113               -            $ 50,535                 -                    -

Tony Giovaniello(3)            12/31/96      $138,654        $ 43,027                   -              35,000                    -
Former COO of                  12/31/95      $118,917          47,930                   -             125,000                    -
Boundless                      12/31/94      $ 98,162          54,708                   -                   -                    -

John Osborne(4)                12/31/96      $120,577        $ 40,000                   -             200,000                    -
Former CEO of                  12/31/95             -               -                   -                   -                    -
Boundless                      12/31/94             -               -                   -                   -                    -

Toni McElroy(5)                12/31/96      $107,885        $ 39,674                   -              35,000                    -
Former Vice                    12/31/95       107,969          46,662                   -             125,000                    -
President-Finance              12/31/94        40,940          25,000                   -                   -                    -

</TABLE>

(1)  Resigned  from the Company in November  1996 and received  severance pay of
     $33,333 in 1996 and payment for unused  vacation and sick leave of $20,000,
     which are not reflected in the above table.

(2)  Other  annual  compensation  consisted of  commissions  of $35,227 in 1996,
     $31,702  in 1995 and  $34,552  in 1994  and  reimbursement  for  relocation
     expenses of $85,749 in 1995 and $15,983 in 1994.

(3)  Compensation prior to December 9, 1994 was from ADDS.

(4)  Resigned  from the Company in November  1996 and received  severance pay of
     $15,833 in 1996 and payment for unused  vacation and sick leave of $25,577,
     which are not reflected in the above table.

(5)  Received  severance  pay  of  $4,231  in  1996.  Upon  termination  of  her
     employment,  80,000 of her  options to  purchase  160,000  shares of Common
     Stock granted in 1995 and 1996 vested  immediately and the remaining 80,000
     was forfeited.

Employment Agreements

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

                                       29

<PAGE>
Compensation Committee Interlocks and Insider Participation

         Mr. Youngblood,  Mr. Long and Ms. McElroy,  who were executive officers
of the Company during parts of 1996, 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.


                                       30

<PAGE>
1995 Incentive Plan

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


         The following  table sets forth  information,  as of December 31, 1996,
regarding  the  outstanding  options  granted in 1996 under the  Company's  1995
Incentive Plan ("1995 Plan") to the named executive officers:
<TABLE>
<CAPTION>

                                                                                                    Potential Realizable
                              Number of                                                               Value at Assumed
                             Securities       Percent of Total                                      Annual rates of Stock
                             Underlying       Options/SARs      Exercise or                        Price Appreciation for
                            Options/SARs      Granted under     Base Price        Expiration             Option Term
          Name             Granted (#)(4)        1995 Plan        ($/Sh)             Date          5%($)           10%($)
          ----             --------------     ---------------   -----------       ----------       -----           ------
<S>                           <C>               <C>              <C>               <C>              <C>            <C>


Leonard MacKenzie(1)              500,000          15.6%           $1.57          12/02           1,007,437     1,291,568

Gerald Youngblood(2)              300,000           9.3%           $1.35          11/99             470,396       546,014

                                  150,000           4.7%           $2.56          11/99             446,005       517,702

Tom Upton(3)                       20,000           0.6%           $2.82          2/01               72,381        92,795

                                   30,000           1.1%           $2.13          4/01               95,674       122,658

Tony Giovaniello(3)                35,000           1.1%           $2.56          1/01              114,989       147,420

John Osborne(2)                   200,000           6.2%           $2.13          11/99             494,787       574,325

Toni McElroy(2)                    17,500           0.5%           $1.35          5/98               25,461        27,431

                                   62,500           1.9%           $2.56          5/98              172,435       185,778

</TABLE>

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

     (1) Options  vest pro rata on a monthly  basis over the 6 months  after the
applicable grant date listed in footnote 4, below.

     (2) Options became fully vested as of the  applicable  grant date listed in
footnote 4, below, as part of a severance arrangement.

     (3) Options vest 25% one year following the applicable grant date listed in
footnote 4, below and the  remainder  vests pro rata on a monthly basis over the
subsequent three year period.

     (4)  Grant  dates  for  options  are  as  follows:   Mackenzie:   12/19/96;
Youngblood:   11/1/96;   Upton:  2/1/96  for  20,000  and  4/23/96  for  30,000;
Giovaniello: 1/5/96; Osborne: 11/1/96; McElroy: 12/3/96.



                                       31

<PAGE>


<TABLE>
                                      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 as at
December 31, 1996.


<CAPTION>
                                                                                                          Value of Unexercised
                                                            Number of Unexercised Options                In-the-Money Options at
                                                               at December 31, 1996 (#)                  December 31, 1996 ($)(1)
                                                          --------------------------------         ---------------------------------

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


Leonard MacKenzie             0               $0                 0              500,000                $0                 $30,000

Gerald Youngblood             0                0           450,000                  0                84,000                   0

Tom Upton                     0                0             3,958               61,042               1,108                 1,692

Tony Giovaniello           10,000          20,875           39,479              110,521              11,054                21,146

John Osborne                  0                0           200,000                  0                    0                    0

Toni McElroy                  0                0            80,000                  0                17,500                   0


</TABLE>

(1)  The last sale price of the Company's  Common Stock on December 31, 1996, as
     reported by The Nasdaq SmallCap Market, was $1.63




                                                           32



<PAGE>

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
              --------------------------------------------------------------

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of the Company's  outstanding Common Stock as of March 21,
1997, 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 SunRiver  Group is 515 Congress  Avenue,  Suite 2500,  Austin,  Texas
78701. The address of Stephen Maysonave is 919 Corriente  Pointe,  Redwood City,
CA 94065.
                               Number of Shares                  Percentage of
Name of Beneficial Owner      Beneficially Owned              Outstanding Shares
------------------------      ------------------              ------------------

SunRiver Group                  30,614,084(1)                        56.9%
Stephen Maysonave,
  Voting Trustee                    30,614,084(1)(2)                 56.9%
Leonard Mackenzie                  416,667(3)                            *
Tom Upton                          125,000(4)                            *
Gerald Youngblood                  450,000(3)                            *
Tony Giovaniello                    65,937(3)                            *
John Osborne                       200,000(3)                            *
Toni McElroy                       150,000(5)                            *
Gary Wood                                -                               *
Daniel Matheson                          -                               *
Jeffrey Moore                            -(2)                            *
All current directors and executive
 officers as a group
 (seven individuals)               708,334                             1.4%

 *           Less than 1%.

(1)  Includes  4,174,704  shares  underlying  the warrant held by SunRiver Group
     (the  "SunRiver  Group  Warrant") to purchase  shares of Common Stock at an
     exercise  price of $1.84 per share.  For  additional  warrants which may be
     issued to SunRiver Group,  see "Item 13-Certain  Relationships  and Related
     Transactions."

(2)  Includes the shares  beneficially  owned by SunRiver  Group, as a result of
     Mr.  Maysonave's  beneficial  ownership,  as voting  trustee,  of 3,330,000
     shares  of  Series B  Preferred  Stock of  SunRiver  Group  (the  "Series B
     Preferred")  pursuant  to a  voting  trust  expiring  March  1999.  Under a
     stockholders agreement, the Series B Preferred has the power to elect three
     of the  five  directors  constituting  SunRiver  Group's  entire  board  of
     directors  which has the sole voting power and,  with the  stockholders  of
     SunRiver  Group,  shares the  investment  power with  respect to the Common
     Stock owned by SunRiver 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 SunRiver Group's Series B Preferred. See
     "Item  13--Certain   Relationships  and  Related  Transactions"  for  legal
     proceedings  and pledges of Common Stock by SunRiver  Group which may, at a
     subsequent date, result in a change in control of the Company.

(3)  Consists of shares of Common  Stock  which may be issued  upon  exercise of
     options.

                                       33

<PAGE>

(4)  Includes 65,000 shares issuable upon exercise of options.

(5)  Includes 80,000 shares issuable upon exercise of options.


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

         As of March 1997, SunRiver Group was a guarantor of $750,000 owing from
TradeWave to MCC through the end of 1997 under the Technology  Agreement between
TradeWave and MCC.  Additionally,  in connection with the TradeWave Acquisition,
TradeWave  owed  MCC  $1,250,000  payable  through  the end of 1997  and MCC had
disputed  the  adequacy  of the  delivery  of 60,000  shares of Common  Stock to
satisfy a $250,000  payment due in 1996.  In March  1997,  MCC,  TradeWave,  the
Company and SunRiver Group entered into  agreements  whereby all  obligations of
the  parties in  connection  with the  Technology  Agreement  and the  TradeWave
Acquisition Agreement,  including SunRiver Group's guaranty, were discharged and
TradeWave's membership in MCC was terminated.  The Company paid MCC $500,000 and
TradeWave granted MCC a non-exclusive  license to use TradeVPI and assigned to a
designee of MCC TradeWave's rights in the Infosleuth Project.

         Prior to his  appointment as the Company's  Controller in November 1996
and Chief  Financial  Officer in December 1996,  Wayne Schroeder was a financial
consultant to the Company and received  consulting  fees in 1996 of $87,500 from
Boundless and $30,000 from TradeWave.

         William Moore, the father of Jeffrey K. Moore and Matthew R. Moore, has
acted as a consultant for SunRiver Group from time to time and, during 1995, was
a key consultant to the Company in financing  transactions and acquisitions that
resulted in the substantial growth of the Company,  including the acquisition of
TradeWave in April 1995 and the Digital  Acquisition  in October 1995.  Under an
agreement  between  the  Company  and  NAFCO  Consulting,   Inc.  ("NAFCO"),   a
corporation  wholly owned by William  Moore,  the Company paid NAFCO $137,742 in
1995,  including  $10,000 for special  assignments and $7,742 for expenses.  The
Company  believes  that the  agreement  between  the  Company  and NAFCO,  which
terminated  on December  31,  1995,  was on terms as favorable to the Company as
obtainable from  unaffiliated  third parties.  On August 6, 1995 and January 31,
1996, the Company issued 200,000  shares and 225,000  shares,  respectively,  of
Common Stock to William  Moore (as stock  grants under the 1995 Plan,  which the
Company has valued at $905,000) in consideration for special consulting services
rendered  in 1995.  Reference  is made to Note 2 to the table  under the caption
"Security  Ownership  of  Certain  Beneficial  Owners  and  Management,"  above,
regarding  the shares of Series B Preferred  of SunRiver  Group owned by Messrs.
Jeffrey K. Moore and Matthew R. Moore, which, if voted together,  have the power
to control SunRiver Group.

         In April 1996,  William Moore was convicted of felonies  related to the
acquisition  and operation of a Texas savings and loan from 1982 to 1984 and was
ordered to pay  approximately  $12  million in  restitution  to several  federal
agencies.  Although  William  Moore  disclaims  beneficial  ownership  of, or an
economic  interest  in, the  controlling  shares of SunRiver  Group owned by his
sons, there can be no assurance that the federal  government will not attempt to
attribute an economic interest in such shares to William Moore, or that his sons
will not sell such shares, in order to satisfy this restitution order. Either of
these  outcomes  could  result in a change in  control  of  SunRiver  Group and,
therefore,  the Company  and its  subsidiaries.  Mr.  Moore is  appealing  these
convictions and restitution order. It is not possible to predict whether or when
such a change of  control  will  occur or the  effect of any such  change in the
Company.


                                       34

<PAGE>

         In connection  with the Digital  Acquisition in October 1995,  SunRiver
Group pledged 21,439,380 shares of Common Stock to Chase and 5,000,000 shares of
Common Stock to NCR. In  consideration  of such pledge,  the Company  expects to
issue to SunRiver  Group  warrants  to purchase  such number of shares of Common
Stock at $3.875 per share,  subject to adjustment,  as the Board of Directors of
the  Company  determines  is  appropriate  after  obtaining  independent  advice
regarding the fairness of such  warrants.  In  consideration  for the release of
SunRiver  Group's  guarantee to MCC, the number of such warrants will be reduced
by the  number of  warrants  equal in value to  $500,000,  determined  under the
Black-Scholes  valuation  model or some other number of warrants  determined  by
independent advice regarding the fairness of such consideration.


                                     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, 1996 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 filed a report on Form 8-K to report an event  occurring on
         December 17, 1996 and included the following item:


         Item 4.     Changes in Registrant's Certifying Accountant.

         The  Company  did not file any other  reports  on Form 8-K  during  the
fourth quarter of 1996.


                                       35


<PAGE>



                     SUNRIVER CORPORATION AND SUBSIDIARIES
                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------

                                                                          Page

Reports of Independent Certified Public Accountants                       F-2

Consolidated Balance Sheets as of December 31, 1996 and 1995              F-4

Consolidated Statements of Operations
  for the years ended December 31, 1996, 1995 and 1994                    F-5

Consolidated Statements of Changes in Stockholders' Equity
  for the years ended December 31, 1996, 1995 and 1994                    F-6

Consolidated Statements of Cash Flows
  for the years ended December 31, 1996, 1995 and 1994                    F-8

Notes to Consolidated Financial Statements                                F-10

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

  Condensed Balance Sheets as of December 31, 1996 and 1995               S-1

  Condensed Statements of Operations
     for the years ended December 31, 1996, 1995 and 1994                 S-2

  Condensed Statements of Cash Flows
     for the years ended December 31, 1996, 1995 and 1994                 S-3

Schedule II - Valuation and Qualifying Accounts                           S-4

                                      F-1
<PAGE>
                     SUNRIVER CORPORATION AND SUBSIDIARIES
                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders
SunRiver Corporation

We  have  audited  the  accompanying  consolidated  balance  sheet  of  SunRiver
Corporation and Subsidiaries as of December 31, 1996 and the related  statements
of operations,  stockholders'  equity and cash flows for the year then ended. We
have also audited the schedules  for the year ended  December 31, 1996 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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  SunRiver
Corporation  and  Subsidiaries  as of  December  31,  1996 and the  consolidated
results  of their  operations  and their  cash  flows for the year then ended in
conformity with generally accepted accounting  principles.  In addition,  in our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial  statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.


BDO Seidman, LLP
Austin, Texas
March 21, 1997

                                       F-2
<PAGE>

                     SUNRIVER CORPORATION AND SUBSIDIARIES
                        REPORT OF INDEPENDENT ACCOUNTANTS








To the Board of Directors and Stockholders
SunRiver Corporation

We  have  audited  the  accompanying  consolidated  balance  sheet  of  SunRiver
Corporation and Subsidiaries as of December 31, 1995 and the related  statements
of operations,  stockholder's equity and cash flows for each of the two years in
the period ended  December 31, 1995.  We have also audited the schedules for the
years ended  December  31, 1995 and 1994 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 are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits  provide a reasonable  basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated   financial  position  of  SunRiver
Corporation  and  Subsidiaries  as of  December  31,  1995 and the  consolidated
results  of their  operations  and their cash flows for each of the two years in
the period ended  December 31,  1995,  in  conformity  with  generally  accepted
accounting  principles.  In addition,  in our opinion,  the financial  statement
schedules  referred to above, when considered in relation to the basic financial
statements  taken as a whole,  present  fairly,  in all material  respects,  the
information required to be included therein.


Coopers & Lybrand L.L.P.
Austin, Texas
March 1, 1996, except for Notes 9 and 18, as to which the date is March 28, 1997

                                      F-3
<PAGE>
                     SUNRIVER CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                                             December 31,
                                                                                                   ---------------------------------
                                                                                                         1996             1995
                                                                                                   ---------------- ----------------
<S>                                                                                                <C>              <C>
Current assets:
  Cash and cash equivalents                                                                               $  5,213         $    369
  Trade accounts receivable, (including $2,393 and $6,206
    from related parties), net                                                                              22,046           18,678
  Inventories (Notes 7 and 10)                                                                              18,525           25,758
  Deferred income taxes (Note 9)                                                                                 -            3,011
  Prepaid expenses and other current assets                                                                    256            1,572
                                                                                                   ---------------- ----------------
     Total current assets                                                                                   46,040           49,388
Property and equipment, net (Note 8)                                                                        11,474           11,795
Goodwill, net (Note 5)                                                                                       9,505           10,608
Other assets                                                                                                 2,506            3,744
Net assets of discontinued operations (Note 18)                                                                  -              321
                                                                                                   ---------------- ----------------
                                                                                                          $ 69,525         $ 75,856
                                                                                                   ================ ================
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Note payable (Note 10)                                                                                  $ 13,950         $  8,000
  Current portion of long-term debt (including $169
    to a related party at December 31, 1995) (Note 10)                                                       8,009            6,211
  Accounts payable                                                                                          10,892           14,340
  Accrued expenses                                                                                           6,345            4,594
  Deferred revenue                                                                                             180              827
  Net liabilities of discontinued operation (Note 18)                                                        3,492                -
                                                                                                   ---------------- ----------------
     Total current liabilities                                                                              42,868           33,972
Long-term liabilities:
  Long-term debt, less current maturities (including $8,000
    and $8,000 to a related party)  (Note 10)                                                               13,382           22,008
  Deferred income taxes (Note 9)                                                                                 -            2,652
  Other                                                                                                        918              832
                                                                                                   ---------------- ----------------
     Total long-term liabilities                                                                            14,300           25,492
                                                                                                   ---------------- ----------------
         Total liabilities                                                                                  57,168           59,464
Commitments and contingencies (Notes 1, 14, 15, 17 and 18)                                                       -                -
Mandatorily redeemable preferred stock of subsidiary                                                         3,555            3,555
Stockholders' equity (Notes 11 and 19):
  Preferred stock                                                                                                -                -
  Common stock                                                                                                 486              456
  Additional paid-in capital                                                                                31,440           23,769
  Accumulated deficit                                                                                     (23,124)         (11,388)
                                                                                                   ---------------- ----------------
     Total stockholders' equity                                                                              8,802           12,837
                                                                                                   ---------------- ----------------
                                                                                                          $ 69,525         $ 75,856
                                                                                                   ================ ================

</TABLE>

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

                                       F-4





<PAGE>

                     SUNRIVER CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                              For the Years Ended
                     (in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                                                    December 31,
                                                                                 ---------------------------------------------------
                                                                                        1996              1995             1994
                                                                                 ------------------ ----------------- --------------
<S>                                                                              <C>                <C>               <C>
Revenue:
  Product sales (including sales to related
    parties of $21855, $39,600 and $1,841)                                               $ 130,733          $ 81,761        $ 7,173
  Services                                                                                   7,492            13,196          1,171
                                                                                 ------------------ ----------------- --------------
     Total revenue                                                                         138,225            94,957          8,344
Cost of revenue:
  Product sales                                                                            107,029            62,555          4,378
  Services                                                                                   2,639             6,829            511
                                                                                 ------------------ ----------------- --------------
     Total cost of revenue                                                                 109,668            69,384          4,889
                                                                                 ------------------ ----------------- --------------
       Gross margin                                                                         28,557            25,573          3,455
Operating expenses:
  Sales and marketing                                                                       10,433             7,940          1,092
  General and administrative                                                                 8,120             6,337            992
  Research and development                                                                   4,855             4,569            990
                                                                                 ------------------ ----------------- --------------
     Total operating expenses                                                               23,408            18,846          3,074
                                                                                 ------------------ ----------------- --------------
       Operating income                                                                      5,149             6,727            381
Other (income) expense:
  Interest expense                                                                           3,794             1,907             97
  Other                                                                                      1,980             (572)             61
                                                                                 ------------------ ----------------- --------------
     Total other expense                                                                     5,774             1,335            158
                                                                                 ------------------ ----------------- --------------
Income (loss) before income taxes,
  extraordinary item and discontinued operations                                             (625)             5,392            223
Income tax expense                                                                             962             1,323            185
                                                                                 ------------------ ----------------- --------------
Income (loss) from operations                                                              (1,587)             4,069             38
Loss from discontinued operations                                                          (9,652)             (870)              -
                                                                                 ------------------ ----------------- --------------
Income (loss) before extraordinary item                                                   (11,239)             3,199             38
Extraordinary loss on early extinguishment of debt,
  net of tax benefit of $393                                                                     -             (589)              -
                                                                                 ------------------ ----------------- --------------
Net income (loss)                                                                         (11,239)             2,610             38
Dividend on preferred stock of subsidiary                                                      497                93              -
Accretion to preferred stock of subsidiary                                                       -               681             64
Restructuring of preferred stock of subsidiary                                                   -             1,668              -
                                                                                 ------------------ ----------------- --------------
Earnings (loss) available for common shareholders                                       $ (11,736)          $    168       $   (26)
                                                                                 ================== ================= ==============
Weighted average common shares outstanding                                                  47,023            43,656         27,186
                                                                                 ================== ================= ==============
Earnings (loss) per common share from:
  Continuing operations                                                                 $   (0.04)          $   0.04        $  0.00
  Discontinued operations                                                                   (0.21)            (0.02)           0.00
  Extraordinary loss                                                                         0.00             (0.02)           0.00
                                                                                 ------------------ ----------------- --------------
Earnings (loss) per common share                                                        $   (0.25)          $   0.00        $  0.00
                                                                                 ================== ================= ==============
</TABLE>

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

                                      F-5


<PAGE>
                     SUNRIVER CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CHANGES IN
                              STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                              Series A            Series B                         Additional
                                           Preferred Stock     Preferred Stock       Common Stock    Paid-in   Accumulated
                                         ----------------- --------- ----------  --------- --------
                                          Shares   Amount   Shares     Amount     Shares    Amount   Capital     Deficit     Total
                                         -------- -------- --------- ----------  --------- -------- --------- ------------ ---------
<S>                                     <C>       <C>      <C>       <C>         <C>       <C>      <C>       <C>          <C>
Balance, January 1, 1994                  13,270   $133     24,026     $240        26,439   $264    $10,931     $(11,530)  $    38
Recapitalization                         (13,270)  (133)   (24,026)    (240)        7,720     77      1,489                  1,193
Common stock sold,
  net of expenses                                                                   4,077     41        845                    886
Common stock issued for retirement
  of long-term debt to related party                                                  288      3        141                    144
Common stock issued to related party
  in settlement of management agreement                                               300      3        147                    150
Accretion to preferred stock
  of subsidiary                                                                                                      (64)      (64)
Net income                                                                                                            38        38
                                         -------- -------- --------- ----------- --------- -------- --------- ------------ ---------

Balance, December 31, 1994 (1)               -       -         -         -         38,824    388     13,553      (11,556)    2,385
Common stock sold                                                                   4,406     44      5,501                  5,545
Conversion of notes payable                                                         3,057     31      4,544                  4,575
Distribution of net assets                                                           (737)    (7)    (2,350)                (2,357)
Warrants issued in connection
  with placement of debt                                                                              1,691                  1,691
Restructuring of mandatorily redeemable
  preferred stock of subsidiary                                                                         830       (1,668)     (838)
Dividend on preferred stock
  of subsidiary                                                                                                      (93)      (93)
Accretion to preferred stock
  of subsidiary                                                                                                     (681)     (681)
Net income                                                                                                         2,610     2,610
                                         -------- -------- --------- ----------- --------- -------- --------- ------------ ---------

</TABLE>

(1)  Includes  26,937 shares of common stock  purchased but unissued at December
     31, 1994.


                                  (continued)
                  The accompanying notes are an integral part
                          of the financial statements.
                                      F-6
<PAGE>
                     SUNRIVER CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CHANGES IN
                        STOCKHOLDERS' EQUITY, CONTINUED
                                 (in thousands)


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


Balance, December 31, 1995                   -        -         -         -        45,550     456    23,769     (11,388)     12,837
Conversion of notes payable                                                           783       8     1,492                   1,500
Common stock sold                                                                   1,267      12     2,858                   2,870
Common stock issued for payment
  of long-term debt                                                                    60       1       299                     300
Options and warrants issued for
  services to non-employees                                                                             526                     526
Stock options exercised                                                               587       6       879                     885
Deferred compensation from
  below market grants of stock
  options of subsidiary                                                                                 107                     107
Dividend on preferred stock
  of subsidiary                                                                       169       1       496        (497)         -
Warrants exercised                                                                    511       5     1,418                   1,423
Common stock repurchased and retired                                                 (725)     (7)   (1,298)                 (1,305)
Common stock issued for consulting services                                           370       4       894                     898
Net loss                                                                                                        (11,239)    (11,239)
                                         -------- -------- --------- ----------- --------- -------- --------- ------------ ---------
Balance, December 31, 1996                   -       $ -         -         $-      48,572    $486   $31,440    $(23,124)    $ 8,802
                                         ======== ======== ========= =========== ========= ======== ========= ============ =========
</TABLE>

                   The acompanying notes are an integral part
                  of these consolidated financial statements.
                                      F-7
<PAGE>


                     SUNRIVER CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                              For the Years Ended
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                  December 31,
                                                     ----------------------------------
                                                          1996       1995       1994
                                                     ----------- ----------  ----------
<S>                                                  <C>            <C>            <C>
Cash flows from operating activities:
  Net income (loss)                                   $(11,239)   $  2,610    $     38
  Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:
    Income (loss) from discontinued operations           9,652         870        --
    Depreciation and amortization                        3,957       2,857         307
    Loss from disposal of assets                           133
    Deferred revenues                                     (647)     (3,193)       (397)
    Provision for doubtful accounts                        180       1,072          48
    Provision for excess and obsolete inventory          3,845         348          42
    Deferred Taxes                                         358      (2,256)         48
    Write off of intangible assets                        --         1,554        --
    Shares issued in settlement of
       management agreement                               --           155         150
    Extraordinary loss on early
       extinguishment of debt                             --           282           8
Changes in assets and liabilities:
  Trade accounts receivable                             (3,548)    (12,270)     (1,879)
  Inventories                                            3,388      (7,595)       (314)
  Other assets                                           1,592      (1,595)       (496)
  Accounts payable and accrued expenses                    (76)      8,938       1,607
                                                      --------    --------    --------
Net cash:
  Provided by (used in) continuing operations            7,595      (8,223)       (838)
  Used in discontinued operations                       (6,160)     (1,629)
                                                      --------    --------    --------
Net cash provided by (used in) operating activities      1,435      (9,852)       (838)
Cash flows from investing activities:
  Capital expenditures                                  (1,384)       (229)       (100)
  Purchase of Digital Assets                              --       (14,970)       --
  Purchase of Boundless, net of cash acquired             --          --        (5,441)
                                                      --------    --------    --------
Net cash used in investing activities                   (1,384)    (15,199)     (5,541)
                                                      --------    --------    --------
Cash flows from financing activities:
  Net proceeds from issuance of common stock             5,177       2,164       1,841
  Decrease in short-term debt                              (30)       --          --
  Proceeds from debt issuance                            1,500      24,575       4,642
  Purchase and retirement of common stock               (1,305)       --           (15)
  Advances on revolving loan payable                     5,950       3,365        --
  Payment on long-term debt                             (6,496)
  Costs associated with issuance of debt                  --        (1,284)       --
  Restructuring of mandatorily redeemable
    preferred stock of subsidiary                         --        (3,500)       --
  Payments on capital leases                                (3)        (11)        (45)
                                                      --------    --------    --------
Net cash provided by financing activities                4,793      25,309       6,423
                                                      --------    --------    --------
Net increase in cash and cash equivalents                4,844         258          44
Cash and cash equivalents at beginning of period           369         111          67
                                                      --------    --------    --------
Cash and cash equivalents at end of period            $  5,213    $    369    $    111
                                                      ========    ========    ========
</TABLE>


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

                                      F-8
<PAGE>


                     SUNRIVER CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
                              For the Years Ended
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                   December 31,
                                                       --------------------------------
                                                          1996        1995      1994
                                                       ----------  ---------  ---------
<S>                                                       <C>     <C>         <C>
Non-cash transactions:
  Issuance of common stock to retire debt                $  --      $  --     $   144
  Issuance of common stock for
    management services                                     --         --         150
  Expenses for private placement
    deducted from proceeds                                  --         --         955
  Accretion to preferred stock of subsidiary                --          681        64
  Dividend on Preferred Stock of Subsidiary                  497         93      --
  Distribution of net assets                                --        2,357      --
  Conversion of notes payable to common stock              1,500      4,575      --
  Issuance of common stock for Note Payment                  300       --        --
  Estimated value of compensatory
    options and warrants                                     526      3,216      --
  Issuance of common stock for consulting services           898        380       150
  Issuance of common stock in Digital Acquisition           --        3,000      --
  Obligations incurred in connection
    with the acquisition of equipment
    and intellectual property                               --          742     8,000
  Equipment acquisitions funded through capital leases       107        232      --
  Deferred compensation
Cash paid for:
  Interest                                                 4,293      1,615        32
  Taxes                                                     (794)     1,553      --

</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.
                                      F-9
<PAGE>
1.   Background



SunRiver  Corporation (the "Company") is engaged in designing and  manufacturing
graphics and text computer  terminals  for business  use. The Company's  general
strategy is to operate in one business  segment as a provider of devices,  which
provide access to corporate network computing environments.  The Company has two
subsidiaries, Boundless Technologies, Inc., formerly SunRiver Data Systems Inc.,
("Boundless")  and  TradeWave   Corporation   ("TradeWave").   The  Company  has
discontinued the operations of TradeWave. (See Note 18)

During the period  beginning in December  1994 and ending in October  1995,  the
Company made acquisitions and dispositions,  which resulted in a total change in
the Company's business and management.  On December 9, 1994, the Company,  which
was  then  known  as  All-Quotes,  Inc.  ("All-Quotes")  and  its  wholly  owned
subsidiary  All-Quotes Capital ("Capital") entered into an acquisition agreement
with SunRiver Group, formerly named SunRiver  Corporation,  (the "SunRiver Group
Acquisition").  For  accounting  purposes  the  transaction  was  treated  as  a
recapitalization  of All-Quotes,  with SunRiver  Group as the acquirer,  and its
assets and liabilities were recorded at carryover  basis. The former  businesses
of All-Quotes that were distributed to certain  All-Quotes'  shareholders during
1995 were recorded at historical  net book value.  Accordingly,  the  historical
financial  statements prior to December 9, 1994 are those of SunRiver Group, and
all  historical  and any pro forma  information  related to All-Quotes  has been
excluded from these financial statements. The Company, which was incorporated in
Delaware in 1988 as All-Quotes,  Inc., changed its name to SunRiver Corporation,
and changed its fiscal year end from June 30 to December 31.

As a result of two  acquisitions  since  December  1994,  the  Company,  through
Boundless,  has been  designing,  assembling,  selling  and  supporting  general
display  terminals with limited graphics  capability,  high performance  network
graphics  display  terminals  based  on  the  X-Terminal   protocol,   and  high
performance  alternatives to personal  computers and other terminal  products in
multi-user, personal computer and minicomputer-based environments.

The  Company  acquired  all of the  outstanding  common  stock of  Boundless  on
December 9, 1994,  through a newly  formed  wholly  owned  subsidiary,  SunRiver
Acquisition  Corporation   ("Acquisition").   This  transaction  is  more  fully
described in Note 3. Boundless also offers  post-sale  customer support services
for its desktop terminals.  Boundless'  products and services are offered solely
to businesses.

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

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

As a result of a third  acquisition  (see Note 4) in April  1995,  the  Company,
through  TradeWave,  had been engaged in the business of developing  and selling
Internet  software and value-added  services which enable  businesses to conduct
private,  secure  communication  and electronic  commerce  transactions over the
Internet.   During  December  1996,  the  Company  decided  to  discontinue  the
operations of TradeWave (See Note 18).

During the third and fourth  quarters  of 1996,  the  Company  violated  certain
financial  covenants of the Chase Credit Line and, during other periods of 1996,
violated certain other covenants. Prior to the fourth quarter violations,  Chase
Manhattan Bank, as agent for the bank syndicate, granted waivers to the covenant
violations.  As a result of the fourth quarter  violations,  the Company entered

                                      F-10
<PAGE>
                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)

into  negotiations  with the bank  syndicate to revise the  covenants for future
quarters and to obtain a waiver of the fourth quarter  violations.  During March
1997, the Company  completed  negotiations  with the bank syndicate and obtained
both the  requested  revisions  to the  covenants  and the  waiver of the fourth
quarter  violations.  The Company believes it will maintain  compliance with the
revised covenants.

2.   Summary of Significant Accounting Policies

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

The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries,  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  remaining  maturities at purchase of three
months or less are considered cash equivalents.

Property and Equipment
----------------------

Property  and  equipment  are stated at cost.  Depreciation  is  computed on the
straight-line  method over the estimated  useful lives of the assets.  Buildings
and  improvements  are  depreciated  over a 25-year  period,  and  machinery and
equipment are depreciated over periods ranging from 2 to 15 years.  Expenditures
that  increase the value or extend the life of an asset are  capitalized,  while
costs of maintenance and repairs are expensed as incurred.  Gains or losses upon
disposal of assets are recognized in income.

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

The  carrying  amounts  of cash and  cash  equivalents,  mandatorily  redeemable
preferred  stock and long-term debt reported on the balance  sheets  approximate
their fair value. The Company  estimated the fair value of redeemable  preferred
stock and  long-term  debt by comparing  the carrying  amount to the future cash
flows of the  instrument,  discounted  using the Company's  incremental  rate of
borrowing for a similar instrument.

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

Research and  development  expenses are charged to operations  as incurred.  The
development  costs of  software to be marketed  are  expensed as incurred  until
technological  feasibility  is  established.  After  that  time,  the  remaining
software  production costs are capitalized as other assets in the balance sheet.
Capitalized  software  costs are  amortized  using the sum of the years'  digits
method over three years, the estimated  economic life of the software  products.
At December 31, 1996 and 1995,  capitalized  software  development costs, net of
amortization,  were $74 and $319.  During the year ended  December 31, 1996, the
Company wrote off $327 of the  capitalized  software.  Amounts  capitalized  and
expensed for the years-ended December 31, 1996, 1995 and 1994 were as follows:

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

Capitalized software costs           $     33      $    195      $     40
Amortization expense                      308           409            30

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 $1,227 and $1,407 as of December 31, 1996 and

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


1995,  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 two customers  representing  16% and 14% of total revenues in 1996,
and had revenues from one customer of 42% of total revenues in 1995.

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

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense was $1,631,  $561 and $104 for the years ended  December 31, 1996,  1995
and 1994.

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 $1,117 and $386 for the years ended  December 31, 1996 and
1995 and $11 during the period from acquisition to December 31, 1994.

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

The  computation of earnings  (loss) per common share is based upon the weighted
average number of common shares and common equivalent shares  outstanding during
the period, deemed to include shares purchased but unissued, plus (in periods in
which they have a dilutive  effect)  the  effect of common  shares  contingently
issuable  from  exercise  of stock  options  and  warrants,  and  conversion  of
convertible notes payable.  These  contingently  issuable common shares were not
included in the  calculation of earnings  (loss) per share for any period except
the year ended  December  31,  1994,  as the effect  would have been  either not
material or  anti-dilutive  for all other  periods  presented.  Earnings  (loss)
available for common  shareholders  includes the effects of the accretion to the
preferred  stock of a subsidiary and preferred stock  dividends.  As a result of
the  recapitalization  described in Note 1, the number of shares outstanding has
been retroactively restated for all periods presented.

Pervasiveness of Estimates
--------------------------

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

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

As more fully  discussed in Note 9, income taxes are provided in accordance with
the liability  method of accounting  for income taxes  pursuant to the Financial
Accounting  Standards Board ("FASB")  Statement No. 109.  Accordingly,  deferred
income taxes are recorded to reflect the future tax  consequences of differences
between the tax bases of assets and liabilities  and their financial  amounts at
year-end.

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

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 FASB  Statement  123,  "Accounting  for  Stock-Based  Compensation"  for
financial statement  disclosure purposes and issuance of options and warrants to
non-employees for services rendered.

In accordance with FAS 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


                                   Continued
                                      F-12
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


circumstances  indicate  the  carrying  amount  of an  asset  may  not be  fully
recoverable. As part of this assessment,  management prepares an analysis of the
undiscounted  cash flows for each product  that has  significant  long-lived  or
intangible  asset values  associated with it. This analysis for the asset values
as of December  31, 1996  indicated  there was no  impairment  to these  assets'
carrying values.

On March 3, 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No. 128 "Earnings Per Share" ("SFAS No. 128").
This pronouncement provides a different method of calculating earnings per share
than is currently used in accordance with APB No. 15, "Earnings Per Share". SFAS
No. 128 provides for  calculation  of "Basic" and "Diluted"  earnings per share.
Basic earnings per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share  reflect the potential
dilution of securities  that could share in the earnings of an entity similar to
fully  diluted  earnings per share.  The Company will adopt SFAS No. 128 in 1997
and  its  implementation  is not  expected  to  have a  material  effect  on the
consolidated financial statements.

3.   Acquisition of SunRiver Group and Boundless

Issuance of Common Stock to SunRiver Group
------------------------------------------

Pursuant to the terms of the SunRiver Group Acquisition agreement referred to in
Note 1, on December 9, 1994, the Company issued  5,594,001  shares of its common
stock to SunRiver  Group in  exchange  for all of  SunRiver  Group's  assets and
liabilities.  The  Company  also  agreed  to issue  to  SunRiver  Group,  for no
additional  consideration,  that number of newly  issued  shares that would have
increased  SunRiver Group's total ownership of the Company's  outstanding common
stock to not less than 63% after  giving  effect to certain  other  issuances of
common stock as described below.

On December 9, 1994,  the Company did not have a sufficient  number of shares of
authorized  but  unissued  common stock  available to complete the  transactions
required by the SunRiver Group Acquisition agreement.  Accordingly, the Board of
Directors  of the  Company  agreed to take all steps  required  to  restate  its
Certificate  of  Incorporation  to increase the number of authorized  shares and
issue the required shares to establish  SunRiver  Group's  ownership at not less
than 63% of the Company's then  outstanding  common stock.  At December 9, 1994,
the Company  delivered  to  SunRiver  Group  proxy and voting  agreements  which
entitled SunRiver Group to represent and vote 3,103,000 shares at any meeting of
stockholders  on any matter  requiring  stockholder  approval.  These  proxy and
voting  agreements,  along with the shares issued to SunRiver  Group at closing,
represented  at  least  51% of the  voting  rights  of  the  outstanding  common
stockholders.  As SunRiver Group unconditionally  controlled the Company and had
the intent  and  ability to  maintain  ongoing  ownership  as noted  above,  the
transaction  was  accounted  for effective  December 9, 1994.  During 1995,  the
Company amended its Certificate of Incorporation to increase the total number of
shares of common stock authorized from 20,000,000 to 60,000,000,  and issued the
additional shares required under the SunRiver Group Acquisition agreement.

During  October 1995,  pursuant to the terms of the SunRiver  Group  Acquisition
agreement and in consideration for SunRiver Group's guarantee of the Amended Put
Option  referred to in Note 5, the Company issued to SunRiver Group a warrant to
acquire an  additional  4,174,704  shares of the  Company's  common  stock at an
exercise price equal to the market value per share of the Company's common stock
on December 9, 1994. The value of these warrants was determined to be immaterial
under APB 25 during 1994.

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

On  December  9,  1994,  the  Company  agreed to assign  all of its  assets  and
liabilities to its wholly owned subsidiary,  Capital,  and effectively cease all


                                   Continued
                                      F-13
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


existing  business  operations.  The proceeds from a private  placement  then in
process  (more  fully  described  below)  and  the  SunRiver  Group  assets  and
liabilities  were excluded from the assets and liabilities  assigned to Capital.
Capital entered into an escrow  agreement  whereby cash and shares of its common
stock were deposited in escrow as collateral for all of the Company  liabilities
transferred  to it. The Company agreed to prepare and complete an exchange offer
whereby the Company would exchange all of its common stock of Capital for shares
of common stock of the Company held by certain of its  shareholders of record as
of the closing date, none of whom were part of SunRiver Group.

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

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

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

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

A portion of the purchase price for the Boundless  Acquisition was funded by the
sale of  7,000,000  shares  of  common  stock  at $.50 per  share to  accredited
investors  in a private  placement  in which an  underwriter  (RAS) acted as the
exclusive  placement agent. As of December 31, 1994,  4,077,452 shares of common
stock had been issued in connection with the offering.  The remaining  2,922,548
shares were issued in 1995.  Total gross proceeds from the offering were $3,500.
Expenses  relating to this  offering  were  approximately  $1,343,  of which RAS
received  $945,  consisting  of a commission of 10%, a  non-accountable  expense
allowance of 3% of the gross proceeds,  $250 as an investment  banking fee and a
$240  consulting  fee.  The per share price of the offering  was  determined  by
arms-length  negotiations  between the Company and RAS.  The balance of the cash
portion of the purchase price was paid from  borrowings on the revolving line of
credit.

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

                                   Continued
                                      F-14
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


The  following  is a summary of the  assets and  liabilities  of  Boundless,  as
acquired, as of the date of the acquisition:

Current assets                                                        $  16,775
Property, plant and equipment, net                                       13,432
Other assets                                                              2,448
                                                              ------------------
     Total assets                                                     $  32,655
                                                              ==================

Current liabilities                                                   $  10,268
Long-term debt                                                            8,000
Other liabilities                                                         3,471
                                                              ------------------
     Total liabilities                                                $  21,739
                                                              ==================

Mandatorily redeemable preferred stock                                $   5,472

See Note 5 for an  unaudited  pro  forma  summary  of  consolidated  results  of
operations in connection  with the Boundless  Acquisition and the acquisition of
the Digital assets.

4.   Acquisition of Enterprise Integration Network Technology

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

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

The purchase of the TradeWave Technology from MCC was funded in part through the
issuance of $1,000 principal amount of 10% convertible notes ("TradeWave Notes")
to investors  outside the United  States.  These notes have been  converted into
1,270,375  shares of the  Company's  common  stock.  In April 1995,  the Company
allocated  substantially  the  entire  $1,300  purchase  price of the  TradeWave
Technology  (inclusive  of  approximately  $300 of  capitalized  costs  directly
related to the TradeWave acquisition) to purchased  intellectual property.  This
allocation  was  based  upon the  belief  that  the web  browser  and  directory
technology included in the TradeWave  Technology were ready to be commercialized
profitably.  Subsequently in 1995, management recognized that sales practices of
its Internet  competitors of providing  Internet browser software free of charge
and listings and advertising space in Internet directories free or for a nominal
charge had impaired the revenue potential of this technology. Nevertheless, this
technology was considered a valuable  component of TradeWave's  Virtual  Private
Internet  product.  In October 1995,  TradeWave  developed a new strategic plan,
which  de-emphasized  the web  browser and  directory  services  technology  and
instead emphasized the TradeWave's Virtual Private Internet solution integrating
applications,  information  servers,  directory  services and  security  ("Trade
VPI").  Based on this revised  business  plan,  the Company  recognized  that no
significant  revenues would result until  development of the integrated  Virtual
Private  Internet  solution was  completed  and released for  commercialization.
Accordingly,  in the quarter ended December 31, 1995,  the Company  recognized a
$1,225 charge associated with in-process research and development.

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


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

In  connection  with the Digital  Acquisition  in October 1995,  SunRiver  Group
pledged  21,439,380  shares of Common  Stock to Chase  and  5,000,000  shares of
Common Stock to NCR. In  consideration  of such pledge,  the Company  expects to
issue to SunRiver  Group  warrants  to purchase  such number of shares of Common
Stock at $3.875 per share,  subject to adjustment,  as the Board of Directors of
the  Company  determines  is  appropriate  after  obtaining  independent  advice
regarding the fairness of such  warrants.  In  consideration  for the release of
SunRiver  Group's  guarantee to MCC, the number of such warrants will be reduced
by the  number of  warrants  equal in value to  $500,000,  determined  under the
Black-Scholes  valuation  model or some other number of warrants  determined  by
independent advice regarding the fairness of such consideration.

5.   Acquisition of Text Terminal Business From Digital Equipment Corporation

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

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

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

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

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

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

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

Of the amount paid to Digital,  $13,498 was paid in cash with $3,000 paid by the
issuance of 1,000,000  shares of the Company's  common stock,  which the Company
registered in July 1996,  at its cost,  for resale under  applicable  securities
laws.  Boundless  obtained bank financing (the "Bank Financing") to pay the cash
portion of the purchase price of the Digital Assets from Chase  Manhattan  Bank,
N.A.,  acting for itself and as agent for other  participating  banks ("Chase"),
under a term loan in the  principal  amount of $20,000 and a revolving  line-of-
credit  providing  for  revolving  loans of up to  $20,000,  based upon  lending

                                   Continued
                                      F-16

<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)

formulas and subject to sub-limits  and other terms as are set forth in the loan
outstanding amounts owed to Congress Financial Corporation  ("Congress") under a
revolving  line-of-credit,  plus a $700 early termination fee, which the Company
recorded  as an expense in October  1995.  The  Company  recorded  an expense of
approximately  $282 related to costs that had been capitalized when the Congress
line-of-credit  was originally  obtained.  The Company incurred costs related to
the Bank Financing of $1,295,  which is being amortized on a straight-line basis
over the three-year term of such Bank Financing.

The Company  guaranteed the  obligations of Boundless  under the Bank Financing,
which was  collateralized by a pledge of all of the outstanding  common stock of
Acquisition   ("Boundless  Common  Stock").   Acquisition  also  guaranteed  the
obligations  of  Boundless  under  the Bank  Financing  and  collateralized  its
guarantee  with a pledge of all of the  outstanding  common stock of  Boundless.
SunRiver  Group  also  guaranteed  the  obligations  of  Boundless,   which  was
collateralized  by a pledge of 21,439,380  shares of common stock of the Company
owned by SunRiver Group.

In addition,  the Company issued to Chase a warrant to purchase 1,000,000 shares
of  common  stock  exercisable  at $3.69 per  share,  subject  to  anti-dilution
adjustments,  at any time  after  October  20,  1996 and  prior to the  close of
business on October 19, 2000. These warrants were valued at $1,660 and are being
amortized as debt issue costs.

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

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

Boundless has 1,000 shares of mandatorily  redeemable  preferred  stock,  all of
which are issued to NCR and currently outstanding.  In the Restructuring (i) the
Company paid NCR $3,500 in cash; (ii) the Call Option  permitting the Company to
purchase the preferred stock of Boundless owned by NCR was amended (the "Amended
Call Option") to reduce its aggregate exercise price to $3,555 and to change its
expiration  date  to the  earlier  of  January  30,  1999 or the  completion  by
Boundless  or any of its parent  companies of a public  offering;  (iii) the Put
Option  requiring the Company to purchase the  preferred  stock was amended (the
"Amended  Put  Option") to reduce its  exercise  price to $3,555,  and to become
exercisable  on or after the  expiration  date of the Amended  Call Option until
December 31, 1999; (iv) the Company issued to NCR a warrant,  valued at $830, to
purchase  500,000  shares of common stock of the Company,  exercisable at $3.875
per share,  subject to adjustment,  at any time after October 20, 1996 and prior
to the close of  business  on  October  20,1998;  (v)  Boundless  and its parent
companies  agreed to pay NCR $497, a rate of 14%, (the "Annual Payment  Amount")
on October 20, 1996 and each anniversary thereafter (the "Annual Payment Date"),
until  either  the  Amended  Put  Option or the  Amended  Call  Option  has been
exercised  or  canceled,  each such  payment  to be made in cash,  to the extent
permitted  by the  terms  of the  Bank  Financing,  and,  to the  extent  not so
permitted,  the balance of the Annual  Payment Amount must be paid by delivering
to NCR such number of shares of common  stock of the Company  which,  if sold on
the  applicable  Annual  Payment  Date,  would net such  balance  due;  (vi) the
maturity  date of the $8,000  Promissory  Note payable by the Company to NCR was
extended to January 31, 1999 and if Acquisition  makes a public  offering of its
securities,  it must  prepay  the  Promissory  note in an  amount  equal  to the
difference  between the net  proceeds of the offering and the amount paid to NCR
or any of its  affiliates  on  redemption  or  purchase  by  Acquisition  of the
Boundless  Preferred  Stock plus the amount paid to Chase under the terms of the
Bank  Financing;  (vii)  SunRiver  Acquisition  Corp.'s  pledge  to  NCR  of the
Boundless  common stock was canceled and the Boundless  common stock was pledged
to Chase;  (viii) SunRiver  Group's pledge to NCR of common stock of the Company
was reduced to 5,000,000  shares and SunRiver Group pledged the remainder of its
common stock of the Company to Chase.

In the event of liquidation of Boundless, NCR shall be entitled to $3,555 before
any amount shall be paid to holders of the  Boundless  common  stock.  While the
Boundless preferred stock is outstanding,  Boundless is restricted from creating


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

any shares of stock  which  shall be in any  respect on parity  with or have any
preferences to take priority over the Boundless  preferred stock, or to alter in
any manner the rights or preferences of the Boundless preferred stock.

The Company recorded a charge of $1,668 to retained  earnings at the date of the
Restructuring for the difference between the change in the carrying value of the
Boundless  preferred stock and the sum of the cash payment and the fair value of
the warrant for 500,000 shares of common stock of the Company issued to NCR.

The cash  payment  of  $3,500  made to NCR was paid by the  Company  from  gross
proceeds of $4,250  received  by the  Company  from  Regulation  S offerings  to
investors  outside of the United States.  In two  offerings,  the Company issued
non-interest  bearing  convertible  promissory  notes for  $2,500  (the  "$2,500
Notes")  and $750 (the  "$750  Notes"),  respectively.  The  $2,500  Notes  were
converted  on November  30, 1995 into  1,236,855  shares of common  stock of the
Company determined by dividing $2,500 by 70% of the average closing bid price of
the common stock of the Company on the five business days immediately  preceding
the  conversion.  The $750 Notes were  converted  in November  1995 into 359,691
shares of common stock of the Company  determined by dividing $750 by 70% of the
average  closing  bid  price  of the  common  stock of the  Company  on the five
business days  immediately  preceding the  conversion.  Upon  conversion of such
non-interest  bearing  notes,  depending on the  significance  of the amount,  a
portion of the  difference  between the carrying value of the notes and the fair
market value of the shares issued is accounted for as financing  expense and the
remainder as cost of equity.  The amount to be  allocated to financing  expense,
assuming an estimated  interest rate of approximately  20%, was determined to be
immaterial.  In a third  Regulation  S  offering,  the  Company  received  gross
proceeds of $1,000 by selling 472,589 shares of common stock.  In addition,  the
Company  obtained bridge  financing of $1,000 at 6% interest  approximately  ten
days before the close of the  offerings.  This loan was repaid from the proceeds
of the offerings described above.

In addition,  warrants,  valued at $661,  to purchase  525,000  shares of common
stock of the Company  exercisable  at $3.625 to $3.875,  the market price on the
date of grant, were granted to financial  advisors in October 1995 in connection
with these  offerings.  These warrants are  exercisable for three years from the
date of grant and the  holders  have  registration  rights  with  respect to the
shares issuable upon exercise of these  warrants.  A portion of the value of the
warrants was recorded as a cost of equity and a portion as debt  issuance  costs
in accordance with the terms of the associated equity or debt  instruments.  The
following  unaudited  pro forma  summary  presents the  consolidated  results of
operations as if the acquisition of Digital Assets had occurred at the beginning
of 1995 and 1994, respectively, and as if the Boundless Acquisition described in
Note 3 had  occurred  at the  beginning  of  1994.  The pro  forma  presentation
reflects the impact of certain  adjustments;  (a) amortization of goodwill,  (b)
increased interest expense, (c) increased depreciation expense, and (d) decrease
of  corporate  overhead  charges.  It does not purport to be  indicative  of the
financial  results,  which actually would have occurred had the acquisition been
made at the beginning of 1995 and 1994, respectively, or of the results that may
occur in the future.

<TABLE>
<CAPTION>
                                                                1995                1994
                                                         ------------------   -----------------
<S>                                                       <C>                 <C>

Net sales                                                        $ 150,352           $ 144,263
Income (loss) from continuing operations                               466             (5,431)
Income (loss) per share from continuing operations                    0.01              (0.18)

The  following  is a  summary  of  the  Digital  Assets  as of the  date  of the
acquisition:

Inventory                                                        $   7,482
Goodwill                                                            11,028
Other assets                                                           188
                                                         ------------------
     Total assets                                                $  18,698
</TABLE>
                                                         ==================
                                   Continued
                                      F-18
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)

6.   GAI Partnership

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

Under the terms of the operating  agreement  which governs the operation of GAI,
(the "Operating  Agreement"),  GAI operates and manages GA's and Boundless' Pick
business.  Under the Operating Agreement,  Boundless is entitled to receive cash
distributions from GAI in an amount equal to a percentage of GAI's net revenues,
which is payable  whether or not GAI 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 GAI,  if any,  after the payment to  Boundless  of the net revenue
percentage described above.

Under the  Operating  Agreement,  the  business  and  affairs of GAI are managed
exclusively by GA.  However,  in the event that GAI fails to achieve agreed upon
revenue or profit  projections,  Boundless has the right to  thereafter  jointly
manage  GAI with GA.  Further,  upon the  occurrence  of certain  other  events,
including the failure of GAI 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 GAI.  During the first year of the  Operating  Agreement,
Boundless paid a management fee of $1,031,000 in connection  with GA's duties as
manager  of  GAI.  However,  subsequent  to the  first  year  of  the  Operating
Agreement,  GA will not be entitled to any compensation for acting as manager of
GAI.

Boundless  received cash  distributions of $2,473 and $1,475 for the years ended
December 31, 1996 and 1995 and is included in product sales in the  accompanying
consolidated statements of operations.  The Company accounts for 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.

                                   Continued
                                      F-19
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


7.   Inventories

The major components of inventories are as follows:

                                                      December 31,
                                         --------------------------------------
                                                1996                1995
                                         ------------------   -----------------
Raw materials and purchased components           $  12,845           $  13,280
Finished goods                                       4,942              11,902
Demonstration equipment                                396                 222
Service parts                                          342                 354
                                         ------------------   -----------------
                                                 $  18,525           $  25,758
                                         ==================   =================




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

8.   Property and Equipment

Property and equipment consists of the following:

                                                    December 31,
                                       ---------------------------------------
                                              1996                1995
                                       ------------------   -----------------
Land                                           $   3,780           $   3,780
Buildings and improvements                         6,175               5,893
Machinery and equipment                            4,846               4,520
                                       ------------------   -----------------
                                                  14,801              14,193
Less accumulated depreciation and                 (3,327)             (2,398)
amortization                           ------------------   -----------------
                                               $  11,474           $  11,795
                                       ==================   =================

9.   Income Taxes

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

                          1996       1995      1994
                        --------   --------  --------
Current:
  Federal               $  (340)   $   597    $   126
  State                     413        431         11
                        -------    -------    -------
                             73      1,028        137
                        -------    -------    -------
Deferred:
  Federal                (3,176)       (83)        44
  State                    --          (29)         4
  Valuation allowance     4,065     (1,121)      --
                        -------    -------    -------
                            889     (1,233)        48
                        -------    -------    -------
                        $   962    $  (205)   $   185
                        =======    =======    =======

                                   Continued
                                      F-20
<PAGE>
                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except 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:

                                                 1996         1995       1994
                                               ----------  ---------  ----------
Federal income tax at statutory rate           $  (3,760)  $     463  $       76
Goodwill amortization                                186         136           4
Losses for which no tax benefit was provided         -           -            89
State income tax benefit, net
  of federal income taxes                            273         243          15
Other, net                                           423          74           1
Change in valuation allowance                      3,840      (1,121)        -
                                               ---------   ---------- ----------
    Income tax expense (benefit)               $     962   $    (205) $      185
                                               =========   ========== ==========

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

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

                                                   December 31,
                                               -------------------
                                                 1996       1995
                                               --------   --------
Current deferred tax assets:
  Inventory                                    $ 2,524    $ 1,543
  Accounts receivable                              466        563
  Warranties                                       723        562
  Net operating loss carryforwards                --           53
  Other                                            764        638
                                               -------    -------
     Total current deferred tax assets           4,477      3,359
Current deferred tax liabilities:
  Software capitalized and other                   (28)      (257)
                                               -------    -------
     Net current deferred tax assets             4,449      3,102
                                               -------    -------
Noncurrent deferred tax assets:
  Net operating loss carryforwards               1,466       --
  Property and equipment                          --            9
  Acquired research and development               --          430
                                               -------    -------
     Total noncurrent deferred tax assets        1,466        439
Noncurrent deferred tax liabilities:
  Property and equipment                        (2,075)    (2,653)
                                               -------    -------
     Net noncurrent deferred tax liabilities      (609)    (2,214)
                                               -------    -------
       Net deferred tax assets                   3,840        888
       Less valuation allowance                 (3,840)      --
                                               -------    -------
                                               $  --      $   888
                                               =======    =======

                                   Continued
                                      F-21

<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


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

The Company files a  consolidated  federal tax return.  As of December 31, 1996,
the Company has net operating loss  carryforwards of  approximately  $4,300 that
will expire during 2011.  For the year ended  December 31, 1996, the Company was
able  to  carryback  $980 of its  net  operating  losses,  which  resulted  in a
receivable of approximately $340.

10.  Debt

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

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

Notes  payable at December 31, 1996 and 1995  consisted  of a $20,000  revolving
credit  agreement  included  in the Chase  Credit  Line for loans and letters of
credit,  based upon the  availability  of collateral,  generally a percentage of
inventory and accounts  receivable as specified in the  agreement.  The interest
rate is prime plus 1.25% or LIBOR plus 2.5% (8.00% at December  31,  1996).  The
revolving loan outstanding at December 31, 1996 and 1995 was $13,950 and $8,000.

Each drawing under a trade letter of credit is subject to a drawing fee equal to
a minimum of 0.25% of the amount drawn.  In addition,  a letter of credit fee of
2% per  annum of the  average  face  amount  of all  standby  letters  of credit
outstanding is payable  quarterly.  There were letters of credit totaling $4,050
and $4,274  outstanding  at December  31, 1996 and 1995.  The maximum  amount of
additional  credit  available  under the revolving loan at December 31, 1996 and
1995 was  $4,607  and  $6,500,  subject  to  limitations  base on the  amount of
eligible collateral.

The  commitment  fee is 0.5%  per year on the  average  daily  unused  principal
balance  of the  revolving  loan and the  outstanding  letters  of  credit.  The
weighted average interest rate on short-term borrowings was 9.5%, 10.5% and 9.4%
for the years ended December 31, 1996, 1995 and 1994, respectively.

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

Long-term debt at December 31, 1996 and 1995 consisted of the following:



                                   Continued
                                      F-22
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)

                                                              1996         1995
                                                       ------------  -----------
Note payable to AT&T-GIS, bearing interest at
  8% payable quarterly, principal due on or before
  January 31, 1999, collateralized by land and building  $   8,000    $   8,000
Term loan payable to banks, collateralized by accounts
  receivable, inventories and substantially all other
  assets of the Company, bearing interest at a variable
  rate payable quarterly (8.00 % at December 31, 1996)      13,382       20,000
Note payable to shareholder of SunRiver Group, bearing
  interest at 9% payable quarterly, paid in June 1996            -          169
Other                                                            9           50
                                                       ------------  -----------
                                                            21,391       28,219
Less current maturities on long-term debt                   (8,009)      (6,211)
                                                       ------------  -----------
                                                         $  13,382    $  22,008
                                                       ============  ===========

TradeWave had a non-interest  bearing note payable  (effective  rate of 9%) to a
corporation in installments through 1997. The note had balances of $500 and $773
as of  December  31,  1996 and 1995,  respectively,  and is  included in the net
liabilities of discontinued operations in the accompanying  Consolidated Balance
Sheets. This note was paid in full in March 1997.

Acquisition is the legal obligor of the note payable to NCR. The note is payable
on or before  January  31,  1999.  However,  the note and  accrued  interest  is
immediately  due  should  Acquisition  make an  offering  of its  stock  or debt
pursuant to the Securities and 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 agreement.  The maximum  aggregate amount that Boundless may loan or advance
to the Company in a fiscal year is $200 less the total cash  dividend  Boundless
paid to the Company in that year. The term and revolving loan agreement requires
the  Company to make  contingent  payments  on the term loan  should the Company
obtain financing above a certain level by issuing stock.

The Company  guaranteed the  obligations of Boundless  under the Bank Financing,
which was  collateralized by all of the outstanding common stock of Acquisition.
Acquisition  also  guaranteed  the  obligations  of  Boundless  under  the  Bank
Financing and  collateralized  its guarantee with all of the outstanding  common
stock of Boundless.  SunRiver Group  collateralized its guarantee of Boundless's
obligations to Chase with 21,439,380 shares of common stock of the Company.

Aggregate debt scheduled maturities at December 31, 1996 were as follows:


1997                         $   8,009
1998                             5,382
1999                             8,000
                             ---------
                             $  21,391
                             =========


                                   Continued
                                      F-23

<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


11.  Equity

At December 31, 1996 and 1995, stockholders' equity consisted of the following:

                                                         1996           1995
                                                      ------------  ------------
Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                                 $     -       $     -
Common stock, $0.01 par value, 60,000,000 shares
  authorized, 48,572,000 and 45,550,000 shares issued
  at December 31, 1996 and 1995, respectively                 486           456
Additional paid-in capital                                 31,440        23,769
Accumulated deficit                                       (23,124)      (11,388)
                                                      ------------  ------------
     Total stockholders' equity                         $   8,802     $  12,837
                                                      ============  ============

The Company  amended  its  Certificate  of  Incorporation  during  March 1995 to
authorize  the Board of Directors  to issue up to 1,000,000  shares of preferred
stock and 60,000,000  shares of common stock.  The preferred stock may be issued
in one or more series,  with preference and other rights as determined from time
to time by the Board of  Directors.  No such  shares had been issued at December
31, 1996.

The Company  issued  288,000  shares of its common stock during  December  1994,
valued at $0.50 per share,  to a creditor  in  satisfaction  of the  outstanding
principal and interest owed by the Company as of that date.

The Company  issued  300,000  shares of its common stock during  December  1994,
valued at $0.50 per share, to Rosbro Capital Corp. ("Rosbro"), which was charged
to expense,  as  consideration  for releasing  the Company from its  obligations
under a management consulting  agreement.  At the time, Rosbro was a corporation
beneficially owned by the former Chairman of the Company.

The Company  issued 200,000 and 225,000 shares of its common stock during August
1995 and January  1996,  valued at $1.63 and $2.56 per share,  to an  individual
whose  sons  are  significant  shareholders  of  SunRiver  Group,  the  majority
shareholder  of the  Company,  which was charged to expense in  connection  with
special consulting services rendered in 1995.

The Company issued 17,000 and 115,464 shares of its common stock during 1995 and
1996,  valued at $3.25  and $2.42 per  share,  to the  former  President  of the
Company,  which was charged to expense in  connection  with  certain  consulting
services rendered in 1995.

The Company issued 20,000 shares of its common stock during January 1996, valued
at $1.12 per  share,  to an  investment  advisor  in  connection  with  services
rendered in 1995.

The Company issued 10,000 shares of its common stock during January 1996, valued
at $1.94 per share, to the former audit firm of the Company.

The Company issued 60,000 shares of its common stock during July 1996, valued at
$5.00 per share, to MCC as payment of installment due on outstanding obligations
of TradeWave.

The Company issued 168,651 shares of its common stock on October 1996, valued at
$2.95 per share, to NCR as payment of dividends due on Boundless preferred stock
(See Note 3).

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

                                   Continued
                                      F-24

<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


1.   The Company  received gross proceeds of $1,000 by selling 594,243 shares of
     common  stock for $1.68 per share.  Approximately  $505 of the  proceeds of
     this offering was used to fund working capital of TradeWave. The balance of
     the proceeds was used to repurchase  275,000 shares of restricted shares of
     its common stock at $1.80 per share.

2.   The  Company  received  gross  proceeds  of  $500  by  selling  convertible
     non-interest  bearing notes. During the year ended December 31, 1996, these
     notes were converted  into 254,826 shares of common stock.  The proceeds of
     this  offering were used to  repurchase  273,333  shares of common stock at
     $1.80 per share.

3.   The Company  received gross proceeds of $1,000 by selling  convertible non-
     interest  bearing  notes.  During the year ended  December 31, 1996,  these
     notes  were  converted  into  528,487  shares of common  stock.  A portion,
     $810,000,  of the proceeds of this offering was used to repurchase  176,667
     shares of common stock at $1.80 per share.  The balance of the proceeds was
     used primarily to fund working capital of TradeWave.

12.  Options and Warrants

In March 1995,  the Company  adopted an  Incentive  Stock Option Plan (the "1995
Plan") which permits the Board of Directors to grant performance  shares,  stock
awards,  stock  options,  Stock  appreciation  rights  and  incentive  awards to
employees, non-employee directors and others. The maximum number of shares to be
issued under the 1995 Plan is not to exceed  6,000,000.  The  exercise  price of
each  option  granted  is to be equal to or less  than the  market  price of the
Company's  stock on the date of grant.  The terms of the options  are  generally
over five years with vesting  occurring  in 25%  increments  beginning  one year
after the grant date.

Prior to the 1995 Plan,  the Company had adopted the 1991  Employee and Director
Stock Option Plan (the "1991  Plan").  After the adoption of the 1995 Plan,  the
Company  amended the 1991 Plan,  eliminating any further grants of options under
the 1991 Plan. As of December 31, 1996 there were 1,098,500 fully vested options
outstanding, expiring in 2002.

The Company has  elected to  continue  to account  for stock  options  issued to
employees in accordance with APB 25, "Accounting for Stock Issued to Employees".
During  the years  ended  December  31,  1996 and 1995,  all  options  issued to
directors,  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 loss applicable to common  stockholders  and loss per
share as if  compensation  cost for the Company's stock options granted had been
determined  in  accordance  with the fair value based method  prescribed in FASB
Statement 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
weight average assumptions used for grants in 1996 and 1995 as follows:

     1.  Dividend yield of 0% for all years

     2.  Expected volatility of .71

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

     4.  Expected terms ranging from 2 to 5 years.

                                   Continiued
                                      F-25
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


Under the  accounting  provisions of FASB  Statement 123, the Company's net loss
applicable to common  stockholders  and loss per share would have been increased
to the pro forma amounts indicated below:

                                               1996                 1995
                                          --------------       -------------
Net loss applicable to common stockholders
  As reported                               $ (11,736)           $     168
  Pro forma                                   (13,263)                (211)

Loss per share
  As reported                               $   (0.25)           $    0.00
  Pro forma                                     (0.28)                0.00

A summary  of the status of the  Company's  stock  options  and  warrants  as of
December 31, 1996 and 1995,  and changes  during the years ending on those dates
is presented below:

<TABLE>
<CAPTION>
Options                                           1996                         1995
-------                                    ------------------------------ ----------------------
                                                      Weighted                       Weighted
                                                       Average                        Average
                                         Shares     Exercise Price     Shares     Exercise Price
                                    --------------- -------------- -------------  --------------
<S>                                 <C>             <C>            <C>            <C>
Outstanding at beginning of year         3,937,500        $  1.43     1,358,500      $    1.56
  Granted                                4,039,117           1.83     2,639,600           1.36
  Exercised                               (927,421)         (0.95)            -              -
  Forfeited                             (1,787,110)         (1.87)      (60,600)         (1.35)
                                    --------------- -------------- -------------  -------------
Outstanding at end of year               5,262,086        $  1.68     3,937,500      $    1.43
                                    =============== ============== =============  =============
Options exercisable at end of year       3,100,401        $  1.68     1,358,500      $    1.56
                                    =============== ============== =============  =============
Weighted average fair value
  of options granted during the year                      $  2.20                    $    1.24
                                                    ==============                =============
</TABLE>

<TABLE>
<CAPTION>

Warrants                                          1996                         1995
--------                            ------------------------------ -----------------------------
                                                      Weighted                       Weighted
                                                       Average                        Average
                                         Shares     Exercise Price     Shares     Exercise Price
                                    --------------- -------------- -------------  --------------
<S>                                 <C>             <C>            <C>            <C>
Outstanding at beginning of year         7,536,593        $  2.95     5,499,704      $    2.76
  Granted                                  325,000           2.69     2,113,889           3.66
  Exercised                               (510,973)         (2.79)             -          0.00
  Forfeited                               (680,000)         (8.25)      (77,000)     $   (8.25)
                                    --------------- -------------- -------------  -------------
Outstanding at end of year               6,670,620        $  2.42     7,536,593      $    2.95
                                    =============== ============== =============  =============
Options exercisable at end of year       6,670,620        $  2.42     6,036,593      $    2.95
                                    =============== ============== =============  =============
Weighted average fair value
  of warrants granted during the                          $  2.63                    $    3.68
  year                                              ==============                =============
</TABLE>

                                   Continued
                                      F-26


<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


The following table summarizes information about fixed stock options and
warrants outstanding at December 31, 1996:

Options
-------
                                                    Weighted
                Number                               Average          Number
              Outstanding                           Remaining       Exercisable
              at December      Exercise            Contractual      at December
               31, 1996          Price            Life (Years)        31, 1996
              -----------      --------           ------------      ------------

              1,872,981        $  1.35                3.16            933,064
                900,000           1.50                2.60            900,000
              1,050,000           1.57                5.97            250,000
                131,000           1.63                2.19            131,000
                 12,500           1.75                2.20             12,500
                 55,000           2.06                2.59             55,000
                715,000           2.13                3.07            605,000
                277,500           2.56                3.21            167,500
                230,305           2.82                3.81             41,520
                 17,800           3.28                3.84              4,817
             -----------                                          ------------
              5,262,086                                             3,100,401
             ===========                                          ============

Warrants
--------
                                                    Weighted
                Number                               Average          Number
              Outstanding                           Remaining       Exercisable
              at December      Exercise            Contractual      at December
               31, 1996          Price            Life (Years)        31, 1996
              -----------      --------           ------------      ------------

                 50,000        $  1.00                0.38             50,000
                350,000           1.65                0.38            350,000
              4,174,704           1.84                7.94          4,174,704
                 50,000           2.41                2.07             50,000
                147,916           2.69                2.11            147,916
                 50,000           3.00                2.00             50,000
                 45,000           3.63                1.83             45,000
              1,000,000           3.69                3.80          1,000,000
                210,000           3.78                1.80            210,000
                525,000           3.88                1.80            525,000
                 68,000           6.60                0.88             68,000
             -----------                                          ------------
              6,670,620                                             6,670,620
             ===========                                          ============

For the year ended December 31, 1996, in accordance with FASB Statement 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.

The Company  granted an option to purchase  250,000  shares of common stock to a
consultant in December  1996,  vesting  immediately,  with an exercise  price of
$1.57.  The option expires in December 2002. The option was granted for services
rendered  during  the  year  ended  December  31,  1996.  The  Company  recorded
compensation expense based on the fair value of the options on the grant date of
$250 using the Black-Scholes option-pricing model.

                                   Continued
                                      F-27
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)



A  warrant  to  purchase  75,000  shares of common  stock of the  Company  at an
exercise  price of $2.69 per share,  exercisable  through  March 20,  1999,  was
granted in February,  1996 in consideration  for obtaining an equipment  leasing
line of $1,000 for expansion  requirements of TradeWave.  The warrant was valued
at approximately $115.

In connection with the January 1996 offerings of securities  under  Regulation S
of the Securities Act of 1933, the Company issued warrants to financial advisors
to purchase 200,000 shares of common stock at exercise prices ranging from $2.41
to $2.69 per share,  exercisable  through  February  1999.  These  warrants were
valued at approximately $326.

The  Company  issued  warrants  to  purchase  50,000  shares of common  stock in
consideration for services provided for financial public relations. The warrants
have an exercise price of $3.00 and are exercisable  through December 1998. This
warrant was valued at approximately $50.

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.

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

13.  Related Party Transactions

The Company sells display desktop  devices to and purchases  components from NCR
and its  subsidiaries.  The  Company's  sales to NCR and its  subsidiaries  were
$15,454, $39,600 and $1,841 for 1996 and 1995 and the period from acquisition to
December 31, 1994,  respectively.  Purchases from NCR and its subsidiaries  were
$2,440, $13,088 and $125 for those same periods,  respectively.  The Company had
accounts  receivable  outstanding from NCR and its subsidiaries of approximately
$2,422 and $5,166 at December  31,  1996 and 1995,  respectively,  and  accounts
payable of $452 at December 31, 1995.  In addition,  the Company  received  cash
distributions  from GAI of $2,473 and $1,475 for the years  ended  December  31,
1996 and 1995. The Company had a receivable  from GAI of $963 as of December 31,
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.

The former  President of Capital  provided  certain  consulting  services to the
Company  during  1995  related  to the  Digital  Assets  acquisition,  obtaining
financing,  and miscellaneous corporate matters.  Compensation to the individual
for the services amounted to approximately  $440,  including  approximately $104
paid in cash and $335 paid in common stock of the Company.

Effective  January  1, 1995,  the  Company  entered  into an  agreement  with an
individual whose sons are significant  shareholders of SunRiver Group. Under the
agreement,  the  individual  provided  consulting  services to the Company for a
monthly fee of $10 plus additional  fees for services  outside the scope of that
required by the base fee. During 1995 the Company granted the individual 425,000
shares of common  stock valued at $901 at the date of grant for  performing  the
special services. The agreement terminated December 31, 1995.

                                   Continued
                                      F-28
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)

14.  Leases

The Company  leases  certain sales offices and  miscellaneous  office  equipment
under  operating  lease  agreements,  which expire at various  times through May
2001.  Total  rent  expense  was $636,  $622,  and $122 in 1996,  1995 and 1994,
respectively.

Future minimum rental commitments as of December 31, 1996 were as follows:

1997                                      $     742
1998                                            718
1999                                            422
2000                                            198
2001                                             34
                                         -----------
                                          $   2,114
                                         ===========

15.  Contingencies

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

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

16.  Concentration of Credit Risk

The Company is required by FASB Statement 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.

Net export sales were approximately  $46,800,  $15,912 and $1,127 for 1996, 1995
and 1994, 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:

                                   Continued
                                      F-29
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


                      1996         1995        1994
                 -------------  ----------   ---------
Middle East                1%          0%          0%
Europe                    30%         13%          5%
Africa                     1%          0%          0%
Canada                     0%          1%          6%
Other                      2%          3%          3%
                 =============  ==========   =========
     Total                34%         17%         14%
                 =============  ==========   =========

17.  Defined Contribution Plan

The Company  provides a 401(k)  retirement  savings plan (the "401(k) Plan") for
its  full-time  employees.  Under  the  provisions  of  the  401(k)  Plan,  each
participant  may elect to contribute up to 15% of his or her annual  salary.  At
its discretion,  the Company may make  contributions to the 401(k) Plan.  During
the year ended December 31, 1996, the Company made a contribution  of $17 to the
plan. No  contributions  were made during the year ended  December 31, 1995. The
Company does not intend to make a  contribution  for the year ended December 31,
1997.

18.  Discontinued Operations

The Company adopted a formal plan in December 1996 to discontinue  operations by
March 31, 1997 of its TradeWave  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 TradeWave
employees were terminated on March 5, 1997 and a small group of consultants were
retained to effect an orderly cessation of its customer obligations.

The Company does not  anticipate  selling  TradeWave for an amount that would be
more  beneficial  than  declaring  bankruptcy.  Therefore the loss  generated by
TradeWave for the year ended December 31, 1996, assumes that TradeWave will file
under Chapter 7 of the Bankruptcy Code.

The  assets  of  TradeWave,  consisting  primarily  of  equipment  and  accounts
receivable, were written down to their liquidation value, resulting in a loss of
approximately  $360. All unsecured  liabilities that could be discharged through
bankruptcy have been written off,  resulting in income of approximately  $1,470.
The debts and  commitments  that were  guaranteed  by the Company  and  SunRiver
Group,  including  the  TradeWave  note payable to MCC,  severance pay and lease
commitments,  totaling  approximately  $3,492 are  included in the  accompanying
consolidated  balance sheet. The Company's management believes that the disposal
or liquidation of TradeWave will be accomplished with no significant  additional
losses accruing to the Company.

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

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

Net sales of TradeWave for 1996 and 1995 were $2,086 and $1,165.


                                   Continued
                                      F-30
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)



In 1995,  the Company  sold  substantially  all of the  operating  assets of its
dial-up market data services business to Global Market Information for $1,800.

Pursuant to the SunRiver Group  Acquisition  Agreement,  the Company disposed of
substantially  all of its interest in diamond mining  properties in Sierra Leone
(owned through  Capital and its subsidiary  All-Quotes  Data, Ltd. which changed
its name to AmCan Minerals, Ltd. ("AmCan")) by granting to Bronson Conrad and J.
Gerald Combs (who simultaneously resigned as Chairman of the Board and President
and director, respectively, of the Company) a proxy to vote all shares of common
stock of Capital owned by the Company (which then  constituted 100% of Capital's
outstanding  common  stock) on all matters  upon which the common  stock had the
right to vote such shares.  As a result,  the Company  relinquished its indirect
beneficial  ownership of approximately 67% of AmCan. Capital subsequently issued
15,000,000  shares of its  common  stock to  Deston  Holdings,  Ltd.,  a company
beneficially  owned by Bronson  Conrad.  The  Company's  ownership  of Capital's
common  stock was thereby  reduced  from 100% to less than 1% and  stockholders'
equity of the Company was reduced by approximately  $2,357,  which was its basis
in  Capital.  The  Company's  remaining  interest  in Capital  was  subsequently
repurchased  by Capital in exchange for 736,501  shares of the Company's  common
stock, which were retired.

The results of these  discontinued  operations at December 31, 1996 and 1995 are
summarized below:

<TABLE>
<CAPTION>
                                                                   1996                1995
                                                            ------------------   -----------------
<S>                                                         <C>                  <C>
Loss on discontinued operations                                    $  (4,243)          $  (2,242)
Gain (loss) on disposal of part of discontinued operations            (5,409)              1,372
                                                            ==================   =================
     Loss from discontinued operations                             $  (9,652)          $    (870)
                                                            ==================   =================
</TABLE>

No tax benefit is given for the loss on discontinued operations of TradeWave for
the year ended  December 31, 1996,  as it could not be determined if it was more
likely than not that the net operating  loss would be realized.  The loss on the
discontinued  operations  of TradeWave  for the year ended  December 31, 1995 is
reflected net of tax benefit of $1,135.

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

No tax  benefit is given for the loss on  discontinued  operations  for the year
ended December 31, 1995, as these  operations are not included in  consolidation
for tax purposes.

19.  Subsequent Events

Regulation S Offerings
----------------------

The Company  completed  two offerings of  securities  under  Regulation S of the
Securities  Act of 1933 (a  "Regulation S Offering")  subsequent to December 31,
1996 described below:

1.   In February 1997, the Company  received gross proceeds of $1,000 by selling
     convertible  notes,  bearing  interest at 8%, which  require the holders to
     convert the notes by December  31, 1998 into common  stock.


                                   Continued
                                      F-31
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, continued
                        (In thousands, except share data)


2.   In March  1997,  the  Company  received  gross  proceeds of $400 by selling
     convertible  notes,  bearing  interest at 8%, which  require the holders to
     convert the notes by December  31, 1998 into common  stock.  In  connection
     with this offering,  the Company issued warrants to a financial  advisor to
     purchase  33,000 shares of common stock at an exercise  price of $1.375 per
     share,  exercisable through February 28, 2000. These options were valued at
     approximately  $13.  The  proceeds of these  offerings  will be used by the
     Company to finance the discontinuance of operations at TradeWave.

Employee Stock Options Granted and Warrants Granted
---------------------------------------------------

Options to  purchase a total of 300,000  shares of common  stock of the  Company
were granted  subsequent  to December 31, 1996 under the 1995 Plan to employees.
The options vest  through the year 2001,  and are  exercisable  through the year
2003 at an exercise price of $1.50.

A warrant  to  purchase  300,000  shares of common  stock of the  Company  at an
exercise  price of $1.87 per share,  exercisable  through  January 31, 2002, was
granted in consideration  for ongoing services provided in the area of financial
consulting. The warrant was valued at approximately $487.

                                   Continued
                                      F-32
<PAGE>

                      SUNRIVER CORPORATION AND SUBSIDIARIES
           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                            CONDENSED BALANCE SHEETS
                                 (In thousands)

                                                             December 31,
                                                     ---------------------------
                                         ASSETS           1996         1995
                                                     ------------- -------------
Current assets:
  Cash and cash equivalents                             $      6    $    106
  Income tax refund                                          340        --
                                                        --------    --------
    Total current assets                                     346         106
Investments in and advances to subsidiaries
    (elimitated in consolidation):
  Investments, at equity                                  (4,154)      5,170
  Advances to subsidiaries, net                           12,752       8,339
  Other assets                                                84          40
                                                        --------    --------
                                                        $  9,028    $ 13,655
                                                        ========    ========
     LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accounts payable and accrued expenses                      226         818
                                                        --------    --------
    Total current liabilities                                226         818
                                                        --------    --------
    Total liabilities                                        226         818
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, 60,000,000 shares
  authorized, 48,572,315 and 45,550,214 shares issued
    at December 31, 1996 and 1995, respectively              486         456
  Additional paid-in capital                              31,440      23,769
  Accumulated deficit                                    (23,124)    (11,388)
                                                        --------    --------
    Total stockholder's equity                             8,802      12,837
                                                        --------    --------
                                                        $  9,028    $ 13,655
                                                        ========    ========


         The financial statements should be read in conjunction with the
             Notes to the Consolidated Financial Statements in the
            Company's Annual Report on Form 10-K for the year ended
       December 31, 1996, which information is included elsewhere herein.

                                       S-1

<PAGE>
                      SUNRIVER CORPORATION AND SUBSIDIARIES
           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                       CONDENSED STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                         December 31,
                                                             --------------------------------
                                                                1996        1995        1994
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Sales                                                        $   --      $   --      $  3,180
Cost of sales                                                    --          --         1,692
                                                             --------    --------    --------
    Gross margin                                                 --          --         1,488
Expenses:
  Operating                                                     2,367         651       1,636
  Interest                                                         52           2          33
  Other (income) and expenses                                    (323)       --            78
                                                             --------    --------    --------
                                                                2,096         653       1,747
                                                             --------    --------    --------
Loss before benefit for income taxes and other items below     (2,096)       (653)       (259)
Benefit (provision) for income taxes                             (191)        215        --
                                                             --------    --------    --------
Loss before equity in loss from consolidated subsidiaries      (2,287)       (438)       (259)
Equity in income (loss) of consolidated subsidiaries              203        (543)        233
                                                             --------    --------    --------
Loss from continuing operations                                (2,084)       (981)        (26)
Equity from gain (loss) on disposal of discontinued operation  (9,652)      1,149        --
                                                             --------    --------    --------
    Net income (loss)                                        $(11,736)   $    168    $    (26)
                                                             ========    ========    ========
Weighted average number of common and common
  equivalent shares outstanding                                47,023      43,656      27,186
                                                             ========    ========    ========
Earnings (loss) per share:
  From continuing operations                                 $  (0.04)   $  (0.02)   $   0.00
  From disposal of discontinued operations                      (0.21)       0.02
                                                             --------    --------    --------
    Net income (loss)                                        $  (0.25)   $   0.00    $   0.00
                                                             ========    ========    ========
</TABLE>

         The financial statements should be read in conjunction with the
             Notes to the Consolidated Financial Statements in the
            Company's Annual Report on Form 10-K for the year ended
       December 31, 1996, which information is included elsewhere herein.

                                       S-2
<PAGE>
                      SUNRIVER CORPORATION AND SUBSIDIARIES
           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the Years Ended
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                  -------------------------------
                                                                    1996        1995       1994
                                                                  ---------- --------- ----------
<CAPTION>
<S>                                                               <C>         <C>       <C>
Net cash flows used in operating activities                       (10,747)    (1,620)       214
Cash flows from investing activities:
  Decrease (increase) in net advances to subsidiaries              (4,113)    (5,629)     3,700
  Increase in investment in consolidated subsidiaries, net          9,324        508     (5,678)
  Payments for other assets                                           (44)      --          (22)
                                                                  -------    -------    -------
    Net cash used in investing activities                           5,167     (5,121)    (2,000)
Cash flows from financing activities:
  Proceeds from sale of convertible notes                           1,500      4,575
  Proceeds from issuance of common stock                            3,980      2,164      1,826
                                                                  -------    -------    -------
    Net cash provided by financing activities                       5,480      6,739      1,826
                                                                  -------    -------    -------
Net increase (decrease) in cash and cash equivalents                 (100)        (2)        40
Cash and cash equivalents at beginning of year                        105        107         67
                                                                  -------    -------    -------
Cash and cash equivalents at end of year                                5        105        107
                                                                  =======    =======    =======
Non-cash transactions:
  Conversion of convertible notes into common stock                 1,500      4,575
  Compensatory value of options and warrants                          526      3,216
  Common stock issued for consulting services                         898        380
  Accrual of services to be paid in common stock                     --          857
  Distribution of assets of discontinued operations                  --        2,358
  Issuance of common stock in Digital purchase                       --        3,000
  Issuance of common stock for preferred dividend of subsibiary       497
  Issuance of common stock for TradeWave obligation                   300
</TABLE>


         The financial statements should be read in conjunction with the
             Notes to the Consolidated Financial Statements in the
            Company's Annual Report on Form 10-K for the year ended
       December 31, 1996, which information is included elsewhere herein.

                                       S-3
<PAGE>

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

                        Balance at
                       Beginning of                          Balance at
      Description        Period      Addition  Deductions  End of Period
--------------------  -------------  --------  ----------  -------------
Allowances:
 Doubtful accounts:
         1994                  -     1,176 (A)    109 (B)      1,067
         1995              1,067     1,072        732 (C)      1,407
         1996              1,407       150        330 (C)      1,227
 Inventory reserves:
         1994                  -     4,046 (D)     48          3,998
         1995              3,998        99      1,065 (E)      3,032
         1996              3,032     3,845      1,024 (E)      5,853



A)   Includes  $1,128  of  allowance  for  accounts  acquired  in the  Boundless
     Acquisition.
B)   Includes accounts written off during the period.
C)   Includes accounts written off during the period.
D)   Includes  $4,004  of  reserves  for  inventory  acquired  in the  Boundless
     Acquisition.
E)   Includes inventory written off during the period.



                                       S-4
<PAGE>

                                   SIGNATURES

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

Date:  March 28, 1997

                                        SUNRIVER CORPORATION




                                        By: /s/
                                           -------------------------------------
                                           Leonard Mackenzie
                                           President and Chief Executive Officer



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



/s/
---------------------   Chairman of the Board of Directors,       March 28, 1997
Leonard Mackenzie       President and Chief Executive Officer


/s/
----------------------   Vice-President - Finance, Chief          March 28, 1997
Wayne Schroeder          Financial Officer, Secretary and
                         Director (Principal Financial and
                         Accounting Officer)


/s/
----------------------   Director                                 March 28, 1997
Gary Wood

/s/
---------------------    Director                                 March 28, 1997
Daniel Matheson


/s/
---------------------    Director                                 March 28, 1997
Jeffrey K. Moore



<PAGE>



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


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


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

2(b)[2]        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 All-Quotes,  Inc. as guarantor of the obligations of
               SunRiver Data Systems, Inc. thereunder.

2(c)[2]        Manufacturing  Services Agreement,  dated as of October 20, 1995,
               between Digital Equipment  Corporation and SunRiver Data Systems,
               Inc.

2(d)[2]        Interim Services Agreement, dated as of October 20, 1995, between
               Digital Equipment Corporation and SunRiver Data Systems, Inc.

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

2(f)[2]        Trademark Assignment,  dated as of October 20, 1995, from Digital
               Equipment Corporation to SunRiver Data Systems, Inc.

2(g)[2]        Software License Agreement, dated as of October 20, 1995, between
               Digital  Equipment  Corporation  and SunRiver Data Systems,  Inc.

2(h)[2]        Patent Assignment and License Agreement,  dated as of October 20,
               1995,  between  Digital  Equipment  Corporation and SunRiver Data
               Systems,  Inc.

2(i)[2]        Registration   Agreement   relating   to  the  common   stock  of
               All-Quotes,   Inc.,  dated  as  of  October  20,  1995,   between
               All-Quotes, Inc. and Digital Equipment Corporation.

2(j)[2]        Stipulation  for Permanent  Injunction  and Final Order  Thereon,
               entered October 30, 1995, relating to action by Sun Microsystems,
               Inc. against SunRiver Corporation, et al.

2(k)[2]        Credit  Agreement  and  Guaranty,  dated as of October 20,  1995,
               among  SunRiver  Data  Systems,   Inc.,  as  Borrower,   SunRiver
               Acquisition Corp. and All-Quotes,  Inc., as Guarantors,  SunRiver
               Group, Inc., as Hypothecator, and The Chase Manhattan Bank, N.A.,
               as Agent and Bank.

2(l)[2]        Revolving  Credit Note,  dated October 20, 1995, of SunRiver Data
               Systems, Inc. payable to The Chase Manhattan Bank, N.A.

2(m)[2]        Term Loan Note, dated October 20, 1995, of SunRiver Data Systems,
               Inc. payable to The Chase Manhattan Bank, N.A.

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


                                       E-1


<PAGE>
2(o)[2]        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.

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

2(q)[2]        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.

2(r)[2]        Pledge  Agreement,  dated  October  20.  1995,  between The Chase
               Manhattan Bank, N.A. and All-Quotes, Inc.

2(s)[2]        Pledge  Agreement,  dated  October  20,  1995,  between The Chase
               Manhattan Bank, N.A. and SunRiver Acquisition Corp.

2(t)[2]        Hypothecation  Agreement,  dated  October 20,  1995,  between The
               Chase Manhattan Bank, N.A. and SunRiver Group, Inc.

2(u)[2]        Release and  Reassignment  Agreement,  dated  October  20,  1995,
               between  SunRiver  Data  Systems,  Inc.  and  Congress  Financial
               Corporation.

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

2(w)[2]        Cancellation  of  Pledge  Agreements,  dated  October  20,  1995,
               executed by AT&T Global Information Solutions Company.

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

2(y)[2]        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.

2(z)[2]        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.

2(aa)[2]       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.

2(bb)[3]       Acquisition  Agreement  by and among  SunRiver  Corporation  (now
               SunRiver Group, Inc.),  All-Quotes,  Inc., and All-Quotes Capital
               Corp.,   dated  December  9,  1994  (filed  as  exhibit  2(a)  to
               Registrant's December 12, 1994 Form 8-K).

2(cc)[3]       Amendment No. 1 to the Acquisition  Agreement,  dated December 9,
               1994 (filed as exhibit  2(b) to  Registrant's  December  12, 1994
               Form 8-K).

2(dd)[3]       Stock  Purchase  Agreement  by and among AT&T Global  Information
               Solutions  Company,  Applied  Digital  Data  Systems,  Inc.,  and
               SunRiver  Corporation (now SunRiver Group,  Inc.), dated November
               23, 1994 (filed as exhibit 2(c) to Registrant's December 12, 1994
               Form 8-K).


                                       E-2

<PAGE>
2(ee)[3]       Promissory  Note Secured by Real Estate  Mortgage  from  SunRiver
               Acquisition Corp.  payable to AT&T Global  Information  Solutions
               Company,  dated  December  9,  1994  (filed  as  exhibit  2(f) to
               Registrant's December 12, 1994 Form 8-K).

2(ff)[3]       Guarantee by SunRiver  Corporation (now SunRiver Group,  Inc.) to
               AT&T Global Information Solutions Company, dated December 9, 1994
               (filed as exhibit  2(i) to  Registrant's  December  12, 1994 Form
               8-K).

2(gg)[3]       Agency  Agreement  between  All-Quotes,  Inc. and RAS  Securities
               Corp.,   dated  October  27,  1994  (filed  as  exhibit  2(n)  to
               Registrant's December 12, 1994 Form 8-K).

2(hh)[3]       RAS Assignment and Transfer  Agreement between  All-Quotes,  Inc.
               and RAS  Securities  Corp.,  dated  December  9,  1994  (filed as
               exhibit 2(o) to Registrant's December 12, 1994 Form 8-K).

2(ii)[3]       Letter  Agreement from  All-Quotes,  Inc. to RAS Securities Corp.
               regarding  Gross  Fees  payable  by  All-  Quotes,  Inc.  to  RAS
               Securities  Corp.,  dated December 9, 1994 (filed as exhibit 2(p)
               to Registrant's December 12, 1994 Form 8-K).

2(jj)[3]       Consulting  Fee  Agreement  between  All-Quotes,   Inc.  and  RAS
               Securities  Corp.,  dated December 8, 1994 (filed as exhibit 2(q)
               to Registrant's December 12, 1994 Form 8-K).

2(kk)[7]       Agreement  of Purchase and sale by and between  All-Quotes,  Inc.
               and Global Market Information, Inc. dated October 13, 1994 (filed
               as  Exhibit  A  to  Registrant's  December  5,  1994  Information
               Statement).

2(ll)[4]       Asset  Purchase  Agreement,  dated as of March 22, 1995,  between
               Microelectronics  and Computer  Technology  Corporation and EiNet
               Acquisition Corp. (now TradeWave  Corporation)  (filed as exhibit
               2(s) to  Registrant's  1994  10-K/A).  (This  Agreement  has been
               revised. See Exhibits 2(mm) and 2(nn), below.)

2(mm)[10]      Amendment  No. 1,  dated  March 4,  1996,  to the Asset  Purchase
               Agreement between MCC and TradeWave Corporation.

2(nn)[10]      Amendment  No. 1, dated  March 4, 1996,  to the  Addendum  to the
               Research  and  Development  Agreement  between MCC and  TradeWave
               Corporation.

3.1[12]        Certificate  of  Incorporation   and  Certificates  of  Amendment
               thereto.

3.2[8]         By-Laws

4(a)[2]        Warrant  granted to The Chase  Manhattan  Bank,  N.A. to purchase
               1,000,000 shares of the common stock of All-Quotes, Inc.

4(b)[2]        Warrant granted to AT&T Global  Information  Solutions Company to
               purchase 500,000 shares of the common stock of All-Quotes, Inc.

4(c)[9]        Warrant  granted to SunRiver  Group,  Inc. to purchase  4,174,704
               shares of All-Quotes, Inc. Common Stock.

4(d)[3]        Two Proxy and Voting Agreements, each appointing William Long and
               Gerald  Youngblood  as  attorneys  and  proxies to vote shares of
               All-Quotes,  Inc.,  dated December 9, 1994 (filed as exhibit 4(b)
               to Registrant's December 12, 1994 Form 8-K).

                                       E-3

<PAGE>

4(e)[3]        Amended and Restated Voting Trust Agreement

4(f)[12]       Agreement of SunRiver  Group,  Inc.  not to exercise  warrants to
               purchase 2,654,565 shares of SunRiver Corporation Common Stock.

10(a)[3]       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)[3]       Master OEM  Maintenance  Agreement by and between Applied Digital
               Data Systems, Inc. and AT&T Global Information Solutions Company,
               dated December 9, 1994.

10(c)[3]       ADDS Computer Systems  Purchase  Agreement by and between Applied
               Digital Data Systems,  Inc. and AT&T Global Information Solutions
               Company, dated December 9, 1994.

10(d)[3]       Registration  Rights Agreement between  All-Quotes,  Inc. and RAS
               Securities Corp., dated December 9, 1994.

10(e)[5]       Lease,  dated August 22,  1994,  between  International  Software
               Systems, Inc. and SunRiver Corporation (now SunRiver Group, Inc.)
               of the premises located at Suite 201,  Building IV, 9430 Research
               Blvd. Austin, Texas.

10(f)[5]       Lease, dated March 16, 1992, between Aetna Life Insurance Company
               and NCR Corporation of the premises located at Heathrow, I Office
               Building, 250 International Parkway, Heathrow, Florida.

10(g)[4]       Operating  Agreement for General  Automation LLC, dated as of May
               22,  1995,  between  SunRiver  Data  Systems,  Inc.  and  General
               Automation, Inc.

10(h)[4]       Consulting  Agreement,  dated  as of  January  1,  1995,  between
               SunRiver Data Systems, Inc. and NAFCO Consulting, Inc.

10(i)[9]       Addendum to  Consulting  Agreement,  dated as of January 2, 1995,
               among SunRiver Data Systems,  Inc.,  NAFCO  Consulting,  Inc. and
               William M. Moore.

10(j)[4]       Stock  Option  Agreement,  dated  October  3, 1994,  between  the
               Company and J. Gerald Combs,  granting to Mr. Combs the option to
               purchase  700,000  shares of Common Stock (filed as exhibit 10(i)
               to Registrant's 1994 Form 10-K/A).

10(k)[4]       Letter  Agreement,  dated January 24, 1995,  from SunRiver Group,
               Inc. to All-Quotes, Inc. and RAS Securities Corp. agreeing not to
               register  shares of Common  Stock prior to June 9, 1996 (filed as
               exhibit 10(j) to Registrant's 1994 Form 10-K/A).

10(l)[6]       All-Quotes,  Inc.  1995  Incentive  Plan  (filed as  Exhibit E to
               Registrant's Information Statement, dated September 28, 1995).

10(m)[10]      Exchange of Shares  Agreement,  dated  August 14,  1995,  between
               All-Quotes,  Inc. and  All-Quotes  Capital  Corp.  involving  the
               exchange of common  stock of the  respective  companies,  general
               releases and release  from escrow of common  stock of  All-Quotes
               Data, Ltd.



                                       E-4

<PAGE>

10(n)[14]      Form of  Separation  Agreement and General  Release,  dated as of
               November 1, 1996, entered into by SunRiver Corporation, Boundless
               Technologies,   Inc.  and  TradeWave   Corporation   with  Gerald
               Youngblood,  Roger  Hughes,  John Osborne and Roy Smith (filed as
               Exhibit 10(a) to the Registrant's Form 10-Q for the quarter ended
               September 30, 1996).

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

16[4]          Letter of Philip Kempisty, former accountant to All-Quotes, Inc.,
               regarding change of the Company's certifying accountant.

16(b)[13]      Letter  of  Coopers  &  Lybrand  L.L.P.  regarding  change of the
               Company's certifying accountant.

21[9]          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 documents from which
               they are being incorporated.

**             Filed herewith.

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

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

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

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

[6]            Incorporated by reference to Registrant's  Information  Statement
               dated September 28, 1995.

[7]            Incorporated by reference to Registrant's  Information  Statement
               dated December 5, 1994.

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

[9]            Incorporated by reference to the original Registration  Statement
               on Form S-1 (File No. 33-80319).

[10]           Incorporated by reference to  Registrant's  Annual Report on Form
               10-K for the fiscal year ended December 31, 1995.

[11]           Incorporated by reference to Amendment No. 2 to the  Registration
               Statement on Form S-1 (File No. 33-80319).


                                       E-5

<PAGE>

[12]           Incorporated by reference to Amendment No. 3 to the  Registration
               Statement on Form S-1 (File No. 33-80319).

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

[14]           Incorporated by reference to the Registrant's Quarterly Report on
               Form 10-Q for the quarter ended September 30, 1996.







                                       E-6