--------------------------------------------------------------------------------
                                    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, 2003

                         Commission File Number 0-17977

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

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
   the preceding 12 months (or for such shorter period that the registrant was
     required to file such reports), and (2) has been subject to such filing
                       requirements for the past 90 days.

                                 Yes |_| No |X|

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

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

                                 Yes |_| No |X|

  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 June 30, 2004, is $0.

 As of August 31, 2005 the registrant had 6,705,613 shares of Common Stock, $.01
                        par value per share, outstanding.

<PAGE>

       Boundless Corporation and Subsidiary Companies Report on Form 10-K
                      For the Year Ended December 31, 2003

<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                          ----
                                     PART I
<S>                                                                                                        <C>
Item 1.  Business                                                                                          2
Item 2.  Properties                                                                                        15
Item 3.  Legal Proceedings                                                                                 15
Item 4.  Submission of Matters to a Vote of Security Holders                                               16

                                     PART II
Item 5.  Market for the Registrant's Common Equity and Related Stockholder Matters                         16
Item 6.  Selected Financial Data                                                                           17
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations             19
Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                        36
Item 8.  Financial Statements and Supplementary Data                                                       37
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure              37
Item 9A. Controls and Procedures                                                                           37
Item 9B  Other Information                                                                                 37

                                    PART III
Item 10. Directors and Executive Officers of the Registrant                                                38
Item 11. Executive Compensation                                                                            41
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters    46
Item 13. Certain Relationships and Related Transactions                                                    48
Item 14. Principal Accountant Fees and Services                                                            48

                                     PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K                                 50

         Signatures                                                                                        55
         Section 302 Certification (Filed as Exhibit 31)
         Section 906 Certification (Filed as Exhibit 32)
</TABLE>

<PAGE>

                                     PART I

                                Introductory Note

      This report on Form 10-K is a cumulative filing for the fiscal years ended
December 31, 2002 and 2003 and the interim  periods  within those years.  Due to
our bankruptcy filing, this is our first periodic filing since the third quarter
of 2001,  although we have made  certain  filings on Form 8-K.  Included in this
filing are the audited  financial  statements  that would have been  included in
annual  reports on Form 10-K for 2002 and 2003 as well as  summarized  quarterly
financial information for the interim periods.

      As previously  disclosed in our current  report on Form 8-K dated April 2,
2003,  BDO Seidman,  LLP resigned its  engagement  as our  independent  auditors
concurrent  with  our  filing  for  protection  under  Chapter  11 of  the  U.S.
Bankruptcy  Code.  On  December  1, 2003 we issued a current  report on Form 8-K
announcing the appointment of BP Audit Group, PLLC as our independent registered
public accounting firm.

ITEM 1. BUSINESS

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

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

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

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


                                       2
<PAGE>

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

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

Bankruptcy Considerations

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

A.    Pre-Petition History

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

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

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

      Boundless  Acquisition is a holding company formed for the sole purpose of
acquiring  the capital  stock of Boundless  Technologies.  It remains a separate
entity and guarantor of certain secured obligations of the Company.

      A fourth subsidiary,  Merinta, Inc.  ("Merinta"),  commenced operations in
2000. Merinta created software and


                                       3
<PAGE>

infrastructure  for Internet  use.  Merinta  offered OEM  customers a completely
customized  user  experience  which  enabled  their  customers to  differentiate
themselves in the market and deliver  tailored  applications and services to the
customer.

      Sales  of  the  Company's  products   significantly   declined  since  the
introduction of enhanced graphic computer terminals,  and the post-September 11,
2001 economic downturn in the telecommunications industry.

      The Company launched  Boundless  Manufacturing and Merinta in January 2000
to  diversify  their  revenue  and take  advantage  of the growth  opportunities
presented in the EMS and Internet  markets.  The Company had intended to finance
the working capital needs of Merinta through the sale of equity security,  which
they had  projected  would be  completed  during  the  second  quarter  of 2000.
However,  the  "Dot  com"  crash  in  April,  2000  significantly   reduced  the
opportunities  to  raise  equity  for an  Internet  start-up.  Operating  losses
generated  by Merinta  for 2001 were $2.15  million and for 2000,  $14  million.
Therefore,  on or  about  May  11,  2001,  the  Company  discontinued  Merinta's
operations.

      The Company was not able to raise equity to support  Merinta's needs until
November 2000,  resulting in the necessity of supporting the start-up efforts of
both  Boundless  Manufacturing,  which by itself  required  significant  working
capital,  and Merinta during the interim  period.  The working  capital  crunch,
already severe as a result of the declining  terminal  revenues,  contributed to
yet additional difficulties in serving the Company's text terminal customers.

      These  factors,  in  combination  with  the  economic  downturn  following
September 11, 2001, caused the Company and its subsidiaries,  on March 12, 2003,
(the "Petition  Date"),  to seek  protection  under Chapter 11 of the Bankruptcy
Code.

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

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

      Prior to the Petition Date, CIT advised the Company that it would not make
any further  advances (the  "Notification").  At that time, the Company owed CIT
approximately  $600,000.  During  the ten  (10)  day  period  subsequent  to the
Notification,  payments of the  Company's  receivables  to CIT  satisfied all or
substantially  all of the  amounts  due and owing to CIT.  By  assignment  dated
February 21, 2003 (the  "Assignment"),  CIT assigned all of its right, title and
interest  in and to the  CIT  Credit  Facility  to  Valtec  Capital  Corporation
("Valtec"). Prior to the Assignment,  Valtec was a subordinated secured creditor
of the Company.

C.    Pre-Petition Credit Facility with Valtec

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

D.    Procedural History

      The Company filed their  respective  petitions for relief  pursuant to the
Bankruptcy Code on March 12, 2003 (the "Petition  Date"). On March 14, 2003, the
Bankruptcy  Court  signed  an  Order  directing  that  the  bankruptcy  cases be
consolidated for procedural purposes and jointly administered. On March 25,2003,
an Official Committee of Unsecured


                                       4
<PAGE>

Creditors  (the  "Committee")  was appointed.  The law firm of Platzer  Swergold
Karlin Levine Goldberg & Jaslow, LLP was retained to represent the Committee.

E.    The Company's Administrative Period

      During the period from the Petition Date through and  including  April 30,
2003, Valtec provided debtor-in-possession financing ("Valtec DIP Financing") to
the Company.  Pursuant to the Bankruptcy  Court's Interim Order entered on April
17, 2003 (the "Interim Order"), the Bankruptcy Court approved: (i) the Company's
use of  Valtec's  cash  collateral  ("Valtec's  Cash  Collateral");  (ii) direct
borrowings  from  Valtec  of  an  amount  up to  $1,500,000.00;  and  (iii)  the
Debtor-in-Possession  Financing  and Security  Agreement by and among Valtec and
the Company (the "DIP Financing Agreement").

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

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

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

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

      At a hearing held on May 14,  2003,  the Court  authorized  the Company to
utilize up to $581,000 of Valtec's  Cash  Collateral  (proceeds of collection of
receivables and sale of inventory)  pursuant to and  conditioned  upon the terms
and conditions  recited into the record of the May 8 Hearing (the "May 14th Cash
Collateral Order").  Pursuant to the May 14th Cash Collateral Order, the Company
paid Valtec  $300,000 to reduce the  Company's  obligations  to Valtec under the
Valtec DIP Financing  Agreement (the "DIP Debt"),  and  additional  amounts were
paid to Valtec as adequate  protection for the Company's use of inventory  which
was acquired by the Company  post-petition and which  collateralized in part the
DIP Debt.

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


                                       5
<PAGE>

F.    Valtec Settlement and Agreement with Vision

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

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

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

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

      4.    The DIP Debt was fully secured.

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

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

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

      8.    Vision would provide supplemental financing to the Company in an
            amount up to $650,000 plus interest (inclusive of the Vision
            advances theretofore provided) as contemplated by the Amended Vision
            Agreement. Payment of the Vision Debt will commence subsequent to
            payment in full of the Valtec Obligations, and shall be secured by a
            lien subordinate to the lien securing payment of the Valtec
            Obligations. As of December 31, 2003, the amounts due under the
            Valtec and Vision Claims were approximately $1,311,000 and $675,000
            (with interest), respectively and the amount of the collateral (as
            defined in the Settlement Stipulation) collateralizing these claims
            amounted to approximately $2,774,000.

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

      10.   As required in the Settlement Stipulation, the Company is and shall
            be required to maintain collateral margins of $100,000 in excess of
            the Valtec Obligations, and provide Valtec with financial
            information on a weekly basis.

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

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

      2.    The establishment of an executive committee acceptable to Vision.
            There is no overlap in functions or duties between the executive
            committee and the Board of Directors. The executive committee of the
            Board of Directors is responsible for the creation and execution of
            the Company's strategic business plan. As of November 5, 2004 the
            executive committee was comprised of Mr. Frank Stephens, a current
            member of the Company's Board of Directors; Mr. John Ryan, the
            Company's Chief Operating Officer; and, Mr. Joseph Gardner, the
            Company's Chief Financial Officer. No compensation is paid to any
            member of the executive committee as a result of being a member of
            the executive committee.

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


                                       6
<PAGE>

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

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

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

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

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

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

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

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

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

      In  general,  the EGC  Agreement  permits  us to  borrow  up to 80% of our
eligible accounts receivable.  Under the EGC Agreement, the annual interest rate
is 6% above the prime rate  announced by  Citibank,  N.A. and we are required to
pay a monthly  service fee equal to three quarters of one percent (0.75%) of the
face  value  of  invoices  assigned  to EGC for  the  preceding  month.  The EGC
Agreement  requires us to pay minimum monthly interest of $7,500 even though our
actual  borrowings  may  result in a lesser  interest  charge.  The  Company  is
responsible for certain fees and fees for early termination of the facility. The
maximum  availability  under the EGC Agreement is $1,000,000 and the term is one
year.

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

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

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

      On or about September 17, 2003, pursuant to that certain Purchase and Sale
Agreement  ("Purchase  Agreement")  by  and  among  the  Company,   Independence
Community Bank ("ICB"), JPMorgan Chase and 100 Marcus LLC, the Company agreed to
transfer all of its right,  title and  interest in and to 100 Marcus  Boulevard,
Hauppauge,  New York, which had served as the Company's main operating  facility
(the "Premises"). ICB and JPMorgan Chase held mortgages on the


                                       7
<PAGE>

Premises and  participated  in the sale  transaction.  The Company  successfully
negotiated a sale of the Premises  which provided for: (i)  satisfaction  of all
liens  and  encumbrances  of  ICB  and  JPMorgan  Chase;  (ii)  payment  of  all
outstanding real estate tax obligations from the proceeds of the sale; (iii) the
Company's  use of 15,000  square feet,  rent free,  for a period of one (1) year
post-closing;  (iv) the  payment of  $250,000  to the Company and (v) ICB and JP
Morgan Chase retaining  unsecured  claims against the Company for the difference
between the Company's  Obligations  to such banks and the amount of the proceeds
of the sale of the Premises remitted to such bank. As a result,  such banks will
have pre-petition unsecured claims against the Company aggregating approximately
$2,271,000.

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

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

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

I.    Miscellaneous

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

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

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

      We are working  towards  emerging from Chapter 11 no later than July 2005,
but that timing is dependent on, among other things,  the timely and  successful
confirmation  and  implementation  of a plan of  reorganization.  The rights and
claims of various  creditors and security holders will be determined by the plan
as well. At this time, it is not possible to predict


                                       8
<PAGE>

accurately the effect of the Chapter 11 reorganization  process on our business,
nor can we make any  predictions  concerning  how each of these  claims  will be
valued in the  bankruptcy  proceedings.  We believe  that  Boundless'  presently
outstanding  equity  securities will have no value and it is expected that those
securities  will be canceled under any plan of  reorganization  that we propose.
For this reason,  we urge that caution be exercised with respect to existing and
future investments in any Boundless security.

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

General

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

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

      The  Company  entered  into the General  Display  Terminal  businesses  in
December 1994 when the Company  purchased  Applied  Digital Data  Systems,  Inc.
("ADDS") from NCR  Corporation  ("NCR").  ADDS changed its name to SunRiver Data
Systems, Inc. and, in 1996, to Boundless Technologies, Inc. In October 1995, the
Company  acquired assets relating to the General  Display  Terminal  products of
Digital Equipment Corporation ("Digital"). 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.

      Boundless  Manufacturing  is  pursuing  opportunities  in  the  electronic
manufacturing  services ("EMS")  marketplace.  As of December 31, 2003 and 2004,
the  Company  owned  75% of the  outstanding  shares  of  common  stock  of this
subsidiary.  Services  include  supply chain  optimization,  global  supply base
management,  systems  assembly  and test,  distribution  and  logistics,  repair
centers and end-of-life management. Boundless Manufacturing also offers in-house
engineering expertise- product design, test development and product development-
to significantly  reduce  time-to-market  for original  equipment  manufacturers
("OEM") customers. Boundless Manufacturing provides a complete supply chain that
is designed and built to each customer's specifications. Boundless Manufacturing
also has post-manufacturing support capability in New York and Atlanta.

      On March 6,  2000,  Boundless  Manufacturing  acquired  the  manufacturing
assets of Boca Research  Inc.  ("Boca") and assumed the lease of a 77,000 sq.ft.
facility  in  Boca  Raton,   Florida.   The   transaction   extended   Boundless
Manufacturing's   capabilities  by  adding  printed  circuit  board   assemblies
("PCBAs") to its expertise. The transaction included the immediate employment by
Boundless  Manufacturing of approximately 70 Boca manufacturing  employees.  The
inability  of the Company to fund the  start-up of  Merinta,  combined  with the
decline in text terminal sales,  adversely  impacted  working  capital.  Lacking
adequate  working  capital,  the Company was not able to maintain the EMS growth
they had  achieved  during  2001;  and in June  2002  closed  its  manufacturing
facility  in  Boca  Raton,  Florida,   consolidating  its  operations  into  the
Hauppauge, New York, facility.

      On July 19, 2002, the Company  completed the sale of substantially all its
machinery and  equipment  located at its leased  manufacturing  facility in Boca
Raton. The Company received proceeds, net of expenses, of approximately $420,000
from the sale. During the second quarter of 2002, the Company recorded a loss of
$778,000  relating  to its  decision  to close the  facility  in Boca  Raton and
consolidate that facility's  operations into its Hauppauge,  NY,  facility.  The
Company  had  previously   negotiated  a  settlement  of  its  remaining   lease
obligations with the landlord of the Boca Raton facility, and has


                                       9
<PAGE>

met its obligations under the settlement.

      The Company also acquired a majority of the common stock of Merinta,  Inc.
("Merinta"). Merinta created software and infrastructure to enable third parties
to deploy  internet-based  applications.  As of December 31, 2003 and 2004,  the
Company owned approximately 84% of the outstanding common stock of Merinta,  and
had the right to vote  approximately 70% of the outstanding voting securities of
Merinta.  On May 11,  2001,  the  Board of  Directors  of the  Company  formally
approved  a plan to  discontinue  the  operations  of  Merinta.  The  loss  from
discontinued  operations  of Merinta for the years 2001 and 2000 was  $2,150,000
and $14,004,000, respectively.

Products and Services

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

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

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

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

                      General Display      Electronic Manufacturing
Period                   Terminals                 Services                Other
------                   ---------                 --------                -----
2003                       88.0%                    12.0%
2002                       64.2%                    35.8%
2001                       49.6%                    45.0%                  5.4%


                                       10
<PAGE>

      Foreign Sales. Net foreign sales were approximately $3,473,000, $7,430,000
and $13,047,000 for 2003, 2002 and 2001, respectively. The tables below set
forth, for each of the last three years ended December 31, the approximate
percentage of total revenue attributable to foreign sales and the percentage
attributable to the European region.

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

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

2003                          29.6%                25.3%

2002                          27.7%                16.9%

2001                          21.9%                19.5%

Manufacturing

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

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

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

      Suppliers. The Company purchases subassemblies and components for its
products from more than 40 domestic and Far East suppliers. Purchases from
Radiance Electronics, Ansen Corporation and Video Display Corporation accounted
for approximately 33.5%, 20.2% and 8.9%, respectively, of the dollar amount of
the Company's total purchases in 2004 of subassemblies and components. Purchases
from Radiance Electronics (formerly Goldtron Electric), Ansen Corporation and
Hewlett Packard, accounted for approximately 24%, 20% and 18%, respectively, of
the dollar amount of the Company's total purchases in 2003 of subassemblies and
components. In 2002 Goldtron Electric, Arrow Electronics and Clinton Electric
Corp. accounted for approximately 22%, 9% and 6%, respectively, of the dollar
amount of the Company's total purchases of subassemblies and components.

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

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


                                       11
<PAGE>

the Company with respect to the original delivery dates. On November 7, 2003,
Ansen notified the Company of its intention to terminate the Ansen Agreement due
to the alleged failure of the Company to accept and pay for the components as
originally scheduled. As of June 1, 2005, Ansen continues to deliver the
components to the Company.

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

      Warranties.  The Company provides a one-year warranty  covering  defective
materials and  workmanship.  The Company's  products are serviced at depots that
are geographically  dispersed  throughout the world. Users can purchase extended
warranties  of up to three years or can pay for repairs on a time and  materials
basis. For the years 2001, 2002 and 2003, the Company's cost of warranty repairs
was less than 1%,  respectively,  of the Company's total  revenues.  The Company
does not warrant  software,  but users are  permitted  to return  software for a
refund within 30 days after  purchase.  Accordingly,  customers are afforded the
opportunity  to use software on a trial basis through the  Company's  evaluation
program.  A provision for potential  warranty  liability is recorded at the time
revenue is recognized.

      Research and Development. During 2003, 2002 and 2001, the Company expended
approximately $170,000, $959,000 and $1,381,000,  respectively,  on research and
development  activities.  Boundless'  research and  development  activities have
historically  related  primarily to General Display  Terminals and Windows-based
terminals.  As  part  of the  Company's  restructuring  activities,  significant
reductions in the staffing were  implemented  in March 2003,  resulting in lower
research and development expenditures as compared to prior years.  Additionally,
because General Display Terminals are mature products, development activities in
the recent past year have only  included  enhancements  to the existing  product
family. With the sale of the Windows-based  terminal product line to Neoware, in
June 2001, the resources  required for product  development  activities has been
further  reduced.  See  "Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations - Results of Operations."


                                       12
<PAGE>

Sales and Marketing

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

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

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

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

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

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

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

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

      During the year ended December 31, 2004,  Hewlett  Packard,  Ingram Micro,
and Jetstar contributed 15.6%, 13.8% and 10.9%,  respectively,  of the Company's
total  revenue.  Hewlett  Packard and NCR were the  Company's  most  significant
customers in 2003,  accounting for approximately 32% and 13%,  respectively,  of
the Company's total revenue. In 2002, Hewlett Packard contributed  approximately
14% of the Company's total revenues. The Company believes a decline in the level
of sales to these  customers,  without  growth in other  areas of its  business,
could adversely affect the Company's results of operations and liquidity.


                                       13
<PAGE>

Competition

      The  Company   believes  that   alternative   technologies,   particularly
graphics-capable  computers,  together with the  abandoning of text terminals by
both IBM and HP, have eroded the total  available  market to between  100,000 to
130,000 units in 2004. The Company  believes the market for general purpose text
terminals will continue to erode at 20-30%  annually.  The decline in text sales
has  resulted  in  a  consolidation  of  former  competitors,  as  well  as  the
outsourcing of production from original equipment manufacturers to the remaining
industry  participants.  Although  industry data is not  available,  the Company
believes  its  market  share to be  approximately  25%,  with Wyse  Technologies
("Wyse"),  a Taiwanese company,  holding an approximate 45% market share. In the
period just prior to the bankruptcy  filing,  the Company  believed the relative
market shares of Boundless and Wyse were  approximately  equal at 35% each.  The
Company  believes that the market will continue to decline and therefore lead to
additional  consolidation.  Any market share increases for the Company will come
at the  expense  of  current  industry  competitors.  General  Display  Terminal
customer  purchase criteria are based on quality,  availability,  customization,
compatibility with other terminals,  and price. The Company holds the leadership
position in this market.

      The EMS market in 2003 was estimated by industry  analysts to be in excess
of $100 billion and was served by over 2,500  competitors in the U.S. alone. The
number of  competitors  in this  market  has  declined  due to lack of  capital,
process  expertise,  or breadth of service offering.  The market continues to be
characterized  by merger activity.  Overall,  the industry is still projected to
grow at  least at a 12%  annual  rate for at  least  the  next  six  years.  The
industry's  top  six  leaders  still  represent  a  substantial  portion  of the
industry's  revenue, at approximately 60% in 2003. Success rests on capitalizing
on the opportunity to build  partnerships with technology product developers and
marketers  to  provide a full range of design,  engineering,  manufacturing  and
customer  care  services  in a fully  integrated  solution  business.  Boundless
Manufacturing  is focused on  delivering a level of service and  commitment,  to
both middle-market OEMs, and start-up  companies,  and for smaller programs with
top tier OEM customers.

Patents, Trademarks and Licensing

      The Company  owns  approximately  20 patents  relating to General  Display
Terminals  issued in the United States and various  foreign  countries,  none of
which is believed to be material to its business.  The patents expire during the
next nine years, with expiration dates ranging from December 2005 through August
2013.  The Company  believes that the knowledge and experience of its management
and personnel and their ability to develop, manufacture and market the Company's
products in response to specific  customer  needs is more  significant  than its
patent rights.

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

Backlog

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

Environmental Regulation

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

Employees

      At June 10, 2005 and December 31, 2004, the Company had  approximately  31
full-time employees engaged as


                                       14
<PAGE>

follows:  3 in product design and engineering,  21 in  manufacturing  and repair
services, 2 in sales, systems services and marketing and 5 in administration. At
December 31, 2003, the Company had approximately 57 full-time  employees engaged
as follows: 3 in product design and engineering,  40 in manufacturing and repair
services,  5 in sales,  systems services and marketing and 9 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

      As of December 31, 2003, the Company's administrative offices were located
in a 15,000 square foot leased facility at 100 Marcus Boulevard,  Hauppauge, New
York.  Under the terms of sale of the  Company's  principal  offices  previously
located at this site, the Company was entitled to utilize the 15,000 square feet
free  of  charge  for  a  term  of  one  year  following  the  sale.  Boundless'
manufacturing  and  service  activities  are  currently  conducted  in a  leased
facility of approximately 32,000 square feet of space in Farmingdale,  New York.
The lease  expires  February  28,  2009,  and  calls for an annual  base rent of
$216,000 in the first year of the agreement, escalating to $243,200 in the fifth
year. The Company leases one other small facility in Atlanta,  Georgia for depot
repair and support  services.  The annual lease  commitment for this facility is
not material.

      In December 2004 the Company consolidated its administrative  offices into
the Farmingdale facility.

ITEM 3. LEGAL PROCEEDINGS

      In re: Boundless Corporation, et. al.

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

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


                                       15
<PAGE>

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

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

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

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

      No matter was submitted to a vote of  stockholders  of the Company through
the  solicitation  of proxies  or  otherwise  during the fourth  quarter of 2002
through December 31, 2004.

                                     PART II

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

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

As of June 24, 2005, and December 31, 2003 and 2004, there were approximately
625 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 AMEX, for the periods indicated for the year 2002 and the first
quarter of 2003. Price per share information for the second, third and fourth
quarters of 2003 and for all of 2004 were as reported by CBS Marketwatch.

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

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


                                       16
<PAGE>

Year Ended December 31, 2003:                                  High        Low
                                                               ----        ---

         First quarter...................................     $ 0.32      $ 0.06
         Second quarter..................................     $ 0.25      $ 0.01
         Third quarter...................................     $ 0.01      $ 0.01
         Fourth quarter..................................     $ 0.01      $ 0.01

Year Ended December 31, 2002:

         First quarter...................................     $ 1.30      $ 0.91
         Second quarter..................................     $ 1.09      $ 0.40
         Third quarter...................................     $ 0.67      $ 0.30
         Fourth quarter..................................     $ 0.60      $ 0.09

The last sale price of the Company's Common Stock on August 31, 2005 was $ 0.00.

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

Recent Sales of Unregistered Securities

      None

Dividend Policy

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

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

      The following  table sets forth selected  consolidated  financial data for
the Company for the periods and the dates indicated.  The  consolidated  balance
sheet data and the  consolidated  statement of operations data as of and for the
years ended  December  31,  2001,  December  31, 2000 and  December 31, 1999 are
derived from the  consolidated  financial  statements  which were audited by BDO
Seidman, LLP, an independent registered public accounting firm. The consolidated
balance sheet data and the  consolidated  statement of operations data as of and
for the years ended December 31, 2003 and December 31, 2002 are derived from the
consolidated financial statements which were audited by BP Audit Group, PLLC, an
independent  registered  public  accounting  firm.  The selected  financial data
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.


                                       17
<PAGE>

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

<TABLE>
<CAPTION>
                                          2003         2002         2001         2000         1999
                                       ---------    ---------    ---------    ---------    ---------
<S>                                    <C>          <C>          <C>          <C>          <C>
Total revenues                         $  11,750    $  26,843    $  59,581    $  64,544    $  80,510

Gross margin (loss)                          788         (537)       6,283       15,500       23,812

Interest expense                           1,093        1,402        1,599        1,455        1,438
Reorganization items                         655
Gain on restructuring of payables             --       (3,924)          --           --           --
Income tax (credit) expense                   --           --        1,383         (289)        (333)
Income (loss) from continuing
  operations                              (3,579)      (7,623)      (8,792)      (3,255)       3,239
Loss from discontinued operations             --           --       (2,150)     (14,004)          --
                                       ---------    ---------    ---------    ---------    ---------
Net income (loss)                         (3,579)      (7,623)     (10,942)     (17,259)       3,239
Dividend on preferred stock of
  subsidiary                                  --           --           --           --           50
Accretion on preferred stock                  99          148           --           --           --
                                       ---------    ---------    ---------    ---------    ---------
Net income (loss) applicable to
   common shareholders                 $  (3,678)   $  (7,771)   $ (10,942)   $ (17,259)   $   3,189
                                       =========    =========    =========    =========    =========

Income (loss) per common share from
  continuing operations:

Basic                                  $   (0.55)   $   (1.21)   $   (1.74)   $   (0.72)   $    0.72
                                       =========    =========    =========    =========    =========
Diluted                                $   (0.55)   $   (1.21)   $   (1.74)   $   (0.72)   $    0.71
                                       =========    =========    =========    =========    =========

Net Income (loss) per common share:

Basic                                  $   (0.55)   $   (1.21)   $   (2.17)   $   (3.81)   $    0.72
                                       =========    =========    =========    =========    =========
Diluted                                $   (0.55)   $   (1.21)   $   (2.17)   $   (3.81)   $    0.71
                                       =========    =========    =========    =========    =========

Consolidated Balance Sheet Data
At December 31:
(in thousands)
Working capital (deficit)              $     (39)   $  (9,775)   $ (16,473)   $   3,435    $  17,942
Total assets                               4,138       13,236       33,215       39,604       50,460
Revolving credit loan (short-term)            --           --        8,507           --           --
Current maturities of long-term debt         837        3,142        6,855           --           --
Liabilities subject to compromise         13,207           --           --           --           --
Long-term obligations                      1,581        8,294          833       13,442       14,206
Mandatorily redeemable preferred
   stock                                      --        1,554           --           --           --
Stockholder's equity (deficit)           (14,877)     (11,199)      (4,143)       5,751       21,415
</TABLE>


                                       18
<PAGE>

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

General

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

Critical Accounting Policies

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

Impairment of goodwill and valuation of deferred tax assets.

      We  periodically  evaluate  acquired  businesses for potential  impairment
indicators.  Our judgments regarding the existence of impairment  indicators are
based on legal factors,  market  conditions and  operational  performance of our
acquired  businesses.  Future events could cause us to conclude that  impairment
indicators  exist and that goodwill  associated with our acquired  businesses is
impaired.  Any resulting impairment loss could have a material adverse impact on
our financial condition and results of operations.

      In June 2001, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible  Assets"  ("SFAS  142").  The Company  adopted SFAS 142 on January 1,
2002,  eliminating the amortization of goodwill and other intangible assets that
have  indefinite  useful  lives.  SFAS 142  also  requires  at  least an  annual
impairment  review of goodwill and other intangible  assets and any asset deemed
to be  impaired is to be written  down to its fair value.  Due to its March 2003
Chapter 11  proceedings,  in December 2002,  the Company  recorded an expense of
$3,262 to  remove  the  remaining  book  value of all  goodwill  and  associated
intellectual property.

      The carrying  value of the Company's net deferred tax assets  assumes that
the Company will be able to generate sufficient future taxable income in certain
tax  jurisdictions,  based on estimates and assumptions.  If these estimates and
related  assumptions change in the future, the Company may be required to record
adjustments  to  the  valuation  allowances  against  its  deferred  tax  assets
resulting  in  additional  income  tax  expense  or  credits  in  the  Company's
consolidated statement of operations.  Management evaluates the realizability of
the  deferred  tax assets  quarterly  and  assesses  the need for changes in the
valuation  allowances  quarterly.  During the year ended  December 31, 2001, the
Company  recorded  $2.3  million  of  valuation  allowances  related  to its net
deferred  tax assets,  resulting in a 100%  valuation  allowance at December 31,
2001.  For the years  ended  December  31,  2002,  2003 and 2004 the Company has
continued to record valuation allowances at 100% of its deferred tax assets.

Sales returns and other allowances, allowance for doubtful accounts.

      The  preparation of financial  statements  requires our management to make
estimates and assumptions that affect the


                                       19
<PAGE>

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

      Similarly,  our management must make estimates of the  uncollectibility of
our accounts receivable.  Management  specifically  analyzes accounts receivable
and  analyzes   historical   bad  debts,   customer   concentrations,   customer
credit-worthiness,  current  economic trends and changes in our customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts.

Warranty and product guaranties.

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

Inventory obsolescence.

      We record  inventory  valuation  allowances for estimated  obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management,  additional inventory valuation allowances may be
required.

Results of Operations

First quarter of 2003 compared with first quarter of 2002

On March 12, 2003, the Company filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. Prior to the filing, the Company's inability to obtain material
for production  adversely  impacted customer demand and the Company's ability to
satisfy existing customer orders.

Revenue - Revenue for the quarter ended March 31, 2003 was $2,470 as compared to
$10,022 for the quarter ended March 31, 2002.

Sales of the Company's General Display Terminals  declined 67% to $1,963 for the
quarter  ended March 31, 2003 from $5,965 for the quarter  ended March 31, 2002.
The working capital constraints combined with the industry decline in demand for
General Display Terminals contributed to the revenue decline.

Revenues for the period ending March 31, 2002, from Boundless Manufacturing were
$4,057,  excluding  intercompany  revenue,  as  compared  to $507 for the period
ending March 31, 2003. The revenue decline is wholly attributable to the working
capital  constraints  faced by the Company  beginning  in the second  quarter of
2002.

Net revenue from the Company's  repairs and spare parts business for the quarter
ended March 31,  2003 was $207 as  compared to $548 for the quarter  ended March
31, 2002.


                                       20
<PAGE>

Hewlett-Packard  contributed  26% of the Company's  revenue in the quarter ended
March 31, 2003. Comdial, IBM and Compaq were the most significant  customers for
the Company's products, accounting for 12%, 8% and 8% of revenue,  respectively,
for the quarter ended March 31, 2002.

Gross  Margin - The Company  recorded a gross  margin loss for the three  months
ended  March 31, 2003 of $112  compared to gross  margin of $665 (7% of revenue)
for the first quarter of 2002. The decrease in gross margin is  attributable  to
the overall  decline in revenue,  as well as fixed overhead  associated with the
Company's manufacturing facility in Hauppauge, New York.

Total  Operating  Expenses - For the  quarter  ended March 31,  2003,  operating
expenses, excluding interest expense and reorganization expenses associated with
the  Company's  bankruptcy  filing,  decreased  67% to $537  (22%  of  revenue),
compared to expenses  for the first  quarter of 2002 of $1,618 (16% of revenue).
This decrease is  attributable  primarily to layoffs and other  expense  control
activities  which the Company had begun  implementing to align sales,  marketing
and administrative expenses with the revenue decline.  Reorganization  expenses,
primarily for legal fees, were $335 during the quarter ended March 31, 2003.

Other  credits - Other  credits  for the  quarter  ended March 31, 2002 was $339
compared to credits of $129 for the period  ended March 31,  2003.  In the first
quarter of 2002, the Company reversed $450 of prior years' bonus accruals.  This
reversal  stemmed from several  employees'  waiver of their 2000 bonus awards in
2002. This credit was partially  offset by a charge of $98 for the write down of
debt financing costs.

Interest  Expense - Interest  expense for the  quarter  ended March 31, 2003 was
$563 compared to $344 for the comparable  period in 2002. In connection with the
bankruptcy filing, during the quarter ended March 31, 2003, the Company obtained
debtor-in-possession  financing with Valtec  Capital,  LLC and wrote off $353 of
capitalized  debt  financing  costs  associated  with  the  asset-based  lending
agreement with the Company's prior lender.

Income Tax Expense - For the first quarter of 2003 and 2002, the Company did not
record an income tax credit  against the  recorded  loss before  income taxes of
$1,419 and $958  respectively.  As a result of  uncertainties  as to whether the
related  future tax benefits  would be realized,  the Company had provided for a
100% valuation  allowance against the deferred tax assets  attributable to these
losses.

Net Loss - For the quarter ended March 31, 2002, the Company recorded a net loss
of $958, compared to net loss of $1,419 for the quarter ended March 31, 2003.

Second quarter of 2003 compared with second quarter of 2002

Revenue - Revenue for the quarter ended June 30, 2003, was $4,008 as compared to
$6,722 for the quarter  ended June 30,  2002.  Revenue for the six months  ended
June 30, 2003 was $6,478 versus $16,744 for 2002.

Sales of the General  Display  Terminals  declined 16% to $3,640 for the quarter
ended June 30,  2003 from  $4,343 for the  quarter  ended  June 30,  2002.  On a
year-to-date basis, revenue for General Display Terminals declined 46% to $5,603
from $10,308 in year 2002.

Revenues for the quarter ended June 30, 2002, from Boundless  Manufacturing were
$2,379,  excluding  intercompany  revenue,  as  compared to $368 for the quarter
ended June 30,  2003.  As a result of the  bankruptcy  filing and the  Company's
decision to close the Boca Raton  manufacturing  facility  in June of 2002,  the
Company's EMS customers had sought alternative suppliers.  The Company completed
contractual  production  for its one remaining EMS customer from its  Hauppauge,
New York facility during the second quarter of 2003.


                                       21
<PAGE>

Net revenue from the Company's  repairs and spare parts business for the quarter
ended June 30, 2003 was $300 as compared to $458 for the quarter  ended June 30,
2002.

Hewlett  Packard  contributed  39% of the Company's total revenue in the quarter
ended  June  30,  2003.  Comdial,  Hewlett  Packard  and  Compaq  were  the most
significant  customers for the Company's  products,  each  accounting for 10% of
revenue for the quarter ended June 30, 2002.

Gross  Margin - Gross  margin for the three months ended June 30, 2003 was $803,
as compared to a gross  margin loss of $459 for the  comparable  period in 2002.
The gross  margin  loss for the 2002  period  was  caused  in large  part by the
underabsorption   of  factory  overhead  due  to  the  closing  of  the  Florida
manufacturing operations.

Total  Operating  Expenses  - For the  quarter  ended June 30,  2003,  operating
expenses,  excluding interest expense and reorganization  expenses,  were $1,253
(31% of revenue),  compared to expenses for the second quarter of 2002 of $1,618
(24% of revenue).  For the six months ended June 30,  2003,  operating  expenses
were $1,791 compared to expenses in the comparable period in 2002 of $3,236.

Other credits during the second quarter ended June 30, 2003 were $21 compared to
other charges of $887 for the  comparable  period in 2002. On July 19, 2002, the
Company  completed  the sale of  substantially  all its  machinery and equipment
located at its leased  manufacturing  facility  in Boca  Raton,  Fl. The Company
received proceeds,  net of expenses, of approximately $420 from the sale. During
the second quarter of 2002, the Company  recorded a loss of $778 relating to its
decision to close the  facility in Boca Raton and  consolidate  that  facility's
operations  into  its  Hauppauge,  NY,  facility.  The  Company  had  previously
negotiated a settlement of its remaining lease  obligations with the landlord of
the Boca Raton  facility  and,  as of June 18,  2002,  the  Company  had met its
obligations under the settlement.

During  the  second   quarter  ended  June  30,  2003,   the  Company   recorded
reorganization  expenses of $330, primarily for legal fees,  associated with its
bankruptcy filing.

Interest Expense - Interest expense for the quarter ended June 30, 2003 was $196
compared to $303 for the comparable period in 2002. Included in interest expense
for the 2002 period was amortization of capitalized  debt financing costs.  This
asset was  written  off during the first  quarter  of 2003,  resulting  in lower
interest expense as compared to the second quarter of 2002.

Net gain on the  restructuring of payables - As part of the restructuring of the
Company's  debt,  the Company  reached  agreement  with its unsecured  creditors
representing  approximately  $10,237 of debt which  required the Company to make
cash payments  totaling  approximately  $2,878,  issue shares of Preferred Stock
with a stated  value of  approximately  $3,115 and a  carrying  value of $1,002,
allow offsets of receivables in the amount of $301 otherwise due the Company and
agree to price  increases  in the total  amount of $820 on future  purchases  of
components.  The Company  recognized a gain on the  restructuring of payables to
creditors of $5,236.  In addition the Company  reached  agreement  with its then
secured lenders to restructure  $1,250 of debt through the issuance of Preferred
Stock with a stated value of $1,250 and a carrying  value of $404,  resulting in
the  recognition  of gain of  $846.  The  amounts  relating  to the  gain on the
restructuring  of the  unsecured  debt  reflect an  increase  of $1,567 from the
amount  originally  reported  to  correct  the  discount  rate used to value the
preferred stock. See Note 18 to the Consolidated Financial Statements

Income Tax Expense - For the second  quarter of 2002, the Company did not record
an income tax expense  against the recorded profit before income taxes of $2,815
due to an expected effective tax rate for the year of zero. As of June 30, 2002,
the Company had not utilized all its available net operating losses. As a result
of  uncertainties  as to  whether  the  related  future  tax  benefits  would be
realized,  the Company had provided for a 100% valuation  allowance  against the
deferred tax assets attributable to these losses.

Net Income (Loss)- For the quarter ended June 30, 2003,  the Company  recorded a
net loss of $955,  compared to net income of $2,815 for the  quarter  ended June
30, 2002.


                                       22
<PAGE>

Third quarter of 2003 compared to third quarter of 2002

Revenue - Revenue  for the  quarter  ended  September  30,  2003,  was $3,461 as
compared to $5,186 for the quarter  ended  September  30, 2002.  Revenue for the
nine months ended September 30, 2003 was $9,939 versus $21,930 for 2002.

Sales of the Company's  General  Display  Terminals  were $3,207 for the quarter
ended  September 30, 2003 compared to $3,212 for the quarter ended September 30,
2002. On a year-to-year  basis,  revenue for General Display Terminals  declined
35% to $8,810 from $13,520 in year 2002.

Due to the  Company's  weak  financial  position no EMS  activity or revenue was
recorded in the quarter ended September 30, 2003. Revenues for the quarter ended
September  30,  2002,  from  Boundless  Manufacturing  were  $1,974,   excluding
intercompany   revenue.   Revenue  for  the  nine-month   period  for  Boundless
Manufacturing  was $8,410 in 2002, as compared to revenue of $1,129 for the nine
months ended  September  30, 2003.  To diversify  its risk,  Boundless  began to
sub-contract Comdial's production requirements during the third quarter of 2002.

Net revenue from the Company's  repairs and spare parts business for the quarter
ended  September  30, 2003 was $253 as  compared  to $435 for the quarter  ended
September 30, 2002.

Hewlett Packard and NCR were the most  significant  customers of the Company for
the quarter ended September 30, 2003, contributing 33% and 27%, respectively, of
total revenue.  Comdial and Hewlett Packard were the most significant  customers
for the Company's products,  accounting for 22% and 16% of revenue respectively,
for the quarter ended September 30, 2002.

Gross Margin - Gross margin for the three and nine months  ended  September  30,
2003 were $691 (20% of revenue)  and $1,382 (14% of  revenue)  respectively,  as
compared to a gross  margin loss of $25 for the third  quarter of 2002 and gross
margin of $181 for the nine months ended September 30, 2002.  Excess capacity at
the  Company's  manufacturing  facilities  resulted in  under-absorbed  overhead
expenses of $2,535, or 12% of revenue for the first nine months of 2002. For the
quarter ended September 30, 2002, under-absorbed overhead expenses were $1,078.

Total Operating  Expenses - For the quarter ended September 30, 2003,  operating
expenses,  excluding interest expense and reorganization expenses, decreased 73%
to $333 (10% of revenue),  compared to expenses for the third quarter of 2002 of
$1,311 (25% of revenue). For the nine months ended September 30, 2003, operating
expenses were $2,123  compared to expenses in the  comparable  period in 2002 of
$4,547.  Reduced  employment  levels  following  the  bankruptcy  filing are the
primary contributor to the lower spending in 2003.

Reorganization  expenses  were $287 and $952 for the three and nine months ended
September 30, 2003, respectively.  During the third quarter of 2003, the Company
recognized  gains of $48 from the sale of excess  assets.  During the nine-month
period the Company incurred $974  representing  legal fees and fees due the U.S.
Trustee administering the bankruptcy case.

Interest Expense - Interest expense for the quarter ended September 30, 2003 was
$192 compared to $317 for the comparable  period in 2002.  Interest  expense for
the nine months was $951 in 2003 versus $964 in 2002.

Income Tax Expense - For the third  quarter of 2002,  the Company did not record
an income tax credit against the recorded loss before income taxes of $1,589. As
of September  30,  2002,  the Company had not  utilized  all its  available  net
operating  losses. As a result of uncertainties as to whether the related future
tax benefits  would be realized,  the Company had provided for a 100%  valuation
allowance against the deferred tax assets attributable to these losses.


                                       23
<PAGE>

Net loss- For the quarter ended  September 30, 2003, the Company  recorded a net
loss of $91,  compared to a net loss of $1,589 for the quarter  ended  September
30, 2002.

Years Ended December 31, 2003 and 2002

      Revenues:  Revenues for the year ended December 31, 2003 were $11,750,  as
compared to $26,843 for the year ended December 31, 2002. The decline in revenue
is  attributable  to a  reduction  in  sales  of the  Company's  text  terminals
products,  as customers  moved to alternative  technologies,  including  graphic
displays.  In addition,  revenue for 2002 included $7,781 from the Company's EMS
offerings,  which  services  the Company did not perform  during the  bankruptcy
period due to their working capital deficit position.

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

      Sales  of the  Company's  General  Display  Terminals  declined  by 40% to
$10,347 for the year ended  December  31,  2003 from  $17,248 for the year ended
December 31, 2002.  The decline is  attributable  to a reduction in sales of the
Company's  OEM  products  to  Digital,   Hewlett  Packard  and  IBM,  which,  in
combination,  accounted for a decline of approximately  $1,897,  or 34.8%,  from
sales in 2002.

      Actual Text revenue in 2003 is below that recorded by the Company in 2002,
even after  considering  the industry  decline in demand for this  product.  The
abnormally  high rate of decline  in 2003 is  attributable  to: (i) the  decline
related to the Company filing for bankruptcy; (ii) a one month disruption in the
Company's  receipt of ANSI  material;  and, (iii) the failure of a key component
vendor to timely place  orders for key ASCII  components  to its  sub-suppliers.
This  resulted in the  delivery of product to the Company four months later than
the quoted delivery date. This delay further exacerbated lead-times, causing the
Company  to attempt to  reschedule  its  commitments  to  customers,  as well as
raising customer concerns as to the Company's ability to continue to function as
a reliable source of text terminals.  Therefore,  customers cancelled orders and
did not place orders with the Company for additional product.

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

      During 2003 the Company's ATFS/EMS services were adversely impacted by its
working capital  constraints and bankruptcy  filing. For the year ended December
31, 2003, the Company recorded EMS revenue of $371. In 2002 the Company recorded
ATFS/EMS  revenue  of  $7,781.  Participation  in  the  EMS  market  requires  a
substantial  investment  in  working  capital  as well as a high  level of trust
between the EMS provider and the  customer;  since,  in effect,  the  customer's
success  is  directly  linked  to the EMS  provider's  ability  to  perform  the
outsourced  services.  The  inability  of the  Company to fund the  start-up  of
Merinta,  combined with the decline in text terminal sales,  adversely  impacted
working capital.  Lacking adequate working capital,  the Company was not able to
maintain the EMS growth they had achieved  during 2001;  and in June 2002 closed
its manufacturing facility in Boca Raton, Florida,  consolidating its operations
into the Hauppauge, New York, facility.


                                       24
<PAGE>

      Customer  Services revenue for 2003 was $1,032 compared to $1,814 in 2002.
Customer  services revenue  includes the sale of spare parts,  repair of product
outside of the warranty period, and the sale of multi-year  warranty  contracts.
Historically,  customer  service  revenue  has been driven from the sales of the
Company's text terminal products.

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

      Spare parts sales in 2003 were also  impacted  by the  Company's  negative
working  capital  position and their  inability  to acquire  material to satisfy
customer  demand.  Sales of spare parts in 2003 were $355 as compared to $598 in
2002.

      Hewlett Packard and NCR were the Company's most  significant  customers in
2003, accounting for approximately 32% and 13%,  respectively,  of the Company's
total revenue.  During 2002,  Hewlett  Packard  contributed 14% of the Company's
revenue.

      Gross Margin.  Gross margin for the year ended  December 31, 2003 was $788
(6.7% of  revenue),  as  compared  to a gross  margin  loss  for the year  ended
December 31, 2002 of $537.

      To  reduce  overhead  expenses,  in  December  2003 the  Company  sold its
manufacturing  facility in Hauppauge,  New York,  thereby  eliminating $8,578 in
principal  amount of secured debt and $634 of accrued property tax and interest.
Under the terms of the sales transaction,  the Company leased 15,000 sq. feet of
administrative  and engineering  space at no out of pocket cost to it during the
first  year of the lease.  In  accordance  with  generally  accepted  accounting
principles, a factor for reasonable rent expense of $150 was imputed to the sale
transaction.  In February  2004 the Company  executed a lease to rent 32,000 sq.
ft. of manufacturing  space in a facility located in Farmingdale,  New York. The
lease term is 5 years and calls for first year annual  rent of $216,  escalating
to $243 in the final year.

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

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

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

      Changes in retail  pricing did not have a material  adverse  effect on the
Company's  gross margin in 2003 or 2002. In a continuing  effort to maintain and
improve margins in an industry  otherwise  characterized  by commodity  pricing,
management has focused on quality, flexibility, and product cost reductions.

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


                                       25
<PAGE>

      Total Operating Expenses.  For the year ended December 31, 2003, operating
expenses,  including interest expense, were $3,905 (33% of revenue), compared to
expenses for 2002 of $7,523 (28 % of revenue).

      Sales and Marketing  Expenses.  Sales and marketing expenses decreased 72%
from $2,193  (8.2% of revenue) for the year ended 2002 to $610 (5.2% of revenue)
for the year ended  December  31,  2003.  The  decrease is  attributable  to the
reorganization  of the Company which resulted in a major  reduction in personnel
and marketing programs.

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

      General and Administrative  Expenses.  General and administrative expenses
decreased  31.6%,  or $937, to $2,032 (17.3% of revenue),  from $2,969 (11.1% of
revenue) for the periods ending  December 31, 2003 and 2002,  respectively.  The
decrease  stems from  reductions  in personnel  costs,  travel and  professional
services.

      Research  and  Development  Expenses.  Research and  development  expenses
decreased to $170 in 2003 from $959 in 2002.  Because General Display  Terminals
are  mature  products,  development  activities  over the past  year  have  only
included enhancements to the existing product family.

      Other Charges (Credits). In October 2001 the Financial Accounting
Standards Board issued Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", effective for fiscal years beginning after
December 15, 2001. In June 2002, the Company recorded an expense of $778 for the
impairment of the carrying value of machinery and equipment, which was sold in
July 2002, upon closing of the Florida manufacturing facility. The actual loss
incurred upon disposal in July was $708, resulting in a third quarter recovery
of $70. In March 2003, the Company recorded an expense of $67 for the impairment
of unique manufacturing machinery which became obsolete when that mode of
operations ceased.

      In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). The Company adopted SFAS 142 on January 1,
2002, eliminating the amortization of goodwill and other intangible assets that
have indefinite useful lives. SFAS 142 also requires at least an annual
impairment review of goodwill and other intangible assets and any asset deemed
to be impaired is to be written down to its fair value. Due to its March 2003
Chapter 11 proceedings, in December 2002, the Company recorded an expense of
$3,262 to remove the remaining book value of all goodwill and associated
intellectual property. Amortization will continue to be recorded for intangible
assets with definite useful lives

      Interest Expense. Interest expense amounted to $1,093 for the year ended
December 31, 2003 compared to $1,402 for 2002. The decrease is attributable to
lower levels of debt carried by the Company during 2003.

      Gain on  Restructuring  of  Payables.  The net gain on debt  restructuring
recognized in 2002 did not recur in 2003.

      Reorganization  Items.  For the year ended  December  31, 2003 the Company
recorded  expenses $655 associated with the Company's  bankruptcy  case. Of this
amount,  $1,298 of expense  was  recorded  for legal fees and fees of the United
States Trustee, offset by $685 of gains associated with the sale of assets.

      Income Tax  Expense/Credit.  Due to the net  losses,  the  Company did not
record an income tax  expense or credit for either of the years  ended  December
31, 2003 and 2002.  The Company has provided a valuation  allowance  against the
total  amount of the net deferred  tax assets due to the  uncertainty  of future
realization.

      Net Loss. For the year ended December 31, 2003, net loss was $3,579 (30.5%
of  revenue),  compared to a net loss of $7,623  (28% of  revenue)  for the year
ended December 31, 2002.


                                       26
<PAGE>

      Accretion  on  Preferred  Stock.  Convertible  preferred  stock  issued in
connection  with the 2002 debt  restructuring  in the face  amount of $4,365 was
recorded at its estimated fair value $1,406. Assuming none of the holders of the
Preferred  Stock convert to Common Stock of Boundless  Corporation,  the Company
would be required to record a charge to earnings  available to stockholders over
the ten-year  redemption  period such that the carrying  value of the  Preferred
Stock  equals  its  face  value  at the time of  redemption.  Pre-petition,  the
difference  between the carrying value of the preferred stock and its face value
was  being  treated  as  a  dividend  and  charged  to  earnings   available  to
stockholders over the ten-year  redemption  period unless conversion  occurs, in
which case accretion terminates at that point. As of December 31,2003,  $247 was
accreted and added to losses attributable to common stockholders.

      Net Loss  Applicable to Common  Shareholders.  For the year ended December
31, 2003, the net loss applicable to common shareholders was $3,678, compared to
a net loss  applicable  to  common  shareholders  of $7,771  for the year  ended
December 31, 2002.

Years Ended December 31, 2002 and 2001

      Revenues:  Revenues for the year ended December 31, 2002 were $26,843,  as
compared to $59,581 for the year ended December 31, 2001.

      Sales of the  Company's  General  Display  Terminals  declined by 41.6% to
$17,248 for the year ended  December  31,  2002 from  $29,531 for the year ended
December 31, 2001.  The decline is  attributable  to a reduction in sales of the
Company's OEM product line to Hewlett  Packard and IBM,  which,  in combination,
accounted for a decline of approximately $9,659, or 63.4%, from sales in 2001.

      Sales of the Company's Windows(R)-based Terminals were $3,218 for the year
ending  December  31, 2001.  The Company sold the Capio  product line to Neoware
Systems, Inc. in June 2001.

      Boundless Manufacturing  recognized revenue of $ 26,709 for the year ended
December 31, 2001 and $7,781 for the year ended  December 31, 2002.  The decline
resulted from the Company's  working capital  constraints and the resultant loss
of key  customers  during  2002,  including  Comdial  Corporation,  which itself
provided $14,300 of the Company's total revenue in 2001.

      Net sales from the Company's Customer Services business- repairs and spare
parts- were  approximately  $1,814 for the year ended December 31, 2002 compared
to $2,108 for the year ended  December  31,  2001.  The decline in the number of
units in the  installed  base as  customers  switched  from  text  terminals  to
graphical  display devices,  as well as increases in the overall  reliability of
the Company's products underlie the decline.

      Comdial and IBM were the  Company's  most  significant  customers in 2001,
accounting for approximately 24% and 11%,  respectively,  of the Company's total
revenue.

      Gross  Margin.  The Company  recorded  negative  gross margin for the year
ended  December 31, 2002 of $537, as compared to gross margin for the year ended
December 31, 2001 of $6,283 (10.5% of revenue).  The inability of the Company to
quickly adjust its overhead expenses to match its declining revenue  contributed
to the decline.

      Changes in retail  pricing did not have a material  adverse  effect on the
Company's gross margin in 2002 or 2001.

      Total Operating Expenses.  For the year ended December 31, 2002, operating
expenses were $7,523 (28% of revenue),  compared to expenses for 2001 of $13,692
(23 % of revenue).


                                       27
<PAGE>

      Sales and Marketing Expenses. Sales and marketing expenses decreased 59.8%
to $2,193  (8.2% of revenue) for the year ended 2002 to $5,459 (9.2% of revenue)
for the year ended December 31, 2001. The decrease is  attributable to the sale,
in June 2001, of the Company's Windows-based terminal product line to Neoware.

      General and Administrative  Expenses.  General and administrative expenses
decreased 61.4%, or $4,721, to $2,969 (11.1% of revenue),  from $7,690 (12.8% of
revenue) for the periods ending  December 31, 2002 and 2001,  respectively.  The
decrease  stems from the  shutdown  of the  Company's  Boca Raton  manufacturing
facility  in  June  2002,  and  reductions  in  personnel   costs,   travel  and
professional services. During the fourth quarter of 2001, the Company recorded a
$1,274  charge to earnings to recognize the  settlement of employment  contracts
with two executives of the Company.

      Research  and  Development  Expenses.  Research and  development  expenses
decreased to $959 in 2002 from $1,381 in 2001. The decline is due to the sale of
the Company's Windows-based terminal product line to Neoware.

      Other Charges (Credits). In October 2001 the Financial Accounting
Standards Board issued Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", effective for fiscal years beginning after
December 15, 2001. In June 2002, the Company recorded an expense of $778 for the
impairment of the carrying value of machinery and equipment, which was sold in
July 2002, upon closing of the Florida manufacturing facility. The actual loss
incurred upon disposal in July was $708, resulting in a third quarter recovery
of $70.

      In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). The Company adopted SFAS 142 on January 1,
2002, eliminating the amortization of goodwill and other intangible assets that
have indefinite useful lives. SFAS 142 also requires at least an annual
impairment review of goodwill and other intangible assets and any asset deemed
to be impaired is to be written down to its fair value. Due to its March 2003
Chapter 11 proceedings, in December 2002, the Company recorded an expense of
$3,262 to remove the remaining book value of all goodwill and associated
intellectual property. Amortization will continue to be recorded for intangible
assets with definite useful lives

      During the second quarter of 2001 the Company recorded a gain of $1,500 on
the sale of the  Windows-based  terminal  product line to Neoware and it reduced
warranty liabilities amounting to $300 due to expiration of the warranty period.
Also,  during the fourth quarter of 2001, the Company  recognized $365 of income
from the reversal of prior year expense accruals for expired marketing  programs
and bonus awards.

      Gain on Restructuring of Payables.  During the second quarter of 2002, the
Company  issued  mandatorily   redeemable   convertible   preferred  stock  (the
"Preferred  Stock"),  in the face  amount of $4,365,  as partial  payment to our
former  lenders for  removing  the lien on our assets and to certain  vendors as
settlement  against the  Company's  trade  payables.  The Company  retained  the
services of an  independent  firm to determine  the fair value of the  Preferred
Stock for  purposes of  recording  the  transactions  on the  Company's  book of
records.

      The  convertible  preferred  stock  was  valued  as a  combination  of  an
unsecured  fixed  income  like  security  ("Debt  Portion")  and a warrant.  The
combination of the Debt Portion and warrant provided for an estimated fair value
of the Preferred Stock of $1,406,  resulting in the Company's recognizing a gain
on the  settlement of troubled  debt of $2,959 in the second  quarter ended June
30, 2002.

      As part of the  restructuring  of debt the Company also reached  agreement
with its  unsecured  trade  creditors to accept cash  payments in an amount less
than the face value of the outstanding trade debt,  short-term  notes,  accounts
receivable  offsets  as  well  as  the  return  of  on-hand  inventories.  These
agreements  resulted in the recognition of gain on the  restructuring of debt of
$3,123.  Under these  agreements  the  Company  was  required to make total cash
payments of $2,878 during calendar years 2002 through 2006. The amounts relating
to the gain on the  restructuring  of the unsecured  debt reflect an increase of
$1,567 from the amount originally  reported to correct the discount rate used to
value the preferred stock. See Note 18 to the Consolidated Financial Statements


                                       28
<PAGE>

      Subsequently, the Company failed to meet its payment obligations under the
agreements,  resulting in a reversal during the fourth quarter of 2002 of $2,158
of gain on the settlement of unsecured trade debt previously recorded.

      Interest  Expense.  Interest expense amounted to $1,402 for the year ended
December  31, 2002  compared to $1,599 for 2001.  Lower levels of debt under the
Company's revolving line of credit with CIT were responsible for the decline.

      Income Tax  Expense/Credit.  The Company recorded an income tax expense of
$1,383 for the year ended  December  31,  2001.  The  Company  did not record an
income tax expense or credit in 2002.  The 2001 charge  resulted from income tax
credits of $898, which represented  changes in estimates of previously  provided
income taxes,  and the recording of a valuation  allowance of $2,281 against the
remaining  portion of the net deferred tax assets,  including net operating loss
carryforwards, that the Company currently estimates may not be realized.

      Discontinued  Operations.  On May 11, 2001,  the Board of Directors of the
Company formally approved a plan to discontinue the operations of Merinta. Since
November 2000, following an investment by National Semiconductor in Merinta, the
Company was prohibited by its lender from  contributing  cash to the subsidiary.
As a result,  Merinta was  required to fund its working  capital  needs from the
proceeds  of  the  National  Semiconductor   investment,   cash  generated  from
operations,  and proceeds from any  additional  investments.  However,  the cash
generated from  operations  was not sufficient to cover its operating  needs and
the Company was not  successful  in raising  additional  equity  investments  to
supplement the proceeds from National Semiconductor.  The loss from discontinued
operations for the year ended December 31, 2001 was $2,150.

      Net Loss.  For the year ended  December  31,  2002,  net loss was  $7,623,
compared to a net loss of $10,942 for the year ended December 31, 2001.

      Accretion  on  Preferred  Stock.  Assuming  none  of  the  holders  of the
Preferred  Stock  issued in the debt  restructuring  convert to Common  Stock of
Boundless  Corporation,  the  Company  would be  required  to record a charge to
earnings available to stockholders over the ten-year redemption period such that
the carrying  value of the Preferred  Stock equals its face value at the time of
redemption.  Pre-petition,  the  difference  between the  carrying  value of the
preferred  stock and its face value was being  treated as a dividend and charged
to earnings available to stockholders over the ten-year redemption period unless
conversion  occurs,  in which case  accretion  terminates  at that point.  As of
December 31,2003,  $247 was accreted and added to losses  attributable to common
stockholders.

      Net Loss Applicable to Common Shareholders. For the year ended December
31, 2002, the net loss applicable to common shareholders was $7,771, compared to
a net loss applicable to common shareholders of $10,942 for the year ended
December 31, 2001.


                                       29
<PAGE>

Impact of Inflation

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

Liquidity and Capital Resources

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

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

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

      The Company is highly leveraged.  As of December 31, 2003, the Company had
a tangible net worth deficit of $14,877 and total  liabilities  of $19,015.  The
Company had a working capital deficit, inclusive of items subject to compromise,
of  approximately  $13,246 as of December 31, 2003,  compared to working capital
deficit of $9,775 as of December 31, 2002. Historically,  the Company has relied
on cash flow from  operations,  bank borrowings and sales of its common stock to
finance its working capital, capital expenditures and acquisitions.

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

      By letter  dated  October 5,  2003,  Ansen  purported  to cancel the Ansen
Agreement.  On  November  13,  2003,  Ansen  filed  a  Request  for  Payment  of
Administrative Claim pursuant to 11 U.S.C. ss. 503 in the amount of $1.3 million
("Ansen  Administrative  Claim"). At December 31, 2003 the balance due Ansen was
approximately $1,130. As of the date hereof the Company estimates that its total
potential liability to Ansen is approximately $235.

      On the  Effective  Date,  the allowed  amount of the Ansen  Administrative
Claim,  as determined by the  Bankruptcy  Court,  will be paid in cash, in full.
Payment  of the  Ansen  Administrative  Claim  shall  be  funded  in cash by the
Company. If there should be a shortfall, Oscar Smith, a principal of Vision, has
agreed to provide the Company with  sufficient  funds,  in cash,  to satisfy the
remaining balance, if any, pursuant to a written agreement to provide funding in
an amount not to exceed $375 (the "Smith Agreement").  By letter dated September
23, 2004, Security Bank of Kansas City committed to advance to Oscar Smith up to
$375 to satisfy Smith's obligations under the Smith Agreement.


                                       30
<PAGE>

      Any advances made by Smith and/or Vision to the Company to fund payment of
administrative claims ("Additional Vision Advances") shall be obligations of the
Company  and shall be  repaid to  Vision,  with  interest  at the rate of 8% per
annum,  in equal monthly  amortizing  payments over a period of 36 months period
commencing  on the first  month  subsequent  to  payment  in full of the  Valtec
Obligations,  to which the  Additional  Vision  Advances shall be subordinate in
right of  repayment.  The  Additional  Vision  Advances  shall be evidenced by a
promissory  note to be issued to Vision by the Company on the Effective Date and
shall provide for the Company's right to prepay the note in full without premium
or penalty.

      On the Effective  Date, the Company shall issue, or cause to be issued for
Vision's  benefit,  and in its name, shares of Boundless Common Stock sufficient
to  provide  Vision  with  100%  of  the  Boundless   Common  Stock  issued  and
outstanding,  or to be issued  and  outstanding,  under  the Plan  (the  "Vision
Shares").  Such  issuance  of the  Vision  Shares  shall be deemed to be in full
satisfaction of the Vision Claim.

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

      The Company's  Plan of  Reorganization  contemplates  an annual payment of
cash to holders of allowed unsecured claims (the "Claims"). The Company believes
that these  Claims  aggregate  approximately  $14,556.  Holders of Claims  shall
receive their Pro Rata share of cash payments in an amount equal to 2% of annual
revenues up to and including $7 million,  on each of the first, second and third
anniversary dates of the Effective Date; and cash payments in an amount equal to
4% of annual  revenues  exceeding $7 million,  on each of the first,  second and
third anniversary dates of the Effective Date.

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

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

      At December 31, 2003, the Company had accrued approximately $756 primarily
for legal assistance  throughout the bankruptcy period. As of December 31, 2004,
outstanding  professional  fees,  inclusive  of legal  fees,  are  estimated  to
approximate  $1,400 as of the  Effective  Date.  Upon  application  for  payment
pursuant to ss.ss.  330, 331 and 503(a) of the  Bankruptcy  Code and approval by
the Bankruptcy  Court, any and all  professional  fees not paid on or before the
Effective  Date shall be paid by the Company on such terms as the parties  shall
agree.  Interest shall accrue on any unpaid professional fees from the Effective
Date at a rate of eight (8%) percent per annum.


                                       31
<PAGE>

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

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

      Net cash used in operating  activities  during the year ended December 31,
2003 was $229, principally related to a net loss before reorganization  expenses
of  $2,924.   This  amount  was  offset  by  non-cash  expenses   consisting  of
depreciation and amortization, inventory provisions, write-off of debt financing
costs, and accounts  receivable  doubtful accounts  allowances  totaling $2,362,
decreases in accounts receivable of $1,357 and decreases in accounts payable and
other accrued expenses of $763.

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

      Net cash provided by operating  activities  during the year ended December
31, 2002 was $3,950,  principally related to a reduction in accounts receivables
and  inventory of $6,999 and $5,594,  respectively;  and offset by a gain on the
restructuring of accounts payable of $3,924.  This amount was further reduced by
a reduction in accounts payable of $4,522,  and $3,262 relating to the write-off
of goodwill.  Other non-cash expenses included  depreciation and amortization of
$1,709,  inventory  provisions of $565 and accounts receivable doubtful accounts
allowances of $599.  Net cash provided by investing  activities was comprised of
$443  from the sale of the  assets at the  Company's  Boca  Raton  manufacturing
facility;  offset by $127 in capital  expenditures.  Net cash used in  financing
activities  was $4,287 and included  proceeds of $1,478,  principally  unsecured
loans from Valtec Capital,  proceeds from the sale of the Company's common stock
in a private placement amounting to $162, and payments on loans of $5,927

      Net cash used in operating  activities  during the year ended December 31,
2001 was $1,646,  principally related to a net loss of $10,942.  This amount was
offset by  non-cash  expenses,  principally  depreciation  and  amortization  of
$3,670,  decreases in inventory  of $798 and  increases in accounts  payable and
other accrued expenses of $2,783. Net cash provided by investing  activities was
comprised  of  $1,600  stemming  from  the sale of the  Company's  Windows-based
terminal product line to Neoware Systems,  Inc., offset by capital  expenditures
of $401. Net cash provided by financing activities was principally  comprised of
the proceeds from the sale of the Company's common stock in the amount of $1,189
and proceeds of $1,733 from the issuance of debt.  These  amounts were offset by
repayments of $2,602 due under the Company's mortgage note and revolving line of
credit.

Capital Commitments.

      Following  is a summary  of our  material  contractual  cash  obligations,
including  operating  lease  commitments  (which are  sometimes  referred  to as
"off-balance sheet debt") as of December 31, 2003:


                                       32
<PAGE>

                                        Less than   Years      Years
                                        one year   2 and 3     4 -6       Total
                                        --------   -------     ----       -----
Long-term debt                          $   837    $ 1,148    $   433    $ 2,418
Operating leases                            228        513        517      1,258
                                        -------    -------    -------    -------
Total contractual cash obligations      $ 1,065    $ 1,661    $   950    $ 3,676
                                        -------    -------    -------    -------

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

Going Concern Comment and Management's Plan of Action

      Our auditors' reports on our financial statements includes a comment
regarding our ability to continue as a going concern.

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

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

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

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

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

      o     The ability of the Company to achieve profitability.

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

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

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

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

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


                                       33
<PAGE>

Asset Management

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

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

      Inventory  turnover was 5.5 times in 2003 and 2002.  Inventory reserves at
December  31,  2003 were  $1,242 and were $789 for the year ended  December  31,
2002. The higher  reserve in 2003 is mainly  attributable  to a  non-cancellable
inventory purchase commitment with our board supplier,  Ansen, which resulted in
an additional  provision of $528, per the Company's  policy for excess inventory
reserve requirements.

      Accounts  Receivable.  The Company  sells its  products  primarily  on net
30-day terms.  Receivable turnover was 6.0 in 2001, 4.3 in 2002 and 6.8 in 2003.
The  decline in  receivable  turnover  in 2002 is due to the  failure of Comdial
Corporation to pay for products purchased in 2002. See Item 3- Legal Matters.

New Accounting Pronouncements

      In  May  2003,   the  EITF   reached  a  consensus   on  Issue  No.  03-5,
"Applicability   of  AICPA   Statement  of  Position  97-2,   Software   Revenue
Recognition,   to  Non-Software   Deliverables  in  an  Arrangement   Containing
More-Than-Incidental Software." The FASB ratified this consensus in August 2003.
EITF Issue No. 03-5  affirms that AICPA  Statement  of Position  97-2 applies to
non-software  deliverables,  such as hardware, in an arrangement if the software
is essential to the functionality of the non-software deliverables. The adoption
of EITF Issue No. 03-5 did not have a material  impact on the Company's  results
of operations and financial condition.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after September 15, 2003. The provisions of this Standard do
not have a significant effect on our financial position or operating results.

In November  2003,  the EITF reached a consensus on issue 03-10,  Application of
EITF  02-16  by   Resellers  to  Sales   Incentives   Offered  to  Consumers  by
Manufacturers, addressing how a reseller is to account for the redemption of a


                                       34
<PAGE>

manufacturer's coupon by a consumer at the reseller's location. The final
consensus eliminates the option that permitted resellers to report the value of
the consideration received as a reduction in costs of goods sold, but rather
mandates that it be recorded as revenue. EITF 03-10 is applicable to new
arrangements, including modifications to existing arrangements, entered into in
fiscal periods beginning after November 25, 2003. The provisions of this
consensus do not have a significant effect on our financial position or
operating results.

In November 2003, the EITF reached a consensus on issue 03-0 1, The Meaning of
Other-Than- Temporary Impairment and its Application to Certain Investments.
EITF 03-0 1 establishes additional disclosure requirements for each category of
FAS 115 investments in a loss position. Effective for years ending after
December 15, 2003, companies must disclose the aggregate amount of unrealized
losses, and the aggregate related fair value of their investments with
unrealized losses. Those investments are required to be segregated by those in a
loss position for less than twelve months and those in a loss position for
greater than twelve months. Additionally, certain qualitative disclosures should
be made to clarify a circumstance whereby an investment's fair value that is
below cost is not considered other-than-temporary. The provisions of this
consensus do not have a significant effect on our financial position, operating
results or disclosures.

      In December  2003,  the FASB issued  revised SFAS No. 132 (revised  2003),
"Employer's Disclosure about Pensions and Other Post-Retirement  Benefits." SFAS
132(R)   revised   employers'   disclosure   about   pension   plans  and  other
post-retirement  benefit plans. SFAS 132(R) requires  additional  disclosures in
annual financial statements about the types of plan assets, investment strategy,
measurement dates, plan obligations,  cash flows, and components of net periodic
benefit cost of defined benefit pension plans and other post-retirement  benefit
plans. The annual disclosure  requirements are effective for fiscal years ending
after  December 15, 2003.  SFAS 132(R) also requires  interim  disclosure of the
elements of net periodic benefit cost and the total amount of contributions paid
or expected to be paid during the current fiscal year if significantly different
from  amounts  previously  disclosed.  The  provisions  of SFAS  132(R)  are not
currently applicable to Boundless.

      In December 2003, the FASB issued  Interpretation  46R,  "Consolidation of
Variable Interest  Entities"  (revised December 2003), ("FIN 46R") which further
clarified the  provisions of FIN 46 and delayed the effective  date for applying
the  provisions  of FIN 46  until  the end of the  first  quarter  of  2004  for
interests  held by public  entities in VIEs or  potential  VIEs  created  before
February 1, 2003. See Note 2(n),  "Summary of Significant  Accounting Policies -
New Accounting Pronouncements" in the Notes to Consolidated Financial Statements
for more details on FIN 46 and FIN 46R and their impact on the Company.

      In November  2004,  the FASB issued  SFAS No.  151,  "Inventory  Costs--An
Amendment of ARB No. 43,  Chapter 4" ("SFAS 151").  SFAS 151 amends the guidance
in ARB No. 43,  Chapter 4,  "Inventory  Pricing," to clarify the  accounting for
abnormal amounts of idle facility expense,  freight,  handling costs, and wasted
material  (spoilage).  Among other provisions,  the new rule requires that items
such  as  idle  facility  expense,   excessive  spoilage,  double  freight,  and
rehandling costs be recognized as current-period  charges  regardless of whether
they meet the criterion of "so abnormal" as stated in ARB No. 43.  Additionally,
SFAS 151 requires that the allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS
151 is effective for fiscal years  beginning after June 15, 2005 and is required
to be adopted by  Boundless in the first  quarter of fiscal  2006,  beginning on
January 1, 2006.  Boundless is currently evaluating the effect that the adoption
of SFAS 151 will have on its  consolidated  results of operations  and financial
condition but does not expect SFAS 151 to have a material impact.

      In  December  2004,   the  FASB  issued  SFAS  No.  123  (revised   2004),
"Share-Based  Payment" ("SFAS 123R"),  which replaces SFAS No. 123,  "Accounting
for  Stock-Based  Compensation"  ("SFAS 123") and supersedes APB Opinion No. 25,
"Accounting  for Stock Issued to Employees."  SFAS 123R requires all share-based
payments  to  employees,  including  grants of  employee  stock  options,  to be
recognized in the  financial  statements  based on their fair values,  beginning
with the first interim or annual period after June 15, 2005, with early adoption
encouraged.  The pro forma disclosures  previously  permitted under SFAS 123, no
longer will be an alternative to financial statement recognition.  Pursuant to a
modification  of the  effective  date  issued  by the  Securities  and  Exchange
Commission,  we will be  required to adopt SFAS 123R at the  beginning  of 2006.
Under SFAS 123R, we must determine the  appropriate  fair value model to be used
for


                                       35
<PAGE>

valuing share-based payments,  the amortization method for compensation cost and
the transition  method to be used at date of adoption.  The  transition  methods
include  prospective and  retroactive  adoption  options.  Under the retroactive
options, prior periods may be restated either as of the beginning of the year of
adoption or for all periods  presented.  The  prospective  method  requires that
compensation  expense be recorded for all unvested  stock options and restricted
stock at the beginning of the first quarter of adoption of SFAS 123R,  while the
retroactive  methods would record  compensation  expense for all unvested  stock
options and restricted  stock beginning with the first period  restated.  We are
evaluating the requirements of SFAS 123R and we expect that the adoption of SFAS
123R will have a material impact on our  consolidated  results of operations and
earnings  per share.  We have not yet  determined  the method of adoption or the
effect of adopting SFAS 123R,  and we have not  determined  whether the adoption
will result in amounts  that are  similar to the  current pro forma  disclosures
under SFAS 123.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      The Company's exposure to market risk for changes in interest rates
related primarily to the Company's revolving credit facility and long-term debt
obligations. The Company managed this risk through utilization of interest rate
swap agreements in amounts not exceeding the principal amount of its outstanding
obligations. Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133) requires the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives are either offset against the change in fair value
of assets, liabilities or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a hedging derivative's change in fair value is
immediately recognized in earnings.

At December 31, 2002 the Company had in place an interest rate swap agreement in
the amount of $305,551 bearing three-month LIBOR interest of 1.4%. The interest
rate swap agreement expired March 31, 2003. The deferred loss resulting from the
swap agreements, as calculated using the mark-to market method, was not
material. At December 31, 2002, the Company's interest rate swap, a cash flow
hedge, was closed out to the statement of operations.

      The Company places its investments with high credit quality issuers and,
by policy, is averse to principal loss and ensures the safety and preservation
of its invested funds by limiting default risk, market risk and reinvestment
risk. As of December 31, 2003 the Company's investments consisted of cash
balances maintained in its corporate account with the Chase Manhattan Bank.


                                       36
<PAGE>

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

      For information regarding the Company's change in independent auditors
from BDO Seidman LLP to BP Audit Group PLLC, please refer to Boundless' Form 8-K
filed with the SEC on December 1, 2003.

ITEM 9A. CONTROLS AND PROCEDURES.

      An evaluation was carried out under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the
Company's disclosure controls and procedures as of December 31, 2003. Based on
that evaluation, the Company's management, including the CEO and CFO, has
concluded that the Company's disclosure controls and procedures are effective.
During the period covered by this report, there was no change in the Company's
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.

ITEM 9B. OTHER

      Not applicable.


                                       37
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

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

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

Frank Stephens        53     Chairman of the Board of Directors

Richard Bowman        44     Director

John D. Ryan          54     Acting Chief Executive Officer

Joseph Gardner        46     Vice President - Finance, Chief Financial Officer

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

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

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

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

      Joseph Gardner has served as Vice President of Finance and Chief Financial
Officer of the Company since October 31, 1997.  Mr. Gardner has been employed by
Boundless Technologies, Inc. since April of 1990. Prior to 1997, Mr. Gardner


                                       38
<PAGE>

served as the Controller  and Vice President of Quality  Assurance for Boundless
Technologies.  Before joining Boundless, Mr. Gardner served in various executive
financial  positions with NCR Corporation  including  Business  Planning for the
Financial  Systems  Division  and  Cash  Management/Foreign   Exchange  Exposure
Management.  Mr.  Gardner is also a  Certified  Public  Accountant  as well as a
Certified  Management  Accountant  and received his MBA from Bowling Green State
University.

      In June  2004 Mr.  Joseph  V.  Joy,  Jr.  resigned  from his  position  as
president  and  CEO of the  Company  and  from  his  position  on the  Board  of
Directors. The Company provided payments to Mr. Joy equal to four-months salary,
payable over six months,  for  consulting  and  transition  services.  The total
payments made to Mr. Joy under the period were approximately $72,000.

      In October  2004 Mr.  Anthony  Giovaniello  resigned  from his position as
Senior Vice President- Business Development.

      In  connection  with the  Company's  bankruptcy  filing on March 12, 2003,
Messrs.  Brooks,  Masri  and Smith  resigned  from the  Board of  Directors.  On
September 30, 2004, Mr. John McGovern resigned from his position as the Chairman
of the Board of Directors.

      Prior to February 28, 2002, non-employee members of the Company's Board of
Directors received $12,000 annually, and $500 for each Board of Director meeting
attended, as compensation for services rendered to the Company in their capacity
as directors of the Company. In addition,  non-employee members of the Company's
Board of Directors received $6,500 annually for services provided as a member of
either the Audit or Compensation Committees.  Due to the significant increase in
time  devoted to the Company  Messrs.  Matheson  and Wood,  each a member of the
Board of Directors prior to February 28, 2002, also were entitled to payments of
approximately $4,500 per month during the first six months of 2001.

      Due to cash  constraints,  the Company reached agreement to defer payments
due to the non-employee  members of the Board of Directors for services rendered
to the company in 2001.  On February  21,  2002,  the Company  issued to each of
Messrs.  Matheson  and  Wood a  promissory  note  in  the  principal  amount  of
$38,666.76,  bearing  interest  thereon at the rate of 7% per annum. The Company
issued to Mr. Murphy,  a member of the Board of Directors  prior to February 28,
2002, a promissory  note in the  principal  amount of  $18,666.72,  also bearing
interest thereon at a rate of 7% per annum. The promissory notes were payable in
equal installments over 52 weeks beginning March 15, 2002.

      On February  21, 2002 the Company  also  negotiated  a  settlement  of its
obligations  to Mr.  Stephens,  for his  services  as a Director  to the Company
during 2001, with the delivery to him of its convertible  promissory note in the
principal  amount of $18,666.72.  The promissory note carries interest at a rate
of 8% per annum,  and matures  August 21, 2003.  The note may be converted  into
shares of the Company's  common stock at any time from the date of the note at a
conversion rate of $1.05 per share of common stock.  The Company is obligated to
register  the shares  available  upon  conversion  if, at any time,  the Company
determines to register any of its  securities  under the  Securities Act of 1933
for sale to the public.

      On February  21,  2002,  the Company  granted to each of its  non-employee
members of the  Company's  Board of  Directors  non-qualified  stock  options to
purchase  shares of the Company's  common stock.  The options vest  immediately,
have a strike  price per share of common  stock of $1.05,  and expire five years
following  the date of grant.  The number of shares of common stock which may be
purchased under the option granted are as follows:  Mr.  Matheson,  44,000;  Mr.
Wood, 34,000; Mr. Murphy, 27,000; and Mr. Stephens, 28,000.


                                       39
<PAGE>

      On  February  28,  2002,  the  Company  granted  to  certain  of its  then
non-employee  members  of the  Company's  Board of  Directors,  each of  Messrs.
Bowman,  Brooks,  Masri,  McGovern and Smith, two non-qualified stock options to
purchase  a total of 40,000  shares of the  Company's  Common  Stock.  The first
option,  to purchase  25,000 shares of Common Stock,  vests  immediately,  has a
strike  price  per  share of  common  stock of $1.03,  and  expires  five  years
following the date of grant.  The second option,  covering the purchase of up to
15,000  shares of Common  Stock,  vests pro rata over a 24-month  period,  has a
strike  price of $1.03  per  share of  Common  Stock,  and  expires  five  years
following the date of grant. In addition the Company granted to Mr. Stephens,  a
non-employee  member of the Company's Board of Directors,  an option to purchase
15,000 shares of the Company's  Common Stock.  Of the 15,000 shares which may be
purchased  under the option,  5,000 vest  immediately,  and 10,000 vest pro rata
over an 16-month period. The option has a strike price per share of Common Stock
of $1.03 and expires five years from the date of grant.

      The stock options  granted on February 28, 2002,  contain such  forfeiture
provisions  as are normally  contained in options  granted by the Company to its
employees,  except that such options will immediately vest in the event there is
a change of control  of the  Company  or if such  Director  ceases to serve as a
Director of the Corporation for any reason, except due to his own initiative.

Audit Committee Financial Expert

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

Audit Committee

      Boundless Corporation has a separately designated standing Audit Committee
established  in  accordance  with Section  3(a)(58)(A)  of the Exchange Act. The
members of the Audit Committee are J. Frank Stephens and Richard Bowman.

Section 16(a) Beneficial Ownership Reporting Compliance

      A review of the Forms 3, 4 and 5 filed or due with the  Commission in 2001
indicates that each of J. Gerald Combs,  Joseph  Gardner,  Anthony  Giovaniello,
Daniel Matheson,  Jeffrey Moore and Gary Wood was late in filing either a Form 4
or a Form 5 with respect to one transaction,  that Joseph Joy was late in filing
Form 4 reports with respect to two transactions and that Jack Murphy was late in
filing a Form 3 following his  appointment to the Company's  Board of Directors.
The late reports by Messrs. Combs, Gardner,  Matheson, Moore and Wood related to
stock option grants, made to each of them effective as of the end of 2000, about
which those persons were not notified by the Company until after the  respective
Section 16(b) reports were due.

      A review of the Forms 3, 4 and 5 filed or due with the  Commission in 2002
indicates that each of Joseph Joy, Joseph Gardner,  Anthony Giovaniello,  Daniel
Matheson,  Jack  Murphy  and Gary Wood did not file  either a Form 4 or a Form 5
with respect to one transaction,  that Frank Stephens did not file a Form 4 or a
Form 5 report with respect to two  transactions and that each of Richard Bowman,
Gary Brooks,  Safwan Masri,  John McGovern and Oscar Smith did not file a Form 3
following his appointment to the Company's Board of Directors.

      A review of the Forms 3, 4 and 5 filed or due with the  Commission in 2003
and 2004 indicates that each of Joseph Joy, Joseph Gardner, Anthony Giovaniello,
Richard Bowman, Gary Brooks, Safwan Masri, John McGovern, Oscar Smith, and Frank
Stephens did not file a Form 5 as required  under  section 16(b) of the Exchange
Act.


                                       40
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

      The table below discloses all cash  compensation  awarded to, earned by or
paid to our  Chief  Executive  Officer  and our  four  most  highly  compensated
executive  officers who earned more than  $100,000 for services  rendered in all
capacities to us during the fiscal year ended  December 31, 2003  (collectively,
the "named  executive  officers").  In addition,  it provides  information  with
respect to the  compensation  paid by us to the named executive  officers during
2002 and 2001.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                    Annual Compensation               Long-Term
                                            ------------------------------------     Compensation
                                                                                     ------------
Name and Principal                                                   Other Annual                       All Other
Position                       Year         Salary        Bonus      Compensation    Options(#)(2)     Compensation
-----------                    ----         ------        -----      ------------    -------------     ------------
<S>                          <C>           <C>              <C>         <C>              <C>                 <C>
Joseph V. Joy(3)(4)          12/31/03      $143,257         --               --               --             --
Former President, and        12/31/02      $136,327         --               --          170,000             --
Chief Executive Officer      12/31/01      $154,431         --               --            2,000             --

Anthony Giovaniello(4)       12/31/03      $134,317         --               --               --             --
Executive VP Boundless       12/31/02      $130,326         --               --          140,000             --
Manufacturing                12/31/01      $147,041         --               --            2,000             --

Joseph Gardner               12/31/03      $136,610         --               --               --             --
Vice President-Finance       12/31/02      $134,574         --               --           75,000             --
Chief Financial Officer      12/31/01      $162,846         --               --            2,000             --

J. Gerald Combs              12/31/01      $316,250         --               --               --             --
Former Chief
Executive Officer

Jeffrey K. Moore             12/31/01      $145,971         --          $11,400               --             --
Former Vice President
Corporate Development
</TABLE>

(2)   Options  granted in February 2001 to the named  executive  officers have a
      strike  price of $2.60 per  share of  Common  Stock.  Options  granted  in
      October 2002 to the named executive  officers have a strike price of $0.45
      per share of Common Stock.

(3)   Promoted to Chief Executive Officer and President  January 2002.  Resigned
      from the company June 30, 2004

(4)   In accordance with their employment  agreements  discussed below,  each of
      Messrs.  Joy and Giovaniello was granted an option in 1999 to purchase for
      $2,000 shares of Boundless  Manufacturing  common stock representing 12.5%
      of the outstanding  shares of Boundless  Manufacturing.  Such options were
      exercised. See "Employment Agreements and Change-in-Control  Arrangements"
      for  additional  information  concerning  the  option of either Mr. Joy or
      Giovaniello to convert shares of Boundless Manufacturing into Common Stock
      of the Company.


                                       41
<PAGE>

Employment Agreements and Change-in-Control Arrangements

      The Company had entered into employment  agreements  with Mr. Combs,  then
the Company's Chairman of the Board and Chief Executive Officer, and Mr. Jeffrey
K. Moore, then the Company's Vice President,  Corporate  Development on March 1,
2000. The employment agreements were originally scheduled to expire February 27,
2003.  On January  17,  2002,  the  Company  filed a report on Form 8-K with the
Securities and Exchange Commission  reporting that it had reached agreement with
each  of  Messrs.  Combs  and  Moore  to the  termination  of  their  respective
employment agreements with the Company. The Company had reached agreement on the
substantive  details of the  agreements  during  December 2001 and finalized the
details  of the  separation  agreements  involving  Mr.  Combs and Mr.  Moore on
January 17, 2002; but the documents were made effective as of January 1, 2002.

      Pursuant to the  separation  arrangements  described  below,  the Board of
Directors of the Company accepted the  resignations,  effective as of January 1,
2002, of J. Gerald Combs, its Chairman and Chief Executive Officer,  and Jeffrey
K.  Moore,  its  Vice  President  of  Corporate  Development,  from all of their
positions  with the Company and its  subsidiaries.  However,  Mr.  Combs and Mr.
Moore were to remain as members of the  Company's  Board of Directors  (with Mr.
Combs also  remaining  as Chairman of the Board)  until the  February  28, 2002,
meeting of the Company's  stockholders,  at which Mr. Combs,  but not Mr. Moore,
was to stand for re-election to the Board.

      The Company  entered into a Separation  Agreement and General Release (the
"Separation  Agreement")  with each of Mr.  Combs and Mr.  Moore and issued a 6%
Convertible  Promissory  Note (the  "Note")  to each of them,  with a  principal
amount of $475,000 for Mr. Combs and $382,600 for Mr.  Moore,  representing  the
separation  payments.  The  principal  amount  of  the  notes  include  a  bonus
previously  awarded by the Company for the year 2000  ($75,000 for Mr. Combs and
$25,000 for Mr. Moore), which had not been paid by the Company.  Simultaneously,
the Company entered into a Consulting Agreement with Mr. Combs and an Employment
and Consulting Agreement with Mr. Moore (together, the "Consulting Agreements").
Mr. Combs was to serve as a consultant to the Company until March 31, 2003,  and
Mr. Moore was to remain as an employee of the Company at a reduced salary and in
a non-officer capacity until March 31, 2002 and thereafter serve as a consultant
to the Company until  February 27, 2003.  Under the  Consulting  Agreements  the
Company  agreed to pay a total of  $241,056  to Mr.  Combs and  $137,500  to Mr.
Moore.  The Company  agreed that,  to the extent not already  vested,  all stock
options  held by Mr. Combs  (480,000)  and Mr.  Moore  (205,000)  would be fully
vested  immediately  and such options would be  exercisable  for five years from
January 1, 2002. The exercise prices of such stock options were not changed. The
Company  (including  its  subsidiaries)  granted  releases to Mr.  Combs and Mr.
Moore,  each of  whom  granted  reciprocal  releases  to the  Company  (and  its
subsidiaries).

      Each Note was payable on  February  27,  2003 and  entitled  the holder to
convert  it at the  price of $1.25  per  share  into  restricted  shares  of the
Company's common stock at any time prior to such maturity date.  However, if the
Notes were not converted  and the Company had not raised equity  financing of at
least  $2,500,000  prior to such  maturity  date,  the Company had the option to
extend the Notes for two years and to pay the Notes in 24 monthly  installments.
The Company's  obligations to make payments under the Notes were subordinated to
its current or future  obligations to repay all other  indebtedness for borrowed
money.  The  shares  into  which  the  Notes  could  have  been  converted  were
accompanied by "piggyback"  registration  rights.  As a result of the bankruptcy
filing,  the  obligations  to both  Messrs.  Combs and Moore are  unsecured  and
subject to compromise.

      Under the Consulting Agreements,  if Mr. Combs or Mr. Moore introduced the
Company to a party with  which the  Company  completed  a  financing,  merger or
acquisition  transaction between June 1, 2002 and December 31, 2003, he would be
entitled  to  certain  commissions  of  either  2% or 4% of the  transaction  or
financing amount. In addition to advising the Company on financings, mergers and
acquisitions  and  business  development,  the duties of Mr. Combs and Mr. Moore
under these agreements included cooperation in the transfer of his duties to his
successor  at the  Company  and  providing  testimony  in any future  proceeding
involving the Company.  No obligation of the Company was incurred as a result of
the Consulting Agreements.


                                       42
<PAGE>

      Under the Separation Agreements, each of Mr. Combs and Mr. Moore agreed to
transfer to the Company his 2,000,000 shares of the outstanding  common stock of
Boundless Manufacturing  Services,  Inc., resulting in the Company's holding 75%
of the 20,000,000  outstanding shares of Boundless  Manufacturing.  In addition,
Mr.  Combs and Mr.  Moore  each  agreed  to the  termination  of his  Employment
Agreement  with the  Company,  surrendering  his  rights  to  early  termination
payments,  which would have exceeded the amount each of them was receiving under
the Notes and Consulting Agreements,  and agreed to certain covenants including,
among  others,   those   relating  to   confidentiality,   non-competition   and
notification to the Company of business opportunities.

      The Company and Boundless  Manufacturing  Services,  Inc. had entered into
employment   agreements  with  Messrs.   Joseph  Joy  and  Anthony  Giovaniello,
respectively  then the President of Boundless  Manufacturing  and Executive Vice
President,  Business Development. The terms and conditions of the agreements for
each of  Messrs.  Joy and  Giovaniello  were  substantially  similar,  having an
initial  term of  approximately  four years and  expiring  July 1, 2003,  unless
sooner extended or terminated as provided for in the agreements.

      The  agreements  called  for the  purchase,  by each  of  Messrs.  Joy and
Giovaniello,  of 12.5% of Boundless  Manufacturing  Services,  Inc.'s issued and
outstanding  common stock. These shares could have been repurchased by Boundless
Manufacturing  Services,  in a manner as defined in the agreements,  should that
company fail to meet  defined  minimum  performance  standards.  The  agreements
called for  annual  salaries  of  approximately  $155,000,  subject to an annual
review;  and a cash bonus of up to $100,000  annually  determined by achievement
against specified objectives.  Pursuant to their employment agreements,  Mr. Joy
and  Mr.  Giovaniello  had  the  option,  upon  attainment  of  certain  defined
performance standards,  to convert their shares of Boundless  Manufacturing into
up to an aggregate of 300,000 shares of the Company's Common Stock.

      In the event  either of Messrs.  Joy or  Giovaniello  was  terminated  for
failure to attain the minimum  performance  standards,  as defined,  he would be
entitled to  continuation  of base salary for a period not to exceed six months.
In  the  event  of  termination  without  cause,  or if  either  Messrs.  Joy or
Giovaniello resigned as a result of a change of control of the Company, he would
be entitled to continuation of base salary for a period not to exceed 18 months.
In addition,  in the event of termination without cause or resignation resulting
from a change of control,  the  employee was entitled to payment of the pro rata
portion  of the cash  bonus the  employee  would  have been  entitled  to had he
remained  continuously  employed  through  the  end of  the  year  within  which
termination occurs.

      In June  2004 Mr.  Joseph  V.  Joy,  Jr.  resigned  from his  position  as
president  and  CEO of the  Company  and  from  his  position  on the  Board  of
Directors. The Company provided payments to Mr. Joy equal to four-months salary,
payable over six months,  for  consulting  and  transition  services.  The total
payments made to Mr. Joy under the period were approximately $72,000. In October
2004  Mr.  Anthony  Giovaniello  resigned  from  his  position  as  Senior  Vice
President-  Business  Development.  While  each of Messrs.  Joy and  Giovaniello
retain  their  respective  ownership  position of Boundless  Manufacturing,  the
Company has no obligations resulting from the employment agreements.

Compensation Committee Interlocks and Insider Participation

      Mr.  Combs and Mr.  Jeffrey  Moore,  who were  executive  officers  of the
Company  during  2001,  were also  members of the  Company's  Board of Directors
during such times and participated in deliberations concerning executive officer
compensation.  Their joint  deliberations  gave rise to  conflicts  of interest,
which could have affected  their  compensation,  and the number of stock options
granted to them  individually  and as a group.  Mr. Moore was also member of the
Board  and an  officer  of Morgan  Kent  Group  during  2000  which had  certain
relationships,  and entered into certain  transactions,  with the Company during
2000 as  described  below  under  "Item 13-  Certain  Relationships  and Related
Transactions."


                                       43
<PAGE>

1995/ 1997/ 2000 Incentive Plans

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

                              Option Grants in 2002

      The  following  table sets forth  information,  as of December  31,  2002,
regarding the outstanding options to purchase the Company's Common Stock granted
in 2002 under either the Company's  1995,  1997, or 2000 Incentive  Plans to the
named executive officers:

<TABLE>
<CAPTION>
                            Number of                                                       Potential Realizable
                           Securities    Percent of Total                                     Value at Assumed
                           Underlying      Options/SARs       Exercise or                   Annual Rates of Stock
                          Options/SARs     Granted under      Base Price     Expiration    Price Appreciation for
        Name               Granted (#)    Incentive Plans       ($/Sh)          Date            Option Term
        ----               -----------    ---------------       ------          ----            -----------
                                                                                             5% ($)      10% ($)
                                                                                             ------      -------
<S>                          <C>                <C>             <C>           <C>            <C>          <C>
Joseph V. Joy, Jr. (1)       170,000            9.4%            $ 0.45        10/30/07       21,136       46,704
Anthony Giovaniello(1)       140,000            7.7%            $ 0.45        10/30/07       17,406       38,462
Joseph Gardner(1)             75,000            4.1%            $ 0.45        10/30/07        9,325       20,605
</TABLE>

----------
(1)   Options  were  granted  10/30/02  and vest over a  maximum  period of four
      years.

                        Option Grants in Last Fiscal Year

      The Company did not grant options to the named  executive  officers during
the fiscal year ending December 31, 2003.


                                       44
<PAGE>

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

      The  following  table  provides  information  on the  value  of the  named
executive  officers'  unexercised  options to purchase shares of Common Stock at
December 31, 2003.

<TABLE>
<CAPTION>
                                                                                        Value of Unexercised
                                                   Number of Unexercised Options      In-the-Money Options at
                                                      at December 31, 2003 (#)        December 31, 2003 ($)(1)
                                                   -----------------------------    ----------------------------
                          Shares
                        Acquired on     Value
       Name             Exercise(#)    Realized     Exercisable    Unexercisable    Exercisable    Unexercisable
       ----             -----------    --------     -----------    -------------    -----------    -------------
<S>                          <C>          <C>         <C>             <C>                <C>              <C>
Joseph V. Joy, Jr.           0            $0           51,583         120,417            $--              $--
Anthony Giovaniello          0             0           42,833          99,167             --               --
Joseph Gardner               0             0          125,124          31,876             --               --
</TABLE>

(1)   The last sale price of the Company's  Common Stock on December 31, 2003, $
      0.01.


                                       45
<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 April 1,
2004, 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 Goldplate  Holdings,  LTD. is 241 Fifth Avenue,  Suite 302, New York,
NY. The address of Unique  Co-Operative  Solutions  Inc./ Oscar L. Smith is 9185
Bond,  Overland  Park,  KS 66214.  The address of Neoware  Systems,  Inc. is 400
Feheley Dr., King of Prussia, PA 19406.

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

Unique Co-Operative Solutions,         1,017,389(1)(3)               15.0%
Inc./ Oscar L. Smith
JPMorganChase                            900,000(5)                  12.5%
J. Gerald Combs                          905,923(2)(3)(6)            12.0%
Neoware Systems, Inc.                    383,335(4)                   5.7%
Valtec Capital Corp.                     400,000(8)                   5.6%
Joseph V. Joy, Jr                        134,684(3)                   2.0%
Joseph Gardner                           127,844(3)                   1.9%
Anthony Giovaniello                       95,438(3)                   1.4%
Frank Stephens                            91,263(3)(7)                1.3%
Richard Bowman                            75,000(3)                   1.1%
John McGovern                             40,000(3)                     *
Jeffrey Hilk                              22,718(3)                     *
Aziz El-Farra                              3,747(3)                     *
All current directors and
executive officers as a group            590,694(3)                   8.3%
(eight individuals)

----------

*     Less than 1%.

(1)   Includes  41,667  shares  issuable  upon the  exercise  of a warrant.  The
      warrant was granted June 4, 2001, in connection  with a sale of our common
      stock. The common shares underlying the warrant vest immediately,  have an
      exercise  price per share of common stock of $1.30,  and expire five years
      following  the  date of  grant.  Prior  to our  sale of the  Windows-based
      terminal product line in June 2001, Unique  Co-operative  Solutions,  Inc.
      had  been  a  reseller  of our  products.  Sales  of  products  to  Unique
      Co-operative Solutions, Inc. during the past three years were not material
      to the results of our operations.

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

(3)   Includes or consists of shares of Common Stock  issuable  upon exercise of
      options as follows:  Mr. Smith:  40,000; Mr. Combs:  480,000; Mr. Gardner:
      112,936;  Mr. Joy: 69,291; Mr. Bowman:  40,000, Mr. Stephens:  43,000; Mr.
      Giovaniello:  57,416;  Mr. Hilk:  22,718;  Mr.  El-Farra:  3,747;  and Mr.
      McGovern:  40,000. Includes or consists of shares of Common Stock issuable
      upon  exercise of warrants as follows:  Mr.  Combs:  5,834;  Mr.  Gardner:
      1,945; Mr. Joy: 8,042; Mr. Stephens: 6,097; and Mr. Giovaniello: 2,917.

(4)   Includes  50,001  shares  issuable  upon the  exercise  of a warrant.  The
      warrant was issued June 29, 2001, in connection  with a sale of our common
      stock.  The common shares  underlying the warrant,  have an exercise price
      per share of common  stock of $1.10,  and the warrant  expires  five years
      following the date of grant. In


                                       46
<PAGE>

      June 2001  Neoware  Systems  Inc.  purchased  our  Windows-based  terminal
      product line for  $1,600,000.  As part of the  transaction,  we secured an
      agreement to manufacture certain products for Neoware Systems, Inc.

(5)   On June 27, 2002, the Company entered into an agreement with its then
      secured lenders to terminate its revolving line of credit (the "Chase
      Credit Line"). In return for termination of the Chase Credit Line, the
      Company, amongst other consideration, agreed to issue 750,000 shares of
      its common stock and shares of its newly-created convertible preferred
      stock (the "Preferred Stock") with a stated value of $1,250,000. The
      Company has agreed to register under the Securities Act of 1933 such
      common stock and the shares into which the Preferred Stock may be
      converted. The lenders have certain anti-dilution protection for their
      shares of common stock. The Preferred Stock may be converted after the
      first anniversary of their issuance into shares of the Company's common
      stock at $3.00 per share and, unless sooner converted into common stock,
      must be redeemed by the Company on June 30, 2012 for their stated value.
      Includes 100,000 shares underlying three warrants held by JPMorganChase to
      purchase shares of Common Stock at an exercise price of $6.875 per share
      with respect to 50,000 shares, $4.50 per share with respect to 35,000
      shares, and $7.00 per share with respect to 15,000 shares.

(6)   Includes  380,000 shares of Common Stock issuable upon the conversion of a
      convertible  promissory note. The principal amount of the note is $475,000
      and may be converted  into shares of Common  Stock of the Company,  at the
      option of Mr.  Combs,  at a conversion  price of $1.25 per share of Common
      Stock.   See  Item  11-  "Employment   Agreements  and   Change-in-Control
      Arrangements"  for additional  information  concerning the issuance of the
      promissory note to Mr. Combs.

(7)   Includes  17,778 shares of Common Stock  issuable upon the conversion of a
      convertible  promissory  note. The principal amount of the note is $18,667
      and may be converted  into shares of Common  Stock of the Company,  at the
      option of Mr. Stephens, at a conversion price of $1.05 per share of Common
      Stock.  See Item 10- "Directors and Executive  Officers of the Registrant"
      for additional  information concerning the issuance of the promissory note
      to Mr. Stephens.

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

Under the Plan of  Reorganization,  all outstanding  common stock and derivative
securities of the Company will be cancelled  upon the Company's  emergence  from
bankruptcy.


                                       47
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During the fourth quarter of 2001 the Company established a reserve in the
amount of $67,625 against a $50,000 note receivable and accrued interest thereon
from the Morgan  Kent  Group.  The note,  evidencing  a loan to the Morgan  Kent
Group, was entered into July 18, 1997, and was due and payable July 1999 but was
extended  to July 2001.  At the time of the loan,  Morgan  Kent held  beneficial
ownership of approximately 54% of the Company.

      On June 27, 2002,  the Company  entered  into an  agreement  with its then
secured  lenders to terminate  its  revolving  line of credit (the "Chase Credit
Line"). In return for termination of the Chase Credit Line, the Company, amongst
other  consideration,  agreed to issue  750,000  shares of its common  stock and
shares of its newly-created  convertible preferred stock (the "Preferred Stock")
with a stated value of $1,250,000.  The Company had agreed to register under the
Securities Act of 1933 such common stock and the shares into which the Preferred
Stock may be converted.  The lenders had certain  anti-dilution  protection  for
their shares of common  stock.  The Preferred  Stock may be converted  after the
first anniversary of their issuance into shares of the Company's common stock at
$3.00 per share and, unless sooner converted into common stock, must be redeemed
by the Company on June 30, 2012 for their stated value.

      During the period from the Petition Date through and  including  April 30,
2003, Valtec provided debtor-in-possession financing ("Valtec DIP Financing") to
the Company.  As a condition to the Valtec DIP  Financing,  Valtec  required the
Company to enter into the Ansen  Corporation  Manufacturing  Services  Agreement
("Ansen  Agreement"),  pursuant  to which,  Ansen  Corporation  ("Ansen")  would
provide  post-petition  manufacturing,  production and delivery  services to the
Company.  Ansen is majority owned by Valtec.  By Order dated April 16, 2003, the
Bankruptcy Court approved the Company's execution of the Ansen Agreement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Independent Accountant Fees

      The aggregate fees billed for professional  services  rendered by BP Audit
Group and by BDO Seidman,  LLP for the years ended  December 31, 2001,  2002 and
2003 are as follows (amounts in dollars):


                                       48
<PAGE>

                                                2003          2002          2001
                                          ----------    ----------    ----------
BP Audit Group
Audit fees                                $   67,404    $   52,425    $       --
Audit-related fees                                --            --            --
Tax fees                                          --            --            --
All other fees                                    --            --            --
                                          ----------    ----------    ----------
                                          $   67,404    $   52,425    $       --
                                          ----------    ----------    ----------

BDO Seidman, LLP
Audit fees                                $    2,500    $   42,050    $  259,110
Audit-related fees                                --        18,000        12,970
Tax fees                                          --        66,792        81,968
All other fees                                    --        41,924         2,944
                                          ----------    ----------    ----------
                                          $    2,500    $  168,766    $  356,992
                                          ----------    ----------    ----------

Total Independent Accountant Fees
Audit fees                                $   69,904    $   94,475    $  259,110
Audit-related fees                                --        18,000        12,970
Tax fees                                          --        66,792        81,968
All other fees                                    --        41,924         2,944
                                          ----------    ----------    ----------
                                          $   69,904    $  221,191    $  356,992
                                          ==========    ==========    ==========

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

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

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

      All Other  Fees  billed  in 2002  consisted  of  review  of the  Company's
registration statement on Form S-3 and reorganization consulting.

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

Audit Committee Pre-Approval Policy and Procedures.

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

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

      Any requests for audit, audit-related, tax and other services not
contemplated with the recurring services approval described above must be
submitted to the Audit Committee for specific pre-approval and cannot commence
until such approval has been granted. Normally, pre-approval is provided at
regularly scheduled meetings. However, the authority to grant specific
pre-approval


                                       49
<PAGE>

between meetings, as necessary, has been delegated to the Chairman of the Audit
Committee. The Chairman must update the Committee at the next regularly
scheduled meeting of any services that were granted specific pre-approval.

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

                                     PART IV

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

<TABLE>
<CAPTION>
                                                                                                Page No.
                                                                                                --------
<S>   <C>                                                                                         <C>
(a)   (1)(2)  Financial Statements and Schedules

              Index to Consolidated Financial Statements and Financial Statement Schedules        F-1
</TABLE>

      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,  2003 or is not
      applicable or required.

(b)   Reports on Form 8-K

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

      On March 12, 2003,  the Company and three of its  subsidiaries,  Boundless
Technologies,   Inc.,  Boundless  Manufacturing  Services,  Inc.  and  Boundless
Acquisition Corp. (a non-operating  subsidiary)  (collectively,  the "Debtors"),
filed  voluntary  petitions  for relief  under  Chapter 11 of the United  States
Bankruptcy Code (the  "Bankruptcy  Code") in the United States  Bankruptcy Court
for the Eastern District of New York, Central Islip (the "Bankruptcy Court").

      On April 2, 2003,  we filed a current  report on Form 8-K  disclosing  BDO
Seidman, LLP resigned its engagement as our independent auditors concurrent with
our filing for protection under Chapter 11 of the U.S. Bankruptcy Code.

      On December 1, 2003 we issued a current  report on Form 8-K announcing the
appointment of BP Audit Group, PLLC as our independent auditors.


                                       50
<PAGE>

                                  EXHIBIT INDEX

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

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

3.2[1]            By-Laws of Registrant.

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

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

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

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

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

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

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

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

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

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

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

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


                                       51
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       52
<PAGE>

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

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

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

12.1[10]          Letter Agreement, dated January 27, 2005, from Entrepreneur
                        Growth Capital LLC to Boundless Corporation and its
                        subsidiaries.

12.2[10]          Loan  and Security Agreement, dated January 27, 2005, by and
                        among Entrepreneur Growth Capital LLC and Boundless
                        Corporation and its subsidiaries.

12.3[10]          Corporate Guaranty of All Liability with Collateral, dated
                        January 27, 2005, by Boundless Corporation and its
                        subsidiaries in favor of Entrepreneur Growth Capital
                        LLC.

12.4[10]          Certificate of Corporate Resolutions, dated January 27, 2005,
                        of Boundless Corporation, Boundless Acquisition Corp.,
                        Boundless Technologies, Inc., and Boundless
                        Manufacturing Services, Inc.

12.5[10]          Intercreditor and Subordination Agreement, dated January 27,
                        2005, by and between Vision Technologies, Inc. and
                        Entrepreneur Growth Capital.

21[5]             List of Subsidiaries

31                Section 302 Certification

32                Section 906 Certification

----------

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

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

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

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

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

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


                                       53
<PAGE>

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

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

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

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

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

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

**    Filed herewith


                                       54
<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: August 31, 2005

                                        BOUNDLESS CORPORATION


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

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

<TABLE>
<S>                                 <C>                                             <C>


/s/ John D. Ryan                    Acting Chief Executive Officer                  August 31, 2005
----------------------------
John D. Ryan


/s/ Joseph Gardner                  Vice President - Finance, Chief Financial       August 31, 2005
----------------------------        Officer (Principal Accounting Officer)
Joseph Gardner


/s/ Richard Bowman                  Director                                        August 31, 2005
----------------------------
Richard Bowman


/s/ Frank Stephens                  Chairman, Board of Directors                    August 31, 2005
----------------------------
Frank Stephens
</TABLE>


                                       55
<PAGE>

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

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Report of Independent Registered Public Accounting Firm                 F-2

Consolidated Balance Sheets as of December 31, 2003 and 2002            F-3

Consolidated Statements of Operations
  for the years ended December 31, 2003 and 2002                        F-4

Consolidated Statements of Comprehensive Loss
  for the years ended December 31, 2003 and 2002                        F-5

Consolidated Statements of Changes in Stockholders' Deficit
  for the years ended December 31, 2003 and 2002                        F-6

Consolidated Statements of Cash Flows
  for the years ended December 31, 2003 and 2002                        F-7

Notes to Consolidated Financial Statements                              F-9-26

Report of Independent Registered Public Accounting Firm                 F-27

Consolidated Balance Sheet as of December 31, 2001                      F-28

Consolidated Statements of Operations
  for the years ended December 31, 2001 and 2000                        F-29

Consolidated Statements of Comprehensive Loss
  for the years ended December 31, 2001 and 2000                        F-30

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
  for the years ended December 31, 2001 and 2000                        F-31

Consolidated Statements of Cash Flows
  for the years ended December 31, 2001 and 2000                        F-32

Notes to Consolidated Financial Statements                              F- 34-51

Schedule I - Condensed Financial Information of Registrant              S- 1-3

Schedule II - Valuation and Qualifying Accounts                         S- 4-5


                                      F-1
<PAGE>

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

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have  audited  the  accompanying  consolidated  balance  sheets of  Boundless
Corporation and Subsidiaries (Debtor and  Debtors-in-Possession)  as of December
31,  2003  and 2002  and the  related  consolidated  statements  of  operations,
comprehensive loss, changes in stockholders'  deficit and cash flows for each of
the years then  ended.  We have also  audited  the  schedule  of  valuation  and
qualifying  accounts  for each of the years  ended  December  31, 2003 and 2002.
These financial  statements and schedule are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  and schedule are free of material  misstatement.  The Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audits included consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial statements and schedule,  assessing the accounting principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  Boundless
Corporation and Subsidiaries (Debtor and  Debtors-in-Possession)  as of December
31, 2003 and 2002 and the  consolidated  results of their  operations  and their
cash  flows for each of the  years  then  ended in  conformity  with  accounting
principles  generally  accepted in the United  States of America.  Also,  in our
opinion,  the schedule of valuation and qualifying  accounts presents fairly, in
all material respects, the information set forth therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial  statements,  the Company and its  subsidiaries  filed for  protection
under Chapter 11 of the U.S.  Bankruptcy Code on March 12, 2003. The Company has
suffered  substantial  losses  from  operations  in each of its last four fiscal
years.  In addition,  as of December 31, 2003,  the Company has a  stockholders'
deficit of $14,877,000 and has a working  capital deficit of $39,000,  excluding
liabilities and other items subject to compromise of $13,207,000.  These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Although the Company and its subsidiaries  are currently  operating as
debtors-in-possession  under  the  jurisdiction  of the  Bankruptcy  Court,  the
continuation  of the business as a going  concern is first  contingent  upon the
ability of the Company to confirm a plan of reorganization  under the Bankruptcy
Code and emerge from bankruptcy  protection and then  subsequently,  among other
things:  (1) the ability of the Company to restructure  the terms of its secured
debtors-in-possession financing, thereby reducing its cost of borrowing; (2) the
ability of the Company to negotiate trade financing with suppliers at acceptable
terms; (3) the ability of the Company to negotiate contracts for the sale of its
manufacturing   services  to  customers  to  provide  additional  liquidity  for
operations;  (4) the ability of the Company to generate cash from operations and
to maintain adequate cash on hand; and (5) the ability of the Company to achieve
profitability.  Management's plans in regard to these matters are also described
in Note 1. The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ BP Audit Group, PLLC

Farmingdale, NY

May 13, 2004, except as to Notes 5 and 10 for which the date is May 19, 2005


                                      F-2
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                            December 31    December 31
                                                            -----------    -----------
                                                               2003           2002
                                                            -----------    -----------
<S>                                                         <C>            <C>
ASSETS

Current assets:
  Cash and cash equivalents                                 $      761     $        4
  Trade accounts receivable, net                                   995          2,456
  Inventories (Note 3)                                           2,072          1,913
  Prepaid expenses and other current assets                        179             24
                                                            ----------     ----------
     Total current assets                                        4,007          4,397
Property and equipment, net (Note 4)                               131          8,423
Other assets                                                        --            416
                                                            ----------     ----------
    Total assets                                            $    4,138     $   13,236
                                                            ==========     ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Liabilities not subject to compromise
Current liabilities:
  Current portion of long-term debt                         $      837     $    3,142
  Accounts payable                                                 900          6,896
  Notes payable                                                     --            965
  Accrued salaries                                                  71            567
  Accrued legal fees                                               756             56
  Purchase order commitments                                     1,130             --
  Accrued payroll and sales taxes payable                          212            210
  Accrued warranty                                                  59            716
  Other accrued liabilities (Note 6)                                81          1,620
                                                            ----------     ----------
     Total current liabilities                                   4,046         14,172

  Long-term debt, less current maturities (Note 8)               1,581          8,294
  Deferred credits                                                 181            415
  Items subject to compromise:
    Mandatorily redeemable preferred stock (Note 9)              1,652             --
    Liabilities subject to compromise (Note 7)                  11,555             --
                                                            ----------     ----------
         Total liabilities                                      19,015         22,881
                                                            ----------     ----------

         COMMITMENTS AND CONTINGENCIES (Notes 12 and 13)

Mandatorily redeemable preferred stock (Note 9)                     --          1,554
                                                            ----------     ----------
Stockholders' deficit:
  Common stock                                                      67             67
  Additional paid-in capital                                    35,844         35,844
  Accumulated deficit                                          (50,788)       (47,110)
                                                            ----------     ----------
     Total stockholders'  deficit                              (14,877)       (11,199)
                                                            ----------     ----------
     Total liabilities and stockholders' deficit            $    4,138     $   13,236
                                                            ==========     ==========
</TABLE>

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


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                              December 31,   December 31,
                                                              ------------   ------------
                                                                  2003           2002
                                                              ------------   ------------
<S>                                                            <C>            <C>
Revenue:
  Product sales                                                $   10,718     $   25,029
  Services                                                          1,032          1,814
                                                               ----------     ----------
     Total revenue                                                 11,750         26,843
                                                               ----------     ----------
Cost of revenue:
  Product sales                                                    10,165         25,651
  Services                                                            797          1,729
                                                               ----------     ----------
     Total cost of revenue                                         10,962         27,380
                                                               ----------     ----------
       Gross margin (loss)                                            788           (537)
                                                               ----------     ----------
Operating expenses:
  Sales and marketing                                                 610          2,193
  General and administrative                                        2,032          2,969
  Research and development                                            170            959
  Interest expense                                                  1,093          1,402
                                                               ----------     ----------
                                                                    3,905          7,523
                                                               ----------     ----------
                                                                   (3,117)        (8,060)
Other expense (income):
  Write-off of goodwill and other intangible assets(Note 2)            --          3,262
  Net gain on the restructuring of payables                            --         (3,924)
  Other charges (credits)                                            (193)           225
                                                               ----------     ----------
Loss before reorganization items                                   (2,924)        (7,623)
Reorganization items                                                 (655)            --
                                                               ----------     ----------
Net loss                                                           (3,579)        (7,623)
   Accretion of preferred stock                                        99            148
                                                               ----------     ----------
Net loss attributable to common stockholders                   $   (3,678)    $   (7,771)
                                                               ==========     ==========
Basic and diluted loss per common share                        $    (0.55)    $    (1.21)
                                                               ==========     ==========
Weighted average shares outstanding                                 6,706          6,430
                                                               ==========     ==========
</TABLE>

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


                                      F-4
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                        For the Years Ended December 31,
                      (in thousands, except per share data)

                                                     December 31,   December 31,
                                                     ------------   ------------
                                                         2003           2002
                                                     ------------   ------------

Net loss                                              $   (3,579)    $   (7,623)
Other comprehensive  income:
  Cash flow hedges, net of taxes                                            141
                                                      ----------     ----------
Total comprehensive loss                              $   (3,579)    $   (7,482)
                                                      ==========     ==========

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


                                      F-5
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                    Accumulated
                                                  Common Stock          Additional                     other
                                            ------------------------     Paid-in      Accumulated  comprehensive
                                              Shares        Amount       Capital        Deficit        (loss)         Total
                                            ----------    ----------    ----------    ----------     ----------    ----------
<S>                                              <C>      <C>           <C>           <C>            <C>           <C>
Balance, January 1, 2002                         5,688    $       57    $   35,280    $  (39,339)    $     (141)   $   (4,143)
Common stock sold                                  267             2           160                                        162
Common stock issued in consideration of                                                                                    --
  debt modification                                750             8           404                                        412
Net loss                                                                                  (7,623)                      (7,623)
Preferred stock accretion                                                                   (148)                        (148)
Other comprehensive loss                                                                      --            141           141
                                            ----------    ----------    ----------    ----------     ----------    ----------
Balance, December 31, 2002                       6,705            67        35,844       (47,110)            --       (11,199)
Net loss                                                                                  (3,579)                      (3,579)
Preferred stock accretion                                                                    (99)                         (99)
                                            ----------    ----------    ----------    ----------     ----------    ----------
Balance, December 31, 2003                       6,705    $       67    $   35,844    $  (50,788)    $       --    $  (14,877)
                                            ==========    ==========    ==========    ==========     ==========    ==========
</TABLE>

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


                                      F-6
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the Years Ended
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                          Dec 31,      Dec 31,
                                                                         ---------------------
                                                                           2003         2002
                                                                         --------     --------
<S>                                                                      <C>          <C>
Cash flows from operating activities:
  Net loss before reorganization items                                   $ (2,924)    $ (7,623)
  Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities:
    Gain on restructuring of payables                                          --       (3,924)
    Depreciation and amortization                                             800        1,709
    Write-off of debt financing costs                                         289           98
    Write-off of goodwill                                                      --        3,262
    Loss (gain) on the disposition of assets                                  (44)         713
    Change in deferred revenues                                               (94)         (91)
    Provision for doubtful accounts                                           104          599
    Provision for excess and obsolete inventory                             1,169          565
Changes in assets and liabilities:
  Trade accounts receivable                                                 1,357        6,999
  Income tax refunds                                                            4            9
  Inventories                                                                (198)       5,594
  Other assets                                                                 71          562
  Accounts payable and accrued expenses                                      (763)      (4,522)
                                                                         --------     --------
Net cash provided by (used in) operating activities                          (229)       3,950
                                                                         --------     --------
Cash flows provided by (used in) reorganization activities:
  Reorganization items, net                                                  (655)          --
  Gain on disposition of property and equipment                              (685)          --
  Proceeds from disposition of property                                       189           --
  Increase in liabilities, net                                              1,176           --
                                                                         --------     --------
Net cash provided by reorganization activities                                 25           --
                                                                         --------     --------
Cash flows from investing activities:
  Capital expenditures                                                         --         (127)
  Proceeds from sale of assets                                                117          443
                                                                         --------     --------
Net cash provided by investing activities                                     117          316
                                                                         --------     --------
Cash flows from financing activities:
  Net proceeds from issuance of debt                                        1,572        1,478
  Proceeds from issuance of common stock                                       --          162
  Payments on loans payable and capital leases                               (728)      (5,927)
                                                                         --------     --------
Net cash provided by (used in) financing activities                           844       (4,287)
                                                                         --------     --------
Net increase (decrease) in cash and cash equivalents                          757          (21)
Cash and cash equivalents at beginning of year                                  4           25
                                                                         --------     --------
Cash and cash equivalents at end of year                                 $    761     $      4
                                                                         ========     ========
</TABLE>

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


                                      F-7
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the Years Ended
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                         2003        2002
                                                                       --------    --------
<S>                                                                    <C>         <C>
Non-Cash Investing & Financing Activities:
  Asset sale proceeds paid directly to creditors                       $  7,000    $     --
  Equipment acquisitions funded through debt                                 --          16
  Common stock issued in consideration for debt modification                 --         412
  Manditorily redeemable preferred stock issued in exchange for debt         --       1,406
Cash paid for:
  Interest                                                                  123       1,737
  Taxes                                                                      --          12
</TABLE>

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


                                      F-8
<PAGE>

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

                 (In thousands, except share and per share data)

1.    Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code

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

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

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

Background

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

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

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

Boundless   Manufacturing   is   pursuing   opportunities   in  the   electronic
manufacturing services ("EMS") marketplace. As of December 31, 2003, the Company
owned 75% of the outstanding shares of common stock of this subsidiary. Services
include  supply  chain  optimization,  global  supply base  management,  systems
assembly and test,  distribution  and logistics,  repair centers and end-of-life
management.  Boundless Manufacturing also offers in-house engineering expertise-
product  design,  test  development and product  development-  to  significantly
reduce  time-to-market for original equipment  manufacturers  ("OEM") customers.
Boundless  Manufacturing  provides a complete  supply chain that is designed and
built  to each  customer's  specifications.  Boundless  Manufacturing  also  has
post-manufacturing support capability in New York and Atlanta.

Financial Statement Presentation.

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

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


                                      F-9
<PAGE>

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

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

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

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

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

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

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

      o     The ability of the Company to achieve profitability.

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

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

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

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

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

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

DIP Financing

During the period from the Petition Date through and  including  April 30, 2003,
Valtec Capital Corporation ("Valtec").  provided debtor-in-possession  financing
("Valtec DIP  Financing")  to the Company.  Pursuant to the  Bankruptcy  Court's
Interim Order entered on April 17, 2003 (the "Interim  Order"),  the  Bankruptcy
Court  approved:  (i) the Company's use of Valtec's cash  collateral  ("Valtec's
Cash Collateral"); (ii) direct borrowings from Valtec of an amount up to $1,500;
and (iii) the Debtor-in-Possession Financing and Security Agreement by and among
Valtec and the Company (the "DIP Financing Agreement").

See Note 19- Subsequent Events, of Notes to Consolidated  Financial  Statements,
for additional information concerning the Company's DIP financing.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, after
elimination of intercompany accounts and


                                      F-10
<PAGE>

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

transactions. As of December 31, 2003 the Company owned 100%, 84%, and 55% of
the outstanding common stock of Boundless Technologies, Merinta and Boundless
Manufacturing, respectively. Due to the equity deficits of the latter two
companies, no minority interest is reflected.

Cash and Cash Equivalents

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

Allowance for Doubtful Accounts

An allowance for uncollectible  trade receivables is provided based on write-off
history,  aging  analysis,  and  any  specific,  known  troubled  accounts.  The
allowance for doubtful accounts was $623 and $763 at December 31, 2003 and 2002,
respectively.

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 the statements of operations.

Long-Lived Assets

In October 2001 the Financial Accounting Standards Board issued Statement No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", effective
for fiscal years beginning after December 15, 2001. In June 2002, the Company
recorded an expense of $778 for the impairment of the carrying value of
machinery and equipment, which was sold in July 2002, upon closing of the
Florida manufacturing facility. The actual loss incurred upon disposal in July
was $708, resulting in a third quarter recovery of $70. In March 2003, the
Company recorded an expense of $67 for the impairment of unique manufacturing
machinery which became obsolete when that mode of operations ceased. The loss is
included in other charges for the year ended 2002.

Goodwill

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"). The Company adopted SFAS 142 on January 1, 2002,
eliminating the amortization of goodwill and other intangible assets that have
indefinite useful lives. SFAS 142 also requires at least an annual impairment
review of goodwill and other intangible assets and any asset deemed to be
impaired is to be written down to its fair value. Due to its March 2003 Chapter
11 proceedings, in December 2002, the Company recorded an expense of $3,262 to
remove the remaining book value of all goodwill and associated intellectual
property. Amortization will continue to be recorded for intangible assets with
definite useful lives, if any.

Minority Interest

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

Fair Value of Financial Instruments

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

Revenue Recognition

The Company recognizes revenue from product sales upon shipment to the customer
or passage of title and assumption of risk. The Company monitors product
returns, generally which are for stock rotation with a coinciding replacement
order, and records provisions for estimated future returns and potential
warranty liability at the time revenue is recorded. The Company recorded bad
debt expense of $104 and $ 599 for the years ending December 31, 2003 and 2002,
respectively. Service revenue is recognized when services are performed and
billable. Revenue from maintenance and extended warranty agreements is deferred
and recognized ratably over the term of the agreement. The Company had two
customers representing 32% and 13% of revenues respectively in 2003; and one
customer representing 14% of revenues in 2002.

Supplier Concentration

The Company  purchases  subassemblies  and components for its products from more
than 40 domestic and Far East  suppliers.  Purchases  from Radiance  Electronics
(formerly Goldtron Electric),  Ansen Corporation and Hewlett Packard,  accounted
for approximately  24%, 20% and 18%,  respectively,  of the dollar amount of the
Company's  total  purchases in 2003 of  subassemblies  and  components.  In 2002
Goldtron  Electric,  Arrow Electronics and Clinton Electric Corp.  accounted for
approximately  22%,  9% and  6%,  respectively,  of  the  dollar  amount  of the
Company's total purchases of subassemblies and components.


                                      F-11
<PAGE>

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

Concentration of Credit Risk

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

Shipping and Handling

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

Advertising

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense was $12 and $94 for the years ended December 31, 2003 and 2002.

Net (Loss) Per Common Share

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

SFAS No. 128, "Earnings Per Share," requires a reconciliation of the numerator
and denominator of the basic net income (loss) per share computation to the
numerator and denominator of the diluted net income (loss) per share
computation. There were no dilutive instruments for 2003 and 2002.

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

Stock Based Compensation

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

Comprehensive Income (Loss)

The adoption of FAS 133, "Accounting for Derivative Instruments and Hedging
Activities," at January 1, 2001, resulted in recording $30 in accumulated other
comprehensive loss for the cumulative effect of the accounting change. At
December 31, 2002 the Company had in place an interest rate swap agreement in
the amount of $306 bearing three-month LIBOR interest of 1.4%. The interest rate
swap agreement expired March 31, 2003. The deferred loss resulting from the swap
agreements, as calculated using the mark-to market method, was not material. At
December 31, 2002, the Company's interest rate swap, a cash flow hedge, was
closed out to the statement of operations.

New Accounting Pronouncements


                                      F-12
<PAGE>

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

In May 2003, the EITF reached a consensus on Issue No. 03-5,  "Applicability  of
AICPA Statement of Position 97-2, Software Revenue Recognition,  to Non-Software
Deliverables in an Arrangement  Containing  More-Than-Incidental  Software." The
FASB  ratified this  consensus in August 2003.  EITF Issue No. 03-5 affirms that
AICPA Statement of Position 97-2 applies to non-software  deliverables,  such as
hardware, in an arrangement if the software is essential to the functionality of
the non-software deliverables.  The adoption of EITF Issue No. 03-5 did not have
a  material  impact  on  the  Company's  results  of  operations  and  financial
condition.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after September 15, 2003. The provisions of this Standard do
not have a significant effect on our financial position or operating results.

In November 2003, the EITF reached a consensus on issue 03-10, Application of
EITF 02-16 by Resellers to Sales Incentives Offered to Consumers by
Manufacturers, addressing how a reseller is to account for the redemption of a
manufacturer's coupon by a consumer at the reseller's location. The final
consensus eliminates the option that permitted resellers to report the value of
the consideration received as a reduction in costs of goods sold, but rather
mandates that it be recorded as revenue. EITF 03-10 is applicable to new
arrangements, including modifications to existing arrangements, entered into in
fiscal periods beginning after November 25, 2003. The provisions of this
consensus do not have a significant effect on our financial position or
operating results.

In November 2003, the EITF reached a consensus on issue 03-0 1, The Meaning of
Other-Than- Temporary Impairment and its Application to Certain Investments.
EITF 03-0 1 establishes additional disclosure requirements for each category of
FAS 115 investments in a loss position. Effective for years ending after
December 15, 2003, companies must disclose the aggregate amount of unrealized
losses, and the aggregate related fair value of their investments with
unrealized losses. Those investments are required to be segregated by those in a
loss position for less than twelve months and those in a loss position for
greater than twelve months. Additionally, certain qualitative disclosures should
be made to clarify a circumstance whereby an investment's fair value that is
below cost is not considered other-than-temporary. The provisions of this
consensus do not have a significant effect on our financial position, operating
results or disclosures.

In  December  2003,  the FASB  issued  revised  SFAS  No.  132  (revised  2003),
"Employer's Disclosure about Pensions and Other Post-Retirement  Benefits." SFAS
132(R)   revised   employers'   disclosure   about   pension   plans  and  other
post-retirement  benefit plans. SFAS 132(R) requires  additional  disclosures in
annual financial statements about the types of plan assets, investment strategy,
measurement dates, plan obligations,  cash flows, and components of net periodic
benefit cost of defined benefit pension plans and other post-retirement  benefit
plans. The annual disclosure  requirements are effective for fiscal years ending
after  December 15, 2003.  SFAS 132(R) also requires  interim  disclosure of the
elements of net periodic benefit cost and the total amount of contributions paid
or expected to be paid during the current fiscal year if significantly different
from  amounts  previously  disclosed.  The  provisions  of SFAS  132(R)  are not
currently applicable to Boundless.

In December 2003, the FASB issued Interpretation 46R, "Consolidation of Variable
Interest  Entities" (revised December 2003), ("FIN 46R") which further clarified
the  provisions  of FIN 46 and  delayed  the  effective  date for  applying  the
provisions  of FIN 46 until the end of the first  quarter of 2004 for  interests
held by public  entities in VIEs or potential  VIEs created  before  February 1,
2003.

3.    Inventories

Inventories are stated at the lower of cost or market with costs determined on a
first-in first-out basis. On a quarterly basis the Company reviews quantities on
hand and on order and  records a  provision  for excess and  obsolete  inventory
based on forecasted  demand.  For the year ended December 31, 2003 and 2002, the
Company  recorded  provisions  of  $1,169  and  $565  for  excess  and  obsolete
inventory. Inventory includes allocated factory overhead.

The major components of inventories are as follows:


                                      F-13
<PAGE>

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

                                                     December 31,   December 31,
                                                     ------------   ------------
                                                         2003           2002
                                                     ------------   ------------
Raw materials and purchased components                $    2,843     $    2,114
Finished goods                                               135            201
Manufacturing inventory reserves                          (1,242)          (789)
Service parts, net                                           336            387
                                                      ----------     ----------
                                                      $    2,072     $    1,913
                                                      ==========     ==========

4.    Property and Equipment

Property and equipment consists of the following:

                                                     December 31,   December 31,
                                                     ------------   ------------
                                                         2003           2002
                                                     ------------   ------------
Land                                                  $       --     $    2,502
Buildings and improvements                                    --          6,517
Machinery and equipment                                    6,605          7,858
                                                      ----------     ----------
                                                           6,605         16,877
Less accumulated depreciation and amortization             6,474          8,454
                                                      ----------     ----------
                                                      $      131     $    8,423
                                                      ==========     ==========

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

Depreciation  expense for the years  ending  December 31, 2003 and 2002 was $752
and $1,557,  respectively.  In 2003 the Company recorded repairs and maintenance
expenses of $26 as compared to $102 for the year ended December 31, 2002.


                                      F-14
<PAGE>

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

5.    Income Taxes

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

                                                         2003           2002
                                                      ----------     ----------
Current:
   Federal                                                    --             --
   State                                                      --             --

Deferred:
   Federal                                                    --             --
   State                                                      --             --

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

                                                         2003           2002
                                                      ----------     ----------

Federal income tax benefit at statutory rate          $   (1,217)    $   (2,592)
Losses not producing tax benefits                          1,217          2,592
                                                      ----------     ----------
  Income tax benefit                                  $        0     $        0
                                                      ==========     ==========

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

                                                             December 31,
                                                         2003           2002
                                                      ----------     ----------
Current deferred tax assets:
  Inventory                                           $      702     $      618
  Accounts receivable                                        321            371
  Warranties                                                 145            322
  Other deferred tax assets                                  676            708
  Less valuation allowance                                (1,844)        (2,019)
                                                      ----------     ----------
    Total current deferred tax assets                 $       --     $       --
                                                      ==========     ==========

Noncurrent deferred tax assets- Goodwill
   and other                                          $      835     $      330
Noncurrent deferred tax liabilities- Property
   and equipment                                            (588)          (636)
Net operating loss carryforwards                          15,726         14,889
Less valuation allowance                                 (15,973)       (14,583)
                                                      ----------     ----------
    Net noncurrent deferred tax assets                $       --     $       --
                                                      ==========     ==========

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

                                                         2003           2002
                                                      ----------     ----------
Current deferred tax asset valuation allowance        $     (175)    $   (1,551)
Long-term deferred tax asset valuation allowance           1,390          5,415
                                                      ----------     ----------
                                                      $    1,215     $    3,864
                                                      ==========     ==========


                                      F-15
<PAGE>

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

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

6.    Other accrued liabilities

      At December 31, 2003 and 2002 other accrued  liabilities  consisted of the
      following:

                                                            2003          2002
                                                          --------      --------
      Accrued debt settlements                            $     --      $    906
      Accrued audit expense                                     12           216
      Accrued interest expense                                  60           101
      Accrued separation agreement expense                                    81
      Other accrued expenses                                     9           316
                                                          --------      --------
                                                          $     81      $  1,620
                                                          ========      ========

7.    Liabilities and Other Items Subject to Compromise

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

At December 31, 2003,  the Company had  liabilities  and other items  subject to
compromise of approximately $13,207 which consisted of the following:

Liabilities:
Accounts payable                                          $  9,971
Convertible notes payable, principally related to
  prior separation agreements                                  965
Accrued salaries                                               397
Accrued warranty                                               222
                                                          --------
                                                            11,555
Other:
Mandatorily redeemable preferred stock                       1,652
                                                          --------
                                                          $ 13,207
                                                          ========


                                      F-16
<PAGE>

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

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

8.    Debt

Long-term debt at December 31, 2003 and 2002 consisted of the following:

<TABLE>
<CAPTION>
                                                                            2003        2002
                                                                          --------    --------
<S>                                                                       <C>         <C>
Note payable to Independence Community Bank, bearing interest
  at 7.75% payable monthly, balloon payment of $4,439 due on
  or before July 1, 2009, collateralized by land and building             $     --    $  5,790
Note payable toValtec Capital Corporation, bearing interest at
   8%, collateralized by receivables, inventory and equipment                1,321       1,218
Notes payable toVision Technologies, Inc., bearing interest at
   8%, payable  in 36 equal monthly installments, commencing the
   month following payment in full of the Valtec Capital note,
   collateralized by receivables, inventory and equipment, subordinate
   to Valtec Capital                                                           650          --
Term loan, collateralized by land and buildings, subordinate
   to Independence Community Bank                                               --       2,570
Revolving loan, collateralized by receivables, inventory and equipment          --         749
Capital lease obligations, secured by underlying assets                        447       1,109
                                                                          --------    --------
                                                                             2,418      11,436
Less current maturities on long-term debt                                      837       3,142
                                                                          --------    --------
                                                                          $  1,581    $  8,294
                                                                          ========    ========
</TABLE>

As of December 31, 2003, the Company's  pre-petition  lease  obligations  are in
default

Aggregate debt scheduled maturities at December 31, 2003 were as follows:

2004                                   $    837
2005                                        931
2006                                        217
2007                                        217
2008                                        216
                                       --------
                                       $  2,418
                                       ========

9.    Equity

            At December 31, 2003 and 2002,  stockholders'  deficit  consisted of
            the following:


                                      F-17
<PAGE>

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

                                                      December 31,  December 31,
                                                      ------------  ------------
                                                          2003          2002
                                                      ------------  ------------
Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                              $       --    $       --
Common stock, $0.01 par value, 25,000,000 shares
  authorized,6,705,613 shares issued and outstanding           67            67
Additional paid-in capital                                 35,844        35,844
Accumulated deficit                                       (50,788)      (47,110)
                                                       ----------    ----------
     Total stockholders' deficit                       $  (14,877)   $  (11,199)
                                                       ==========    ==========

Mandatorily Redeemable Preferred Stock and Related Gain on Debt Settlement.

During the second  quarter of 2002, the Company  issued  mandatorily  redeemable
convertible  preferred  stock (the  "Preferred  Stock"),  in the respective face
amounts  of $1,250  and  $3,115  as part of two debt  settlements.  The  Company
retained the services of an independent  firm to determine the fair value of the
aggregate face value of $4,365 of the Preferred  Stock for purposes of recording
the transactions on the Company's books.

The  convertible  preferred  stock was valued as a  combination  of an unsecured
fixed income like security  ("Debt  Portion") and a warrant.  The combination of
the Debt  Portion  and  warrant  provided  for an  estimated  fair  value of the
Preferred Stock of $1,406,  resulting in the Company's recognizing a gain in the
second  quarter  ended  June 30,  2002 of $846 and  $2,113  respectively  on the
portion of troubled debt attributable to the issuance of the Preferred Stock.

In  satisfying  the  secured  debt and in return  for  removing  the lien on our
assets, the Company,  amongst other consideration,  also agreed to issue 750,000
shares of its common  stock to the  lenders  and shares of the  Preferred  Stock
referred  to above with a stated  value of $1,250 and a carrying  value of $404,
resulting in the recognition of gain of $846 as reflected above. The Company had
agreed to register  under the  Securities  Act of 1933 such common stock and the
shares into which the Preferred Stock may be converted. The lenders have certain
anti-dilution protection for their shares of common stock.

The Company also reached  agreement  with its unsecured  creditors  representing
approximately  $10,237 of debt which  required the Company to make cash payments
totaling  approximately  $2,878,  issue shares of  Preferred  Stock as discussed
above  with a stated  value of  approximately  $3,115  and a  carrying  value of
$1,002,  allow offsets of  receivables  in the amount of $301  otherwise due the
Company  and  agree to price  increases  in the  total  amount of $820 on future
purchases of components.  The Company  recognized a gain on the restructuring of
these payables to creditors of $5,236 including the gain  attributable  directly
to the  Preferred  stock in the  amount of $2,113 as shown  above.  The  amounts
relating  to the gain on the  restructuring  of the  unsecured  debt  reflect an
increase of $1,567 from the amount  originally  reported to correct the discount
rate  used to  value  the  preferred  stock.  See  Note  18 to the  Consolidated
Financial  Statements.  Subsequently,  the  Company  failed to meet its  payment
obligations  under the  agreements,  resulting  in a reversal  during the fourth
quarter  of 2002 of $2,158 of gain on the  settlement  of  unsecured  trade debt
previously recorded. As a result, the gain of $6,082 from the second quarter was
reduced to a net gain of $3,924 for the full year.

In reporting the gain as a component of continuing operations, the Company early
adopted the  provisions of SFAS No. 145. SFAS No. 145 rescinds SFAS No. 4, which
required all gains and losses from  extinguishment of debt to be aggregated and,
if material,  classified as an  extraordinary  item,  net of related  income tax
effect.  As a result,  the  criteria  in Opinion 30 will now be used to classify
those gains and losses.

The  Preferred  Stock  issued  to  the  lenders  and  unsecured   creditors  was
convertible  after the first  anniversary  of their  issuance into shares of the
Company's  common stock at $3.00 per share and,  unless  sooner  converted  into
common stock,  must be redeemed by the Company on June 30, 2012 for their stated
value.

If all of such Preferred Stock,  including the Preferred Stock which the Company
is  required  to issue to the  lenders,  are  converted,  the  Company  would be
required to issue approximately 1,455,073 shares of its common stock, subject to
adjustment.  As part of the Company's  Plan of  Reorganization,  which  requires
Bankruptcy Court approval, it is contemplated that the shares issuable under the
Preferred  Stock  will be  cancelled.  The  carrying  value  of the  mandatorily
redeemable  stock is included in other items  subject to  compromise at December
31, 2003.


                                      F-18
<PAGE>

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

Assuming none of the holders of the  Preferred  Stock convert to Common Stock of
Boundless  Corporation,  the  Company  would be  required  to record a charge to
earnings available to stockholders over the ten-year redemption period such that
the carrying  value of the Preferred  Stock equals its face value at the time of
redemption.  Pre-petition,  the  difference  between the  carrying  value of the
preferred  stock and its face value was being  treated as a dividend and charged
to earnings available to stockholders over the ten-year redemption period unless
conversion  occurs,  in which case  accretion  terminates  at that point.  As of
December 31,2004, $247 was accreted and charged to losses attributable to common
stockholders.

During  the  quarter  ended  September  30,  2002,  the  Company  sold  to  nine
individuals (the  "Subscribers")  267,367 shares of unregistered Common Stock of
the Company for proceeds of $162. Proceeds of the offering were used for general
working  capital  purposes.  The  purchase  price was  calculated  by taking the
average  closing price of the Common Stock on the American Stock Exchange during
the five (5)  consecutive  trading days ending on the trading  date  immediately
preceding the purchase date. In connection  with this sale, the Company  granted
to the Subscribers  warrants to purchase  267,367 shares of the Company's Common
Stock.  The warrants  are  exercisable  at between  $0.47 and $0.70 per share of
Common Stock and expire on the fifth anniversary from the date of issuance.

10.   Options and Warrants

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

On March 6, 1998,  the Company  filed an  Information  Statement on Schedule 14C
with the Securities and Exchange  Commission in connection  with,  amongst other
items,  the Board of  Directors  of the Company  approving  the  Company's  1997
Incentive Plan permitting the grant of stock options, stock appreciation rights,
performance shares, stock awards, stock units and incentive awards to employees,
directors and others.

The Company had previously adopted its 1995 Incentive Plan which permitted up to
600,000 shares of Common Stock to be issued thereunder. As additional shares
were no longer available to be issued under the 1995 Incentive Plan, the Board
adopted the 1997 Incentive Plan. The maximum number of shares to be issued under
the 1997 Incentive Plan is not to exceed 1,000,000. The exercise price of each
option granted is to be equal to or greater than the market price of the
Company's stock on the date of grant. The terms of the options are generally
over five years with vesting occurring in 25% increments beginning one year
after the grant date. In December 2000 the Board created the 2000 Incentive Plan
that covers up to 1,000,000 shares of Common Stock. The number of shares granted
on a calendar year basis under the 2000 Incentive Plan is limited to 5% of the
total number of shares of Common Stock outstanding, or 10% in any five-year
period.

The Company has elected to continue to account for stock options issued to
employees in accordance with APB 25, "Accounting for Stock Issued to Employees".
During the years ended December 31, 2003 and 2002, all options issued to
officers and employees were granted at an exercise price which equaled or
exceeded the market price per share at the date of grant and accordingly, no
compensation was recorded.

The Company follows the disclosure requirements of FASB Statement 123,
"Accounting for Stock-Based Compensation". This statement requires the Company
to provide pro forma information regarding net income and net income per share
as if compensation cost for the Company's employee stock options granted had
been determined in accordance with the fair value based method prescribed in
SFAS No. 123. The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option pricing model. There were no option
grants in 2003. The following weighted average assumptions were used for grants
in 2002:

      1.    Dividend yield of 0%

      2.    Expected volatility of 114%.

      3.    Risk-free interest rates ranging from 1.47% to 2.1%

      4.    Expected term of 3 years


                                      F-19
<PAGE>

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

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

                                                           2003          2002
                                                        ----------    ----------
Net loss
  As reported                                           $  (3,579)    $  (7,623)
  Under SFAS No. 123                                       (3,696)       (8,096)

Net loss per share
  As reported - basic                                   $   (0.55)    $   (1.21)
  As reported - diluted                                     (0.55)        (1.21)
  Under SFAS No. 123 - basic                                (0.55)        (1.26)
  Under SFAS No. 123 - diluted                              (0.55)        (1.26)

A summary  of the status of the  Company's  stock  options  and  warrants  as of
December 31, 2003 and 2002,  and changes  during the years ending on those dates
is as follows:

<TABLE>
<CAPTION>
Options -Boundless Corporation                        2003                            2002
-------------------------------           ----------------------------    ----------------------------
                                                           Weighted                        Weighted
                                                           Average                         Average
                                            Shares      Exercise Price      Shares      Exercise Price
                                          -----------   --------------    -----------   --------------
<S>                                         <C>            <C>              <C>            <C>
Outstanding at beginning of year            2,326,247      $    2.42        1,473,959      $    3.96
  Granted                                          --             --        1,808,700           2.12
  Exercised                                        --             --               --             --
  Forfeited                                  (333,532)         (1.92)        (956,412)         (4.24)
                                          -----------      ---------      -----------      ---------
Outstanding at end of year                  1,992,715      $    2.50        2,326,247      $    2.42
                                          ===========      =========      ===========      =========
Options exercisable at end of year          1,653,171      $    2.92        1,622,035      $    3.20
                                          ===========      =========      ===========      =========
Weighted average fair value
  of options granted during the year                             N/A                       $    0.46
                                                           =========                       =========

<CAPTION>
Warrants- Boundless Corporation                       2003                            2002
-------------------------------           ----------------------------    ----------------------------
                                                           Weighted                        Weighted
                                                           Average                         Average
                                            Shares      Exercise Price      Shares      Exercise Price
                                          -----------   --------------    -----------   --------------
<S>                                         <C>            <C>                <C>          <C>
Outstanding at beginning of year            1,530,900      $    3.55          893,532      $    6.35
  Granted                                          --             --          667,368           0.48
  Exercised                                        --             --               --             --
  Forfeited                                   (67,340)         (9.69)         (30,000)        (18.60)
                                          -----------      ---------      -----------      ---------
Outstanding at end of year                  1,463,560      $    3.27        1,530,900      $    3.55
                                          ===========      =========      ===========      =========
Warrants exercisable at end of year         1,463,560      $    3.27        1,530,900      $    3.55
                                          ===========      =========      ===========      =========
Weighted average fair value
  of warrants granted during the year                            N/A                       $    0.24
                                                           =========                       =========
</TABLE>


                                      F-20
<PAGE>

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

The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at December 31, 2003:

<TABLE>
<CAPTION>
                                                                            Weighted
                                                                             Average              Number
                                    Number              Weighted            Remaining         Exercisable at
                                Outstanding at           Average        Contractual Life       December 31,
Options - Boundless Corp.      December 31, 2003     Exercise Price          (Years)               2003
-------------------------      -----------------     --------------     ----------------      --------------
<S>                                 <C>                 <C>                      <C>             <C>
                                      564,400           $     0.45               3.83              231,106
                                      215,000                 1.03               2.81              208,750
                                      148,000                 1.05               3.14              148,000
                                      220,000                 1.50               2.45              220,000
                                      180,100                 3.60               1.04              180,100
                                      131,060                 4.50               2.98              131,060
                                      150,000                 4.88               3.00              150,000
                                      176,155                 5.00               1.76              176,155
                                      205,000                 5.62               3.00              205,000
                                        3,000                 8.40               1.00                3,000
                                 ------------         ------------       ------------         ------------
                                    1,992,715           $     2.50               2.87            1,653,171
                                 ============         ============       ============         ============

<CAPTION>
                                                                            Weighted
                                                                             Average              Number
                                    Number                                  Remaining         Exercisable at
                                Outstanding at                          Contractual Life       December 31,
Warrants - Boundless Corp.     December 31, 2003     Exercise Price          (Years)               2003
--------------------------     -----------------     --------------     ----------------      --------------
<S>                                 <C>                 <C>                      <C>             <C>
                                      400,000           $     0.36               3.92              400,000
                                      172,430                 0.65               3.51              172,430
                                      146,676                 0.84               3.16              146,676
                                      152,952                 2.40               1.70              152,952
                                       46,500                 5.00               2.01               46,500
                                      150,000                 5.80               1.38              150,000
                                       65,000                 6.90               1.14               65,000
                                      307,502                 7.50               0.95              307,502
                                       20,000                 7.97               0.48               20,000
                                        2,500                18.40               0.95                2,500
                                 ------------         ------------       ------------         ------------
                                    1,463,560           $     3.27               2.44            1,463,560
                                 ============         ============       ============         ============
</TABLE>

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

On February 23, 2001, the Company sold 110,000 shares of its Common Stock to
three individuals for total proceeds of $225. In connection with the sale, the
Company issued warrants to purchase 27,500 shares of its Common Stock at an
exercise price of $2.40 per share of Common Stock. The warrants expire four
years from the date of grant. Mr. Joseph V. Joy, Jr. and Mr. Jack Ryan, then the
President and Vice President, Supply Chain Services, of Boundless Manufacturing,
respectively, participated in this offering. Mr. Frank Stephens, currently a
member of the Company's Board of Directors, but who was not associated with the
Company at the time of the sale, also participated in the offering. Proceeds
from this sale were used for general working capital purposes.

From May 29, 2001, through June 29, 2001, the Company sold 947,877 shares of its
Common Stock in a private placement offering, raising gross proceeds of $964. In
connection with this sale, the Company issued warrants to purchase 142,190
shares of its Common Stock at exercise prices ranging from $1.10 to $1.36 per
share of Common Stock. The warrants expire five years following the date of
grant. Fourteen individuals or legal entities participated in the private
placement, including four executive officers of the Company and a member of the
Company's Board of Directors.

In connection with a sale of common stock in September, 2001, the Company
granted to the subscribers warrants to purchase 267,367 shares of the Company's
Common Stock. The warrants are exercisable at between $0.47 and $0.70 per share
of Common Stock and

                                      F-21
<PAGE>

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

expire on the fifth anniversary from the date of issuance.

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

11.   Related Party Transactions

Sale of common shares

On February 23, 2001, the Company sold 110,000 shares of its Common Stock to
three individuals for total proceeds of $225. In connection with the sale, the
Company issued warrants to purchase 27,500 shares of its Common Stock at an
exercise price of $2.40 per share of Common Stock. The warrants expire four
years from the date of grant. Mr. Joseph V. Joy, Jr. and Mr. Jack Ryan, then the
President and Vice President, Supply Chain Services, of Boundless Manufacturing,
respectively, purchased securities in this offering. Mr. Frank Stephens,
currently a member of the Company's Board of Directors, but who was not
associated with the Company at the time of the sale, also purchased securities
in the offering. Proceeds from this sale were used for general working capital
purposes.

Other

In 2002 the Company issued certain convertible notes in connection with
separation agreements. These are included in liabilities subject to compromise.
For a description of these obligations see "Item 11. Executive Compensation-
Employment Agreements and Change-in-Control Arrangements".

12.   Commitments

Leases

The Company leases certain manufacturing, sales and administrative facilities
and office equipment under operating lease agreements, which expire at various
times through February 2009. The only significant lease is for the Company's
facility in Farmingdale, New York, entered into February 2004, with a total
outstanding commitment of $1,111. Total rent expense was $91 and $591 in 2003
and 2002, respectively.

Future  minimum rental  commitments,  as of December 31, 2003, and including the
commitments for the Farmingdale facility, were as follows:

Leases
2004                                     $    228
2005                                          272
2006                                          241
2007                                          235
2008                                          241
2009                                           41
                                         --------
                                         $  1,258
                                         ========

13.   Contingencies

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

See "Item 3. Legal  Proceedings"  for a description of outstanding  lawsuits and
claims.


                                      F-22
<PAGE>

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

14.   Segment Reporting and Geographic Information

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

Operating segments are identified as components of an enterprise about which
separate financial information is available for evaluation by its decision
making group. For 2002, the Company had two reportable segments. With the
Company's restructuring in conjunction with Chapter 11 filing on March 12, 2003,
the business segment reporting ceased. The results of the reportable segments
are derived from the Company's management reporting system. These results are
based on the Company's method of internal reporting and are not necessarily in
conformity with generally accepted accounting principles. These results are used
to evaluate the performance of each segment and determine the appropriate
resource allocation mix.

Information for 2002 by business segment is presented below (in thousands):

<TABLE>
<CAPTION>
                                                                   Boundless      Boundless
For the year ended                                  Elimi-         Technol-       Manufact-
December 31, 2002                       Total       nations        ogies/Corp.    uring
--------------------------------     ----------     ----------     ----------     ----------
<S>                                  <C>            <C>            <C>            <C>
Customer Revenue                     $   26,843                    $   17,248     $    9,595
Intercompany Revenue                                $  (12,153)                       12,153
                                     ----------     ----------     ----------     ----------
Total Revenue                        $   26,843     $  (12,153)    $   17,248     $   21,748
                                     ==========     ==========     ==========     ==========

Gross Margin                         $     (537)    $     (371)    $    4,473     $   (4,639)
                                     ==========     ==========     ==========     ==========
Gross Margin percent                       -2.0%                         25.9%         -21.3%
                                     ==========                    ==========     ==========

Operating income (loss)              $   (8,060)                   $   (1,567)    $   (6,493)
                                     ==========                    ==========     ==========

Total assets by business segment     $   13,236                    $    9,575     $    3,661
                                     ==========                    ==========     ==========
</TABLE>

Foreign  sales  were  approximately   $3,473  and  $7,430  for  2003  and  2002,
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:

                                                             2003        2002
                                                           --------    --------
Western Europe                                                   25%         17%
Other European countries                                          0%          0%
Other foreign countries                                           4%         11%
                                                           --------    --------
     Total                                                       29%         28%
                                                           ========    ========

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

15.   Defined Contribution Plan

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

In 2002,  there  were  three  instances  where the Plan  failed to timely  remit
withheld employee  contributions  totaling approximately $14. In 2003, there was
one  instance  where  the  Plan  failed  to  timely  remit   withheld   employee
contributions   totaling   approximately   $3.  These   delinquent   participant
contributions are considered prohibited transactions.  Accordingly,  the Company
is expected to  reimburse  the Plan for the lost  interest  that would have been
earned had the contribution been made timely. The amount of the reimbursement is
approximately $1.

16.   Reorganization Expenses

The Company  voluntarily  petitioned  for relief under  Chapter 11 of the United
States  Bankruptcy Code on March 12, 2003,  (the


                                      F-23
<PAGE>

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

"Petition Date") in the United States  Bankruptcy Court for the Eastern District
of New York,  Central  Islip.  The Company has  retained the law firm of Ruskin,
Moscou, Faltischek,  P.C. as counsel in the bankruptcy proceedings. On March 14,
2003, the Bankruptcy  Court signed an Order directing that the bankruptcy  cases
be  consolidated  for  procedural  purposes and jointly  administered.  On March
25,2003,  an Official  Committee of Unsecured  Creditors (the  "Committee")  was
appointed. The law firm of Platzer Swergold Karlin Levine Goldberg & Jaslow, LLP
was retained to represent the Committee.

During 2003 the Company  incurred  the  following  expenses  which relate to its
reorganization:

Professional fees                                                      $  1,266
United States District Court fees                                            32
Facility relocation expenses                                                 42
(Gain) on the disposition of building and equipment                        (685)
                                                                       --------
                                                                       $    655
                                                                       ========

17.   Derivative Financial Instruments

The Company's exposure to market risk for changes in interest rates related
primarily to the Company's revolving credit facility and long-term debt
obligations. The Company managed this risk through utilization of interest rate
swap agreements in amounts not exceeding the principal amount of its outstanding
obligations. Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133) requires the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives are either offset against the change in fair value
of assets, liabilities or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a hedging derivative's change in fair value is
immediately recognized in earnings.

At December 31, 2002 the Company had in place an interest rate swap agreement in
the amount of $306 bearing three-month LIBOR interest of 1.4%. The interest rate
swap agreement expired March 31, 2003. The deferred loss resulting from the swap
agreements,  as calculated using the mark-to market method, was not material. At
December 31, 2002,  the  Company's  interest  rate swap, a cash flow hedge,  was
closed out to the statement of operations.

18.   Selected Quarterly Financial Data - (unaudited)

Provided below is the selected unaudited  quarterly financial data from 2003 and
2002.


                                      F-24
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     For the three months ended
                                                       December 31,   September 30,    June 30,       March 31,
                                                       ---------------------------------------------------------
                                                           2003            2003          2003           2003
                                                       ------------   -------------  ------------   ------------
<S>                                                     <C>            <C>            <C>            <C>
Net revenue                                             $    1,811     $    3,461     $    4,008     $    2,470
Cost of product sold and services                            2,405          2,770          3,205          2,582
Gross profit (loss)                                           (594)           691            803           (112)
Net loss                                                $   (1,113)    $      (92)    $     (955)    $   (1,419)

Per share amounts:
Basic and diluted net loss per common share             $    (0.17)    $    (0.01)    $    (0.15)    $    (0.22)

<CAPTION>
                                                                     For the three months ended
                                                       December 31,   September 30,    June 30,       March 31,
                                                       ---------------------------------------------------------
                                                           2002            2002          2002           2002
                                                       ------------   -------------  ------------   ------------
<S>                                                     <C>            <C>            <C>            <C>
Net revenue                                             $    4,913     $    5,186     $    6,722     $   10,022
Cost of product sold and services                            5,631          5,211          7,181          9,357
Gross profit (loss)                                           (718)           (25)          (459)           665
Gain on debt restructuring/(loss on subsequent
    payment default)                                        (2,158)            --          6,082
Net income (loss)                                       $   (7,891)    $   (1,589)    $    2,815     $     (958)

Per share amounts:
Basic and diluted net income (loss) per common share    $    (1.24)    $    (0.26)    $     0.46     $    (0.17)
</TABLE>

On August 14, 2002, the Company filed with the Securities and Exchange
Commission a quarterly report on Form 10-Q for the period ending June 30, 2002.
The condensed consolidated statements of operations for the three and six months
ended June 30, 2002 included a net gain on the restructuring of payables of
approximately $4,515. The Company utilized an incorrect discount rate on the
preferred stock in calculating the gain originally reported during the second
quarter of 2002. The following table shows the effect of the correction on
amounts previously reported on our Form 10-Q for the quarter ending June 30,
2002:

                                                  As Previously
                                                    Reported        As Restated
                                                  -------------    -------------

Net gain on restructuring of payables                    4,515            6,082
                                                   ===========      ===========

Net income                                         $     1,248      $     2,815
                                                   ===========      ===========

Per share amounts:
Basic net income (loss) per common share           $      0.20      $      0.46
                                                   ===========      ===========

Diluted net income (loss) per common share         $      0.20      $      0.46
                                                   ===========      ===========


                                      F-25
<PAGE>

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

19.   Subsequent Events

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

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

      In general, the EGC Agreement permits us to borrow up to 80% of our
eligible accounts receivable. Under the EGC Agreement, the annual interest rate
is 6% above the prime rate announced by Citibank, N.A. and we are required to
pay a monthly service fee equal to three quarters of one percent (0.75%) of the
face value of invoices assigned to EGC for the preceding month. The EGC
Agreement requires us to pay minimum monthly interest of approximately $8 even
though our actual borrowings may result in a lesser interest charge. The Company
is responsible for certain fees and fees for early termination of the facility.
The maximum availability under the EGC Agreement is $1,000 and the term is one
year.

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

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

      In February 2004 the Company entered into a lease with LJM Associates for
a facility of approximately 32,000 square feet of space in Farmingdale, New
York. The lease expires February 28, 2009, and calls for an annual base rent of
$216 in the first year of the agreement, escalating to $243 in the fifth year.


                                      F-26
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Boundless Corporation
Hauppauge, New York

We have  audited  the  accompanying  consolidated  balance  sheet  of  Boundless
Corporation   and   Subsidiaries  as  of  December  31,  2001  and  the  related
consolidated   statements  of  operations,   comprehensive   loss,   changes  in
stockholders'  equity  (deficit) and cash flows for each of the two years in the
period ended December 31, 2001. We have also audited the schedules on pages S-1,
S-2, S-3, and S-5 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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  and schedules are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial  statements  and schedules.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  Boundless
Corporation  and  Subsidiaries  as of  December  31,  2001 and the  consolidated
results  of their  operations  and their cash flows for each of the two years in
the period ended  December 31, 2001 in  conformity  with  accounting  principles
generally  accepted in the United States of America.  Also, in our opinion,  the
schedules  present fairly, in all material  respects,  the information set forth
therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial   statements,   the  Company  has  suffered  substantial  losses  from
operations in 2001 and 2000. In addition,  as of December 31, 2001,  the Company
has a  stockholders'  deficit of $4,143,000  and has a working  capital  deficit
totaling  $16,473,000,  resulting  primarily from the  reclassification  of debt
under the Company's  loan and mortgage  agreements to current  liabilities  as a
result of loan covenant violations.  These factors raise substantial doubt about
the  Company's  ability to continue as a going  concern.  Management's  plans in
regard to these matters are also  described in Note 2. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


BDO Seidman, LLP

Melville, New York

March 14, 2002


                                      F-27
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

                           CONSOLIDATED BALANCE SHEET
                                 (in thousands)

                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                      --------
Current assets:
  Cash and cash equivalents                                          $      25
  Trade accounts receivable, net                                        10,053
  Income tax refunds                                                        13
  Inventories (Note 5)                                                   8,073
  Prepaid software license fees                                             37
  Prepaid expenses and other current assets                                543
                                                                     ---------
     Total current assets                                               18,744
Property and equipment, net (Note 6)                                    10,993
Goodwill, net                                                            3,187
Other assets                                                               291
                                                                     ---------
                                                                     $  33,215
                                                                     =========
LIABILITIES  AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Current portion of long-term debt (Note 8)                         $  15,362
  Accounts payable                                                      15,355
  Accrued salaries                                                       1,430
  Accrued  taxes payable                                                    13
  Accrued warranty                                                         645
  Accrued marketing programs                                               100
  Other accrued liabilities (Note 11)                                    2,002
  Deferred revenue                                                         310
                                                                     ---------
     Total current liabilities                                          35,217
                                                                     ---------
Long-term liabilities:
  Long-term debt, less current maturities (Note 8)                         833
  Other  (Note 11)                                                       1,308
                                                                     ---------
     Total long-term liabilities                                         2,141
                                                                     ---------

         Total liabilities                                              37,358
                                                                     ---------
Commitments and contingencies (Notes 12 and 13)
Stockholders' deficit (Note 9):
  Preferred stock                                                           --
  Common stock                                                              57
  Additional paid-in capital                                            35,280
  Accumulated deficit                                                  (39,339)
  Accumulated other comprehensive loss                                    (141)
                                                                     ---------
     Total stockholders' deficit                                        (4,143)
                                                                     ---------
                                                                     $  33,215
                                                                     =========

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


                                      F-28
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        For the Years Ended December 31,
                      (in thousands, except per share data)

                                                     December 31,   December 31,
                                                     ------------   ------------
                                                         2001           2000
                                                       --------       --------
Revenue:
  Product sales                                        $ 57,473       $ 62,642
  Services                                                2,108          1,902
                                                       --------       --------
     Total revenue                                       59,581         64,544
                                                       --------       --------
Cost of revenue:
  Product sales                                          51,608         47,326
  Services                                                1,690          1,718
                                                       --------       --------
     Total cost of revenue                               53,298         49,044
                                                       --------       --------
       Gross margin                                       6,283         15,500
                                                       --------       --------
Operating expenses:
  Sales and marketing                                     5,459          7,442
  General and administrative                              7,690          8,279
  Research and development                                1,381          1,691
  Other charges (credits) (Notes 3, 4 and 11)            (2,437)           177
                                                       --------       --------
     Total operating expenses                            12,093         17,589
                                                       --------       --------
       Operating loss                                    (5,810)        (2,089)
  Interest expense, net                                   1,599          1,455
                                                       --------       --------
Loss before income taxes                                 (7,409)        (3,544)
Income tax (credit) expense (Note 7)                      1,383           (289)
                                                       --------       --------
Loss from continuing operations                          (8,792)        (3,255)
Loss from discontinued operations (Note 17)              (2,150)       (14,004)
                                                       --------       --------
Net loss                                               $(10,942)      $(17,259)
                                                       ========       ========
Weighted average common shares outstanding                5,048          4,535
                                                       ========       ========
Basic net loss per common share:
  Continuing operations                                   (1.74)         (0.72)
  Discontinued operations                                 (0.43)         (3.09)
                                                       --------       --------
Basic net loss per common share                        $  (2.17)      $  (3.81)
                                                       ========       ========
Weighted average dilutive shares outstanding              5,048          4,535
                                                       ========       ========
Diluted net loss per common share                      $  (2.17)      $  (3.81)
                                                       ========       ========

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


                                      F-29
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                        For the Years Ended December 31,
                      (in thousands, except per share data)

                                                      December 31,  December 31,
                                                      ------------  ------------
                                                          2001          2000
                                                        --------      --------
Net loss                                               $ (10,942)    $ (17,259)
Other comprehensive  loss:
  Cumulative effect of adoption of FAS 133                   (30)           --
  Cash flow hedges, net of taxes                            (111)           --
                                                       ---------     ---------
   Other comprehensive loss                                 (141)           --
                                                       ---------     ---------
Total comprehensive loss                               $ (11,083)    $ (17,259)
                                                       =========     =========

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


                                      F-30
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                         Common Stock          Additional                   other
                                    ----------------------      Paid-in    Accumulated  comprehensive
                                     Shares        Amount       Capital      Deficit        (loss)         Total
                                    --------      --------      --------     --------      --------      --------
<S>                                    <C>        <C>           <C>          <C>           <C>           <C>
Balance, January 1, 2000               4,457      $     45      $ 32,508     $(11,138)     $     --      $ 21,415
Stock options exercised                  121             1         1,001                                    1,002
Options and warrants issued for
  services to non-employees                                          197                                      197
Warrants exercised                        52                         396                                      396
Net loss                                                                      (17,259)                    (17,259)
                                    --------      --------      --------     --------      --------      --------
Balance, December 31, 2000             4,630            46        34,102      (28,397)           --         5,751
Common stock sold                      1,058            11         1,178                                    1,189
Net loss                                                                      (10,942)                    (10,942)
Other comprehensive loss                                                                       (141)         (141)
                                    --------      --------      --------     --------      --------      --------
Balance, December 31, 2001             5,688      $     57      $ 35,280     $(39,339)     $   (141)     $ (4,143)
                                    ========      ========      ========     ========      ========      ========
</TABLE>

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


                                      F-31
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the Years Ended
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                     ---------------------
                                                                       2001         2000
                                                                     --------     --------
<S>                                                                  <C>          <C>
Cash flows from operating activities:
  Net loss                                                           $(10,942)    $(17,259)
  Adjustments to reconcile net loss to net cash used in
       operating activities:
    Loss from discontinued operations                                   2,150       14,004
    Depreciation and amortization                                       3,670        2,968
    Gain on the disposition of assets                                  (1,461)        (223)
    Change in deferred revenues                                             2         (249)
    Provision for doubtful accounts                                       450          221
    Provision for excess and obsolete inventory                         1,055          844
    Provision for long-term asset impairment                               --          824
    Options and warrants issued for services                               --          197
    Deferred taxes                                                      2,281           14
Changes in assets and liabilities:
  Trade accounts receivable                                            (1,218)       2,872
  Income tax refunds                                                      290          530
  Inventories                                                             798        2,982
  Other assets                                                            (20)      (1,178)
  Accounts payable and accrued expenses                                 2,783        5,478
  Net change in assets and liabilities of discontinued operations         666         (666)
                                                                     --------     --------
Net cash:
  Provided by continuing operations                                       504       11,359
  Used in discontinued operations                                      (2,150)     (12,513)
                                                                     --------     --------
Net cash used in operating activities                                  (1,646)      (1,154)
                                                                     --------     --------
Cash flows from investing activities:
  Capital expenditures                                                   (401)      (1,136)
  Proceeds from sale of assets                                          1,600        1,538
                                                                     --------     --------
Net cash provided by investing activities                               1,199          402
                                                                     --------     --------
Cash flows from financing activities:
  Proceeds from exercise of warrants and employee stock options            --        1,398
  Net proceeds from issuance of debt                                    1,733        4,400
  Proceeds from issuance of common stock                                1,189           --
  Payments on loans payable and capital leases                         (2,602)      (6,179)
                                                                     --------     --------
Net cash provided by (used in) financing activities                       320         (381)
                                                                     --------     --------
Net decrease in cash and cash equivalents                                (127)      (1,133)
Cash and cash equivalents at beginning of year                            152        1,285
                                                                     --------     --------
Cash and cash equivalents at end of year                             $     25     $    152
                                                                     ========     ========
</TABLE>

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


                                      F-32
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)

                CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
                               For the Years Ended
                                 (in thousands)

                                                                December 31,
                                                            --------------------
                                                              2001        2000
                                                            --------    --------
Non-cash transactions:
  Options and warrants issued for services                  $     --    $    197
  Equipment acquisitions funded through capital leases         1,348       1,635
Cash paid for:
  Interest                                                     1,309       1,426
  Taxes                                                           21         329

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


                                      F-33
<PAGE>

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

                 (In thousands, except share and per share data)

1. Background

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

The Company entered into the General Display Terminal and high resolution,  high
performance  desktop graphics display terminals  ("Network  Graphics  Displays")
businesses  in  December  1994  when  the  Company,  through  its  wholly  owned
subsidiary,  Boundless  Acquisition  Corp.  ("Acquisition"),  purchased  Applied
Digital  Data  Systems,   Inc.  ("ADDS")  from  NCR  Corporation  ("NCR"),  (the
"Boundless Acquisition").  ADDS, renamed in 1996 to Boundless Technologies, Inc.
had been a supplier of general purpose desktop display terminals worldwide under
either the customer's or ADDS(R) trademark.  Simultaneously,  with the Company's
acquisition  of ADDS,  the Company  acquired  all of the assets and  business of
SunRiver Group, Inc. (the "SunRiver Group Acquisition"). Prior thereto, SunRiver
Group, Inc.  ("SunRiver  Group") had been engaged,  for more than nine years, in
the  development  and  manufacture  of software and  hardware  for  MultiConsole
Terminals. SunRiver Group, subsequently renamed Morgan Kent Group, Inc. ("Morgan
Kent  Group")  was a  pioneer  in the  development  of  high-speed  MultiConsole
Terminals for open system, multi-user platforms.

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

Boundless  Manufacturing  Services,  Inc.  ("Boundless  Manufacturing"),   which
commenced  operations  in 2000,  is  pursuing  opportunities  in the  electronic
manufacturing services ("EMS") marketplace. As of December 31, 2001, the Company
owned approximately 55% of the shares of common stock of this subsidiary.

Boundless  Manufacturing  is utilizing the Company's  state-of-the-art  ISO 9002
certified  manufacturing  facility  in  Hauppauge  and  may  acquire  additional
manufacturing facilities as the business expands.  Services include supply chain
optimization,   global  supply  base  management,  systems  assembly  and  test,
distribution and logistics, repair centers and end-of-life management. Boundless
Manufacturing also offers in-house  engineering  expertise- product design, test
development,  product  development- to significantly  reduce  time-to-market for
original  equipment  manufacturers  ("OEM") customers.  Boundless  Manufacturing
provides a complete  supply chain that is designed and built to each  customer's
specifications.  Boundless  Manufacturing  also has  post-manufacturing  support
capability in Chicago, Atlanta, Los Angeles and The Netherlands.

Merinta  Inc.  ("Merinta"),  which  commenced  operations  in 2000,  created the
software and infrastructure for a more enjoyable  Internet  experience.  Through
tightly integrated Remote Device Management and Services,  professional services
and Information Appliance ("IA") Client Software solutions,  Merinta offered OEM
and Vertical Channel customers a completely customizable user-experience,  which
enabled their  customers to  differentiate  themselves in the market and deliver
tailored  applications and services to the customer.  Merinta's client solution,
built upon the Linux operating  system,  in combination with server based Remote
Device  Management  and  Services  products,  supported  a wide  range  of  IAs,
including Web Terminals and Tablets,  Set-Top  Boxes,  Residential  Gateways and
Wireless  Handheld  Devices.   As  of  December  31,  2001,  the  Company  owned
approximately  84% of the  common  stock of  Merinta,  and had the right to vote
approximately 70% of the voting securities of Merinta. On a fully-diluted basis,
assuming conversion of the preferred stock, warrants and options to purchase the
common stock of Merinta,  the Company owns approximately 58% of the common stock
of  Merinta.  On May  11,  2001,  management  decided  to  discontinue  Merinta.
Merinta's  results are presented as discontinued  operations in the accompanying
consolidated financial statements (See Note 17).

2. Going Concern Considerations and Management's Plans

The accompanying  consolidated  financial statements have been prepared assuming
the Company will continue as a going concern.


                                      F-34
<PAGE>

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

The Company has  incurred  significant  losses  from  operations,  has a working
capital deficit totaling approximately $16 million, resulting primarily from the
classification  of debt under the  Company's  loan and  mortgage  agreements  to
current  liabilities as a result of loan covenant violations and it requires new
financing to meet its current cash requirements. These factors raise substantial
doubt  about the  Company's  ability  to  continue  as a going  concern,  unless
management's plans are effected in a timely manner. Management believes that the
following  actions,  in  addition  to the  continued  profitable  growth  of the
Company's  operating  subsidiaries,  will afford the Company the ability to fund
its daily operations and service its remaining debt obligations.  No adjustments
have been made to the carrying value of assets or liabilities as a result of the
uncertainty about obtaining cash required to pay obligations as they become due.

o  Management  plans to  re-negotiate  with  current  vendors and holders of the
existing  subordinated  debt,  totaling  approximately  $13  million,  terms and
conditions  which the Company can better  meet in the future.  Management  is in
discussions  with the  vendors  and  debt  holders  attempting  to  secure  more
favorable terms.

o Management is working with its secured lender on a restructuring  of the terms
of the debt they hold to allow for the  raising  of  additional  capital.  While
management is hopeful an arrangement  can be achieved,  it can give no assurance
an agreement will be reached.

o  Management  entered  into  negotiations  to secure  equity  financing of $3-5
million under terms and conditions to be agreed upon.

o Management  entered into negotiations to secure an asset-based  revolving line
of credit to replace the Chase Credit Line.

o The Company is currently  negotiating  material  contracts for the sale of its
manufacturing  services to  customers  which  management  believes  will provide
additional liquidity for operations.  There can be no assurances these contracts
will ultimately materialize.

There are no assurances that  management will be successful in negotiating  with
its  remaining  creditors or raising  sufficient  capital to continue as a going
concern.

3. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, after
elimination of intercompany  accounts and transactions.  As of December 31, 2001
the  Company  owned  100%,  84%,  and 55% of the  outstanding  common  stock  of
Boundless  Technologies,  Merinta  and  Boundless  Manufacturing,  respectively.
Certain reclassifications have been made to prior years' financial statements to
conform to the current year's presentation.

Cash and Cash Equivalents

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


                                      F-35
<PAGE>

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

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 the statements of operations.

Long-Lived Assets

In accordance with Statement of Financial  Accounting  Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," management  reviews long-lived assets and intangible assets for
impairment  whenever  events or changes in  circumstances  indicate the carrying
amount  of an asset  may not be fully  recoverable.  As part of the  assessment,
management  considers   undiscounted  cash  flows  for  each  product  that  has
significant  long-lived  or  intangible  asset values  associated  with it. When
impairments  are  identified,  the related assets are written down to fair value
using  discounted  cash flows or other  measures of fair value.  No  impairments
occurred in 2001.

On  September  30,  1999,  the Company  sold the entirety of its interest in the
General  Automation Inc. ("GAI")  Partnership to General Automation ("GA") for a
combination  of  cash,  restricted  securities  of GA,  convertible  notes,  and
warrants. The value of debt and equity securities, reported as a long-term asset
was $824 in 1999.  During the fourth quarter of 2000, the Company wrote off 100%
of the common stock and convertible  debt which it had received in consideration
for the sale of its interest in the GAI Partnership to GA in 1999. The write-off
was recorded as a result of the  deterioration  in GA's economic  position,  its
reporting of significant continuing losses and its announcement during the first
quarter of 2001 that it had sold its hardware  and  services  business and would
restructure the company.

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.  During 2000, in
view of a  declining  market  in the text  terminals  business,  with  which the
Company's goodwill is associated,  management reassessed its useful life. It was
determined  that the useful  life of  goodwill  should be  shortened  to be more
reflective of the rate of decline in this segment of the business.  Accordingly,
management  changed the remaining  useful life of 5 years to a remaining  useful
life of 3 years,  commencing  in the  fourth  quarter  of 2000.  This  change in
accounting  estimate  increased  amortization  expense in 2000 by  approximately
$185. The Company did not record any impairment charges in 2001. Amortization of
goodwill  amounted to $1,822 for the year ended December 31, 2001 and $1,263 for
the year ended  December 31, 2000.  Accumulated  amortization  of goodwill as of
December 31, 2001 was $7,604. The Company's previous business  combinations were
accounted for using the purchase  method.  Currently,  the Company is assessing,
but has not yet  determined  how the  adoption  of  SFAS  142  will  impact  its
financial position and results of operations. See New Accounting Standards.

Minority Interest

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


                                      F-36
<PAGE>

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

Fair Value of Financial Instruments

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

Revenue Recognition

The Company  recognizes revenue from product sales upon shipment to the customer
or  passage  of title and  assumption  of risk.  The  Company  monitors  product
returns,  generally  which are for stock rotation with a coinciding  replacement
order,  and records  provisions  for  estimated  future  returns  and  potential
warranty  liability  at the time revenue is  recorded.  The Company  recorded an
allowance for doubtful  accounts of $1,348 and $ 723 as of December 31, 2001 and
2000,  respectively.  Service  revenue is recognized when services are performed
and  billable.  Revenue from  maintenance  and extended  warranty  agreements is
deferred and recognized ratably over the term of the agreement. Software revenue
is  recognized  upon  delivery  of the  software  to the  customer  and there is
reasonable  assurance  of  collection  of the  receivable.  The  Company had two
customers  representing 24% and 11% of revenues  respectively in 2001. No single
customer  represented more than 10% of revenue in 2000. As of December 31, 2001,
the balance due from one single  customer  amounted to 26% of net trade accounts
receivable,  for  which  the  Company  has  negotiated  a pay down  schedule  to
eliminate the past due amount by May 2002.

Concentration of Credit Risk

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

Shipping and Handling

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

Advertising

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense was $920 and $2,183 for the years ended December 31, 2001 and 2000.

Net Loss Per Common Share

SFAS No. 128,  "Earnings Per Share," requires a reconciliation  of the numerator
and denominator of the basic net loss per share computation to the numerator and
denominator  of the  diluted  net  loss per  share  computation.  There  were no
dilutive instruments for 2001 and 2000.

Options to purchase 2,206,957 shares of common stock at a weighted average price
of $4.20 per share were not included in the  computation of diluted net loss per
share in 2001 because the options'  exercise  price was either  greater than the
average  market  price of the common  shares or the effect of exercise  would be
antidilutive.


                                      F-37
<PAGE>

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

Pervasiveness of Estimates

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

Income Taxes

As more fully  discussed in Note 7, income taxes are provided in accordance with
the liability  method of accounting  for income taxes  pursuant to SFAS No. 109.
Accordingly,  deferred  income  taxes are  recorded  to  reflect  the future tax
consequences of differences  between the tax basis of assets and liabilities and
their  financial  amounts at  year-end.  Deferred  tax assets are  reduced by an
estimated valuation allowance.

Stock Based Compensation

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

Comprehensive Loss

The adoption of FAS 133,  "Accounting  for  Derivative  Instruments  and Hedging
Activities," at January 1, 2001,  resulted in recording $30 in accumulated other
comprehensive  loss for the cumulative  effect of the accounting  change.  As of
December 31, 2001,  the Company had  interest  rate swap  contracts to pay fixed
rates of interest  (ranging from 7.59% to 8.76%) and receive  variable  rates of
interest  based  on  LIBOR  on  an  aggregate  of  $5,528   notional  amount  of
indebtedness with maturity dates ranging from March 2002 through March 2003. The
aggregate  fair market value of all interest  rate swap  contracts was ($141) on
December  31,  2001 and is  included  in  accrued  expenses  and  other  current
liabilities on the Consolidated Balance Sheet.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business  Combinations"
and SFAS No. 142,  "Goodwill and Other Intangible  Assets"  effective for fiscal
years  beginning  after  December 15,  2001.  The FASB also issued SFAS No. 143,
"Accounting for Obligations Associated with the Retirement of Long-Lived Assets"
in August 2001 and SFAS No. 144,  "Accounting  for the Impairment or Disposal of
Long-Lived Assets" in October 2001.

SFAS 141 requires the use of the purchase method of accounting and prohibits the
use of the  pooling-of-interests  method of accounting for business combinations
initiated after June 30, 2001. SFAS 141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet certain criteria.  SFAS 141 applies to all business combinations  initiated
after June 30, 2001 and for purchase business combinations completed on or after
July 1, 2001.  It also  requires,  upon  adoption of SFAS 142,  that the Company
reclassify the carrying  amounts of intangible  assets and goodwill based on the
criteria in SFAS 141.

SFAS 142  requires,  among  other  things,  that  companies  no longer  amortize
goodwill,  but instead,  test  goodwill for  impairment  at least  annually.  In
addition,  SFAS 142 requires that the Company  identify  reporting units for the
purposes of assessing  potential  future  impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other
intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  SFAS 142 requires the Company to complete a transitional
goodwill  impairment  test six months from the date of adoption.  The Company is
also required to reassess the useful lives of other intangible assets within the
first  interim  quarter  after  adoption  of SFAS 142.  The  Company's  previous
business  combinations  were  accounted  for using the  purchase  method.  As of
December 31, 2001, the net carrying amount of goodwill is $3,187. Currently, the
Company is assessing,  but has not yet  determined  how the adoption of SFAS 141
and SFAS 142 will impact its financial position and results of operations.


                                      F-38
<PAGE>

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

SFAS 143 establishes standards for the reporting of obligations  associated with
the retirement of tangible long-lived assets and the associated asset retirement
costs. It also provides  accounting  guidance for legal  obligations  associated
with the  retirement of tangible  long-lived  assets.  SFAS 143 is effective for
fiscal years  beginning after June 15, 2002 with early adoption  permitted.  The
Company  expects that the provisions of SFAS 143 will not have a material effect
on its consolidated results of operations.

SFAS 144 establishes a single accounting model for the impairment or disposal of
long-lived assets and new standards for reporting discontinued  operations.  The
provisions of SFAS 144 are effective in fiscal years  beginning  after  December
15, 2001 and in general, are to be applied prospectively.

4. GAI Partnership

On September 30, 1999,  the Company sold the entirety of its interest in the GAI
Partnership  to GA for a  combination  of  cash,  restricted  securities  of GA,
convertible notes, and warrants. GA was in default of material obligations under
the  partnership  agreement,  including  payment of past due royalties and other
fees, which totaled $2,468 as of December 31, 1998. The Company reserved against
all  outstanding  receivables  during 1997,  and,  since that time, has recorded
revenue  attributable  to the  partnership  on a cash basis  only.  The  Company
recorded  income  of  $2,324  relating  to the  sale  after  having  received  a
third-party  valuation assessment of the value of the securities and convertible
debt components of the settlement.

During the fourth quarter of 2000 the Company  reserved 100% of the common stock
and convertible debt which it had received in consideration  for the sale of its
interest in the GAI  Partnership  to GA in 1999.  The reserve was  recorded as a
result  of the  deterioration  in  GA's  economic  position,  its  reporting  of
significant  continuing losses and its announcement  during the first quarter of
2001 that it had sold its hardware and services  business and would  restructure
the company.

5. Inventories

Inventories are stated at the lower of cost or market with costs determined on a
first-in first-out basis. On a quarterly basis the Company reviews quantities on
hand and on order and  records a  provision  for excess and  obsolete  inventory
based on forecasted  demand.  For the year ended December 31, 2001 and 2000, the
Company  recorded  provisions  of  $1,055  and  $844  for  excess  and  obsolete
inventory.

The major components of inventories are as follows:

                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                      --------
Raw materials and purchased components                                $  6,329
Finished goods                                                             952
Service parts                                                              792
                                                                      --------
                                                                      $  8,073
                                                                      ========

6. Property and Equipment

Property and equipment consists of the following:

                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                      --------
Land                                                                  $  2,502
Buildings and improvements                                               6,503
Machinery and equipment                                                  9,856
                                                                      --------
                                                                        18,861
Less accumulated depreciation and amortization                           7,868
                                                                      --------
                                                                      $ 10,993
                                                                      ========


                                      F-39
<PAGE>

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

7. Income Taxes

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

                                                           2001          2000
                                                         --------      --------
Current:
  Federal                                                $   (898)     $   (303)
  State                                                        --            --
                                                         --------      --------
                                                             (898)         (303)
                                                         --------      --------
Deferred:
  Federal                                                   2,281            14
  State                                                        --            --
                                                         --------      --------
                                                            2,281            14
                                                         --------      --------
                                                         $  1,383      $   (289)
                                                         ========      ========

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

                                                           2001          2000
                                                         --------      --------
Federal income tax at statutory rate                     $ (2,519)     $ (1,205)
Utilization of prior year net operating
  loss carryforwards                                         (195)           --
Reversal of prior year overaccruals                          (898)           --
Other, net                                                     38          (273)
Change in valuation allowance on deferred
  tax assets                                                4,957         1,189
                                                         --------      --------
     Income tax expense (benefit)                        $  1,383      $   (289)
                                                         ========      ========


                                      F-40
<PAGE>

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

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

                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                      --------
Current deferred tax assets:
  Inventory                                                           $  1,666
  Accounts receivable                                                      538
  Warranties                                                               363
  Other                                                                  1,003
  Less valuation allowance                                              (3,570)
                                                                      --------
     Total current deferred tax assets                                $     --
                                                                      ========
Noncurrent deferred tax assets - Goodwill
  and other                                                           $  1,713
Noncurrent deferred tax liabilities - Property
  and equipment                                                           (783)
Net operating loss carryforwards                                         8,238
Less valuation allowance                                                (9,168)
                                                                      --------
     Net noncurrent deferred tax liabilities                          $     --
                                                                      ========

The Company,  Boundless  Manufacturing  and Merinta have  available  Federal net
operating loss  carryforwards of  approximately $2 million,  $12 million and $10
million,  respectively,  at December 31, 2001 which may be carried forward as an
offset to taxable  income,  if any, in future years through their  expiration in
2020 to 2021. If certain  substantial  changes in the Company  ownership  should
occur,  there would  potentially  be an annual  limitation  on the amount of the
carryforwards which can be utilized in a tax year.

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

8. Debt

Long-term debt at December 31, 2001 consisted of the following:

                                                                          2001
                                                                        --------
Note payable to Independence Community Bank, bearing interest
 at 7.75% payable monthly, balloon payment of $4,439 due on
  or before July 1, 2009, collateralized by land and building           $  5,946
Revolving loan                                                             8,507
Capital lease obligations                                                  1,742
                                                                        --------
                                                                          16,195
Less current maturities on long-term debt                                 15,362
                                                                        --------
                                                                        $    833
                                                                        ========

a) Notes  payable were $8,507 at December 31,  2001,  under a $12,000  revolving
credit  agreement  with a bank  syndicate  for loans and letters of credit.  The
revolving credit agreement  expires April 14, 2003. There was a letter of credit
outstanding  totaling $18 at December 31, 2001.  Borrowing  under the  Revolving
Loan is based on a borrowing base formula of up to 75% of eligible receivables,


                                      F-41
<PAGE>

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

plus 50% of delineated eligible inventory,  plus 30% of non-delineated  eligible
inventory.  On April 17, 2001,  the revolving  line of credit was reduced from a
maximum amount of $15,000 to $12,000.  The maximum  amount of additional  credit
available under the revolving loan at December 31, 2001 was $1,570.

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 9.2% for the year
ended December 31, 2001.

As of December  31, 2001,  the Company was in violation of certain  covenants of
the Chase Credit Line.  As of March 25, 2002,  the covenant  violations  had not
been waived by the participating banks.  Additionally,  during the first quarter
of 2002, certain collateral against which the Company had secured borrowings was
declared  ineligible  by  Chase.  The  elimination  of the  collateral  from the
borrowing  base formula  caused the Company to be in an  over-advanced  position
with respect to the Chase Credit Line. Under the terms of the Chase Credit Line,
the Company is allowed an over-advance  amount of only $750 and for no more than
a 30-day period. The Company has initiated actions to eliminate the over-advance
position prior to March 27, 2002, the deadline  instituted by Chase, but was not
successful. As a result of the inability to eliminate the over-advance position,
on March 27,  2002,  the Company  signed an  amendment  to the Chase Credit Line
wherein the Company  agreed to limit the amount of the  over-advance  to $500 by
April 5,  2002 and to $400 by  April  12,  2002.  As part of the  agreement  the
Company  also  agreed  to a  reduction  in the  overall  amount to the line from
$12,000 to $6,500.  As of March 27,  2002,  the Company  had $5,720  outstanding
under the Chase  Credit  Line.  The Company  believes it will be  successful  in
limiting  the  amount  of the  over-advance  to the  prescribed  amounts  in the
timeframe  allotted.  However,  there can be no  assurance  the Company  will be
successful in limiting the over-advance to these amounts in the time prescribed.
Should the Company be  unsuccessful,  Chase may rely on remedies  defined in the
Chase Credit Line, including calling the loan for immediate repayment.

Due to cross-default  provisions within the mortgage  agreement,  the Company is
also in default with respect to the note  payable  with  Independence  Community
Bank. Accordingly,  as the lender has the right to demand immediate payment, the
note has been  reclassified  to current  liabilities.  The  Company  has met its
payment  obligations under this note for the three months subsequent to December
31, 2001.

b) In October of 2001,  the Company paid off the  remainder  of its  outstanding
term loan with Chase Manhattan Bank.

With respect to the revolving loan:

At the option of the  Company,  the  interest  rate is prime plus 1.25% or LIBOR
plus 2.5%,  the latter of which was the lower rate at 8.8% at December 31, 2000.
At December 31, 2001, the Company had in place interest rate swap  agreements in
the amount of $5,528 at an effective average interest rate of 8.4%.

The Company 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 agreements without obtaining bank approval.

With the exception of the  Company's  manufacturing  facility in Hauppauge,  NY,
which is  pledged  as  collateral  against  the  note  payable  to  Independence
Community  Bank,  substantially  all other  assets of the Company are pledged as
collateral  against the revolving and term loans,  including the common stock of
Merinta held by the Company.

Aggregate debt scheduled maturities at December 31, 2001 were as follows:

2002                         $ 1,105
2003                           9,164
2004                             368
2005                             314
2006                             213
2007-2009                      5,031
                             -------
                             $16,195
                             =======


                                      F-42
<PAGE>

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

9. Equity

At December 31, 2001, stockholders' deficit consisted of the following:

                                                                   December 31,
                                                                   ------------
                                                                       2001
                                                                     --------
Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                                            $     --
Common stock, $0.01 par value, 25,000,000 shares
  authorized,5,688,037 and 4,630,160 shares issued                         57

Additional paid-in capital                                             35,280
Accumulated deficit                                                   (39,339)
Accumulated other comprehensive loss                                     (141)
                                                                     --------
     Total stockholders' deficit                                     $ (4,143)
                                                                     ========

10. Options and Warrants

On March 6, 1998,  the Company  filed an  Information  Statement on Schedule 14C
with the Securities and Exchange  Commission in connection  with,  amongst other
items,  the Board of  Directors  of the Company  approving  the  Company's  1997
Incentive Plan permitting the grant of stock options, stock appreciation rights,
performance shares, stock awards, stock units and incentive awards to employees,
directors and others.

The Company had previously adopted its 1995 Incentive Plan which permitted up to
600,000  shares of Common Stock to be issued  thereunder.  As additional  shares
were no longer  available to be issued under the 1995 Incentive  Plan, the Board
adopted the 1997 Incentive Plan. The maximum number of shares to be issued under
the 1997 Incentive Plan is not to exceed  1,000,000.  The exercise price of each
option  granted  is to be  equal to or  greater  than  the  market  price of the
Company's  stock on the date of grant.  The terms of the options  are  generally
over five years with vesting  occurring  in 25%  increments  beginning  one year
after the grant date. In December 2000 the Board created the 2000 Incentive Plan
that covers up to 1,000,000 shares of Common Stock. The number of shares granted
on a calendar year basis under the 2000  Incentive  Plan is limited to 5% of the
total  number of shares of Common  Stock  outstanding,  or 10% in any  five-year
period.

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, 2001 there were 95,250  fully vested  options
under the 1991 Plan outstanding, expiring in June 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,  2001 and 2000,  all  options  issued to
officers  and  employees  were  granted at an exercise  price  which  equaled or
exceeded  the market  price per share at the date of grant and  accordingly,  no
compensation was recorded.

The  Company  follows  the  disclosure   requirements  of  FASB  Statement  123,
"Accounting for Stock-Based  Compensation".  This statement requires the Company
to provide  pro forma  information  regarding  net income  applicable  to common
stockholders and net income per share as if compensation  cost for the Company's
employee stock options  granted had been  determined in accordance with the fair
value based method  prescribed  in SFAS No. 123. The Company  estimates the fair
value of each stock option at the grant date by using the  Black-Scholes  option
pricing model with the following weighted average assumptions used for grants in
2001 and 2000 as follows:

      1.    Dividend yield of 0% for all years


                                      F-43
<PAGE>

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

      2.    Expected volatility of 137% in 2001, and 50% in 2000

      3.    Risk-free  interest  rates  ranging from 4.7% in 2001,  and 5.07% to
            5.48% in 2000

      4.    Expected term of 3 years in 2001, and 3 years in 2000

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

                                                          2001          2000
                                                        ---------     ---------
Net loss
  As reported                                           $ (10,942)    $ (17,259)
  Under SFAS No. 123                                      (11,236)      (18,005)

Net loss per share
  As reported - basic                                   $   (2.17)    $   (3.81)
  As reported - diluted                                     (2.17)        (3.81)
  Under SFAS No. 123 - basic                                (2.23)        (3.97)
  Under SFAS No. 123 - diluted                              (2.23)        (3.97)

A summary  of the status of the  Company's  stock  options  and  warrants  as of
December 31,  2001and 2000 and changes during the years ending on those dates is
as follows:

<TABLE>
<CAPTION>
Options -Boundless Corporation                     2001                      2000
------------------------------             ---------------------     --------------------
                                           Weighted                  Weighted
                                           Average                   Average
                                           Exercise                  Exercise
                                           Shares        Price       Shares        Price
                                           ---------     ------      ---------     ------
<S>                                        <C>           <C>         <C>           <C>
Outstanding at beginning of year           1,546,178     $ 4.61      1,395,765     $ 5.70
  Granted                                    200,938       2.04        417,000       2.76
  Exercised                                       --         --       (161,539)      8.67
  Forfeited                                 (270,657)      5.13       (105,048)      5.90
                                           ---------     ------      ---------     ------
Outstanding at end of year                 1,476,459     $ 3.97      1,546,178     $ 4.61
                                           =========     ------      =========     ------
Options exercisable at end of year         1,175,301     $ 4.10      1,052,441     $ 4.49
                                           =========     ======      =========     ======
Weighted average fair value
  of options granted during the year                     $ 0.91                    $ 1.22
                                                         ======                    ======
</TABLE>


                                      F-44
<PAGE>

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

<TABLE>
<CAPTION>
Warrants- Boundless Corporation                    2001                      2000
-------------------------------            --------------------      --------------------
                                           Weighted                  Weighted
                                           Average                   Average
                                           Exercise                  Exercise
                                           Shares        Price       Shares        Price
                                           ---------     ------      ---------     ------
<S>                                          <C>         <C>           <C>         <C>
Outstanding at beginning of year             677,342     $ 7.67        640,058     $ 7.85
  Granted                                    216,190       2.20         70,000       7.19
  Exercised                                       --         --        (31,375)     10.00
  Forfeited                                       --         --         (1,341)     12.96
                                           ---------     ------      ---------     ------
Outstanding at end of year                   893,532     $ 6.35        677,342     $ 7.67
                                           =========     ------      =========     ------
Warrants exercisable at end of year          847,032     $ 6.42        657,342     $ 7.67
                                           =========     ======      =========     ======
Weighted average fair value
  of warrants granted during the year                    $ 1.06                    $ 2.60
                                                         ======                    ======
</TABLE>

The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                                                                 Weighted
                                Number            Weighted       Average            Number
                                Outstanding at    Average        Remaining          Exercisable at
                                December 31,      Exercise       Contractual Life   December 31,
                                2001              Price          (Years)            2001
                                ---------         ------         ------             ---------
<S>                             <C>               <C>              <C>              <C>
Options - Boundless Corp.         100,000         $ 1.25           3.50                50,000
                                  220,000           1.50           3.99               220,000
                                  180,289           2.71           3.48                84,058
                                  173,020           3.95           2.49               147,051
                                  132,240           4.50           3.51                66,488
                                  150,142           4.88           1.42               150,092
                                  201,884           5.00           2.13               147,219
                                   18,956           5.38           2.44                16,213
                                  269,068           5.63           0.50               268,956
                                   30,860           9.07           1.76                25,224
                                ---------         ------         ------             ---------
                                1,476,459         $ 3.97           3.11             1,175,301
                                =========         ======         ======             =========

<CAPTION>
                                Number            Weighted       Average            Number
                                Outstanding at    Average        Remaining          Exercisable at
                                December 31,      Exercise       Contractual Life   December 31,
                                2001              Price          (Years)            2001
                                ---------         ------         ------             ---------
<S>                               <C>             <C>              <C>                <C>
Warrants - Boundless Corp.        114,410         $ 1.21           4.45               114,410
                                   90,280           2.89           3.20                90,280
                                   46,500           5.00           4.01                    --
                                  150,000           5.80           3.38               150,000
                                   65,000           6.90           3.14                65,000
                                  307,502           7.50           2.95               307,502
                                   20,000           7.97           2.48                20,000
                                   67,340           9.69           1.92                67,340
                                    2,500          18.40           2.95                 2,500
                                   30,000          18.60           0.39                30,000
                                ---------         ------         ------             ---------
                                  893,532         $ 6.35           3.80               847,032
                                =========         ======         ======             =========
</TABLE>


                                      F-45
<PAGE>

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

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

In January  2000,  the Company  granted  60,000  options to  purchase  shares of
Merinta's  Common Stock to 3 financial  advisors  for services  rendered and the
Company recorded an expense of $1 for the grant.

In May 2000, the Company  granted a warrant to purchase  50,000 shares of Common
Stock at $6.88 per share to Chase  Manhattan  Bank for bank fees and the Company
recorded an expense of $ 137 for the grant.

In June 2000, the Company  granted a warrant to purchase 20,000 shares of Common
Stock at $7.97 per share to Stern  Stewart,  a consulting  services firm and the
Company recorded an expense of $ 47 for the grant.

In October  2000,  the Company  granted  20,000  options to  purchase  shares of
Merinta's  Common Stock to 2 financial  advisors  for services  rendered and the
Company recorded an expense of $5 for the grant.

In October  2000,  the Company  granted  25,000  options to  purchase  shares of
Merinta's  Common Stock to outside legal  counsel for services  rendered and the
Company recorded an expense of $6 for the grant.

On February  23, 2001,  the Company  sold 110,000  shares of its Common Stock to
three  individuals for total proceeds of $225,200.  In connection with the sale,
the Company issued  warrants to purchase 27,500 shares of its Common Stock at an
exercise  price of $2.40 per share of Common  Stock.  The  warrants  expire four
years from the date of grant. Mr. Joseph V. Joy, Jr. and Mr. Jack Ryan, then the
President and Vice President, Supply Chain Services, of Boundless Manufacturing,
respectively,  participated in this offering.  Mr. Frank  Stephens,  currently a
member of the Company's Board of Directors,  but who was not associated with the
Company at the time of the sale,  also  participated  in the offering.  Proceeds
from this sale were used for general working capital purposes.

From May 29, 2001, through June 29, 2001, the Company sold 947,877 shares of its
Common  Stock  in a  private  placement  offering,  raising  gross  proceeds  of
$963,500.  In connection with this sale, the Company issued warrants to purchase
142,190  shares of its Common  Stock at exercise  prices  ranging  from $1.10 to
$1.36 per share of Common Stock.  The warrants  expire five years  following the
date of  grant.  Fourteen  individuals  or legal  entities  participated  in the
private placement, including four executive officers of the Company and a member
of the Company's Board of Directors.

The shares of Common  Stock  sold in the  private  placement,  and the shares of
Common  Stock  underlying  the  warrants,  are  required  by the  Company  to be
registered  for sale in accordance  with the Securities Act of 1933. The Company
is  currently  preparing  an  amended  registration  statement  on Form  S-3 and
anticipates filing such registration statement in April 2002.

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.

11 Related Party Transactions

During  1999,  Boundless  Manufacturing  issued  shares of its  common  stock as
follows: 400 shares (12.5% of the outstanding) to each of Joseph Joy and Anthony
Giovaniello for $5.00 per share,  320 shares (10% of the outstanding) to each of
J. Gerald Combs and Jeffrey Moore upon their  exercise of employee stock options
at an  exercise  price  of  $5.50  per  share,  and  1,760  shares  (55%  of the
outstanding) to the Company.  Pursuant to their employment  agreements,  Mr. Joy
and Mr.  Giovaniello  will have the option,  upon  attainment of certain defined
performance standards,  to convert their shares of Boundless  Manufacturing into
up to an aggregate of 300,000 shares of the Company's  Common Stock. The Company
has allocated 160 shares of its Boundless  Manufacturing common stock for future
issuance under Boundless  Manufacturing's  incentive plan.  Under terms of their
respective separation agreements,  as described in Note 12, Mr. Combs and Mr. J.
Moore each agreed to transfer  to the  Company  his  2,000,000  shares of common
stock to Boundless Manufacturing.

During 1999,  Merinta  adopted an incentive  plan and reserved 30% of its common
stock for  issuance  under the plan.  Each of Mr. Combs and Mr. J. Moore in 1999
exercised  Merinta  employee  stock options  previously  issued to him and, as a
result, each was issued


                                      F-46
<PAGE>

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

shares representing 6.5% of Merinta's common stock. Boundless  Manufacturing and
Merinta  received  third party  fairness  opinions  before  granting  options to
Messrs. Combs and Moore.

In June 2000 the  Company  retained  Cross  Roads for the  purpose of  providing
investor relations services. The agreement,  which terminated December 31, 2000,
called for fees of $150 plus  expenses.  The Company paid to Cross Roads $133 in
2000 under the investor relations services agreement.

12 Commitments

Leases

The Company leases certain  manufacturing,  sales and administrative  facilities
and office equipment under operating lease  agreements,  which expire at various
times through May 2006. The most significant lease is for the Company's facility
in Boca Raton,  Florida which expires in September 2005 with a total outstanding
commitment  of $1,894.  Total rent expense was $1,377 and $935 in 2001and  2000,
respectively.

Future minimum rental commitments as of December 31, 2001 were as follows:

2002                           $   819
2003                               788
2004                               780
2005                               448
2006                                53
                               -------
                               $ 2,888
                               =======

Other Commitments

In December 2001, the Company reached agreement on the substantive  details of a
Separation Agreement and General Release (the "Separation  Agreement") with each
of J. Gerald Combs,  its Chairman and Chief  Executive  Officer,  and Jeffrey K.
Moore,  its Vice President of Corporate  Development and issued a 6% Convertible
Promissory  Note (the "Note") to each of them,  with a principal  amount of $475
for Mr. Combs and $382 for Mr. Moore,  representing the separation payments. The
separation  payments include a bonus from the Company for the year 2000 ($75 for
Mr. Combs and $25 for Mr.  Moore).  Simultaneously,  the Company  entered into a
Consulting  Agreement with Mr. Combs and an Employment and Consulting  Agreement
with Mr. Moore (together, the "Consulting Agreements"). Mr. Combs is to serve as
a consultant to the Company until March 31, 2003,  and Mr. Moore is to remain as
an  employee of the Company at a reduced  salary and in a  non-officer  capacity
until March 31, 2002 and  thereafter  serve as a consultant to the Company until
February 27, 2003.  Under the Consulting  Agreements the Company agreed to pay a
total of $241 to Mr. Combs and $137 to Mr.  Moore.  The Company  agreed that, to
the extent not already vested, all stock options held by Mr. Combs (480,000) and
Mr. Moore (205,000) would be fully vested  immediately and such options would be
exercisable  for five years from January 1, 2002.  The  exercise  prices of such
stock options were not changed. The Company (including its subsidiaries) granted
releases to Mr. Combs and Mr. Moore, each of whom granted reciprocal releases to
the Company (and its subsidiaries).

Each Note is payable on February  27, 2003 and entitles the holder to convert it
at the price of $1.25 per share into restricted  shares of the Company's  common
stock at any time prior to such  maturity  date.  However,  if the Notes are not
converted  and the Company has not raised  equity  financing  of at least $2,500
prior to such maturity  date, the Company has the option to extend the Notes for
two  years  and to pay the  Notes  in 24  monthly  installments.  The  Company's
obligations to make payments under the Notes are  subordinated to its current or
future  obligations  to repay all other  indebtedness  for borrowed  money.  The
shares into which the Notes may be  converted  are  accompanied  by  "piggyback"
registration  rights and are being  registered  under the Company's  most recent
Registration Statement on Form S-3.

During the fourth quarter of 2001, the Company  recorded $417 in current accrued
liabilities  for the consulting  services and $857 in long term  liabilities for
the fair value of the two promissory  notes,  as  substantially  all amounts due
under the Separation  Agreements  relate to services  provided prior to December
31, 2001.


                                      F-47
<PAGE>

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

13 Contingencies

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

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

The Company intends to vigorously defend this suit since it believes that it has
meritorious  defenses to the  action.  As of March 5, 2002 a  deposition  of the
Plaintiff had taken place. No depositions of the defendants have occurred and no
trial date has been established.

An action was  commenced by Donald W. Lytle  ("Plaintiff")  on February 8, 2001,
against Boundless Technologies, Inc., GN Netcom, Inc., Portal Connect, Inc., and
Wholesale Audio Video, Inc. in the Iowa District Court,  Johnson County; Law No.
LACU061503  alleging  negligence and products  defects  resulting in injuries to
Plaintiff's  hearing as a result of the use of the products.  Plaintiff is suing
for  unspecified  damages.  Document  requests  have been  served on  Plaintiff;
however, to date, no documents have yet been produced and no other discovery has
taken place.

14 Segment Reporting and Geographic Information

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

Operating  segments are  identified as  components of an enterprise  about which
separate  financial  information  is available  for  evaluation  by its decision
making group. In line with the formation of its two new subsidiaries,  effective
in 2000 the Company began  managing its  operations  and reporting its financial
results as three business segments.  However, due to the decision to discontinue
Merinta (see Note 17), only two continuing business segments remain. The results
of the reportable segments are derived from the Company's  management  reporting
system.  These results are based on the Company's  method of internal  reporting
and are  not  necessarily  in  conformity  with  generally  accepted  accounting
principles.  These results are used to evaluate the  performance of each segment
and determine the appropriate resource allocation mix.

Information  for the  current and prior year by  business  segment is  presented
below (in thousands):

<TABLE>
<CAPTION>
                                                                    Boundless      Boundless
For the year ended                                   Elimi-         Technol-       Manufact-
December 31, 2001                     Total          nations        ogies/Corp.    uring
------------------                    ---------      ---------      -----------    ---------
<S>                                   <C>            <C>            <C>            <C>
Customer Revenue                      $  59,581                     $  32,872      $  26,709
Intercompany Revenue                                 $ (23,392)                       23,392
                                      ---------      ---------      ---------      ---------
Total Revenue                         $  59,581      $ (23,392)     $  32,872      $  50,101
                                      =========      =========      =========      =========

Gross Margin                          $   6,283      $  (1,128)     $   7,963      $    (552)
                                      =========      =========      =========      =========
Gross Margin percent                       10.5%                         24.2%          -1.1%
                                      =========                     =========      =========

Operating income (loss)               $  (5,810)                    $     902      $  (6,712)
                                      =========                     =========      =========

Total assets by business segment      $  33,215                     $  10,396      $  22,819
                                      =========                     =========      =========
</TABLE>


                                      F-48
<PAGE>

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

<TABLE>
<CAPTION>
For the year ended                                   Elimi-         Technol-       Manufact-
December 31, 2000                     Total          nations        ogies/Corp.    uring
------------------                    ---------      ---------      -----------    ---------
<S>                                   <C>            <C>            <C>            <C>
Customer Revenue                      $  64,544                     $  55,665      $   8,879
Intercompany Revenue                                 $ (41,649)                       41,649
                                      ---------      ---------      ---------      ---------
Total Revenue                         $  64,544      $ (41,649)     $  55,665      $  50,528
                                      =========      =========      =========      =========

Gross Margin                          $  15,500                     $  16,183      $    (683)
                                      =========                     =========      =========
Gross Margin percent                       24.0%                         29.1%          -1.4%
                                      =========                     =========      =========

Operating income (loss)               $  (2,089)                    $   3,640      $  (5,729)
                                      =========                     =========      =========

Total assets by business segment      $  39,604                     $  19,267      $  20,337
                                      =========                     =========      =========
</TABLE>

Foreign  sales  were  approximately  $13,047  and  $18,157  for 2001  and  2000,
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:

                                   2001       2000
                                   ----       ----
United Kingdom                       8%         8%
Other European countries            11%        13%
Other foreign countries              3%         7%
                                   ---        ---
     Total                          22%        28%
                                   ===        ===

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

15 Defined Contribution Plan

The Company  provides a 401(k)  retirement  savings plan (the "401(k) Plan") for
its  full-time  employees.  Under  the  provisions  of  the  401(k)  Plan,  each
participant  may elect to contribute up to 15% of his or her annual  salary.  At
its discretion,  the Company may make  contributions to the 401(k) Plan.  During
the years ended  December 31, 2001 and 2000, the Company made  contributions  of
$229 and $173.


                                      F-49
<PAGE>

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

16 Selected Quarterly Financial Data - (unaudited)

Provided below is the selected unaudited  quarterly financial data from 2001 and
2000.  The  underlying  per share  information  is calculated  from the weighted
average shares outstanding each quarter, which may fluctuate. Therefore, the sum
of the quarters per share information may not equal the total year amounts.

Net loss for the three  months  ended  December  31,  2001  includes  $1,274 for
settlement of employment contracts with two executives of the Company as well as
$2,281  in  income  tax  expense   relating  to  deferred  tax  asset  valuation
allowances.

Net loss for the three  months ended  December  31, 2000  reflects a writeoff of
$824 against the value of debt and equity securities of General Automation,  Inc
and amortization of goodwill of $185 related to the change to a 3 year remaining
useful  life and  $2,324  related  to  reserves  and  accruals  associated  with
Merinta's transactions with Internet Appliance Network, Inc.

<TABLE>
<CAPTION>
                                                          For the three months ended
                                                Dec. 31,     Sept. 30,    June 30,     March 31,
                                                ------------------------------------------------
                                                  2001         2001         2001         2001
                                                --------     --------     --------     --------
<S>                                             <C>          <C>          <C>          <C>
Net revenue                                     $ 13,621     $ 18,074     $ 14,897     $ 12,989
Cost of product sold and services                 12,397       15,605       13,855       11,441
Gross profit                                       1,224        2,469        1,042        1,548
Income (loss) from continuing operations          (4,511)         224       (1,585)      (2,920)
Income (loss) from discontinued  operations           --          316           --       (2,466)
Net income (loss)                               $ (4,511)    $    540     $ (1,585)    $ (5,386)

Per share amounts:
Basic net income (loss) per common share        $  (0.89)    $   0.10     $  (0.32)    $  (1.16)
Diluted net income (loss) per common share      $  (0.89)    $   0.10     $  (0.32)    $  (1.16)

<CAPTION>
                                                          For the three months ended
                                                Dec. 31,     Sept. 30,    June 30,     March 31,
                                                ------------------------------------------------
                                                  2000         2000         2000         2000
                                                --------     --------     --------     --------
<S>                                             <C>          <C>          <C>          <C>
Net revenue                                     $ 14,461     $ 15,871     $ 17,480     $ 16,732
Cost of product sold and services                 11,345       11,884       12,986       12,829
Gross profit                                       3,116        3,987        4,494        3,903
Loss from continuing operations                   (1,932)        (657)        (232)        (434)
Loss from discontinued operations                 (4,396)      (3,753)      (3,569)      (2,286)
Net loss                                        $ (6,328)    $ (4,410)    $ (3,801)      (2,720)

Per share amounts:
Basic net loss per common share                 $  (1.39)    $  (0.97)    $  (0.84)    $  (0.61)
Diluted net loss per common share               $  (1.39)    $  (0.97)    $  (0.84)    $  (0.61)
</TABLE>

17 Discontinued Operations

On May 11, 2001, the Board of Directors of the Company formally  approved a plan
to  discontinue  the operations of Merinta.  Since  November 2000,  following an
investment by National  Semiconductor in Merinta,  the Company was prohibited by
its lenders from contributing cash to the subsidiary.  As a result,  Merinta was
required to fund its working  capital  needs from the  proceeds of the  National
Semiconductor investment,  cash generated from operations, and proceeds from any
additional  investments.  However,  these funds were not sufficient to cover its
operating needs and the Company was not successful in raising  additional  funds
from investors.  The loss from discontinued  operations for the period January 1
through  March 31, 2001 was $2,466.  In the third  quarter of 2001,  the Company
realized a gain of $316 on the  disposal of  Merinta,  net of  operating  losses
subsequent to March 31, 2001.  The  consolidated  financial  statements  present
Merinta's results for the years ended December 31, 2001 and December 31, 2000 as
discontinued operations.


                                      F-50
<PAGE>

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

The net assets of Merinta were zero at December 31, 2001.

The reported loss from  discontinued  operations for the year ended December 31,
2000 was $14,004.  The reported loss from  discontinued  operations for the year
ended December 31, 2001 is as follows:

                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                    ------------
Loss from discontinued operations from  January 1, 2001
 until the measurement date of March 31, 2001                         $ (2,466)
                                                                      --------
Gain on disposal of subsidiary:
Loss from operations  from April 1, 2001 to date of disposal          $ (1,237)
Net accounts receivable writeoff                                          (125)
Write off of prepaid license fees and other intangible assets           (4,011)
Net machinery and equipment writeoff                                      (180)
Gain on accounts payable settlements                                       869
Writeoff of minority interest in subsidiary                              5,000
                                                                      --------
Gain on disposal of subsidiary                                             316
                                                                      --------
   Total loss from discontinued operations                            $ (2,150)
                                                                      ========


                                      F-51
<PAGE>

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

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

                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                      --------
                         ASSETS

Current assets:

  Other current assets                                                $     50
                                                                      --------
    Total current assets                                                    50
Investments in and advances to subsidiaries
    (eliminated in consolidation)                                       (4,168)
                                                                      --------
                                                                      $ (4,118)
                                                                      ========
         LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable and accrued expenses                                     25
                                                                      --------
    Total current liabilities                                               25
                                                                      --------

Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                                                   --
Common stock, $0.01 par value, 25,000,000 shares
  authorized, 5,688,037 shares issued                                       57
Additional paid-in capital                                              35,280
Accumulated deficit                                                    (39,339)
Accumulated other comprehensive loss                                      (141)
                                                                      --------
    Total stockholders' deficit                                         (4,143)
                                                                      --------
                                                                      $ (4,118)
                                                                      ========


                                      S-1
<PAGE>

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

            SCHEDULE I -CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                        CONDENSED STATEMENT OF OPERATIONS
                               FOR THE YEARS ENDED
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                  December 31,
                                                           --------------------------
                                                               2001           2000
                                                           -----------    -----------
<S>                                                        <C>            <C>
Sales                                                      $        --    $        --
Cost of sales                                                       --             --
                                                           -----------    -----------
    Gross margin                                                    --             --
Expenses:
  General and administrative                               $       150    $       659
  Interest                                                          --            (35)
                                                           -----------    -----------
                                                                   150            624
                                                           -----------    -----------
Loss before equity in loss of consolidated subsidiaries           (150)          (624)
Equity in loss of consolidated subsidiaries                    (10,792)       (16,635)
                                                           -----------    -----------
Net loss applicable to common stockholders                 $   (10,942)   $   (17,259)
                                                           ===========    ===========
</TABLE>


                                      S-2
<PAGE>

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

            SCHEDULE I -CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                        CONDENSED STATEMENT OFCASH FLOWS
                               FOR THE YEARS ENDED
                                 (In thousands)

                                                               December 31,
                                                           --------------------
                                                             2001        2000
                                                           --------    --------
Net cash flows used in operating activities                $   (930)   $   (234)
                                                           --------    --------
Cash flows from investing activities:
Investment in subsidiaries                                     (279)     (1,644)
                                                           --------    --------
    Net cash used in investing activities                      (279)     (1,644)
                                                           --------    --------
Cash flows from financing activities:
  Proceeds from issuance of common stock                      1,189       1,398
                                                           --------    --------
    Net cash provided by financing activities                 1,189       1,398
                                                           --------    --------
Net decrease in cash and cash equivalents                       (20)       (480)
Cash and cash equivalents at beginning of year                   20         500
                                                           --------    --------
Cash and cash equivalents at end of year                   $     --    $     20
                                                           ========    ========
Non-cash transactions:
  Options, warrants and common stock issued for services   $     --    $    197


                                      S-3
<PAGE>

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

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

<TABLE>
<CAPTION>
                                         Balance at                                       Balance at
                                        Beginning of                                        End of
           Description                     Period         Additions       Deductions        Period
----------------------------------     --------------  ---------------  --------------   -------------
<S>                                        <C>             <C>              <C>             <C>
Allowances:
 Doubtful accounts:
    2003                                   $  763          $  104           $  244(A)       $  623
    2002                                    1,348             599            1,184(A)          763
 Manufacturing inventory reserves:
    2003                                      789           1,169              716(B)        1,242
    2002                                    3,451             565            3,227(B)          789
</TABLE>

(A)   Includes accounts written off during the period.

(B)   Includes inventory written off during the period.


                                      S-4
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        FOR THE YEARS ENDED DECEMBER 31,
                                 (In thousands)

<TABLE>
<CAPTION>
                                         Balance at                                       Balance at
                                        Beginning of                                        End of
           Description                     Period         Additions       Deductions        Period
----------------------------------     --------------  ---------------  --------------   -------------
<S>                                        <C>             <C>              <C>             <C>
Allowances:
 Doubtful accounts:
         2001                              $  723          $  993(C)        $ 368(A)        $1,348
         2000                                 627             221             125(A)           723
         Inventory reserves:
         2001                               4,308           1,055           1,912(B)         3,451
         2000                               2,920           2,012(C)          624(B)         4,308
</TABLE>

(A)   Includes accounts written off during the period.

(B)   Includes inventory written off during the period.

(C)   Includes  transfers in from other asset  reserves for related  amounts now
      included in inventory.


                                      S-5