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

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

                                       OR

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

                   For the fiscal year ended December 31, 2004

                         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|

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

                                 Yes |_|   No |X|

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

  As of February 28, 2006 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, 2004

Included in Item 7 of this Annual Report on Form 10-K is management's discussion
and analysis of financial condition and results of operations applicable to the
three fiscal quarters ended March 31, June 30 and September 30, 2004, not
previously filed with the Securities and Exchange Commission. This Annual Report
on Form 10-K for the fiscal year ended December 31, 2004 is being filed
contemporaneously with the above mentioned quaterly reports on Form 10-Q.

<TABLE>
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<S>                                                                                                                           <C>
                                                              PART I

Item 1.   Business                                                                                                             2
Item 2.   Properties                                                                                                          14
Item 3.   Legal Proceedings                                                                                                   14
Item 4.   Submission of Matters to a Vote of Security Holders                                                                 15

                                                             PART II

Item 5.   Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities    15
Item 6.   Selected Financial Data                                                                                             16
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations                               18
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk                                                          37
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                                                                                                   38

                                                             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                      44
Item 13.  Certain Relationships and Related Transactions                                                                      46
Item 14.  Principal Accountant Fees and Services                                                                              46

                                                             PART IV

Item 15.  Exhibits, Financial Statements, Schedules and Reports on Form 8-K                                                   48

          Signatures                                                                                                          53
          Section 302 Certification  (Filed as Exhibit 31)
          Section 906 Certification  (Filed as Exhibit 32)
</TABLE>

<PAGE>

                                     PART I

ITEM 1. BUSINESS

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

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

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

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

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

      Forward-looking  statements  that the Company  makes,  or that are made by
others on its behalf with its  knowledge  and express  permission,  are based on
knowledge of the Company's  business and the  environment  in which it operates,
but


                                       2
<PAGE>

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").

      A fourth subsidiary,  Merinta, Inc.  ("Merinta"),  commenced operations in
2000.  Merinta created software and  infrastructure  for Internet use. 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 operating losses generated by Boundless  Manufacturing and Merinta, in
combination with the economic downturn following  September 11, 2001, caused the
Company and its subsidiaries,  on March 12, 2003, (the "Petition Date"), to seek
protection under Chapter 11 of the Bankruptcy Code.

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

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

      Prior to the Petition Date, CIT advised the Company that it would not make
any further  advances (the  "Notification").  At that time, the Company owed CIT
approximately   $600,000.   During  the  ten  day  period   subsequent   to  the
Notification,  payments of the  Company's  receivables  to CIT  satisfied all or
substantially  all of the  amounts  due and owing to CIT.  By


                                       3
<PAGE>

assignment  dated  February 21, 2003,  CIT assigned all of its right,  title and
interest  in and to the  CIT  Credit  Facility  to  Valtec  Capital  Corporation
("Valtec"). Prior to this assignment, Valtec was a subordinated secured creditor
of the Company.

C.    Pre-Petition Credit Facility with Valtec

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

D.    Procedural History

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

E.    The Company's Administrative Period

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

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

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

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

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


                                       4
<PAGE>

      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").

F.    Valtec Settlement and Agreement with Vision

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

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

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

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

      4.    The DIP Debt was fully secured.

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

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

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

      8.    Vision would provide supplemental financing to the Company in an
            amount up to $650,000 plus interest (inclusive of the Vision
            advances theretofore provided) as contemplated by the Amended Vision
            Agreement. Payment of the Vision Debt will commence subsequent to
            payment in full of the Valtec Obligations, and shall be secured by a
            lien subordinate to the lien securing payment of the Valtec
            Obligations. As of December 31, 2004, the amounts due under the
            Valtec and Vision Claims were approximately $638,000 and $738,000
            (with interest), respectively and the amount of the collateral (as
            defined in the Settlement Stipulation) collateralizing these claims
            amounted to approximately $2,225,000.

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


                                       5
<PAGE>

      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. As of December 31, 2004, the Company
            has met both the excess collateral margin and reporting
            requirements.

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

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

      2.    The establishment of an executive committee acceptable to Vision.
            There is no overlap in functions or duties between the executive
            committee and the Board of Directors. The executive committee of the
            Board of Directors is responsible for the creation and execution of
            the Company's strategic business plan. As of February 10, 2006 the
            executive committee was comprised of Mr. Frank Stephens, a current
            member of the Company's Board of Directors; Mr. John Ryan, the
            Company's Chief Operating Officer; and, Mr. Joseph Gardner, the
            Company's Chief Financial Officer. No compensation is paid to any
            member of the executive committee as a result of being a member of
            the executive committee.

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

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

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

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

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

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

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

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

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

      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


                                       6
<PAGE>

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

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

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

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

I.    Miscellaneous

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


                                       7
<PAGE>

      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.  In addition,  the Company is required to file with the Securities
and Exchange  Commission  delinquent  financial  reports prior to their removing
objections to the Company's plan of reorganization.

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

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

General

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

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

      Boundless  Manufacturing  is  pursuing  opportunities  in  the  electronic
manufacturing  services ("EMS")  marketplace.  As of December 31, 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.


                                       8
<PAGE>

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
three  calendar  years  ended  December  31  the  percentage  of  total  revenue
contributed by those classes of similar products or services which accounted for
a  material  portion of  consolidated  revenue  in any of such  years.  Material
inter-company revenue has been eliminated.

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

2004                                  87.6%                  12.4%

2003                                  88.0%                  12.0%

2002                                  64.2%                  35.8%


                                       9
<PAGE>

            Foreign  Sales.  Net foreign  sales were  approximately  $1,929,000,
$3,473,000  and  $7,430,000 for 2004,  2003 and 2002,  respectively.  The tables
below set forth,  for each of the three  calendar  years ended  December 31, the
approximate  percentage of total revenue  attributable  to foreign sales and the
percentage attributable to the European region.

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

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

2004                          26.4%                     20.9%

2003                          29.6%                     25.3%

2002                          27.7%                     16.9%

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 of subassemblies and components in 2004. 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  of  subassemblies  and
components in 2003. 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


                                       10
<PAGE>

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

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

      Warranties.  The Company provides a one-year warranty  covering  defective
materials and  workmanship.  The Company's  products are serviced at depots that
are geographically  dispersed  throughout the world. Users can purchase extended
warranties  of up to three years or can pay for repairs on a time and  materials
basis. For the years 2004, 2003 and 2002, 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 2004, 2003 and 2002, the Company expended
approximately  $150,000,  $170,000 and $959,000,  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.

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.


                                       11
<PAGE>

      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.

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

Competition

            The Company  believes that  alternative  technologies,  particularly
graphics-capable  computers,  together with the  abandoning of text terminals by
both IBM and HP, have eroded the total available market. For 2004, the last year
for which the Company has data,  annual  units  shipped into the text market was
estimated  to be between  100,000 to 130,000  units.  The Company  believes  the
market for  general  purpose  text  terminals  will  continue to erode at 20-30%
annually.  The decline in text sales has resulted in a  consolidation  of former
competitors,  as well as the outsourcing of production  from original  equipment
manufacturers to the remaining industry participants.  Although industry data is
not available,  the Company believes its market share to be  approximately  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.


                                       12
<PAGE>

Patents, Trademarks and Licensing

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

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

Backlog

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

Environmental Regulation

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

Employees

      At December 31, 2005 and December 31, 2004, the Company had  approximately
31 full-time  employees engaged as follows: 3 in product design and engineering,
21 in  manufacturing  and repair  services,  2 in sales,  systems  services  and
marketing  and 5 in  administration.  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.


                                       13
<PAGE>

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.

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


                                       14
<PAGE>

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

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

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

      No matter was submitted to a vote of  stockholders  of the Company through
the solicitation of proxies or otherwise for the year ended December 31, 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  December  31,  2005,  and  December  31,  2004  and  2003,   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 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


                                       15
<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

The last sale price of the Company's Common Stock on December 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 and December 31, 2000 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,  2004,  2003,  and 2002 are derived  from the  consolidated
financial  statements which were audited by BP Audit Group, PLLC, an independent
registered  public  accounting firm. The selected  financial data as of December
31,  2004 and 2003,  and for each of the years in the  three-year  period  ended
December 31, 2004 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.


                                       16
<PAGE>

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

<TABLE>
<CAPTION>
                                            2004           2003          2002          2001         2000
                                          ---------     ---------     ---------     ---------     ---------
<S>                                       <C>           <C>           <C>           <C>           <C>
Total revenues                            $   7,309     $  11,750     $  26,843     $  59,581     $  64,544

Gross margin (loss)                           1,852           788          (537)        6,283        15,500

Interest expense                                129           804         1,402         1,599         1,455
Reorganization items                            484           655            --            --            --
Gain on restructuring of payables                --            --        (3,924)           --            --
Income tax expense (credit)                      --            --            --         1,383          (289)
Loss from continuing
   operations                                   (28)       (3,579)       (7,623)       (8,792)       (3,255)
Loss from discontinued operations                --            --            --        (2,150)      (14,004)
                                          ---------     ---------     ---------     ---------     ---------
Net loss                                        (28)       (3,579)       (7,623)      (10,942)      (17,259)
Accretion on preferred stock                     --            99           148            --            --
                                          ---------     ---------     ---------     ---------     ---------
Loss applicable to
   common shareholders                    $     (28)    $  (3,678)    $  (7,771)    $ (10,942)    $ (17,259)
                                          =========     =========     =========     =========     =========

Loss per common share from
   continuing operations:

Basic and diluted                         $      --     $   (0.55)    $   (1.21)    $   (1.74)    $   (0.72)
                                          =========     =========     =========     =========     =========

Loss per common share:

Basic and diluted                         $      --     $   (0.55)    $   (1.21)    $   (2.17)    $   (3.81)
                                          =========     =========     =========     =========     =========

Consolidated Balance Sheet Data
At December 31:
(in thousands)
Working capital (deficit)                 $     632     $     (39)    $  (9,775)    $ (16,473)    $   3,435
Total assets                                  3,010         4,138        13,236        33,215        39,604
Revolving credit loan (short-term)               --            --            --         8,507            --
Current maturities of long-term debt            350           837         3,142         6,855            --
Liabilities and other items subject to
   compromise                                14,622        13,207            --            --            --
Long-term obligations                           953         1,581         8,294           833        13,442
Mandatorily redeemable preferred
   stock                                         --            --         1,554            --            --
Stockholder's equity (deficit)              (14,905)      (14,877)      (11,199)       (4,143)        5,751
</TABLE>


                                       17
<PAGE>

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

General

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

Critical Accounting Policies

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

Bankruptcy Considerations- Financial Statement Presentation

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

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

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

      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.


                                       18
<PAGE>

Basis of Presentation

      Boundless  Corporation is a holding company whose  principal  subsidiaries
are Boundless Technologies,  Inc., Boundless  Manufacturing Services,  Inc., and
Merinta Inc. The consolidated  financial  statements include the accounts of all
of the Company's majority-owned subsidiaries. We sometimes collectively refer to
Boundless  Corporation,  together with our consolidated  subsidiaries,  as "we,"
"Boundless" or the  "Company." All  significant  intercompany  transactions  are
eliminated.  Certain prior year amounts have been reclassified to conform to the
current year's presentation.

Use of Estimates

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

Cash and Cash Equivalents and Short-Term Investments

      Cash in excess of operating requirements is invested in short-term, highly
liquid,  income-producing  investments.  Investments  with a  maturity  of three
months  or less on  their  acquisition  date  are  classified  as cash  and cash
equivalents. Other investments are classified as short-term investments.

      We had $271,000 and $328,000  classified  as "cash on deposit with lender"
at December  31, 2004 and 2003,  respectively,  representing  cash  on-hand in a
lockbox  account under the control of the  Company's DIP lender.  On approval of
the DIP lender the Company accesses these funds;  further,  the lender withdraws
payments  on  terms  of its  DIP  financing  agreement  as  discussed  above  in
"Bankruptcy Considerations".

Machinery and Equipment

      Owned  machinery and equipment are stated at cost.  Property under capital
leases, and the related obligation for future lease payments,  is recorded at an
amount equal to the initial present value of those lease payments.

      Depreciation and amortization of owned depreciable  assets is based on the
straight-line  method  over  the  assets'  estimated  service  lives.  Leasehold
improvements  are  amortized  over  the  remaining  period  of the  lease or the
estimated service life of the related asset, whichever is less.

      Properties under capital leases are amortized on the straight-line  method
over the life of the lease or over their estimated  service lives.  Amortization
of capital leases is included in depreciation and amortization expense.

      Maintenance  and repairs,  including the cost of minor  replacements,  are
charged to maintenance  expense as incurred.  Costs of additions to and renewals
of units of property are capitalized as property and equipment additions.

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 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.


                                       19
<PAGE>

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

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.  Management's review of this allowance could result in a reduction and
corresponding credit to the statement of operations.

Deferred Taxes

      The carrying  value of the  Company's  net deferred tax assets is based on
assumptions as to whether the Company will be able to generate sufficient future
taxable income in certain tax jurisdictions,  based on applicable  estimates and
assumptions to utilize its existing loss carry-forwards.  If these estimates and
related  assumptions change in the future, the Company may be required to record
applicable  adjustments  to the  valuation  allowances  against its deferred tax
assets  resulting in  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.  For the years ended December 31, 2004, 2003 and
2002 the Company has recorded  valuation  allowances at 100% of its deferred tax
assets.

Results of Operations

First quarter of 2004 compared with first quarter of 2003

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, 2004 was $2,183 as compared to
$2,470 for the quarter ended March 31, 2003.

Sales of the Company's  General  Display  Terminals  were $1,985 for the quarter
ended March 31, 2004  compared to $1,963 for the quarter  ended March 31,  2003.
The first  quarter of 2003 was adversely  impacted by the  Company's  bankruptcy
filing.  Stabilization of the Company's  operations in the periods subsequent to
the filing allowed the Company to record revenues of General  Display  Terminals
during  the first  quarter  of 2004  similar  to  recorded  revenue in the first
quarter of


                                       20
<PAGE>

2003 despite the industry decline in demand for this product.

Net revenue from EMS  activities,  primarily  logistics  services sold to Unique
Co-operative  Solutions,  Inc.  ("UCSI"),  were $18. UCSI is wholly owned by Mr.
Oscar Smith, who also is the majority shareholder of Vision. Mr. Smith also owns
approximately  15% of the outstanding  common stock of the Company.  EMS revenue
for the quarter  ended March 31,  2003 was $300.  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,  2004 was $179 as  compared to $207 for the quarter  ended March
31, 2003.

Hewlett-Packard  contributed  34% of the Company's  revenue in the quarter ended
March 31,  2004,  and 26% of recorded  revenues  for the first  quarter of 2003.
During 2003 Hewlett Packard  informed the Company of its decision to discontinue
the sale of the Company's  products.  Sales to Hewlett  Packard during the first
quarter of 2004 represented purchases for its immediate needs as well as product
purchases  it  anticipated  needing  for  the  transition  of its  customers  to
alternative products.

Gross  Margin - The Company  recorded  gross  margin for the three  months ended
March 31,  2004 of $644 (29.5% of  revenue)  compared to a gross  margin loss of
$112 for the first quarter of 2003. The increase in gross margin is attributable
to the reduction in fixed overhead  associated with the Company's  manufacturing
facility in  Hauppauge,  New York,  which the Company sold in December  2003. In
addition,  General Display  Terminals,  which contribute  higher gross margin as
compared to the Company's other sources of revenue,  provided  approximately 91%
of revenue in the first  quarter of 2004 compared to 79% of revenue in the first
quarter of 2003.

Total  Operating  Expenses - For the  quarter  ended March 31,  2004,  operating
expenses, excluding interest expense and reorganization expenses associated with
the Company's bankruptcy filing, decreased 5% to $513 (23% of revenue), compared
to  expenses  for the  first  quarter  of 2003 of $537  (22% 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.

Loss on  reimbursement of employee  services-  Beginning in the first quarter of
2004 the Company agreed to provide UCSI resources,  primarily Company employees,
to allow UCSI to pursue programs critical to their continued  development of the
thin client market.  UCSI is wholly-owned by Mr. Oscar Smith.  Mr. Smith is also
the majority owner of Vision Technologies,  Inc., the entity which will own 100%
of the Company upon  confirmation  of the Company's  plan of  reorganization.  A
monthly  charge to UCSI was agreed to based upon the  Company's  estimate of the
percentage  of time its  employees  would be devoted to UCSI  projects.  For the
first  quarter  of 2004 the  Company  charged  UCSI $75 and  incurred  estimated
expenses of $90,  resulting in a loss on reimbursement  of employee  services of
$15.

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

During  the  first  quarter  of 2004 the  Company  recorded  net  reorganization
expenses of $113; which amount included  approximately  $123 related to expenses
associated  with  the  Company's  relocating  its  manufacturing  operations  to
Farmingdale,  New York. In addition, the Company recognized $23 from the sale of
excess  assets.  Reorganization  expenses,  primarily for legal fees,  were $336
during the quarter ended March 31, 2003.

Other  credits - Other  credits  for the  quarter  ended  March 31, 2004 was $49
compared  to  credits  of $129 for the  period  ended  March 31,  2003.  Credits
recorded  in 2004  include  $12  relating  to return  of  premiums  against  the
Company's  workers'  compensation  insurance due to a reduction in the Company's
experience  rating.


                                       21
<PAGE>

The  Company  reviews  its  account  receivable  balances  monthly to assess its
estimate of the  collectability  of such accounts.  The Company  utilizes ratios
based on its historical  experience,  as well as management's  judgment,  in its
assessment.  For the first  quarter of 2004 the Company  recorded a reduction in
the reserve against its receivables in an amount of approximately $24.

Interest Expense - Interest expense for the quarter ended March 31, 2004 was $41
compared  to $274 for the  comparable  period in 2003.  The  decline in interest
expense is attributable to the elimination of mortgage interest on the Company's
former  manufacturing  facility,  sold in December of 2003, and the rejection of
certain  capital  leases as a result of the  bankruptcy  filing.  Pursuant  to a
Financing  Agreement  dated June 27,  2002,  the Company  entered  into a credit
facility with the CIT Group/Business  Credit,  Inc. ("CIT"). By assignment dated
February 21, 2003,  CIT assigned all of its right,  title and interest in and to
the CIT Credit Facility to Valtec Capital Corporation ("Valtec").  Prior to this
assignment, the Company had been amortizing the capitalized debt financing costs
associated  with the CIT  agreement to interest  expense.  For the first quarter
ended March 31, 2003, the amortized capitalized debt financing costs were $42.

Income Tax Expense - For the first  quarter of 2004 and 2003 the Company did not
record income tax expense or credit  against the recorded  results.  The Company
recorded no income tax benefit for the quarter  ended March 31,  2003,  based on
the Company's  estimate of its annual  effective income tax rate to be zero. For
annual reporting  purposes,  the Company has provided a 100% valuation allowance
for its net deferred tax assets.

Net Income (Loss) - For the quarter ended March 31, 2004,  the Company  recorded
net income of $11,  compared to net loss of $1,419 for the  quarter  ended March
31, 2003.

Second quarter of 2004 compared with second quarter of 2003

Revenue - Revenue for the quarter ended June 30, 2004, was $1,811 as compared to
$4,008 for the quarter  ended June 30,  2003.  Revenue for the six months  ended
June 30, 2004 was $3,994 versus $6,478 for 2003.

Sales of the General  Display  Terminals  declined 55% to $1,575 for the quarter
ended June 30, 2004 from $3,640 for the quarter ended June 30, 2003. Results for
the second  quarter of 2003 include  substantial  conversion of backlog  arising
from the  interruption of  manufacturing  activities  immediately  following the
Company's  filing for  bankruptcy  on March 12, 2003. On a  year-to-date  basis,
revenue  for General  Display  Terminals  declined  36% to $3,560 from $5,603 in
2003.

Electronic  manufacturing services revenues for the quarter ended June 30, 2004,
were $64,  excluding  intercompany  revenue,  as compared to $68 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.

Net revenue from the Company's  repairs and spare parts business for the quarter
ended June 30, 2004 was $173 as compared to $300 for the quarter  ended June 30,
2003.

Agilysis and 1st Solutions  contributed 12.3% and 9.8%,  respectively,  of total
revenues during the second quarter of 2004.  Hewlett Packard  contributed 39% of
the Company's total revenue in the quarter ended June 30, 2003.

Gross  Margin - Gross margin for the three months ended June 30, 2004 were $441,
as  compared  to gross  margin of $803 for the  comparable  period in 2003.  The
decline in gross  margin is  directly  attributable  to the  decline in revenue.
Gross  margin for the six months  ended June 30, 2004 were $1,085 as compared to
$691 for the comparable period in 2003.

Total  Operating  Expenses  - For the  quarter  ended June 30,  2004,  operating
expenses, excluding interest expense and


                                       22
<PAGE>

reorganization  expenses,  were $350 (19% of revenue),  compared to expenses for
the second quarter of 2003 of $1,253 (31% of revenue).  For the six months ended
June 30,  2004,  operating  expenses  were  $863  compared  to  expenses  in the
comparable period in 2003 of $1,790.

Loss on  reimbursement of employee  services-  Beginning in the first quarter of
2004 the Company agreed to provide UCSI resources,  primarily Company employees,
to allow UCSI to pursue programs critical to their continued  development of the
thin client market.  UCSI is wholly-owned by Mr. Oscar Smith.  Mr. Smith is also
the majority owner of Vision Technologies,  Inc., the entity which will own 100%
of the Company upon  confirmation  of the Company's  plan of  reorganization.  A
monthly  charge to UCSI was agreed to based upon the  Company's  estimate of the
percentage  of time its  employees  would be devoted to UCSI  projects.  For the
quarter ended June 30, 2004, the Company charged UCSI $75 and incurred estimated
expenses of $90,  resulting in a loss on reimbursement  of employee  services of
$15.  For the six  months  ended June 30,  2004,  the loss on  reimbursement  of
employee services was $30.

During  the second  quarter  ended  June 30,  2004,  the  Company  recorded  net
reorganization  expenses of $76,  primarily for legal fees,  associated with its
bankruptcy filing. For the second quarter of 2003  reorganization  expenses were
approximately  $330. On a year-to-date basis  reorganization  expenses were $189
for the six months ended June 2004 compared to $666 for the comparable period in
2003.

Other  Charges/Credits  - The Company recorded charges of $74 during the quarter
ended June 30, 2004  compared  to credits of $21 for the quarter  ended June 30,
2003.  Charges in the second quarter of 2004 include  accruals of  approximately
$58 associated  with the lease  obligations of the Company's depot repair center
in Illinois which the Company had decided to close.  At that time, the Company's
lease  on  the  facility  had  18  months  remaining  until  expiration.   On  a
year-to-date  basis, other charges were $25 in 2004 compared to other credits of
$150 in 2003.

Interest  Expense - Interest expense for the quarter ended June 30, 2004 was $37
compared to $196 for the  comparable  period in 2003.  Mortgage  interest on the
Company's  former  manufacturing   facility,  sold  in  December  of  2003,  was
approximately $112 for the quarter ended June 30, 2003. On a year-to-date basis,
interest expense was $78 in 2004 compared to $470 in 2003.

Income Tax  Expense - For the second  quarter of 2004 and 2003,  the Company did
not record an income tax credit against the recorded losses before income taxes.
The Company  recorded no income tax benefit for the quarter  ended June 30, 2004
and 2003,  based on the Company's  estimate of its annual  effective  income tax
rate to be zero. For annual reporting purposes,  the Company has provided a 100%
valuation allowance for its net deferred tax assets.

Net Loss- For the quarter ended June 30, 2004,  the Company  recorded a net loss
of $111, compared to a net loss of $955 for the quarter ended June 30, 2003. The
year-to-date loss in 2004 was $100 compared to $2,374 in 2003.

Third quarter of 2004 compared to third quarter of 2003

Revenue - Revenue  for the  quarter  ended  September  30,  2004,  was $1,412 as
compared to $3,461 for the quarter  ended  September  30, 2003.  Revenue for the
nine months ended September 30, 2004 was $5,406 versus $9,939 for 2003.

Sales of the Company's  General  Display  Terminals  were $1,203 for the quarter
ended  September 30, 2004 compared to $3,207 for the quarter ended September 30,
2003. On a year-to-year  basis,  revenue for General Display Terminals  declined
46% to $4,763 from $8,810 in year 2003.

The Company  recorded EMS revenue of $32 for the third  quarter of 2004.  Due to
the Company's weak financial position no EMS activity or revenue was recorded in
the quarter ended September 30, 2003.

Net revenue from the Company's repairs and spare parts business for the quarter
ended September 30, 2004 was $177 as


                                       23
<PAGE>

compared to $253 for the quarter ended September 30, 2003.

Ingram Micro and Jetstar  contributed  19.9% and 11.4%,  respectively,  of total
revenues for the quarter ending September 30, 2004. 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.

Gross Margin - Gross margin for the three and nine months  ended  September  30,
2004 were $335 (23.7% of revenue) and $1,420 (26.3% of revenue) respectively, as
compared to gross margin of $691 (20% of revenue) for the third  quarter of 2003
and $1,382 (14% of revenue) for the nine months ended September 30, 2003.

Total Operating  Expenses - For the quarter ended September 30, 2004,  operating
expenses,  excluding interest expense and reorganization expenses, decreased 20%
to $266 (19% of revenue),  compared to expenses for the third quarter of 2003 of
$334 (10% of revenue).  For the nine months ended September 30, 2004,  operating
expenses were $1,129  compared to expenses in the  comparable  period in 2003 of
$2,124.

Loss on  reimbursement of employee  services-  Beginning in the first quarter of
2004 the Company agreed to provide UCSI resources,  primarily Company employees,
to allow UCSI to pursue programs critical to their continued  development of the
thin client market.  UCSI is wholly-owned by Mr. Oscar Smith.  Mr. Smith is also
the majority owner of Vision Technologies,  Inc., the entity which will own 100%
of the Company upon  confirmation  of the Company's  plan of  reorganization.  A
monthly  charge to UCSI was agreed to based upon the  Company's  estimate of the
percentage  of time its  employees  would be devoted to UCSI  projects.  For the
quarter  ended  September  30, 2004,  the Company  charged UCSI $75 and incurred
estimated  expenses of $90,  resulting  in a loss on  reimbursement  of employee
services of $15.  For the nine months  ended  September  30,  2004,  the loss on
reimbursement of employee services was $45.

Net  reorganization  expenses  were $86 and $275 for the three  and nine  months
ended September 30, 2004, respectively, as compared to expenses of $287 and $953
for the three and nine months ended  September 30, 2003.  Of the $85  recognized
during the third quarter of 2004, $75  represented  legal  expenses.  During the
third  quarter of 2003,  the  Company  recognized  gains of $48 from the sale of
excess  assets  and  for  the  nine-month   period  the  Company  incurred  $974
representing  legal  fees  and  fees  due the  U.S.  Trustee  administering  the
bankruptcy case.

Other  Charges/Credits  - The Company recorded credits of $40 during the quarter
ended  September  30,  2004  compared  to credits of $30 for the  quarter  ended
September  30, 2003.  Other  credits in the third quarter of 2004 is composed of
the partial reversal of previously accrued expenses, originally in the amount of
approximately  $58, and recorded during the second quarter of 2004 in connection
with the  Company's  decision  to shut down its leased  depot  repair  center in
Illinois.  During the third quarter of 2004 the Company  reached  agreement with
the  landlord of the  Illinois  facility  releasing  the  Company  from the then
remaining obligations under the lease. Other credits in 2003 include $26 related
to premium  returns  on the  Company's  workers'  compensation  insurance.  On a
year-to-date  basis, other credits were $15 in 2004 compared to other credits of
$180 in 2003.

Interest Expense - Interest expense for the quarter ended September 30, 2004 was
$21 compared to $192 for the comparable period in 2003. For the third quarter of
2003, the Company recorded interest expense of approximately $112 related to the
mortgage on its Hauppauge,  NY,  facility.  Interest expense for the nine months
was $99 in 2004 versus $662 in 2003.

Income Tax Expense - For the third quarter of 2004 and 2003, the Company did not
record an income tax credit against the recorded losses before income taxes. The
Company  recorded no income tax benefit for the quarter ended September 30, 2004
and 2003,  based on the Company's  estimate of its annual  effective  income tax
rate to be zero. For annual reporting purposes,  the Company has provided a 100%
valuation allowance for its net deferred tax assets.

Net loss- For the quarter ended  September 30, 2004, the Company  recorded a net
loss of $13,  compared to a net loss of $92 for the quarter ended  September 30,
2003.  For the  nine  months  ended  September  30,  2004  the net loss was $113
compared


                                       24
<PAGE>

to $2,466 for the nine months ended September 30, 2003.

Years Ended December 31, 2004 and 2003

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

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

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

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

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

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

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

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

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


                                       25
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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


                                       26
<PAGE>

included enhancements to the existing product family.

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

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

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

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

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

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

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

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


                                       27
<PAGE>

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

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.  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.

      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.

      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


                                       28
<PAGE>

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."

      Total Operating Expenses.  For the year ended December 31, 2003, operating
expenses,  excluding interest expense, were $2,812 (24% of revenue), compared to
expenses for 2002 of $6,121 (23 % 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


                                       29
<PAGE>

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.

      Interest  Expense.  Interest  expense  amounted to $804 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. Pursuant to a Financing
Agreement  dated June 27, 2002, the Company  entered into a credit facility with
the CIT  Group/Business  Credit,  Inc.  ("CIT").  Prior to the assignment of the
credit facility to Valtec Capital  Corporation during the first quarter of 2003,
the Company had been amortizing the capitalized  debt financing costs associated
with the CIT  agreement to interest  expense.  For the first quarter ended March
31, 2003, the amortized  capitalized debt financing costs were $63. For the year
ended December 31, 2002,  amortized debt financing costs associated with the CIT
credit facility were $121.

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

      Write-off  of Goodwill  and Other  Intangible  Assets.  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

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

      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 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 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.

      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


                                       30
<PAGE>

of $7,623 (28% of revenue) for the year ended December 31, 2002.

      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.

      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  equity is  doubtful.  Therefore,  the
preferred  stock is  included  on the  consolidated  balance  sheet with  "Items
subject  to  compromise"  and the  Company  discontinued  the  accretion  of the
difference  between the carrying value of the preferred stock and its face value
to earnings available to 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.

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.


                                       31
<PAGE>

      The Company is highly leveraged.  As of December 31, 2004, the Company had
a tangible net worth deficit of $14,905 and total  liabilities  of $17,915.  The
Company had a working capital deficit,  inclusive of liabilities and other items
subject to  compromise,  of  approximately  $13,990  as of  December  31,  2004,
compared  to  working  capital  deficit  of $13,246  as of  December  31,  2003.
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, 2004 the balance due Ansen was
approximately $561. As of December 31, 2005 the Company estimates that its total
potential liability to Ansen is approximately $50.

      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.

      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.

      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"). As a
result of the Purchase Agreement,  ICB and JPMorgan Chase 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  $14,622.  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


                                       32
<PAGE>

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,  2004,  the Company  had  accrued  approximately  $1,029
primarily for legal assistance  throughout the bankruptcy period. As of December
31, 2004, outstanding  professional fees, inclusive of legal fees, are estimated
to approximate  $1,950 as of the Effective  Date.  Upon  application for payment
pursuant to ss.ss.  330, 331 and 503(a) of the  Bankruptcy  Code and approval by
the Bankruptcy  Court, any and all  professional  fees not paid on or before the
Effective  Date shall be paid by the Company on such terms as the parties  shall
agree.  Interest shall accrue on any unpaid professional fees from the Effective
Date at a rate of eight (8%) percent per annum.

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

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

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

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

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

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

      Net cash provided by reorganization activities during 2003 amounted to $25
principally  from  proceeds  of $189  from the sale of the  Company's  Hauppauge
facility  and  payment  of legal  fees of  professionals  and fees of the United
States


                                       33
<PAGE>

Trustee.  Net cash provided by investing activities during 2003 was comprised of
$117 stemming  from the sale of  miscellaneous  equipment.  Net cash provided by
financing activities during 2003 was $844 which includes proceeds of $1,572 from
DIP loans offset by payments on loans and capital leases of $728.

      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

Capital Commitments.

      Following  is a summary  of our  material  contractual  cash  obligations,
including  operating lease commitments and accrued interest (which are sometimes
referred to as "off-balance sheet debt") as of December 31, 2004. The amounts in
the table  include $372 of accrued and  contractual  interest over the next five
years.

<TABLE>
<CAPTION>
                                                  Less than     Years       Years
                                                  one year     2 and 3     4 and 5       Total
                                                  --------     -------     -------       -----
<S>                                                  <C>        <C>          <C>        <C>
            Long-term debt                           $390       $  799       $486       $1,675
            Operating leases                          221          463        283          967
                                                     ----       ------       ----       ------
            Total contractual cash obligations       $611       $1,262       $769       $2,642
                                                     ====       ======       ====       ======
</TABLE>

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

Going Concern Comment and Management's Plan of Action

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

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

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

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

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


                                       34
<PAGE>

            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.

Asset Management

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

Key metrics:

<TABLE>
<CAPTION>
                                                       December 31,       December 31,       December 31,
                                                       ------------       ------------       ------------
                                                            2004              2003               2002
                                                       ------------       ------------       ------------
<S>                                                              <C>                <C>                <C>
Days of sales outstanding in accounts receivable                 59                 28                 26
Days of supply in inventory                                      72                 68                 25
Days of purchases outstanding in accounts payable                (3)               (30)               (91)
                                                       ------------       ------------       ------------

Cash conversion cycle                                           128                 66                (39)
                                                       ============       ============       ============
</TABLE>

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

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

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


                                       35
<PAGE>

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

      The  increase in DSO from 2002  through 2004 is a result in the decline in
sales to Hewlett  Packard and IBM,  both OEM  customers  of the  Company,  whose
payment  terms were net 30 days.  Additionally,  in the fourth  quarter of 2004,
Ingram  Micro,  which  pays its  obligations  on net 60 day  terms,  contributed
approximately 19% of total revenue, resulting in an increase in the DSO for 2004
compared with 2003.

      The decrease in DPO from 2002  through 2004 is a result of the  bankruptcy
filing  and  the  change  in  the  Company's   payment  terms  for  material  to
cash-in-advance.

New Accounting Pronouncements

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

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

      In December 2004, the FASB issued SFAS No. 153,  "Exchanges of Nonmonetary
Assets--An   Amendment  of  APB  Opinion  No.  29,  Accounting  for  Nonmonetary
Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from


                                       36
<PAGE>

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.

      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, 2004 the  Company's  investments  consisted  of cash
balances maintained in its corporate account with the Chase Manhattan Bank.

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

      None.

ITEM 9A.  CONTROLS AND PROCEDURES.


                                       37
<PAGE>

      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, 2004. Based on
that  evaluation,  the  Company's  management,  including  the CEO and CFO,  has
concluded that the Company's  disclosure controls and procedures were effective.
During the period  covered by this report,  there was no change in the Company's
internal control over financial  reporting that has materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

ITEM 9B. OTHER

      Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

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

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

Frank Stephens         54     Chairman of the Board of Directors

Richard Bowman         45     Director

John D. Ryan           55     Acting Chief Executive Officer

Joseph Gardner         46     Vice President - Finance, Chief Financial Officer

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

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


                                       38
<PAGE>

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
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.

      On September 30, 2004, Mr. John McGovern resigned from his position as the
Chairman of the Board of  Directors.  In October  2004 Mr.  Anthony  Giovaniello
resigned from his position as Senior Vice President- Business Development.

Audit Committee Financial Expert

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

Audit Committee

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

Code of Ethics

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


                                       39
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

      A review of the Forms 3, 4 and 5 filed or due with the  Commission in 2004
indicates that each of Frank  Stephens,  Richard  Bowman,  John Ryan, and Joseph
Gardner 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, 2004  (collectively,
the "named  executive  officers").  In addition,  it provides  information  with
respect to the  compensation  paid by us to the named executive  officers during
2003 and 2002.

                           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)               12/31/04      $134,982       --           --                  --            --
Former President, and          12/31/03      $143,257       --           --                  --            --
Chief Executive Officer        12/31/02      $136,327       --           --             170,000            --

Anthony Giovaniello(4)         12/31/04      $112,074       --           --                  --            --
Executive VP                   12/31/03      $134,317       --           --                  --            --
                               12/31/02      $130,326       --           --             140,000            --

Joseph Gardner                 12/31/04      $128,762       --           --                  --            --
Vice President-Finance         12/31/03      $136,610       --           --                  --            --
Chief Financial Officer        12/31/02      $134,574       --           --              75,000            --

John D. Ryan                   12/31/04      $128,762       --           --                  --            --
Acting Chief Executive         12/31/03      $ 88,990       --           --                  --            --
Officer                        12/31/02      $126,989       --           --              80,000            --
</TABLE>

(2)   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)   Resigned from the Company October 2004.


                                       41
<PAGE>

Employment Agreements and Change-in-Control Arrangements

      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.

      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.

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 Last Fiscal Year

      The Company did not grant options to the named  executive  officers during
the fiscal years ending December 31, 2004.


                                       42
<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, 2004. No options were exercised during the year.

<TABLE>
<CAPTION>
                                                                                         Value of Unexercised
                                               Number of Unexercised Options at        In-the-Money Options at
                                                    December 31, 2004 (#)              December 31, 2004 ($)(1)
                                                  -------------------------           -------------------------
                       Shares
                    Acquired on      Value
     Name           Exercise(#)    Realized      Exercisable      Unexercisable      Exercisable      Unexercisable
     ----           -----------    --------      -----------      -------------      -----------      -------------
<S>                      <C>           <C>          <C>                <C>                <C>               <C>
Joseph Gardner           0             0            102,624            14,376             --                --
John D. Ryan             0             0             72,624            14,376             --                --
</TABLE>

(1)   The last sale price of the Company's Common Stock on December 31, 2004, $
      0.01.


                                       43
<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 December
31, 2005, by (i) each of the Company's directors and "named executive officers,"
(ii)  directors and executive  officers of the Company as a group and (iii) each
person  believed  by  the  Company  to  own  beneficially  more  than  5% of its
outstanding  shares of Common  Stock.  Except as indicated  each such person has
sole  voting and  investment  powers  with  respect to his and her  shares.  The
address  of Unique  Co-Operative  Solutions  Inc./  Oscar L. Smith is 9185 Bond,
Overland  Park, KS 66214.  The address of Neoware  Systems,  Inc. is 400 Feheley
Dr., King of Prussia, PA 19406.

<TABLE>
<CAPTION>
                                               Number of Shares                     Percentage of
Name of Beneficial Owner                      Beneficially Owned                  Outstanding Shares
------------------------                      ------------------                  ------------------
<S>                                             <C>                                     <C>
Unique Co-Operative Solutions,
Inc./ Oscar L. Smith                            1,017,389(1)(3)                         15.0%
J. Gerald Combs                                   905,923(2)(3)(6)                      12.0%
JPMorganChase                                     750,000(5)                            11.2%
Neoware Systems, Inc.                             383,335(4)                             5.7%
Valtec Capital Corp.                              400,000(8)                             5.6%
John D. Ryan                                      173,872                                2.6%
Joseph Gardner                                     87,741(3)                             1.3%
Frank Stephens                                     87,293(3)(7)                          1.3%
Richard Bowman                                     75,000(3)                             1.1%
All current directors and executive
officers as a group                               423,906(3)                             6.1%
 (four individuals)
</TABLE>

----------

*     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 warrant vested immediately,  has an exercise price per share of
      common stock of $1.30, and expires five years following the date of grant.

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

(3)   Includes or consists of shares of Common Stock  issuable  upon exercise of
      options as follows:  Mr.  Smith:  40,000;  Mr. Combs:  480,000;  Mr. Ryan:
      82,833; Mr. Gardner: 72,833; Mr. Bowman: 40,000; and Mr. Stephens: 43,000.
      Includes or consists of shares of Common Stock  issuable  upon exercise of
      warrants as follows:  Mr. Combs:  5,834; Mr. Ryan: 3,889; and Mr. Gardner:
      1,945.

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

(5)   On June 27, 2002,  the Company  entered  into an  agreement  with its then
      secured  lenders to  terminate  its  revolving  line of credit (the "Chase
      Credit  Line").  In return for  termination  of the Chase Credit Line, the
      Company,  amongst other  consideration,  agreed to issue 750,000 shares of
      its common  stock and shares of its  newly-created  convertible  preferred
      stock (the  "Preferred  Stock")  with a stated  value of  $1,250,000.  The
      Company  had  agreed to  register  under the  Securities  Act of 1933 such
      common  stock  and the  shares  into  which


                                       44
<PAGE>

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

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

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

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

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


                                       45
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During the period from the  Petition  Date  through and January 28,  2005,
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.

      Net revenue from EMS  activities,  primarily  logistics  services  sold to
Unique  Co-operative  Solutions,  Inc.  ("UCSI"),  were $240 for the year  ended
December 31, 2004.  Net revenue from UCSI during 2003 and 2002 was not material.
UCSI is wholly owned by Mr. Oscar Smith, who also is the majority shareholder of
Vision  Technologies,  Inc.  ("Vision").  The Company's Plan of  Reorganization,
assuming  approval by the Bankruptcy  Court,  contemplates  that Vision will own
100%  of  the  Company.  Mr.  Smith  currently  owns  approximately  15%  of the
outstanding common stock of the Company.

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

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, 2004,  2003 and
2002 are as follows (amounts in dollars):


                                       46
<PAGE>

                                          2004          2003             2002
                                       ----------    ----------      ----------
BP Audit Group
Audit fees                             $   55,250    $   71,863      $   55,893
Audit-related fees                          8,639            --              --
Tax fees                                   15,384            --              --
All other fees                              1,788            --              --
                                       ----------    ----------      ----------
                                           81,061        71,863          55,893
                                       ----------    ----------      ----------
BDO Seidman, LLP
Audit fees                                                2,500          42,050
Audit-related fees                                           --          18,000
Tax fees                                                     --          66,792
All other fees                                               --          41,924
                                       ----------    ----------      ----------
                                               --         2,500         168,766
                                       ----------    ----------      ----------
Total Independent Accountant Fees
Audit fees                                 55,250        74,363          97,943
Audit-related fees                          8,639            --          18,000
Tax fees                                   15,384            --          66,792
All other fees                              1,788            --          41,924
                                       ----------    ----------      ----------
                                       $   81,061    $   74,363      $  224,659
                                       ==========    ==========      ==========

      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 2004 consisted of consulting  services related to
the  Company's  bankruptcy  filing.  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


                                       47
<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

<TABLE>
<CAPTION>
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K                      Page No.
                                                                                              --------
<S>                                                                                              <C>
(a)   (1)(2) Financial Statements and Schedules

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

      All other financial statements and schedules not listed have been omitted since the required
      information is either included in the Financial Statements and the Notes thereto as included in
      the Company's Annual Report on Form 10-K for the Year ended December 31, 2004 or is not
      applicable or required.

(b)   Reports on Form 8-K
</TABLE>

      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

                                  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.


                                       48
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.


                                       49
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       50
<PAGE>

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

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

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

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

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

21[5]             List of Subsidiaries

31                Section 302 Certification

32                Section 906 Certification

----------

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

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

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

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

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

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

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

[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.


                                       51
<PAGE>

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

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

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

**    Filed herewith


                                       52
<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: February 28, 2006

                                        BOUNDLESS CORPORATION

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

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

<TABLE>
<S>                              <C>                                                <C>
 /s/ John D. Ryan                Acting Chief Executive Officer                     February 28, 2006
--------------------------
John D. Ryan


/s/  Joseph Gardner              Vice President - Finance, Chief Financial
--------------------------       Officer (Principal Accounting Officer)             February 28, 2006
Joseph Gardner


/s/ Richard Bowman               Director                                           February 28, 2006
--------------------------
Richard Bowman


 /s/ Frank Stephens              Chairman, Board of Directors                       February 28, 2006
--------------------------
Frank Stephens
</TABLE>


                                       53
<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, 2004 and 2003             F-3

Consolidated Statements of Operations
  for the years ended December 31, 2004, 2003 and 2002                   F-4

Consolidated Statements of Comprehensive Loss
  for the years ended December 31, 2004, 2003 and 2002                   F-5

Consolidated Statements of Changes in Stockholders' Deficit
  for the years ended December 31, 2004, 2003 and 2002                   F-6

Consolidated Statements of Cash Flows
  for the years ended December 31, 2004, 2003 and 2002                   F-7

Notes to Consolidated Financial Statements                               F- 9-25

Schedule II - Valuation and Qualifying Accounts                          S-1


                                      F-1
<PAGE>

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

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,  2004  and 2003  and the  related  consolidated  statements  of  operations,
comprehensive loss, changes in stockholders'  deficit and cash flows for each of
the years in the three-year period then ended. We have also audited the schedule
of valuation and  qualifying  accounts for each of the years ended  December 31,
2004,  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, 2004 and 2003 and the  consolidated  results of their  operations  and their
cash  flows  for  each of the  years  in the  three-year  period  then  ended in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the schedule of valuation and qualifying accounts
presents fairly, in all material respects, the information set forth therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial  statements,  the Company and its  subsidiaries  filed for  protection
under Chapter 11 of the U.S.  Bankruptcy Code on March 12, 2003. The Company has
suffered  substantial  losses  from  operations  in each of its last four fiscal
years.  In addition,  as of December 31, 2004,  the Company has a  stockholders'
deficit  of  $14,905,000  and  has  working   capital  of  $632,000,   excluding
liabilities and other items subject to compromise of $14,622,000.  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

September 28, 2005


                                      F-2
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                           CONSOLIDATED BALANCE SHEETS
                          At December 31, 2004 and 2003
                                 (in thousands)

<TABLE>
<CAPTION>
ASSETS                                                        --------       --------
                                                                2004           2003
                                                              --------       --------
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents                                   $    124       $    373
  Cash on deposit with lender                                      271            328
  Trade accounts receivable, net                                 1,150            912
  Affiliate receivables                                             92             --
  Other receivables                                                117            143
  Inventories (Note 3)                                           1,094          2,072
  Prepaid expenses and other current assets                         59            179
                                                              --------       --------
     Total current assets                                        2,907          4,007
Property and equipment, net (Note 4)                               103            131
                                                              --------       --------
    Total assets                                              $  3,010       $  4,138
                                                              ========       ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities not subject to compromise
Current liabilities:
  Current portion of long-term debt                           $    350       $    837
  Accounts payable                                                  44            900
  Accrued salaries                                                  86             71
  Accrued legal fees                                             1,029            756
  Purchase order commitments                                       561          1,130
  Accrued payroll and sales tax payable                             30            212
  Accrued warranty                                                  18             59
  Other accrued liabilities (Note 6)                               157             81
                                                              --------       --------
     Total current liabilities                                   2,275          4,046
                                                              --------       --------

  Long-term debt, less current maturities (Note 8)                 953          1,581
  Deferred credits                                                  65            181
  Items subject to compromise:
  Manditorily redeemable preferred stock (Notes 7 & 9)           1,652          1,652
  Liabilities subject to compromise (Note 7)                    12,970         11,555
                                                              --------       --------
         Total liabilities                                      17,915         19,015
                                                              --------       --------

         COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)
Stockholders' deficit: (Note 9)
  Common stock                                                      67             67
  Additional paid-in capital                                    35,844         35,844
  Accumulated deficit                                          (50,816)       (50,788)
                                                              --------       --------
     Total stockholders'  deficit                              (14,905)       (14,877)
                                                              --------       --------
     Total liabilities and stockholders' deficit              $  3,010       $  4,138
                                                              ========       ========
</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, 2004, 2003 and 2002
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                    2004              2003              2002
                                                                -----------       -----------       -----------
<S>                                                             <C>               <C>               <C>
Revenue:
  Product sales                                                 $     6,400       $    10,718       $    25,029
  Services                                                              909             1,032             1,814
                                                                -----------       -----------       -----------
    Total revenue                                                     7,309            11,750            26,843
                                                                -----------       -----------       -----------
Cost of revenue
  Product sales                                                       5,010            10,165            25,651
  Services                                                              447               797             1,729
                                                                -----------       -----------       -----------
    Total cost of revenue                                             5,457            10,962            27,380
                                                                -----------       -----------       -----------

     Gross margin (loss)                                              1,852               788              (537)
                                                                -----------       -----------       -----------

Operating expenses
  Sales and marketing                                                   295               610             2,193
  General and administrative                                            989             2,032             2,969
  Research and development                                              150               170               959
  Interest expense (excluding contractual interest of $64
    and $49 not recognized in 2004 and 2003, respectively)              129               804             1,402
                                                                -----------       -----------       -----------
                                                                      1,563             3,616             7,523
                                                                -----------       -----------       -----------
                                                                        289            (2,828)           (8,060)
Other expense (income)
  Loss on reimbursement of employee services
    (net of reimbursement of $255)                                       51                --                --
  Loss on extinguishment of debt                                         --               289                --
  Write-off of goodwill and other intangible assets                      --                --             3,262
  Net gain on restructuring of payables                                  --                --            (3,924)
  Other charges (credits)                                              (218)             (193)              225
                                                                -----------       -----------       -----------
Income (loss) before reorganization items                               456            (2,924)           (7,623)

Reorganization items (Note 15)                                         (484)             (655)               --
                                                                -----------       -----------       -----------
Net loss                                                                (28)           (3,579)           (7,623)
  Accretion of preferred stock                                           --                99               148
                                                                -----------       -----------       -----------
Net loss attributable to common stockholders                    $       (28)      $    (3,678)      $    (7,771)
                                                                ===========       ===========       ===========

Basic and diluted loss per common share                         $        --       $     (0.55)      $     (1.21)
                                                                ===========       ===========       ===========

Basic and diluted weighted average shares outstanding                 6,706             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, 2004, 2003 and 2002
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                      -----------       -----------       -----------
                                          2004              2003              2002
                                      -----------       -----------       -----------
<S>                                   <C>               <C>               <C>
Net loss                              $       (28)      $    (3,579)      $    (7,623)
Other comprehensive  income:
  Cash flow hedges, net of taxes               --                --               141
                                      -----------       -----------       -----------
Total comprehensive loss              $       (28)      $    (3,579)      $    (7,482)
                                      ===========       ===========       ===========
</TABLE>

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


                                      F-5
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
              For the Years Ended December 31, 2004, 2003 and 2002
                                 (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)
Net loss                                                                                     (28)                              (28)
                                         --------       -------       ----------      ----------       ----------       ----------
Balance, December 31, 2004                  6,705       $    67       $   35,844      $  (50,816)      $       --       $  (14,905)
                                         ========       =======       ==========      ==========       ==========       ==========
</TABLE>

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


                                      F-6
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2004, 2003 and 2002
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 ----------
                                                                                       2004          2003          2002
                                                                                    ---------     ---------     ---------
<S>                                                                                 <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss) before reorganization items                                           456        (2,924)       (7,623)
  Adjustments to reconcile net income (loss) to net cash provided by (used in)
       operating activities:
    Gain on restructuring of payables                                                      --            --        (3,924)
    Depreciation and amortization                                                          43           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                                                          (116)          (94)          (91)
    Provision (credit) for doubtful accounts                                             (117)          104           599
    Provision (credit) for excess and obsolete inventory                                 (109)        1,169           565
Changes in assets and liabilities:
  Cash on deposit with lender                                                              57          (328)           --
  Trade accounts receivable                                                              (121)        1,357         6,999
  Affiliate receivables                                                                   (92)           --            --
  Other  receivables                                                                       26           (60)           --
  Income tax refunds                                                                       --             4             9
  Inventories                                                                           1,087          (198)        5,594
  Other assets                                                                            120            71           562
  Accounts payable and accrued expenses                                                  (583)         (763)       (4,522)
                                                                                    ---------     ---------     ---------

Net cash provided by (used in) operating activities                                       651          (617)        3,950
                                                                                    ---------     ---------     ---------
Cash flows provided by (used in) reorganization activities:
  Reorganization expenses                                                                (484)         (655)           --
  Gain on disposition of property and equipment                                           (23)         (685)           --
  Proceeds from disposition of property                                                    23           189
  Increase in liabilities, net                                                            273         1,176            --
                                                                                    ---------     ---------     ---------
Net cash provided by (used in) reorganization activities                                 (211)           25            --
                                                                                    ---------     ---------     ---------
Cash flows from investing activities:
  Capital expenditures                                                                    (15)           --          (127)
  Proceeds from sale of assets                                                                          117           443
                                                                                    ---------     ---------     ---------
Net cash provided by (used in) investing activities                                       (15)          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                                           (674)         (728)       (5,927)
                                                                                    ---------     ---------     ---------
Net cash provided by (used in) financing activities                                      (674)          844        (4,287)
                                                                                    ---------     ---------     ---------
Net increase (decrease) in cash and cash equivalents                                     (249)          369           (21)
Cash and cash equivalents at beginning of year                                            373             4            25
                                                                                    ---------     ---------     ---------
Cash and cash equivalents at end of year                                            $     124     $     373     $       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 December 31, 2004, 2003 and 2002
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                             2004           2003           2002
                                                                          ---------      ---------      ---------
<S>                                                                       <C>            <C>            <C>
Non-cash transactions:
  Asset sale proceeds paid directly to creditors                          $      --      $   7,000      $      --
  Equipment acquisitions funded through debt                                     --             --             16
  Common stock issued in exchange for debt                                       --             --            412
  Manditorily redeemable preferred stock issued in exchange for debt             --             --          1,406
Cash paid for:
  Interest                                                                       91            123          1,737
  Taxes                                                                           4             --             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. Additionally,  the Company is
delinquent in its filings with the  Securities  and Exchange  Commission  and is
required to file those delinquent reports prior to gaining confirmation.

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.  The Company's  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, 2004 and 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 its
historical  success in POS to establish a strong link between the  Company's and
POS'  applications.  A key  activity in support of the POS  initiative  includes
leveraging the Company's existing technology platforms

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

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

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

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

DIP Financing

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

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


                                      F-10
<PAGE>

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

2. Summary of Significant Accounting Policies

Basis of Presentation

Boundless  Corporation is a holding  company whose  principal  subsidiaries  are
Boundless  Technologies,  Inc.,  Boundless  Manufacturing  Services,  Inc.,  and
Merinta Inc. The consolidated  financial  statements include the accounts of all
of the majority-owned subsidiaries.

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

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, after
elimination of intercompany  accounts and transactions.  As of December 31, 2004
the  Company  owned  100%,  84%,  and 75% 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.  The Company had $271 and $328 classified
as "cash on deposit with  lender" at December  31, 2004 and 2003,  respectively,
representing  cash  on-hand  in a  lockbox  account  under  the  control  of the
Company's DIP lender.  On approval of the DIP lender the Company  accesses these
funds,  further,  the lender  withdraws  payments on terms of its DIP  financing
agreement discussed above.

Allowance for Doubtful Accounts

An  allowance  for   uncollectible   trade  receivables  is  provided  based  on
management's  analysis of write-off history,  aging analysis,  and any specific,
known  troubled  accounts.  Periodically  management's  review of this allowance
could  result  in a  reduction  and  corresponding  credit to the  statement  of
operations.  The Company  recorded a credit to bad debt expense of $117 in 2004,
and recorded bad debt expense of $104 and $599 for the years ended  December 31,
2003 and 2002,  respectively.  The allowance for doubtful  accounts was $501 and
$623 at December 31, 2004 and 2003, respectively.

Inventory

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

Property and Equipment

Property  and  equipment  are stated at cost.  Depreciation  is  computed on the
straight-line  method over the estimated  useful lives of the assets.  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 2002,  the  Company  recorded  an expense of $775 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 loss is included in other
charges for the year ended 2002.

Goodwill

Due to its March 2003  Chapter 11  proceedings,  in December  2002,  the Company
recorded an expense of $3,262 to remove the remaining  unamortized book value of
all goodwill and associated intellectual property.

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


                                      F-11
<PAGE>

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

fair  value  of  liabilities  and  other  items  subject  to  compromise  is not
determinable.

Revenue Recognition

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

Supplier Concentration

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

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 would provide post-petition  manufacturing,
production and delivery  services to the Company.  The Company placed with 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 with the
Company;  and  generally  resulted  in a reduction  of the number of  components
required by the Company with respect to the original delivery dates. On November
7, 2003,  Ansen  notified the Company of its  intention  to terminate  the Ansen
Agreement  due to the  alleged  failure of the Company to accept and pay for the
components as originally scheduled.  By subsequent  agreement,  the Company will
continue to purchase any remaining  components from Ansen as needed; and, should
any  components  remain as of the Effective  Date, the Company will purchase the
then  remaining  balance.  Ansen  continues  to deliver  the  components  to the
Company. The balance due Ansen was approximately $561 and $1,130 at December 31,
2004 and 2003,  respectively;  and such balance is included in  "Purchase  order
commitments" on the balance sheets.

Due to the Company's poor working  capital  position  immediately  preceding its
bankruptcy filing, Hewlett Packard agreed to provide the cash the Company needed
to purchase  components  necessary for the  manufacturing  of Hewlett  Packard's
product  requirements.  During the period from  December  2002 through July 2003
Hewlett Packard purchased approximately $1,493 of components.

Concentration of Credit Risk

The  Company is  required  by SFAS No. 105,  "Disclosure  of  Information  about
Financial   Instruments  with   Concentrations  of  Credit  Risk,"  to  disclose
concentrations  of  credit  risk  regardless  of the  degree of such  risk.  The
Company's  financial  instruments that are exposed to  concentrations  of credit
risk  consist  primarily  of  cash  and  cash  equivalents  and  trade  accounts
receivable.  The  Company's  cash policy limits credit  exposure;  however,  for
limited  periods  of time  during  the year bank  balances  may  exceed the FDIC
insurance coverage. The Company routinely assesses the financial strength of its
customers and as a  consequence,  believes that its accounts  receivable  credit
risk exposure is limited. No collateral is required.  The Company extends credit
in the normal  course of business to a number of  distributors  and  value-added
resellers in the computer industry. The Company had three customers representing
16%, 14% and 11% of revenues,  respectively, in 2004, two customers representing
32% and 13% of revenues,  respectively,  in 2003, and one customer  representing
14% of revenues in 2002.

Shipping and Handling

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

Advertising

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense  was $0, $12 and $94 for the years ended  December  31,  2004,  2003 and
2002.

Income Taxes

As more fully  discussed in Note 5, income taxes are provided in accordance with
the liability  method of accounting  for income taxes


                                      F-12
<PAGE>

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

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.

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 2004, 2003 or 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.

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

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.

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.  Should this analysis  indicate that the demand for
product has increased from previous estimates,  a decrease in the reserves would
be affected through a credit to the statement of operations.  For the year ended
December 31, 2004 the Company  recorded a credit of $109 for excess and obsolete
inventory  as  compared  to a  provision  of  $1,169  and $565 in 2003 and 2002,
respectively.

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,
                                                  ------------     ------------
                                                      2004             2003
                                                  ------------     ------------
Raw materials and purchased components            $      1,584     $      2,843
Finished goods                                             126              135
Manufacturing inventory reserves                          (935)          (1,242)
Service parts                                              319              336
                                                  ------------     ------------
                                                  $      1,094     $      2,072
                                                  ============     ============

4. Property and Equipment

Property and equipment consists of the following:

                                                  December 31,     December 31,
                                                  ------------     ------------
                                                      2004             2003
                                                  ------------     ------------
Machinery and equipment                           $      6,519     $      6,605
Less accumulated depreciation and amortization           6,416            6,474
                                                  ------------     ------------
                                                  $        103     $        131
                                                  ============     ============

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

Depreciation  expense for the years ending  December 31, 2004, 2003 and 2002 was
$43, $752 and $1,557, respectively. The Company recorded repairs and maintenance
expenses of $13, $26 and $102 for the years ended  December  31, 2004,  2003 and
2002.

5. Income Taxes


                                      F-14
<PAGE>

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

      Due to the reported net losses,  there were no  provisions  for current or
deferred  federal or state income  taxes for the years ended  December 31, 2004,
2003 or 2002.

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

<TABLE>
<CAPTION>
                                                    2004            2003            2002
                                                -----------     -----------     -----------
<S>                                             <C>             <C>             <C>
Federal income tax benefit at statutory rate    $       (10)    $    (1,217)    $    (2,592)
Losses not producing tax benefits                        10           1,217           2,592
                                                -----------     -----------     -----------
  Income tax benefit                            $        --     $        --     $        --
                                                ===========     ===========     ===========
</TABLE>

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

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

                                                         2004           2003
                                                      ----------     ----------
Current deferred tax assets:
  Inventory                                           $      702     $      702
  Accounts receivable                                        259            321
  Warranties                                                  79            145
  Other deferred tax assets                                  679            676
  Less valuation allowance                                (1,719)        (1,844)
                                                      ----------     ----------
    Total current deferred tax assets                 $       --     $       --
                                                      ==========     ==========

Noncurrent deferred tax assets- Goodwill
   and other                                          $      828     $      835
Noncurrent deferred tax liabilities- Property
   and equipment                                            (675)          (588)
Net operating loss carryforwards                          15,955         15,726
Less valuation allowance                                 (16,108)       (15,973)
                                                      ----------     ----------
    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:

                                                         2004            2003
                                                      ----------     ----------
Current deferred tax asset valuation allowance        $     (125)    $     (175)
Long-term deferred tax asset valuation allowance             135          1,390
                                                      ----------     ----------
                                                      $       10     $    1,215
                                                      ==========     ==========

6. Other accrued liabilities

      At December 31, 2004 and 2003 other accrued  liabilities  consisted of the
following:


                                      F-15
<PAGE>

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

                                                          2004           2003
                                                      -----------    -----------
Accrued interest expense                              $       100    $        60
Accrued audit expense                                           1             12
Other accrued expenses                                         56              9
                                                      -----------    -----------
                                                      $       157    $        81
                                                      ===========    ===========

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.

As a result of the bankruptcy  proceedings,  certain  accounts payable have been
re-characterized as liabilities subject to compromise in 2004. In addition, as a
result  of  other  bankruptcy  proceedings  certain  capital  lease  obligations
previously  reported in long-term debt are now  re-characterized  as liabilities
subject to compromise. See Note 8- Debt.

At December  31, 2004 and 2003,  the  Company  had  liabilities  and other items
subject to compromise of  approximately  $14,622 and $13,207 which  consisted of
the following:

<TABLE>
<CAPTION>
                                                             2004            2003
                                                          -----------    -----------
<S>                                                       <C>            <C>
Liabilities:
Accounts payable                                          $    10,948    $     9,971
Convertible notes payable, principally related to
  prior separation agreements                                     965            965
Accrued salaries                                                  397            397
Accrued warranty                                                  222            222
Capital lease obligations                                         438             --
                                                          -----------    -----------
                                                               12,970         11,555
Other:
Manditorily redeemable preferred stock                          1,652          1,652
                                                          -----------    -----------
                                                          $    14,622    $    13,207
                                                          ===========    ===========
</TABLE>

      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.

      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


                                      F-16
<PAGE>

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

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.

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

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

      Since the Plan of Reorganization  contemplates that all equity instruments
of the Company will be cancelled on the Effective Date, the Company discontinued
the  accretion of the  difference  between the carrying  value of the  preferred
stock and its face value to earnings available to stockholders.

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

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

8. Debt

Long-term debt at December 31, 2004 and 2003 consisted of the following:

<TABLE>
<CAPTION>
                                                                        2004          2003
                                                                    -----------    -----------
<S>                                                                 <C>            <C>
Note payable toValtec Capital Corporation, bearing interest at
   8%, collateralized by receivables, inventory and equipment       $       653    $     1,321
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            650
Capital lease obligations, secured by underlying assets                      --            447
                                                                    -----------    -----------
                                                                          1,303          2,418
Less current maturities on long-term debt                                   350            837
                                                                    -----------    -----------
                                                                    $       953    $     1,581
                                                                    ===========    ===========
</TABLE>


                                      F-17
<PAGE>

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

The aggregate debt schedule maturities is as follows:

2005                              $       350
2006                                      351
2007                                      204
2008                                      221
2009                                      177
                                  -----------
                                  $     1,303
                                  ===========

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

As a result of other bankruptcy  proceedings  certain capital lease  obligations
previously  reported in long-term debt are now  re-characterized  as liabilities
subject to compromise. See Note 7- Liabilities Subject to Compromise.

9. Equity

At December 31, 2004 and 2003, stockholders' deficit consisted of the following:

<TABLE>
<CAPTION>
                                                            2004            2003
                                                        -----------     -----------
<S>                                                     <C>             <C>
Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                               $        --     $        --
Common stock, $0.01 par value, 25,000,000 shares
  authorized,6,705,613 shares issued and outstanding             67              67
Additional paid-in capital                                   35,844          35,844
Accumulated deficit                                         (50,816)        (50,788)
                                                        -----------     -----------
     Total stockholders' deficit                        $   (14,905)    $   (14,877)
                                                        ===========     ===========
</TABLE>

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. 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


                                      F-18
<PAGE>

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

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.

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, 2004 and 2003.

Assuming none of the holders of the  Preferred  Stock convert to Common Stock of
Boundless  Corporation,  the  Company  would be  required  to record a charge to
earnings available to stockholders over the ten-year redemption period such that
the carrying  value of the Preferred  Stock equals its face value at the time of
redemption.  Pre-petition,  the  difference  between the  carrying  value of the
preferred  stock and its face value was being  treated as a dividend and charged
to earnings available to stockholders over the ten-year redemption period unless
conversion occurs, in which case accretion terminates at that point. As a result
of the  bankruptcy,  in the  third  quarter  of 2003  the  Company  discontinued
accreting the difference.  As of December 31,2004, $247 was accreted and charged
to losses attributable to common stockholders.  Since the Plan of Reorganization
contemplates that all equity instruments of the Company will be cancelled on the
Effective Date, the Company discontinued the accretion of the difference between
the carrying value of the preferred stock and its face value.

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  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.

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 year ended  December  31,  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


                                      F-19
<PAGE>

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

cost for the Company's  employee  stock options  granted had been  determined in
accordance  with the fair value based  method  prescribed  in SFAS No. 123.  The
Company estimates the fair value of each stock option at the grant date by using
the  Black-Scholes  option pricing model. No options or warrants were granted in
2004 or 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

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:

                                             2004          2003          2002
                                          ---------     ---------     ---------
Net loss
  As reported                             $     (28)    $  (3,579)    $  (7,623)
  Under SFAS No. 123                            (28)       (3,696)       (8,096)

Net loss per share
  As reported - basic                     $   (0.00)    $   (0.55)    $   (1.21)
  As reported - diluted                       (0.00)        (0.55)        (1.21)
  Under SFAS No. 123 - basic                  (0.00)        (0.55)        (1.26)
  Under SFAS No. 123 - diluted                (0.00)        (0.55)        (1.26)

A summary  of the status of the  Company's  stock  options  and  warrants  as of
December 31, 2004 and 2003,  and changes  during the years ending on those dates
is as follows:

<TABLE>
<CAPTION>
Options -Boundless Corporation                   2004                          2003
                                        ------------------------     -------------------------
                                                      Weighted                       Weighted
                                                       Average                        Average
                                                      Exercise                       Exercise
                                          Shares        Price          Shares          Price
                                        ----------    ----------     ----------     ----------
<S>                                      <C>          <C>             <C>           <C>
Outstanding at beginning of year         1,992,715    $     2.50      2,326,247     $     2.42
  Granted                                       --            --             --             --
  Exercised                                     --            --             --             --
  Forfeited                               (587,265)        (1.94)      (333,532)         (1.92)
                                        ----------    ----------     ----------     ----------
Outstanding at end of year               1,405,450    $     2.74      1,992,715     $     2.50
                                        ==========    ==========     ==========     ==========
Options exercisable at end of year       1,362,032    $     2.81      1,653,171     $     2.92
                                        ==========    ==========     ==========     ==========
Weighted average fair value
  of options granted during the year                      N/A                           N/A
                                                      ==========                    ==========
</TABLE>


                                      F-20
<PAGE>

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

<TABLE>
<CAPTION>
Warrants- Boundless Corporation                    2004                          2003
                                         ------------------------     -------------------------
                                                       Weighted                       Weighted
                                                        Average                        Average
                                                       Exercise                       Exercise
                                           Shares        Price          Shares          Price
                                         ----------    ----------     ----------     ----------
<S>                                       <C>          <C>             <C>           <C>
Outstanding at beginning of year          1,463,560    $     3.27      1,530,900     $     3.55
  Granted                                        --            --             --             --
  Exercised                                      --            --             --             --
  Forfeited                                (380,002)        (7.30)       (67,340)         (9.69)
                                         ----------    ----------     ----------     ----------
Outstanding at end of year                1,083,558    $     1.86      1,463,560     $     3.27
                                         ==========    ==========     ==========     ==========
Warrants exercisable at end of year       1,083,558    $     1.86      1,463,560     $     3.27
                                         ==========    ==========     ==========     ==========
Weighted average fair value
  of warrants granted during the year                       N/A                           N/A
                                                       ==========                    ==========
</TABLE>

The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at December 31, 2004:

<TABLE>
<CAPTION>
                                                                          Weighted
                                        Number          Weighted           Average            Number
                                    Outstanding at      Average           Remaining       Exercisable at
                                     December 31,       Exercise         Contractual       December 31,
     Options - Boundless Corp.           2004            Price          Life (Years)           2004
                                    --------------     ----------       ------------       ------------
<S>                                      <C>           <C>                      <C>          <C>
                                           207,400         $ 0.45               2.83           163,982
                                           215,000           1.03               1.81           215,000
                                           148,000           1.05               2.14           148,000
                                           220,000           1.50               1.45           220,000
                                            30,050           2.60               1.15            30,050
                                           130,000           4.50               2.00           130,000
                                           150,000           4.88               2.00           150,000
                                           100,000           5.00               2.00           100,000
                                           205,000           5.62               2.00           205,000
                                      ------------     ----------          ---------       -----------
                                         1,405,450     $     2.74               2.01         1,362,032
                                      ============     ==========          =========       ===========
<CAPTION>

                                                                         Weighted
                                       Number          Weighted           Average            Number
                                   Outstanding at      Average           Remaining       Exercisable at
                                    December 31,       Exercise         Contractual       December 31,
    Warrants - Boundless Corp.          2004            Price          Life (Years)           2004
                                   --------------     ----------       ------------       ------------
<S>                                      <C>           <C>                      <C>          <C>
                                           400,000     $     0.36               2.92           400,000
                                           172,430           0.65               2.51           172,430
                                           144,939           0.84               2.17           144,939
                                            64,409           1.30               1.42            64,409
                                             6,946           1.33               1.43             6,946
                                            20,834           1.36               1.41            20,834
                                            27,500           2.40               0.15            27,500
                                            46,500           5.00               1.01            46,500
                                           150,000           5.80               0.38           150,000
                                            50,000           6.88               0.40            50,000
                                      ------------     ----------          ---------       -----------
                                         1,083,558     $     1.86               2.01         1,083,558
                                      ============     ==========          =========       ===========
</TABLE>


                                      F-21
<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 connection  with a sale of the Company's  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 expire on the fifth  anniversary  from the date of
issuance.

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

In 2002  the  Company  issued  certain  convertible  notes  in  connection  with
separation agreements.  These are included in liabilities subject to compromise.
See Note 7- Liabilities Subject to Compromise.

Net revenue from EMS  activities,  primarily  logistics  services sold to Unique
Co-operative Solutions,  Inc. ("UCSI"), was $240 for the year ended December 31,
2004.  Net  revenue  from UCSI during  2003 and 2002 was not  material.  UCSI is
wholly owned by Mr. Oscar Smith, who also is the majority  shareholder of Vision
Technologies,  Inc. ("Vision").  The Company's Plan of Reorganization,  assuming
approval by the Bankruptcy Court,  contemplates that Vision will own 100% of the
Company.  Mr. Smith currently owns  approximately 15% of the outstanding  common
stock of the Company.

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

12. Commitments

Leases

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

Total rent expense was $336 and $91 in 2004 and 2003, respectively.

Future minimum rental commitments as of December 31, 2004 were as follows:

2005                         $    221
2006                              228
2007                              235
2008                              242
2009                               41
                             --------
                             $    967
                             ========

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.


                                      F-22
<PAGE>

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

14. Segment Reporting and Geographic Information

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

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

Foreign sales were  approximately  $1,929,  $3,473 and $7,430 for 2004, 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:

                               2004           2003            2002
                            ----------     ----------     ----------
Western Europe                      21%            25%            17%
Other European countries             1%             0%             0%
Other foreign countries              5%             4%            11%
                            ----------     ----------     ----------
     Total                          27%            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. During 2003, the
Company discontinued employee contributions.

16. Reorganization Expenses

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
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.

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

                                                        2004           2003
                                                     ----------     ----------
Professional fees                                    $      298     $    1,266
United States District Court fees                            25             32
Facility relocation expenses                                184             42
Gain on the disposition of building and equipment           (23)          (685)
                                                     ----------     ----------
                                                     $      484     $      655
                                                     ==========     ==========

17. Selected Quarterly Financial Data - (unaudited)

Provided below is the selected unaudited  quarterly financial data from 2004 and
2003.


                                      F-23
<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,
                                                       --------------------------------------------------------
                                                           2004           2004           2004           2004
                                                       -----------     ----------     ----------     ----------
<S>                                                     <C>            <C>            <C>            <C>
Net revenue                                             $    1,903     $    1,412     $    1,811     $    2,183
Cost of product sold and services                            1,471          1,077          1,370          1,539
Gross profit                                                   432            335            441            644
Net income (loss)                                       $       85     $      (13)    $     (111)    $       11

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

<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 six months ended
                                                          June 30,       June 30,
                                                        --------------------------
                                                           2004            2003
                                                        -----------    -----------
<S>                                                     <C>            <C>
Net revenue                                             $     3,994    $     6,478
Cost of product sold and services                             2,909          5,787
Gross profit (loss)                                           1,085            691
Net income (loss)                                       $      (100)   $    (2,374)

Per share amounts:
Basic and diluted net loss per common share             $     (0.01)   $     (0.37)

<CAPTION>
                                                         For the nine months ended
                                                       September 30,   September 30,
                                                       -------------   -------------
                                                           2004            2003
                                                       -------------   -------------
<S>                                                     <C>            <C>
Net revenue                                             $     5,406    $     9,939
Cost of product sold and services                             3,986          8,557
Gross profit                                                  1,420          1,382
Net income (loss)                                       $      (113)   $    (2,466)

Per share amounts:
Basic and diluted net loss per common share             $     (0.02)   $     (0.38)
</TABLE>


                                      F-24
<PAGE>

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

18. 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 its debtor-in-possession ("DIP") financing and
to release its liens on the Company's personal  property.  At the same time, the
Company entered into another secured DIP financing  agreement with  Entrepreneur
Growth Capital,  LLC ("EGC")  pursuant to which EGC was granted a lien on all of
the Company's personal property.

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

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


                                      F-25
<PAGE>

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

<TABLE>
<CAPTION>
                                               Balance at
                                              Beginning of                                             Balance at End
           Description                           Period          Additions          Deductions           of Period
-----------------------------------          --------------     -----------         ----------         --------------
<S>                                           <C>               <C>                 <C>                 <C>
Allowances:
 Doubtful accounts:
         2004                                 $      623        $      (117)        $      5  (A)       $      501
         2003                                        763        $       104              244  (A)       $      623
         2002                                      1,348                599            1,184  (A)              763
 Manufacturing inventory reserves:
         2004                                      1,242               (109)             198  (B)              935
         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-1