<PAGE>

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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

       (MARK ONE)
               [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

               FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997

               [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

               FOR TRANSITION PERIOD FROM               TO

                        COMMISSION FILE NUMBER 0-18690

                                  RADIUS INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              CALIFORNIA                                   68-0101300
(STATE OR OTHER JURISDICTION OF                         (I.R.S. EMPLOYER 
  INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)



                 215 MOFFETT PARK DRIVE
                 SUNNYVALE, CA                               94089
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)         (ZIP CODE)

                                (408) 541-6100
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


      SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:   NONE

   SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  COMMON STOCK

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.  YES   X   NO
                                               -----    -----

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANTS 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.  (    )

                                                         AS OF DECEMBER 31, 1997
                                                         -----------------------
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT BASED ON THE CLOSING
BID PRICE OF SUCH STOCK:                                       $18,951,716

NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:                   55,092,198

                      DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD FEBRUARY 11, 1998 ARE INCORPORATED BY REFERENCE INTO
PART III (ITEMS 10, 11, 12, AND 13) HEREOF.

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<PAGE>


                                  RADIUS INC.
                        1997 ANNUAL REPORT ON FORM 10-K

                               TABLE OF CONTENTS


PART I                                                                      Page
                                                                            ----
ITEM 1.   Business .........................................................  2
ITEM 2.   Properties .......................................................  8
ITEM 3.   Legal Proceedings ................................................  9
ITEM 4.   Submission of Matters to a Vote of Security Holders ..............  9
ITEM 4A.  Executive Officers of Registrant .................................  9


PART II

ITEM 5.   Market for Registrant's Common Equity and Related 
          Shareholder Matters .............................................. 11
ITEM 6.   Selected Financial Data .......................................... 12
ITEM 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations ............................................ 13
ITEM 7A   Quantitative and Qualitative Disclosures about Market Risk ....... 27
ITEM 8.   Financial Statements and Supplementary Data ...................... 27
ITEM 9.   Changes in and Disagreements With Accountants on Accounting and
          Financial Disclosure ............................................. 27


PART III

ITEM 10.  Directors and Executive Officers of the Registrant ............... 28
ITEM 11.  Executive Compensation ........................................... 28
ITEM 12.  Security Ownership of Certain Beneficial Owners and Management ... 28
ITEM 13.  Certain Relationships and Related Transactions ................... 28


PART IV

ITEM 14.  Exhibits, Financial Statement Schedule, and Reports on Form 8-K .. 29


SIGNATURES ................................................................. 34


Radius, the Radius logo, SuperMac, Super Match, PressView, PrecisionView,
MultiView, IntelliColor, Precision Color, Cinepak, Thunder, Thunder Storm,
VideoFusion and VideoVision, among others are registered trademarks and/or
registered service marks of Radius Inc. or one of its subsidiaries. Radius
Edit, Radius Edit, EditDV, MotoDV, and Super Resolution, among others, are
trademarks and/or service marks of Radius Inc. or one of it subsidiaries.
Other brands or products contained in this document are trademarks, service
marks, registered trademarks or registered service marks of their respective
holders and should be treated as such.


                                      -1-

<PAGE>

                                    PART I

ITEM 1.   BUSINESS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: The following discussion
contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 that are subject to risks and uncertainties.
Statements indicating that the Company or management "intends", "plans",
"expects," "estimates" or "believes" are forward-looking, as are all other
statements concerning future financial results, product offerings or other
events that have not yet occurred. There are several important factors that
could cause actual results or events to differ materially from those
anticipated by the forward-looking statements contained in this discussion and
other sections of this Form 10-K. Such factors include, but are not limited
to: the Company's ability to achieve profitability; the Company's ability to
dispose of its remaining holdings in Splash on a timely and profitable basis;
the Company's ability to repay its indebtedness to IBM Credit; the Company's
ability to successfully negotiate a favorable license renewal for Apple Quick
Time 3.0 (and greater); the timely payment of royalty obligations by Umax to
the Company and Umax's success in the Mac clone business, the Company's
ability to successfully renew its lease of space for its main offices in
Sunnyvale; the Company's ability to successfully conclude or settle its patent
infringement litigation with EFI, the success of the Apple Macintosh computer
line and operating system, the success of Apple as well as the Company's
ability to compete successfully with Apple; the Company's ability to
successfully develop and introduce new products to keep pace with
technological innovation, particularly in light of its limited financial
resources; the Company's ability to successfully market its software products
and to execute its cross platform strategy; the Company's ability to compete
in its market; the ability of the Company's manufacturers and suppliers to
deliver components and manufacture the Company's products; the Company's
reliance on international sales and the effect of its partially exclusive
distributor arrangements with respect to Europe and Japan; and the Company's
ability to attract and retain its key personnel.

OVERVIEW

     The Company designs, develops, assembles, markets and supports color
publishing and digital video computer products for creative professionals.
The Company's current product line includes: multimedia authoring and editing
video systems and software that can acquire and manipulate video and audio
information; high resolution color reference displays that allow users to
view text, graphics, images and video; accelerated color graphics products
that facilitate the creation of graphical images; and PCI bus adapter cards
featuring Windows compatibility to users of MacOS products ("PC on a card" or
"DOS on Mac" products).

     The primary target markets for the Company's products are color
publishing and multimedia. These markets encompass creative professionals
involved in such areas as multimedia authoring, color prepress, graphic arts,
video editing, video and multimedia production and playback and corporate
training.

     To date, substantially all of the Company's products have been designed
for and sold to users of Macintosh computer products (the "Macintosh")
manufactured by Apple Computer, Inc. ("Apple") as Apple products have been the
preferred platform in the Company's target markets.  The Company's current
product development plans include adding cross platform (Windows) capabilities
to some of the Company's products in order to market these products to users
of the Windows operating system.

     As shown in the accompanying consolidated financial statements, the
Company has incurred substantial operating and net losses.  During fiscal 1996
and 1997, management implemented a number of actions to address its cash flow
and operating issues including: restructuring its outstanding indebtedness to
trade creditors and its secured creditor, as discussed below; refocusing its
efforts on providing solutions for high end digital video and graphics
customers; discontinuing sales of mass market and other low value added
products; divesting a number of businesses and product lines, including its
Color Server Group, which is now known as Splash Technology Holdings, Inc.
("Splash"); significantly reducing expenses and headcount; and reducing its
lease obligations for its current facility lease given its reduced occupancy
requirements.

     During September 1996, the Company, IBM Credit Corporation ("IBM Credit")
and many of the Company's unsecured creditors consummated a restructuring of
the Company's then outstanding delinquent indebtedness pursuant to which the
Company's creditors received equity in satisfaction of their claims (the
"Plan").  The Company issued 36,294,198 shares of Common Stock in satisfaction
of approximately $45.9 million in unsecured claims and repaid approximately
$1.9 million of unsecured claims, most of which were less than $50,000, at an
average discount of approximately 75% of the amount of the claim. The Company
also issued 750,000 shares of its Series A Convertible Preferred Stock and
warrants to purchase 600,000 shares of Common Stock to IBM Credit in
satisfaction of $3.0 million indebtedness and in consideration of
restructuring its then remaining approximately $23.4 million indebtedness to
IBM Credit.  All 750,000 shares of Convertible Preferred Stock were redeemed
by


                                      -2-

<PAGE>

the Company in September 1997 at which time all long term debt to IBM
Credit was repaid with the proceeds from the sale of shares of Splash Common
Stock held by the Company.  As of December 31, 1997 the Company's working
capital line of credit obligation to IBM Credit was $6.5 million.

     The Company's executive offices are located at 215 Moffett Park Drive,
Sunnyvale, CA 94089, and its telephone number is (408) 541-6100.

RECENT DEVELOPMENTS

POTENTIAL NASDAQ SMALLCAP MARKET DELISTING

     The Company's Common Stock is listed on the Nasdaq SmallCap Market
pursuant to an agreement with the NASD which requires that the Company comply
with the continued listing requirements for the Nasdaq SmallCap Market.
Failure to meet the continued listing requirements in the future would subject
the Common Stock to delisting.  Companies traded on the Nasdaq SmallCap Market
will be required commencing in March 1998, for example, to maintain a minimum
bid price of $1.00 per share.  Because the Company's Common Stock has not
traded over $1.00 per share since November 1996, the Common Stock could be
delisted from the Nasdaq SmallCap Market.  As a result, the Board of
Directors has proposed, subject to shareholder approval at the February 1998
annual meeting of shareholders, a significant reverse stock split if the
trading price of the Company's Common Stock remains below $1.00 per share, but
there can be no assurance that such a proposal will be timely approved by the
shareholders, or if approved, that the stock price will perform as hoped.  If
the Company's Common Stock is delisted, there can be no assurance that the
Company will meet the requirements for initial inclusion on Nasdaq in the
future, particularly in light of the fact that Nasdaq requires traded
securities to have a $4.00 minimum per share bid requirement. Moreover, the
NASD is considering the elimination of the SmallCap Market altogether.
Trading, if any, in the listed securities after delisting or the elimination
of the SmallCap Market would be conducted in the over-the-counter market in
what are commonly referred to as the "pink sheets."  As a result, investors
may find it more difficult to dispose of, or to obtain accurate quotations as
to the value of, the Company's securities

VALUE AND LIQUIDITY OF INTEREST IN SPLASH TECHNOLOGY HOLDINGS, INC.

     A significant portion of the Company's net worth and liquidity is
represented by the Company's remaining holdings in Splash.  As of December 31,
1997, the Company owned 530,139 shares of Splash Common Stock, net of IBM
Credit's option to purchase 174,113 shares at a nominal price.  As of that
date the closing price for Splash Common Stock was $22.50 per share.  Although
the Company may trade its shares in the open market pursuant to Rule 144 or
privately, the market price of Splash Common Stock has been volatile with
relatively limited volume since Splash's secondary public offering in August
1997.  There are other shareholders in Splash with large blocks of restricted
common stock who may try to sell their shares at the same time as the Company.
If too many shares are offered for sale at the same time, the price may be
depressed.  The Company's business plan for fiscal 1998 assumes that the
proceeds from the sale of Splash Common Stock held by the Company will be
sufficient to repay the balance of the IBM Credit facility and to provide
sufficient working capital to the Company during fiscal 1998, but there can be
no assurance that the Company will be able to effectively time its sales or
that the market value of Splash Common Stock will be adequate to achieve such
goals.  See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."


                                      -3-

<PAGE>

PRODUCTS AND APPLICATIONS

     A summary of some of the Company's principal products and their typical 
applications is set forth below:

Product Category         Product                        Suggested Retail Price $
----------------         -------                        ------------------------
Digital Video                                                           
                         Telecast Upgrade VVS*                    $1,999
                         VideoVision PCI*                          2,599
                         VideoVision ML                            2,099

                         PhotoDV (with Firewire)                     499
                         MotoDV  (with Firewire)                     499
                         EditDV  (with Firewire)                     999
                         Software  upgrades to:                      
                            PhotoDV                                   99
                            MotoDV                                    99
                            EditDV                                   249
                         Radius Edit                             bundled


Color Reference and      PressView 21SR display                    3,999
Management Products      Precision View 17SR*                      1,999
                         Precision View 2150                       1,999
                         PressView for Workgroups                  3,499
                         ProSense Display                            799
                          Calibrator


Accelerated Color        ThunderPower 30/1920*                       699
Graphics Products
                         ThunderPower 30/1600*                       599
                         Thunder TX 1152*                            999
                         Thunder 3D*                               1,699
                         Tempest*                                    399
                         Precision Color 24/1600*                    499





**

*Denotes that the Company does not intend to manufacture additional units but
that the products are still available for sale.
** Since the Reply transaction in March 1997, the Company has also sold
several DOS on Mac products, which are no longer being manufactured.  The
Company does not expect to devote significant resources to the development or
sale of such products during fiscal 1998.

DIGITAL VIDEO SYSTEMS AND SOFTWARE

     Radius offers a number of products for both the multimedia authoring and
the non-linear digital video editing and production market.  Non-linear
digital editing enables video editors to manipulate pictures and sound in a
faster, easier and more cost effective manner than traditional analog tape-
based systems.  Editors can randomly access and digitally "cut and paste"
images, videos and sound clips avoiding the tedious process of winding and
rewinding of linear tape and the subsequent physical cutting and splicing of
film segments.

     PhotoDV is an Adobe Photoshop import plug-in that includes the Radius
FireWire card and a digital interface cable. PhotoDV enables a Digital Video
("DV") camcorder to perform as a still image camera, in addition to being used
to record video. Pictures are acquired digitally over FireWire and can be used
for Web sites, picture databases, printed pages, and QuickTimed VR scenes.

     MotoDV is the first product for MacOS computers to provide a digital
basis for editing DV footage.  MotoDV is targeted at video designers and
other creative professionals who produce video and multimedia content for
tape, CD-ROM, and Web 


                                      -4-

<PAGE>

delivery. The MotoDV application remotely controls the DV camcorder or VTR 
over FireWire and captures DV clips, in real-time or time-lapse mode. As 
clips are being captured, MotoDV converts the integrated DV data stream into 
QuickTime movies with separate video and audio tracks. These clips can then 
be imported into any QuickTime application, including Adobe Premiere, Radius 
Edit, and Adobe After Effects.

     EditDV is a digital non linear editing system which operates on the 
MacOs in conjunction with digital camcorders, Apple's QuickTime (an industry 
standard architecture of digital media) and FireWire connections.  Users can 
create digital video with multiple video and effects tracks, rubber-band 
audio, and traditional wipes and fades for fast interactive editing, color 
modification and keying.

     VideoVision, Radius' leading desktop video hardware product, was the 
first QuickTime compatible video editing and production system that supported 
full-screen (640 x 480 pixels), full-motion video at 60-fields per-second. 
VideoVision offers JPEG video compression/decompression capabilities, 16-bit 
CD stereo audio and allows users to output their finished product directly 
and easily to videotape.  VideoVision is compatible with QuickTime-based 
software applications for editing, effects, titling, graphics, animation and 
audio.

     Radius also offers QuickTime-compliant digital video non linear editing, 
compositing and animation software applications that facilitate the creation 
and editing of digital video content.  Radius Edit 2.0 is a non-linear 
professional digital video editing solution that features an intuitive user 
interface, FX templates, built-in titling, multiple key frames, batch 
digitizing and picture-in-picture capabilities.  Radius Edit 2.0 also offers 
a variety of high-quality special effects for digital video editing including 
pan-zoom-rotating, chroma keying and compositing.

     The Company expects to continue to invest significant resources in its 
software digital video products during fiscal 1998 including adding cross 
platform functionality for the Windows environment and intends to introduce 
various enhancements to these products.

COLOR REFERENCE AND MANAGEMENT PRODUCTS

     The Company currently offers two large color reference displays designed 
for desktop color publishers and graphic artists.  The PressView SR series is 
designed to offer the color accuracy, resolution and clarity needed for high 
quality color prepress, media authoring, photography, medical imaging and 
scientific image processing.  These color reference displays offer consistent 
and accurate color preproofing at resolutions of up to 1600 by 1200 pixels. 
The PrecisionView 21 also offers resolutions of up to 1600 by 1200 pixels but 
at a lower price point.  The PressView SR series supports Kodak 
PrecisionColor, Agfa FotoFlow, Apple ColorSync 2.0 and EFI Color management 
systems to ensure color accuracy.  The Company no longer offers monochrome 
displays.

     Color peripherals tend to vary over time from their original 
specifications, thus causing significant color variances.  Display 
calibrators control the way peripherals produce color, making the color more 
consistent and predictable. The Company's Prosense Display Calibrator works 
with sensing technology and Macintosh software to measure the actual color 
performance of a display and then adjusts information in the Macintosh 
graphics card so that the colors will be accurate.  This product also 
communicates with a number of third party color management systems to provide 
color information about the display so that color can be managed from one 
peripheral to another.

The Company expects to focus its development efforts on the software elements 
of its color business during fiscal 1998 in addition to adding cross platform 
functionality.

ACCELERATED COLOR GRAPHICS PRODUCTS

     The Radius graphics product families has offered a wide range of user 
choices to enhance the graphics performance of Apple Macintosh computers 
based on both the NuBus and PCI bus architectures.  All NuBus based products 
were discontinued prior to fiscal 1997.  The choices range from an entry 
level accelerated 8-bit color graphics card (256 colors with up to 1 million 
pixels of color display information) to a variety of accelerated 24-bit color 
graphics cards (up to 16.7 million colors).  All of the Company's graphics 
card products offer a range of high speed QuickDraw acceleration features and 
support numerous Radius, Apple and other third-party displays ranging from 
13-inches to 21-inches in size.  The Company's graphics card products also 
allow the user to switch resolutions "on-the-fly" without having to reboot 
the computer.


                                      -5-

<PAGE>

     The Thunder and ThunderPower class graphics cards offer enhanced
resolutions, as well as a number of other acceleration capabilities for Adobe
Photoshop, a popular application for working with computer images.   These
graphics cards also feature hardware pan and zoom capability, enabling users
to quickly change the size and the amount of the information on their color
display.  The Company believes these capabilities allow users working with
large amounts of detailed information to be more productive because they can
quickly accomplish a variety of tasks using these hardware-based acceleration
features.

     The Company does not expect to continue to devote significant resources
to the development or sale of graphics accelerator cards during fiscal 1998.

TECHNOLOGY AND PRODUCT DEVELOPMENT

     The Company's fiscal 1997 research and development efforts have focused
on graphics acceleration products for the MacOS.  With the realignment of the
Company's business, its current development focus is on the software elements
of its digital video and color businesses with cross platform (i.e., Windows
as well as MacOS) functionality.  The Company's research and development
efforts are focused on creating new products and technologies for customers
who create, review, approve and utilize high resolution color images and
moving video.  Current research and development efforts include:  (i)
performance improvements and cost reductions of current products; (ii)
development of application software to facilitate the creation and
manipulation of video and high resolution still and full motion images;  (iii)
development of next generation technology to enable new methods of displaying
and creating digital video information with greater flexibility, speed, and
quality;  iv) development of technology to permit use of the Company's color
display and digital video software products in the Windows operating
environment; and (v) development of technology to permit the use of the
Company's color calibration and matching systems with the displays of
manufacturers other than Mitsubishi.

     The Company believes that the competitive nature of the computer
industry, along with the rapid pace of technological evolution, requires that
it continue to introduce innovative products on a timely basis to compete
effectively.  During fiscal 1997, 1996 and 1995, the Company's expenditures
for research and development totaled $5.0 million, $7.5 million and  $19.3
million, respectively.  To date, all of the Company's research and development
expenditures have been charged to operations as incurred.  Because of its
smaller size and narrowing of product focus, the Company does not anticipate
having research and development expenditures equal to earlier levels.  Because
of the Company's diminished development resources, there can be no assurance
that the Company will be able to successfully develop new or enhanced
products.  There can be no assurance that the Company's development efforts
will result in commercially successful products, or that the Company's
products will not be rendered obsolete by changing technology or new products
introduced  by others.  Additionally, should the Company fail to introduce new
products on a timely basis, the Company's operating results could be adversely
affected.  In the past, the Company expended substantial resources towards its
MacOS product line which did not achieve profitability.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Certain Factors That May Affect the Company's Future Results of Operations --
Technological Change; Continuing Need to Develop New Products."

MARKETING, SALES AND DISTRIBUTION

     Domestically the Company employs a two-tiered distribution model whereby
it sells its products primarily through a limited number of distributors that
in turn distribute the Company's products to a variety of resellers including
superstores, independent dealers, educational resellers, systems integrators,
value added resellers and mail order resellers.  The Company's domestic
distributors and master resellers purchase products at discounts from
suggested retail prices based on purchase volumes.  The Company also makes
limited direct sales efforts in the United States and intends to pursue Web-
based sales of certain or its products during fiscal 1998.

     In the United States, the Company sells its products primarily through
the following major distributors:  Ingram Micro, Inc.; and MicroAge. The
Company's business and financial results are highly dependent on the success
of these distributors. To assist these domestic distributors and to provide
marketing, training and technical support, the Company provides sales
representatives in a number of locations in the United States.

      Radius provides market development funds to give distributors incentives
to increase sales, improve reporting and achieve a product mix favoring higher
margin products.

     Internationally, sales are made through foreign distributors, which
market, sell and service the Company's products.  During fiscal 1996, the
Company entered into exclusive distributor arrangements with respect to Japan
and Europe which result in commissions to the Company, rather than gross sales
proceeds.  For fiscal years ended September 30, 1997, 1996 and 1995, the


                                      -6-
<PAGE>

Company's export sales accounted for approximately 15.7%, 50.7% and 40.4%,
respectively, of the Company's net sales.  See Note 7 of Notes to Consolidated
Financial Statements.  The Company's export sales are subject to certain risks
common to international operations, such as currency fluctuations
and governmental regulation.  During the third quarter of fiscal 1997, the
exclusivity clause in the agreement with the Japanese distributor was
terminated. No other distribution relationship for Japan has been entered into
by the Company.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Certain Factors That May Affect the
Company's Future Results of Operations -- International Sales."

     For the fiscal years ended September 30, 1997, 1996 and 1995, one 
customer accounted for approximately 66.1%, 34.3% and  34.0% of the Company's 
net sales, respectively.

     Many of the Company's distributors have the right to return products
purchased from the Company.  While the Company provides for estimated product
returns, if in the future the Company were to experience returns from
customers significantly in excess of this estimate, such returns could have a
material adverse effect on the Company's results of operations.

     The Company's marketing programs support worldwide sales and distribution
of its products. The Company's principal marketing activities include frequent
participation in industry trade shows and seminars, advertising in major trade
publications worldwide, public relations activities with the trade and
business press, publication of technical articles, distribution of sales
literature and product specifications and communications with its installed
base of end users. The Company's marketing programs are designed to generate
sales leads for its distributors and master resellers as well as to enhance
the Company's brand name recognition.

MANUFACTURING AND SUPPLIERS

     As a result of the Company's outsourcing of manufacturing, substantially
all of the Company's assembly, quality control testing, packaging and other
manufacturing operations are performed by the Company's suppliers, contract
manufacturers, and other subcontractors.  The Company has developed a quality
assurance program with these third parties.

     The Company attempts to utilize standard parts and components available
from multiple vendors.  However, certain components used in the Company's
products are available only from sole or limited suppliers.  The Company's
products have also incorporated components, such as video random access
memory, that are available from multiple sources but have been subject to
substantial fluctuations in availability and price.  Although the Company has
been able to obtain an adequate supply of such components in the past, there
can be no assurance that it will be able to obtain an adequate supply in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Certain Factors That May Affect the Company's Future
Results of Operations -- Dependence on Limited Number of Manufacturers and
Suppliers."

COMPETITION

     All markets in which the Company competes are expected to remain highly
competitive.  The Company's principal competitors in the color reference and
management market include Apple, Barco and Mitsubishi Electronics.   The
Company's principal competitors in the digital video market include Adobe,
Adaptec, ProMax, DPS, Avid Technology, Inc.. and Fast Electronics GmbH.  The
Company's principal competitors in the graphics acceleration market include
ixMicro Corporation.  The market for the Company's products is evolving, and
it is difficult to predict all future sources of competition.  Therefore, the
Company could face significant competition in the future from newly
established companies or newly introduced or improved products of others.

     Although Apple is principally a supplier of general purpose computing
platforms upon which third parties are encouraged to build more complete
solutions, the Company also faces competition from Apple.  Apple markets a
number of products, including  color displays, that compete directly or
indirectly with the Company.  Apple also could introduce additional products,
add functionality to their computer systems that is similar to that provided
by certain of the Company's products, or alter its systems' architecture in a
manner that could adversely affect the Company's ability to compete.  For
example, Apple's Power PC based products which have on-board graphic
functionality and faster processing speed, could be considered competitors of
specific product lines of the Company's.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect the Company's Future Results of Operations -- Dependence on
and Competition with Apple."

     The Company believes that the principal competitive factors for its
product line are product performance, breadth of distribution, brand name
recognition, price and customer support.  There can be no assurance that the
Company will be able to compete successfully with respect to these factors.
In addition, many of the Company's current and prospective competitors have


                                      -7-
<PAGE>

significantly greater technical, manufacturing and marketing resources than
the Company.  As a result, there can be no assurance that the Company will
compete effectively with current or future competitors or that competitive
pressures faced by the Company will not have a material adverse affect on the
Company's business, financial condition or results of operations.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Factors That May Affect the Company's Future Results of
Operations -- Competition."

PATENTS AND LICENSES

     The Company relies on a combination of patent, copyright, trademark and
trade secret protection, nondisclosure agreements and licensing arrangements
to establish and protect its proprietary rights.  The Company has a number of
patents and patent applications and intends to file additional patent
applications as it considers appropriate.  There can be no assurance that
patents will issue from any of these pending applications or, if patents do
issue, that any claims allowed will be sufficiently broad to protect the
Company's technology.  In addition, there can be no assurance that any patents
that may be issued to the Company will not be challenged, invalidated or
circumvented, or that any rights granted thereunder would provide proprietary
protection to the Company.  The Company has a number of trademarks and
trademark applications.  There can be no assurance that litigation with
respect to trademarks will not result from the Company's use of registered or
common law marks, or that, if litigation against the Company were successful,
any resulting loss of the right to use a trademark would not reduce sales of
the Company's products in addition to the possibility of a significant damages
award.  Although, the Company intends to defend its proprietary rights,
policing unauthorized use of proprietary technology or products is difficult,
and there can be no assurance that the Company's efforts will be successful.
The laws of certain foreign countries may not protect the proprietary rights
of the Company to the same extent as do the laws of the United States.

     The Company has received, and may receive in the future, communications
asserting that its products infringe the proprietary rights of third parties,
and the Company is engaged and has been engaged in litigation alleging that
the Company's products infringe others' patent rights.  As a result of such
claims or litigation, it may become necessary or desirable in the future for
the Company to obtain licenses relating to one or more of its products or
relating to current or future technologies, and there can be no assurance that
it would be able to do so on commercially reasonable terms.  See "Legal
Proceedings" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Certain Factors That May Affect the Company's
Future Results of Operations -- Dependence on Proprietary Rights."

EMPLOYEES

     As of December 31, 1997, the Company had approximately 61 full time
employees.  24 of which are in sales and marketing functions, 16 of which are
in research and development, and the balance are in administration (finance,
operations, and senior management).

     The Company's success will depend, in large measure, on its ability to 
attract, motivate and retain highly qualified technical, marketing, 
engineering and management personnel, who are in great demand. See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations -- Certain Factors That May Affect the Company's Future Results of 
Operations -- Dependence on Key Personnel."

     The Company's employees are not represented by any collective bargaining
agreements, and the Company has never experienced a work stoppage.  The
Company believes that its employee relations are good.


ITEM 2.        PROPERTIES

     The Company's primary facility is located in Sunnyvale, California and
consists of leased space of approximately 45,000 square feet.  The Company
believes that its current facilities are in excess of its current needs.  The
lease on the primary facility will expire in March 1998.  The Company expects
to be able to renew its current lease for reduced space or to be able to lease
new space within the local area for a total cost that is consistent with its
current costs.

     The Company has subleased to other companies approximately 145,000 square
feet of facilities which the Company is currently not using.


                                      -8-
<PAGE>

     The Company had maintained field sales facilities in a number of
locations throughout the United States as well as in Surrey, England; Paris,
France; Hamburg, Germany; and Tokyo, Japan but discontinued such activities
during fiscal years 1995, 1996 and 1997.


ITEM 3.        LEGAL PROCEEDINGS

     (a)  On November 16, 1995, Electronics for Imaging, Inc. ("EFI") filed a
suit in the United States District Court in the Northern District of
California alleging that the Company infringes a patent allegedly owned by
EFI.  Although the complaint does not specify which of the Company's products
allegedly infringe the patent, subsequent pleading indicates that EFI alleges
that the Company's Color Server products allegedly infringe.  In January 1996,
the Company completed the divestiture of the Color Server Group.

     The Company has filed an answer denying all material allegations, and has
filed counterclaims against EFI alleging causes of action for interference
with prospective economic benefit, antitrust violations, and unfair business
practices.  EFI's motion to dismiss or sever the Company's amended
counterclaims was granted in part and the ruling permitted the Company to file
an amended counterclaim for antitrust violations.  The Company has filed an
amended antitrust claim.  The Company believes it has meritorious defenses to
EFI's claims and is defending them vigorously.  In addition, the Company
believes it has indemnification rights with respect to EFI's claims.  A motion
for summary judgment based on these indemnification rights disposing of EFI's
claims was filed, and the court granted this motion finding the Company immune
from suit under the patent after February 22, 1995.  The Company expects to
vigorously defend the remaining claims of EFI and to vigorously prosecute the
claims it has asserted against EFI.  In the opinion of management, based on
the facts known at this time, although the eventual outcome of this case is
unlikely to have a material adverse effect on the results of operations or
financial position of the Company, the costs of defense, regardless of
outcome, may have a material adverse effect on the results of operations or
financial position of the Company.  In addition, in connection with the
divestiture of its Color Server business, the Company has certain
indemnification obligations for which approximately $2.0 million remains held
in escrow at September 30, 1997 to secure such obligations in the event that
the purchaser (Splash) suffers any losses resulting from such claims.

     (b)  The Company is involved in a number of other judicial and
administrative proceedings incidental to its business, including a lawsuit by
Intelligent Electronics, Inc. in the Denver federal court claiming
approximately $800,000.  See Note 3 of the Notes to Consolidated Financial
Statements.  The Company intends to defend such lawsuits vigorously and
although adverse decisions (or settlements) may occur in one or more of such
cases, the final resolution of these lawsuits as well as the costs of defense
and prosecution, individually or in the aggregate, is not expected to have a
material adverse effect on the financial position of the Company.  However,
depending on the amount and timing of an unfavorable resolution of these
lawsuits, it is possible that the Company's future results of operations or
cash flows could be materially adversely affected in a particular period.

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

     Not applicable.

ITEM 4A.  EXECUTIVE OFFICERS OF REGISTRANT

     The executive officers of the Company are as follows:

       NAME                AGE               POSITION
       ----                ---               --------
Mark Housley                41          Chairman of the Board of Directors,
                                        Chief Executive Officer and President

Henry V. Morgan             58          Senior Vice President,
                                        Chief Financial Officer and Secretary

Steven V. Petracca          42          Senior Vice President


                                      -9-
<PAGE>

     MARK HOUSLEY has been President and Chief Operating Officer of the
Company since January 1997, CEO since August 1997 and Chairman since December
1997.  From March 1995 until October 1996, Mr. Housley was founder and Vice
President of marketing of Spectrum Wireless, Inc., a manufacturer of wireless
infrastructure products.  From May 1992 until March 1995, Mr. Housley held
various positions of responsibility for the Company and its predecessor
SuperMac Technologies, Inc., including Vice President and General Manager of
the Company's Color Publishing Division.  From October 1990 until May 1992,
Mr. Housley was a Vice President for Siemens in Santa Clara, a multinational
manufacturer of electronic equipment, directing product marketing and
planning.

     HENRY V. ("HANK") MORGAN joined the Company on February 24, 1997 as Chief
Financial Officer and Senior Vice President, Finance and Administration.
During 1995 and 1996, Mr. Morgan was Executive Vice President and Chief
Financial Officer of Connect, Inc. of Mountain View, California, an Internet-
based interactive commerce applications software company.  From 1989 through
1994, Mr. Morgan was Executive Vice President and Chief Financial Officer of
Logitech International, S.A., a computer mouse manufacturer.

     STEVEN V. PETRACCA joined the Company in April of 1997 and assumed
responsibility for all for engineering and operations activities at the
Company.  Prior to joining the Company  and since 1988, Mr. Petracca was
President and Chief Executive Officer of Reply Corporation, a manufacturer of
personal computers and printed circuit boards.  From 1979 to 1988, Mr.
Petracca was employed by International Business Machines in a variety of
engineering and operation positions.


                                      -10-
<PAGE>

                                    PART II

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

     The Company's Common Stock was quoted on the Nasdaq National Market from
August 21, 1991 until July 1, 1996.  The Company's Common Stock is now quoted
on the Nasdaq SmallCap Market under the symbol "RDUS."  The high and low sales
prices for the Common Stock are indicated below.  See "Recent Developments -
Potential Nasdaq SmallCap Market Delisting."

Year Ended September 30, 1996                         Low          High
-----------------------------                         ---          ----
First Quarter                                       1 15/16       7  1/8
Second Quarter                                        15/16       2  1/2
Third Quarter                                       2  3/16       4  5/8
Fourth Quarter                                      1  1/4        2 13/16

Year Ending September 30, 1997
------------------------------
First Quarter                                         15/32       1 13/16
Second Quarter                                         5/16         17/32
Third Quarter                                          3/16         13/32
Fourth Quarter                                         1/4          23/32

     On December 31, 1997,  there were approximately 3350 holders of record of
the Company's Common Stock.

     The price of the Company's Common Stock has fluctuated widely in the
past.  Management believes that such fluctuations may have been caused by
announcements of new products, quarterly fluctuations in the results of
operations and other factors, including changes in conditions of the personal
computer industry in general and of Apple Computer in particular, changes in
the Company's results of operations and financial condition and recent sales
of large numbers of shares of Common Stock by former creditors of the Company.
Stock markets, and stocks of technology companies in particular, have
experienced extreme price volatility in recent years.  This volatility has had
a substantial effect on the market prices of securities issued by the Company
and other high technology companies, often for reasons unrelated to the
operating performance of the specific companies.  Due to the factors referred
to herein, the dynamic nature of the Company's industry, general economic
conditions, the substantially larger number of freely tradeable shares of
Common Stock held by former creditors of the Company and other factors, the
Company's future operating results and stock prices may be subject to
significant volatility in the future. Such stock price volatility for the
Common Stock has in the past provoked securities litigation, and future
volatility could provoke litigation in the future that could divert
substantial management resources and have an adverse effect on the Company's
results of operations.

     The Company has never declared or paid any cash dividends on its Common
Stock. In addition, the terms of the Company's restructured loan agreement
with IBM Credit prohibits the payment of any cash dividends so long as any
amounts are outstanding under the loan agreement. Accordingly, the Company
anticipates that it will retain any future earnings for use in its business or
the retirement of debt and does not anticipate paying any cash dividends on
its Common Stock in the foreseeable future.

                                     -11-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30, (1)
                                                       ----------------------------------------------------------------------
                                                           1997          1996            1995         1994 (2)        1993(2)
                                                       ----------      ---------     ----------     ----------     ----------
                                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA) 
<S>                                                    <C>             <C>           <C>            <C>            <C> 
CONSOLIDATED STATEMENTS OF
 OPERATIONS DATA:
Total net sales                                          $ 31,150      $  90,290     $  308,133     $  324,805     $  337,373
Cost of sales                                              31,032         77,382        302,937        276,948        254,321
                                                       ----------      ---------     ----------     ----------     ----------
 Gross profit                                                 118         12,908          5,196         47,857         83,052
Operating expenses:
 Research and development                                   5,002          7,478         19,310         33,956         33,503
 Selling, general and administrative                       21,355         25,886         90,068         94,731         84,132
                                                       ----------      ---------     ----------     ----------     ----------
  Total operating expenses                                 26,357         33,364        109,378        128,687        117,635
                                                       ----------      ---------     ----------     ----------     ----------
Loss  from operations                                     (26,239)       (20,456)      (104,182)       (80,830)       (34,583)
Other income (expense), net                                30,600         24,032         (3,045)          (376)            70
Interest expense                                           (2,777)        (3,736)        (3,023)          (869)             -
Litigation settlement                                           -              -        (12,422)             -              -
                                                       ----------      ---------     ----------     ----------     ----------
Income (loss) before income taxes and
 cumulative effect of a change in
 accounting principle                                       1,584           (160)      (122,672)       (82,075)       (34,513)
Provision (benefit) for income taxes                          316            815          9,070         (4,600)       (13,774)
                                                       ----------      ---------     ----------     ----------     ----------
Income (loss) before cumulative effect of
 a change in accounting principle                        $  1,268      $    (975)    $ (131,742)    $  (77,475)    $  (20,739)
Cumulative effect of a change in method of
 accounting for income taxes                                    -              -              -              -            600
                                                       ----------      ---------     ----------     ----------     ----------
Net income (loss)                                        $  1,268      $    (975)    $ (131,742)    $  (77,475)    $  (20,139)
                                                       ----------      ---------     ----------     ----------     ----------
                                                       ----------      ---------     ----------     ----------     ----------

Preferred stock dividend                                      272              -              -              -              -
                                                       ----------      ---------     ----------     ----------     ----------
Net income (loss) applicable to
 common shareholders                                     $    996      $    (975)    $ (131,742)    $  (77,475)    $  (20,139)
                                                       ----------      ---------     ----------     ----------     ----------
                                                       ----------      ---------     ----------     ----------     ----------
Net income (loss) per common share:
Income (loss) before cumulative effect of
 a change in accounting principle                        $   0.02      $   (0.05)    $    (8.75)    $    (5.70)    $    (1.61)
Cumulative effect of a change in method
 of accounting for income taxes                                 -              -              -              -           0.05
                                                       ----------      ---------     ----------     ----------     ----------
Net income (loss) per common share                       $   0.02      $   (0.05)    $    (8.75)    $    (5.70)    $    (1.56)
                                                       ----------      ---------     ----------     ----------     ----------
                                                       ----------      ---------     ----------     ----------     ----------
Shares used in computing net income
  (loss) per common share                                  55,223         21,251         15,049         13,598         12,905
                                                       ----------      ---------     ----------     ----------     ----------
                                                       ----------      ---------     ----------     ----------     ----------

</TABLE>


<TABLE>
<CAPTION>

                                                                                      SEPTEMBER 30, (1)
                                                       ----------------------------------------------------------------------
                                                          1997           1996           1995         1994 (2)        1993(2)
                                                       ----------      ---------     ----------     ----------     ----------
                                                                                       (IN THOUSANDS)
<S>                                                    <C>             <C>           <C>            <C>             <C>
CONSOLIDATED BALANCE SHEET DATA
Working capital (Working capital deficiency)             $ 7,909        $ 8,476      $(59,334)      $ 29,856        $ 86,711
Total assets                                              26,272         45,526        87,878        126,859         172,275
Long-term debt---noncurrent portion                           -          22,213         1,331          2,857           3,975
Convertible preferred stock                                   -           3,000             -              -               -
Shareholders' equity (Net capital deficiency)             8,158           3,960       (57,117)        35,691          98,155

</TABLE>


(1)  The Company's fiscal year ends on the Saturday closest to September 30 
and includes 53 weeks in fiscal 1993 and 52 weeks in all other fiscal years 
presented.  During fiscal 1995, the Company changed its fiscal year end from 
the Sunday closest to 

                                     -12-

<PAGE>

September 30 to the Saturday closest to September 30 for operational 
efficiency purposes.  For consistency of presentation, all fiscal periods in 
this Form 10-K are reported as ending on a calendar month end.

(2)  These periods have been restated to reflect the Merger of Radius and 
SuperMac which has been accounted for as a pooling of interests.  The 
consolidated financial statements for all periods prior to fiscal 1994 have 
not been restated to adjust SuperMac's fiscal year end to that of Radius. 
Such periods include Radius' results of operations and balance sheet data on 
a September 30 fiscal year basis and SuperMac's on a December 31 calendar 
year basis.  The results for both of the fiscal years ended September 30, 
1994 and 1993 include the results of SuperMac's operations for the three 
months ended December 31, 1993.  Revenues, costs and expenses and net loss of 
SuperMac for such period were $48.5 million, $64.7 million and $9.9 million, 
respectively.

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: The following 
discussion contains forward-looking statements within the meaning of Section 
21E of the Securities Exchange Act of 1934 that are subject to risks and 
uncertainties. Statements indicating that the Company or management 
"intends", "plans", "expects," "estimates" or "believes" are forward-looking, 
as are all other statements concerning future financial results, product 
offerings or other events that have not yet occurred. There are several 
important factors that could cause actual results or events to differ 
materially from those anticipated by the forward-looking statements contained 
in this discussion and other sections of this Form 10-K. Such factors 
include, but are not limited to: the Company's ability to achieve 
profitability; the Company's ability to dispose of its remaining holdings in 
Splash on a timely and profitable basis; the Company's ability to repay its 
indebtedness to IBM Credit; the Company's ability to successfully negotiate a 
favorable license renewal for Apple Quick Time 3.0 (and greater); the timely 
payment of royalty obligations by Umax to the Company and Umax's success in 
the Mac clone business, the Company's ability to successfully renew its lease 
of space for its main offices in Sunnyvale; the Company's ability to 
successfully conclude or settle its patent infringement litigation with EFI, 
the success of the Apple Macintosh computer line and operating system, the 
success of Apple as well as the Company's ability to compete successfully 
with Apple; the Company's ability to successfully develop and introduce new 
products to keep pace with technological innovation, particularly in light of 
its limited financial resources; the Company's ability to successfully market 
its software products and to execute its cross platform strategy; the 
Company's ability to compete in its market; the ability of the Company's 
manufacturers and suppliers to deliver components and manufacture the 
Company's products; the Company's reliance on international sales and the 
effect of its partially exclusive distributor arrangements with respect to 
Europe and Japan; and the Company's ability to attract and retain its key 
personnel.

RESULTS OF OPERATIONS

     The following table sets forth for the years indicated certain 
operational data as a percentage of net sales (may not add due to rounding).

<TABLE>
<CAPTION>

                                                                   YEAR ENDED SEPTEMBER 30,
                                                              -----------------------------------
                                                               1997           1996           1995
                                                              -----          -----          -----
<S>                                                           <C>            <C>            <C>
 Total net sales                                              100.0%         100.0%         100.0%
 Cost of sales                                                 99.6           85.7           98.3
                                                              -----          -----          -----
     Gross profit                                               0.4           14.3            1.7
 Operating Expenses:
   Research and development                                    16.1            8.3            6.3
   Selling, general, and administrative                        68.5           28.7           29.2
                                                              -----          -----          -----
     Total operating expenses                                  84.6           37.0           35.5
                                                              -----          -----          -----
 Loss from operations                                         (84.2)         (22.7)         (33.8)
 Other income (expense), net                                   98.2           26.6           (1.0)
 Interest expense                                              (8.9)          (4.1)          (1.0)
 Litigation settlement                                            -              -           29.2
                                                              -----          -----          -----
 Income (loss) before income taxes                              5.1           (0.2)         (39.8)
 Provision for income taxes                                     1.0            0.9            2.9
                                                              -----          -----          -----
 Net income (loss)                                              4.1%          (1.1)%        (42.8)%
                                                              -----          -----          -----
                                                              -----          -----          -----

</TABLE>

                                     -13-

<PAGE>

FISCAL 1997 TO FISCAL 1996

     NET SALES.  The Company's net sales for fiscal 1997 decreased 65.5% to 
$31.2 million from $90.3 million for fiscal 1996. The decline is due to the 
following factors: the Company's efforts to refocus its business on higher 
margin products; the divestiture of certain business units, such as its Color 
Server Copy Group which had $7.0 million in sales for fiscal 1996; entering 
into distributor arrangements for Japan and Europe effective April 1, 1996 
and July 1, 1996, respectively, which relationships provide for the Company 
to recognize as net sales, a percentage of the sales price of each product 
sold by those distributors as compared to the entire sales price of the 
product which was recognized by the Company as net sales prior to the 
appointment of these distributors; uncertainty regarding the viability of the 
Apple Macintosh product line; and the slow development of the 3D graphics 
market due to limited applications software availability. As a result of 
these factors, product sales decreased 70.2% in fiscal 1997 from fiscal 1996. 
Commissions and royalties increased in fiscal 1997 by 125.5% to $4.9 million 
from $2.2 million in fiscal 1996 due to the distributor relationships in 
Europe and Japan and due to royalties paid by Umax Computer Corporation under 
its license agreement for the MacOS compatible systems signed in February 
1996. Also as a result of the distributor relationships in Japan and Europe, 
the Company's export sales for fiscal 1997 declined to 15.7% of net sales as 
compared to 50.7% of net sales for fiscal 1996.

     The Company anticipates significantly lower overall net sales in the 
immediate future as a result of its decision to focus its efforts on its 
color publishing and digital video software product lines while discontinuing 
the development of its accelerated color graphics products and its DOS on Mac 
products. As a result, the Company also anticipates that the proportion of 
hardware sales will decline in the coming periods. For example, in the 
Company's digital video product line, the sales of the systems products have 
been declining while the sale of the software products for digital video 
camcorders (PhotoDV introduced in April 1997 and MotoDV introduced in 
September 1997) have increased during 1997. The Company's EditDV product, 
which the Company introduced in November 1997, may add to this trend.  There 
can be no assurance that sales of these software products will continue to 
increase or that they will increase to a sufficient extent to offset the 
anticipated decline in hardware sales.  Moreover, the Company anticipates 
that its royalties from Umax will decline significantly during fiscal 1998 
due to Apple's decision not to extend the operating system licenses and the 
expiration of this obligation in March 1998.
     
     One customer accounted for 66.1% of the Company's net sales for 
fiscal 1997.  For fiscal 1996 the same distributor accounted for 34.3% of the 
Company's net sales.

     GROSS PROFIT.  The Company's gross profit margin was 0.4% for fiscal 
1997, as compared with 14.3% for  fiscal 1996. Included in fiscal 1997 cost 
of sales are one-time charges of $9.7 million consisting principally of 
inventory write downs of $7.7 million reflecting current market conditions 
for the Company's products and reserves for excess purchase order commitments 
of $2.0 million for inventory in excess of anticipated demand.  These charges 
reflect decreases in demand and the Company's decision to refocus its 
business. Included in fiscal 1996 cost of sales was a one-time charge of $3.5 
million resulting from the Company's financial restructuring completed in 
September 1996. Excluding these one time charges, gross profit margin in 
fiscal 1997 was 31.5% compared to 18.3% in fiscal 1996.  This increase was a 
result of the Company's decision to refocus its business on higher margin 
products.

     The Company anticipates continued price reductions and margin pressure 
within its industry; however, these trends may be offset if the Company 
increases sales of higher gross margin software products that are expected to 
become a focus of the Company's sales and marketing efforts in the coming 
periods. Additionally, the Company is taking further steps to reduce product 
costs and controlling expenses.  There can be no assurance that the Company's 
gross margins will improve  or remain at current levels.

     RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses 
decreased from $7.5 million or 8.3% of net sales for fiscal 1996 to $5.0 
million or 16.1% of net sales for fiscal 1997.  The Company decreased its 
research and development expenses primarily by reducing expenses related to 
headcount resulting from the Company's efforts to refocus its business and 
business divestitures.  The increase in research and development expenses 
expressed as a percentage of net sales for fiscal 1997 was primarily 
attributed to the decrease in net sales and the Company's refocusing on 
higher-end products, rather than high-volume lower-margin products.  The 
Company expects to devote approximately $3 million to development in its 
digital video and color product lines during fiscal 1998.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and 
administrative expenses decreased from $25.9 million or 28.7% of net sales 
for fiscal 1996 to $21.4 million or 68.6% of net sales for fiscal 1997. 
Included in these expenses for fiscal 1997 is a $2.6 million charge to 
increase the allowance for doubtful accounts due to accounts which the 
Company determined were unlikely to be collected in full. Included in these 
expenses for fiscal 1996 was a reduction of $0.9 million for a reduction in 
restructuring reserves to reflect the then current requirements. Adjusting 
for these charges and reductions, selling, general and administrative 
expenses would have been $18.8 million or 60.3% of net sales in fiscal 1997, 
compared to $26.8 million or 29.7% of net sales in fiscal 1996. The Company 
decreased its selling, general and administrative expenses primarily by 

                                     -14-

<PAGE>

reducing expenses related to headcount resulting from the Company's efforts 
to refocus its business and business divestitures. The increase in selling, 
general and administrative expenses expressed as a percentage of net sales 
was primarily attributed to the decrease in net sales and the Company's 
refocusing on higher-end products, rather than high-volume, lower-margin 
products.  Although the Company expects selling, general and administrative 
expenses to increase gradually over time, the Company does not expect them to 
approach historical levels in absolute amount.

     OTHER INCOME (EXPENSE), NET.  Other income was $30.6 million for fiscal 
1997 compared to $24.0 million for fiscal 1996.  The other income for fiscal 
1997 was due to the sale of 996,875 shares of Splash Common Stock in August 
1997.  The other income in fiscal 1996 was primarily due to approximately 
$23.8 million resulting from the Company's divestitures of three business 
lines, including the Color Server Group.

     INTEREST EXPENSE.  Interest expense was $2.8 million for fiscal 1997 as 
compared to $3.7 million for fiscal 1996.  This decrease was due to lower 
average borrowings.

     PROVISION FOR INCOME TAXES.  The Company recorded a provision for income 
taxes of $316,000 for fiscal 1997 as compared to $815,000 for fiscal 1996. 
The provision for fiscal 1997 differs from the provision computed utilizing 
the combined statutory rate in effect during the period primarily as a result 
of the impact of foreign taxes offset by the impact of previously unbenefited 
net operating losses and the reversal of existing deferred tax assets.  The 
provision for fiscal 1996 differs from the provision computed utilizing the 
combined statutory rate in effect during the period primarily as a result of 
the impact of foreign taxes.

     FASB Statement 109, Accounting for Income Taxes, provides for the 
recognition of deferred tax assets if realization of such assets is more 
likely than not.  The Company's valuation allowance reduced the deferred tax 
asset to the amount realizable.  The Company has provided a full valuation 
allowance against its net deferred tax assets due to uncertainties 
surrounding their realization.  Due to the net losses reported in prior years 
and as a result of the material changes in operations, predictability of 
earnings in future periods is uncertain.  The Company will evaluate the 
realizability of the deferred tax asset on a quarterly basis.

     As a result of the issuance of Common Stock and Series A Convertible 
Preferred Stock in exchange for certain liabilities of the Company in 
September 1996, the Company experienced a "change in ownership" as defined 
under Section 382 of the Internal Revenue Code.  Accordingly, utilization of 
substantial net operating losses and tax credit carryforwards will be subject 
to an approximate $2.0 million annual limitation due to the ownership change 
limitations provided by the Internal Revenue Code of 1986 (and similar state 
provisions), except under limited circumstances.  This limitation will result 
in the expiration of all of the tax credit carryforwards and a substantial 
portion of the net operating loss carryforwards without full utilization.  
See Note 5 of Notes to Consolidated Financial Statements.

     NET INCOME (LOSS).  As a result of the above factors, the Company had 
net income of $996,000 in fiscal 1997 compared to a net loss of $975,000 for 
fiscal 1996.  The Color Server Group had net income of approximately $0.9 
million for fiscal 1996.  Had this business not been included in the 
calculation of the Company's net loss for fiscal 1996, the Company would have 
had a net loss of approximately $1.9 million.

FISCAL 1996 TO FISCAL 1995

     NET SALES.  Net sales for fiscal 1996 decreased 70.7% to $90.3 million 
from $308.1 million in fiscal 1995. This decline was primarily due to the 
Company's efforts to refocus its business which included exiting markets for 
high-volume low-margin displays, reduced sales of the Company's video and 
graphics products caused by Apple's shift from NuBus to PCI Bus computers, 
business divestitures and as a result of entering into distributor 
arrangements for Japan and Europe effective April 1,1996 and July 1,1996, 
respectively, which relationships provide for the Company to recognize as net 
sales, a percentage of the sales price of each product sold by those 
distributors as compared to the entire sales price of the product prior to 
the appointment of the distributor.

     As a result of the sale by the Company of its Color Server Group, the 
Company recorded no net sales of color server products after the second 
quarter of its 1996 fiscal year.  The Company sold its Color Server Group in 
January 1996 and sold its MacOS business in February 1996. Net sales from the 
Color Server Group were approximately $7.0 million for fiscal 1996 and 
approximately $29.3 million for fiscal 1995 and net sales from the MacOS 
business were approximately ($1.5 million) for fiscal 1996 and $21.8 million 
for fiscal 1995. Had the net sales of these businesses not been included in 
the Company's net sales for fiscal 1996 or fiscal 1995, the Company's net 
sales for such periods would have been approximately $84.8 million and $257.0 
million for fiscal 1996 and fiscal 1995, respectively.

     One customer accounted for 34.3% of the Company's net sales for fiscal 
1996.  For fiscal 1995, the same customer accounted for 34.0% of the 
Company's net sales.

                                     -15-

<PAGE>

     The Company's export sales for fiscal 1996 were 50.7% of net sales as 
compared to 40.4% of net sales for fiscal 1995.  Net sales have been 
adversely affected in the future as a result of the distributor relationships 
for Japan and Europe because the Company earned royalties and commissions on 
sales to such regions and therefore only recognized as net sales a portion of 
the sales price of any product sold through such distributor arrangements.  
Even if sales for such regions increase or remain similar to historic levels, 
the Company therefore recognizes a lesser amount of net sales for such 
regions as compared to historic levels.  Export sales are also subject to the 
normal risks associated with doing business in foreign countries such as 
currency fluctuations, longer payment cycles, greater difficulties in 
accounts receivable collection, export controls and other government 
regulations and, in some countries, a lesser degree of intellectual property 
protection as compared to that provided under the laws of the United States.  
The Company hedges substantially all of its trade receivables denominated in 
foreign currency through the use of foreign currency forward exchange 
contracts based on third party commitments.  Gains and losses associated with 
currency rate changes on forward contracts are recognized in the Company's 
consolidated statements of operations upon contract settlement and were not 
material in fiscal 1996 or 1995.

     GROSS PROFIT.  The Company's gross profit margin was 14.3% for fiscal 
1996, as compared with 1.7% for  fiscal 1995. Included in fiscal 1996 is a 
one-time charge of $3.5 million resulting from the Company's financial 
restructuring completed in September 1996. Excluding this one time charge and 
the restructuring and other charges recorded in fiscal 1995, gross profit 
margin in fiscal 1996 was 18.2% compared to 16.9% in fiscal 1995.

     In addition, the Color Server Group had gross profit of approximately 
$2.2 million for fiscal 1996 and the Color Server Group and MacOS business 
had gross profit (loss) of approximately $9.8 million and ($19.2 million), 
respectively, for fiscal 1995.  Had those businesses not been included in the 
calculation of the Company's gross profit for fiscal 1996 and 1995, gross 
profit for such fiscal years would have been approximately $10.6 million and 
$14.6 million, respectively with a gross profit margin of approximately 12.6% 
and 5.7%, respectively.

     RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses 
decreased from $19.3 million or 6.3% of net sales for fiscal 1995 to $7.5 
million or 8.3% of net sales for fiscal 1996.  The Company decreased its 
research and development expenses primarily by reducing expenses related to 
headcount resulting from the Company's efforts to refocus its business and 
business divestitures.  The increase in research and development expenses 
expressed as a percentage of net sales for fiscal 1996, was primarily 
attributed to the decrease in net sales and the Company's refocusing on 
higher-end products, rather than high-volume lower-margin products.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and 
administrative expenses decreased from $90.1 million or  29.2 % of net sales 
for fiscal 1995 to $25.9 million or 28.7% of net sales for fiscal 1996. The 
Company decreased its selling, general and administrative expenses primarily 
by reducing expenses related to headcount resulting from the Company's 
efforts to refocus its business and business divestitures. Selling general 
and administrative expenses in fiscal 1995 reflected a reduction of 
approximately $2.1 million of merger-related restructuring reserves to 
reflect current requirements.

     During the second quarter of fiscal 1996, the building in which the 
Company leases its headquarters was sold.  In connection with the sale, the 
Company terminated its existing lease and entered into a lease with the new 
owner of the building.  In connection with the final terms of this new lease, 
expenses in the third quarter of fiscal 1996 included a reduction of 
approximately $913,000 of restructuring reserves to reflect current 
requirements.

     OTHER INCOME (EXPENSE), NET.  Other income was $24.0 million for fiscal 
1996, as compared to other expense of $3.0 million for fiscal 1995. The 
increase was due primarily to other income of approximately of $23.8 million 
resulting from the Company's divestitures of three business lines, including 
the Color Server Group.

     INTEREST EXPENSE.  Interest expense was $3.7 million for fiscal 1996 as 
compared to $3.0 million for fiscal 1995.  This increase was due to higher 
average interest rates on higher average borrowings.

     PROVISION FOR INCOME TAXES.  The Company recorded a provision for income 
taxes of $815,000 for fiscal 1996 as compared to a provision for income taxes 
for fiscal 1995 of $9.1 million.  The provision for fiscal 1996 differs from 
the provision computed utilizing the combined statutory rate in effect during 
the period primarily as a result of the impact of foreign taxes.  The fiscal 
1995 provision differs from the provision computed utilizing the combined 
statutory rate in effect during the period primarily as a result of the 
impact of not benefiting the 1995 operating losses and the reversal of 
existing deferred tax assets.

     NET INCOME (LOSS).  As a result of the above factors, the Company had a 
net loss of $975,000 for fiscal 1996, as compared to a net loss of $131.7 
million for fiscal 1995. The Color Server Group had net income of 
approximately $0.9 million and $3.5 million for fiscal 1996 and 1995, 
respectively .  Had this business not been included in the calculation of the 
Company's net loss for fiscal 1996 and 1995, the Company would have had a net 
loss of approximately $1.9 million and $135.2 million for fiscal 1996 and 
1995, respectively.

                                     -16-

<PAGE>

RESTRUCTURING, MERGER AND OTHER CHARGES

     During fiscal 1994 and 1995, three restructuring and other charges were 
recorded. SuperMac recorded a $16.6 million restructuring charge during 
December 1993 in connection with a program to realign its inventory and 
facility and personnel resources.  Subsequently, the two companies merged and 
incurred a restructuring charge of $43.4 million.  In September 1995, Radius 
recorded $57.9 million restructuring charge in connection with the Company's 
efforts to refocus and streamline its business.  A discussion of each of 
these events follows.

     SUPERMAC DECEMBER 1993 RESTRUCTURING AND OTHER CHARGES:  In December 
1993, SuperMac recorded charges of $16.6 million in connection with a program 
to adjust inventory levels, eliminate excess facilities, terminate certain 
projects and contract arrangements and reduce the number of employees.  The 
charges (in thousands) are included in:  cost of sales ($13,352); research 
and development ($2,000); and selling, general and administrative expenses 
($1,238).  There have been no material changes in the restructuring plan or 
in the estimates of the restructuring costs.  The remaining balance of 
$236,000 at September 30, 1995 in its restructuring reserve which related to 
facility costs, was eliminated in fiscal 1996.
     
     RADIUS FISCAL 1994 MERGER RELATED RESTRUCTURING AND OTHER CHARGES.  In 
the fourth quarter of fiscal 1994, the Company recorded charges of $43.4 
million in connection with the Merger of Radius and SuperMac Technology Inc. 
These charges include the discontinuance of duplicative product lines and 
related assets; elimination of duplicative facilities, property and equipment 
and other assets; and personnel severance costs as well as transaction fees 
and costs incidental to the merger.  The charges (in thousands) are included 
in:  net sales ($3,095); cost of sales ($25,270); research and development 
($4,331); and selling, general and administrative expenses ($10,711).  The 
remaining balance of $44,000 in its restructuring reserve which related to 
facility costs, was eliminated in fiscal 1997.
     
     RADIUS FISCAL 1995 RESTRUCTURING AND OTHER CHARGES.  In September 1995, 
Radius recorded charges of $57.9 million in connection with the Company's 
efforts to restructure its operations by refocusing its business on the color 
publishing and multimedia markets.  The charges primarily included a 
writedown of inventory and other assets.  Additionally, the charges included 
expenses related to the cancellation of open purchase orders, excess 
facilities and employee severance. The charges (in thousands) are included in 
cost of sales ($47,004), and selling, general and administrative expense 
($10,861).  The elements of the total charge as of September 30, 1997 are as 
follows (in thousands):

<TABLE>
<CAPTION>


                                                                            Representing
                                                                    ---------------------------
                                                                                          Cash Outlays
                                                                                          ------------
                                                                          Asset
                                                       Provision     Write-Downs      Completed     Future
                                                       ---------     -----------      ---------     ------
<S>                                                    <C>            <C>             <C>           <C>
  Adjust inventory levels                              $  33,138      $  32,300       $    838      $  --
  Excess facilities                                        2,004            404          1,600         --
  Cancellation fees and asset write-offs                  19,061          5,196         13,865         --
  Employee severance                                       3,662              -          3,642         20
                                                       ---------     -----------      ---------     ------
  Total charges                                        $  57,865      $  37,900        $19,945      $  20

</TABLE>


     The adjustment of inventory levels reflects the discontinuance of 
several product lines.  The provision for excess facility costs represents 
the write-off of leasehold improvements and the costs associated with 
anticipated reductions in facilities. The cancellation fees and asset 
write-offs reflect the Company's decision to refocus its efforts on providing 
solutions for the color publishing and multimedia markets.  Employee 
severance costs are related to employees or temporary employees who have been 
or will be released due to the restructuring. As of December 31, 1997, 
substantially all of the 240 positions planned had been eliminated in 
connection with the restructuring. The Company has satisfied $19.9 million of 
the originally anticipated cash outlays for this restructuring as of 
September 30, 1997 of which approximately $6.0 million represented cash 
expenditures and approximately $13.9 million represented cancellation of 
indebtedness or claims in consideration of the issuance of equity in the 
Company.  The restructuring is substantially completed and remaining cash 
outlays relate primarily to the restructuring of the Company's international 
operations. and are immaterial

LITIGATION SETTLEMENT

     In September 1992, the Company and certain of its officers and directors 
were named as defendants in a securities class action litigation brought  in 
the United States District Court for the Northern District of California that 
sought unspecified damages, prejudgment and post judgment interest, 
attorneys' fees, expert witness fees and costs, and equitable relief.  In 
July 1994, SuperMac Technology, Inc. ("SuperMac") and certain of its officers 
and directors, several venture capital firms and several of the underwriters 
of SuperMac's May 1992 initial public offering and its February 1993 
secondary offering were named as defendants in a class action litigation 
brought in the same court that sought unspecified damages, prejudgment and 
post judgment interest, 

                                     -17-


<PAGE>

attorneys' fees, experts' fees and costs, and equitable relief (including the 
imposition of a constructive trust on the proceeds of defendants' trading 
activities).

     In June 1995, the Court approved the settlement of both litigations and 
entered a Final Judgment and Order of Dismissal.  Under the settlement of the 
litigation brought in 1992 against the Company, the Company's insurance 
carrier paid $3.7 million in cash and the Company issued a total of 128,695 
shares of its Common Stock to a class action settlement fund.  In the 
settlement of the litigation brought in 1994 against SuperMac, the Company 
paid $250,000 in cash and is to issue into a class action settlement fund a 
total of 707,609 shares of its Common Stock.  The number of shares to be 
issued by the Company increased by 100,000 because the price of the Company's 
Common Stock was below $12 per share during the 60-day period following the 
initial issuance of shares.  In connection with these settlements, the 
financial statements for the first quarter of fiscal 1995 included a charge 
to other income of $12.4 million, reflecting settlement costs not covered by 
insurance as well as related legal fees, resulting in a reduction in net 
income from $1.4 million to a net loss of $11.0 million or $0.78 per share 
for the quarter.

     As of September 30, 1997, the Company had issued 836,304 shares of its 
Common Stock due to the settlements and approximately 100,000 shares remained 
to be issued.

BUSINESS DIVESTITURES

     COLOR SERVER GROUP DIVESTITURE.  In January 1996, the Company completed 
the sale of its Color Server Group ("CSG") to Splash Merger Company, Inc. 
(the "Buyer"), a wholly owned subsidiary of Splash Technology Holdings, Inc. 
("Splash"), a corporation formed by various investment entities associated 
with Summit Partners. The Company received approximately $17.2 million in 
cash and 4,282 shares of Splash's 6% Series B Redeemable and Convertible 
Preferred Stock (the "Series B Preferred Stock"). An additional $4.7 million 
was placed in escrow to secure certain post-closing and indemnification 
obligations. In April 1996, approximately $2.3 million was released from this 
escrow to the Company and the Company also received approximately $1.5 
million as a result of post-closing adjustments. The shares of Series B 
Preferred Stock were converted into shares of Splash Common Stock in 
connection with the initial public offering of Splash. Such stock has been 
pledged to IBM Credit in order to secure the Company's obligations to IBM 
Credit under the restructured loan agreement with IBM Credit.  In connection 
with the restructuring of the terms of its loan agreement with IBM Credit, 
the Company granted IBM Credit an option to purchase 428 shares of Series B 
Preferred Stock at a nominal amount (174,113 shares of Splash Common Stock 
after conversion).  The Company has certain indemnification obligations in 
connection with the patent lawsuit brought by Electronics for Imaging, Inc. 
(See Note 3 to Consolidated Financial Statements).  The net proceeds of the 
CSG transaction were paid to Silicon Valley Bank ("SVB"), in order to repay 
the Company's indebtedness to SVB, and to IBM Credit, in order to reduce the 
Company's outstanding indebtedness to IBM Credit.

     PORTRAIT DISPLAY LABS.  In January 1996, the Company entered into a 
series of agreements with Portrait Display Labs, Inc. ("PDL"). The agreements 
assigned the Company's pivoting technology to PDL and canceled PDL's on-going 
royalty obligation to the Company under an existing license agreement in 
exchange for a one-time cash payment. The Company did not receive any 
material amount of payments under such license agreement. PDL also granted 
the Company a limited license back to the pivoting technology. Under these 
agreements, PDL also settled its outstanding receivable to the Company by 
paying the Company $500,000 in cash and issuing to the Company 214,286 shares 
of PDL's Common Stock. The cash proceeds were paid to IBM Credit.  See Note 
10 to Consolidated Financial Statements.

     UMAX DATA SYSTEMS, INC.  In February 1996, the Company sold its MacOS 
compatible systems business to UMAX Computer Corporation ("UCC"), a company 
formed by UMAX Data Systems, Inc. ("UMAX"). The Company received 
approximately $2.3 million in cash and debt relief, and 1,492,500 shares of 
UCC's Common Stock, representing approximately 19.9% of UCC's then 
outstanding shares of UCC Common Stock. The cash proceeds were paid to IBM 
Credit and the shares of UCC Common Stock were pledged to IBM Credit.  See 
Note 10 to Consolidated Financial Statements.

    DISPLAY TECHNOLOGIES ELECTROHOME INC.  In December 1995, the Company 
completed the sale of its monochrome display monitor business to Display 
Technologies Electrohome Inc. ("DTE"). DTE purchased Radius' monochrome 
display monitor business and certain assets related thereto, for 
approximately $200,000 in cash and cancellation of $2.5 million of the 
Company's indebtedness to DTE. In addition, DTE and Radius canceled 
outstanding contracts relating to DTE's manufacture and sale of monochrome 
display monitors to Radius.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's cash and cash equivalents decreased approximately $2.2 
million during fiscal 1997 to approximately $0.8 million at September 30, 
1997, as compared with the fiscal 1996 ending balance of cash and cash 
equivalents of $3.0 million.  Approximately $0.1 million of the $0.8 million 
of cash and cash equivalents available at September 30, 1997 was restricted 
under 


                                     -18-

<PAGE>

a letter of credit.  The decrease in the Company's cash and cash equivalents 
during fiscal 1997 was primarily attributable to funding of operating losses 
of the Company.

     On August  25, 1997 and August 29, 1997, the Company sold an aggregate 
of 875,000  and 121,875 shares, respectively, of the 1,741,127 shares of 
Splash Common Stock owned by the Company.  These shares were sold pursuant to 
an underwritten public offering of an aggregate of 3,250,000 shares of Common 
Stock of Splash by Splash and certain other stockholders of Splash. The 
shares of Splash Common Stock were sold to the underwriters at a price of 
$30.875 per share (including underwriting discount) for aggregate net 
proceeds to the Company of $30.8 million.  The Company used $21.9 million of 
such proceeds to repay all outstanding indebtedness of the Company under its 
term loan agreement with IBM Credit Corp. ("IBM Credit"), used $3.3 million 
of such proceeds to redeem all of the Company's outstanding Series A 
Preferred Stock (all of which shares were held by IBM Credit) and used $5.5 
million of such proceeds towards repayment of principal outstanding of $6.8 
million on the working capital line of credit with IBM Credit. After the 
completion of the sale of these shares of Splash Common Stock, the Company 
continued to own 570,139 shares of Splash Common Stock (net of the option to 
buy 174,113 shares held by IBM Credit and which is exercisable at a nominal 
price).

     During December 1997 the Company sold 40,000 shares of Splash Common 
Stock at an average price of $29.11 for a total of $1,164,340. The Company 
continues to own 530,139 shares of Splash Common Stock, net of the IBM Credit 
option, which are "restricted securities" under Rule 144 promulgated under 
the Securities Act and are available for sale currently, subject to certain 
volume, manner of sale, notice and availability of public information 
requirements of such rule.

     The Company also holds securities in Portrait Display Labs and UMAX 
Computer Corporation ("UMAX"), which have been pledged to IBM Credit. Because 
PDL and UMAX are private companies, there is no market for such securities 
and there can be no assurance that one will develop in the future.  Because 
of PDL's most recent round of funding by third parties, the Company does not 
expect to ever receive significant sums for its PDL holdings.

     The Company's principal source(s) of liquidity currently are cash 
generated by operations, if any; an up to $6.5 million amended working 
capital line of credit provided by IBM Credit pursuant to the terms of the 
restructured loan with IBM Credit; and cash generated from the sale of Splash 
Common Stock net of repayments on the working capital line of credit. Under 
the terms of the amended working capital line of credit, the amount available 
to borrow will be decreased to $5.5 million on January 9, 1998 and will be 
further reduced by mandatory pre-payments which arise from the sale of 
additional shares of Splash Common Stock until the working capital line of 
credit is fully repaid. The borrowing base under the amended working capital 
line of credit is fifty percent of the value of the Splash Common Stock held 
by the Company net of IBM Credit's option to purchase 174,113 shares. As the 
borrowing base is dependent on the daily closing price of Splash Common 
Stock, there can be no assurance that it will be sufficient to allow the 
Company to borrow up to the full amount of the amended working capital line 
of credit. The Company is also required to sell the shares of Splash Common 
Stock subject to IBM Credit's option at prices agreed to with IBM Credit. See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations -- Certain Factors That May Affect the Company's Future Results of 
Operations -- Need for Additional Financing; Loan Restrictions."  See also 
"Business -- Recent Developments -- Value and Liquidity of Interest in Splash 
Technology Holdings, Inc."

     The Company has granted to IBM Credit a security interest in 
substantially all of its assets to secure the Company's various obligations 
to IBM Credit.  The Company has also granted to Mitsubishi Electronics a 
security interest (securing an amount up to $4.4 million) in all of the 
Company's technology and intellectual property rights related to and 
incorporated into the Company's PressView products.

     As of September 30, 1997, the Company was not in compliance with all of 
the financial covenants under the amended loan agreement dated May 12, 1997 
(specifically, minimum working capital and current assets to current 
liabilities ratio). The Company obtained a waiver from IBM Credit of this 
noncompliance. The loan agreement was further amended in November 1997 and as 
of December 31, 1997, the Company expects not to be in compliance with the 
financial covenants of the new amended loan agreement.  There can be no 
assurance that IBM Credit will grant a waiver in the event the Company is not 
in compliance with the amended financial covenants.  See Note 2 to 
Consolidated Financial Statements.

     As a result of IBM's control over the Company's cash flow and 
restrictions on the use of the  Company's excess cash flow, the Company 
anticipates that it will not have significant cash available for expenditures 
other than for its ordinary course of business operating expenses, which will 
be significantly lower than historical amounts.  In the event the Company 
were unable to generate sufficient net sales or if the Company incurs 
unforeseen operating expenses, it may not be able to meet its operating 
expenses without additional financing or a restructuring of its loan 
agreements with IBM Credit.  In the event that the Company desires to acquire 
any strategic technologies or businesses, it would probably be unable to do 
so without obtaining additional financing or the consent of IBM Credit.  See 
"Management's Discussion and Analysis of Financial Condition and Results of 


                                     -19-

<PAGE>

Operations -- Certain Factors That May Affect the Company's Future Results of 
Operations -- Need for Additional Financing; Loan Restrictions."

     Capital expenditures were approximately $0.1 million during fiscal 1997, 
$0.2 million in fiscal 1996 and $1.9 million in fiscal 1995 and were 
primarily for leasehold improvements and upgrading the Company's management 
information systems.  The Company has no present plans for any significant 
amount of capital expenditures in the future.  See Management's Discussion 
and Analysis of Financial Condition and Results of Operation -- Certain 
Factors That May Affect the Company's Future Results of Operations -- Impact 
Year 2000.

     At September 30, 1997, the Company's principal commitments consisted of 
obligations under its restructured loan agreement with IBM Credit and its 
obligations under building and capital leases.  See Notes 2 and 3 to 
Consolidated Financial Statements.  The Company is also a party to various 
litigation proceedings, the costs of defending which or the outcome of which 
could adversely affect the Company's liquidity.  See "Business -- Legal 
Proceedings."

     A significant portion of the Company's net worth and liquidity is 
represented by the Company's remaining holdings in Splash.  As of December 
31, 1997, the Company owned 530,139 shares of Splash Common Stock, net of IBM 
Credit's option to purchase 174,113 shares at a nominal price.  As of that 
date the closing price for Splash Common Stock was $22.50 per share.  
Although the Company may trade its shares in the open market pursuant to Rule 
144 or privately, the market price of Splash Common Stock has been volatile 
with relatively limited volume since Splash's secondary public offering in 
August 1997.  There are other shareholders in Splash with large blocks of 
restricted common stock who may try to sell their shares at the same time as 
the Company. If too many shares are offered for sale at the same time, the 
price may be depressed.  The Company's business plan for fiscal 1998 assumes 
that the proceeds from the sale of Splash Common Stock held by the Company 
will be sufficient to repay the balance of the IBM Credit facility and to 
provide sufficient working capital to the Company during fiscal 1998, but 
there can be no assurance that the Company will be able to effectively time 
its sales or that the market value of Splash Common Stock will be adequate to 
achieve such goals.  See "Management's Discussion and Analysis of Financial 
Condition and Results of Operations."

CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS OF OPERATIONS

     A number of uncertainties exist that could affect the Company's future 
operating results, including, without limitation, the following:

CONTINUING OPERATING LOSSES

     The Company experienced operating losses in each of its prior five 
fiscal years.  In the future, the Company's ability to achieve and 
subsequently sustain profitable operations will depend upon a number of 
factors, including the Company's ability to control costs; the Company's 
ability to service its outstanding indebtedness to IBM Credit; the Company's 
ability to realize appreciation in minority ownership interests in Splash and 
other investments; the Company's ability to generate sufficient cash from 
operations or obtain additional funds to fund its operating expenses; the 
Company's ability to successfully market its software products; the Company's 
ability to develop innovative and cost-competitive new products and to bring 
those products to market in a timely manner; the commercial acceptance of 
Apple computers and the MacOS and the rate and mix of Apple computers and 
related products sold; the Company's ability to successfully develop and 
market products for the Microsoft Windows and NT operating systems in a 
timely manner; competitive factors such as new product introductions, product 
enhancements and aggressive marketing and pricing practices; general economic 
conditions; the Company's ability to successfully negotiate a lease renewal 
for its main offices facility, negotiate a license for Apple's Quick Time 
Version 3.0 and greater, and negotiate a settlement or other favorable 
conclusion of the EFI litigation; and other factors.  For these and other 
reasons, there can be no assurance that the Company will be able to achieve 
or subsequently maintain profitability in the near term, if at all.

FLUCTUATIONS IN OPERATING RESULTS

     The Company has experienced substantial fluctuations in operating 
results.  The Company's customers generally order on an as-needed basis, and 
the Company has historically operated with relatively small backlogs. 
Quarterly sales and operating results depend heavily on the volume and timing 
of bookings received during the quarter, which are difficult to forecast.  A 
substantial portion of the Company's revenues are derived from sales made 
late in each quarter, which increases the difficulty in forecasting sales 
accurately.  Since the end of the Company's 1995 fiscal year, shortages of 
available cash have restricted the Company's ability to purchase inventory 
and have delayed the Company's receipt of products from suppliers and 
increased shipping and other costs.  Furthermore, because of its financial 
condition, the Company believes that many suppliers are hesitant 


                                     -20-

<PAGE>

to continue their relationships with or extend credit terms to the Company 
and potential new suppliers are reluctant to provide goods to the Company.  
The Company recognizes sales upon shipment of product, and allowances are 
recorded for estimated uncollectable amounts, returns, credits and similar 
costs, including product warranties and price protection.  Due to the 
inherent uncertainty of such estimates, there can be no assurance that the 
Company's forecasts regarding bookings, collections, rates of return, credits 
and related matters will be accurate.  A significant portion of the operating 
expenses of the Company are relatively fixed in nature, and planned 
expenditures are based primarily on sales forecasts which, as indicated 
above, are uncertain.  Any inability on the part of the Company to adjust 
spending quickly enough to compensate for any failure to meet sales forecasts 
or to receive anticipated collections, or any unexpected increase in product 
returns or other costs, could also have an adverse impact on the Company's 
operating results.  As a strategic response to a changing competitive 
environment, the Company has elected, and, in the future, may elect from time 
to time, to make certain pricing, service or marketing decisions or 
acquisitions that could have a material adverse effect on the Company's 
business, results of operations and financial condition.  The Company also 
completed a variety of business divestitures during fiscal 1996 and 1997, 
restructured the terms of its indebtedness to IBM Credit and issued a 
substantial amount of equity in the Company to its creditors in satisfaction 
of approximately $45.9 million in claims and indebtedness during the fourth 
quarter of fiscal 1996. In addition, the Company has begun to focus its 
efforts on developing and marketing software products, an area in which it 
has limited experience.  As a result, the Company believes that 
period-to-period comparisons of its results of operations will not 
necessarily be meaningful and should not be relied upon as any indication of 
future performance.  Due to all of the foregoing factors, it is likely that 
in some future quarter the Company's operating results will be below the 
expectations of public market analysts and investors.  In such event, the 
price of the Company's Common Stock would be likely to be materially 
adversely affected.  See "Management's Discussion and Analysis of Financial 
Condition and Results of Operations."

VALUE AND LIQUIDITY OF INTEREST IN SPLASH TECHNOLOGY HOLDINGS, INC.

     A significant portion of the Company's net worth and liquidity resides 
in the Company's remaining holdings in Splash.  Although the Company may 
trade its shares pursuant to Rule 144 or privately, the market price of 
Splash Common Stock has been volatile with relatively limited volume since 
Splash's secondary public offering in August 1997.  There are other 
shareholders in Splash with large blocks of restricted common stock who may 
try to sell their shares when the Company is in the market.  If too many 
shares are offered for sale at the same time, the price may be depressed.  
Ideally, proceeds from the sale of Splash Common Stock held by the Company 
will be sufficient to repay the balance of the IBM Credit facility and to 
provide sufficient working capital to the Company during fiscal 1998, but 
there can be no assurance that the Company will be able to effectively time 
its sales or that the market value of Splash Common Stock will be adequate to 
achieve such goals.

NEED FOR ADDITIONAL FINANCING; LOAN RESTRICTIONS

     The Company intends to finance its working capital needs through cash 
generated by operations, sales of liquid assets and borrowings under a 
restructured working line of credit with IBM Credit.  Because the Company has 
experienced operating losses in each of its prior five fiscal years, the 
Company must significantly reduce operating expenses and/or significantly 
increase net sales in order to finance its working capital needs with cash 
generated by operations.  Furthermore, pursuant to the restructured loan with 
IBM Credit, the Company is required to deposit its revenues in accounts 
subject to control by IBM Credit.  At any time, regardless of whether the 
Company is in default of its obligations to IBM Credit, IBM Credit is 
permitted to apply these amounts towards the repayment of the Company's 
obligations to IBM Credit.  This loan is also subject to mandatory prepayment 
as follows:  (i) upon the disposition of any assets of the Company outside of 
the ordinary course of business, all net proceeds to the Company must be 
applied towards the Company's obligations under the loan; (ii) upon the 
closing of any financing, 10% of the proceeds must be applied towards the 
Company's obligations under the loan; (iii) upon the thirtieth day following 
the end of each fiscal quarter, an amount of no less than 50% of operating 
cash flow for such prior fiscal quarter must be applied towards the Company's 
obligations under the loan; and (iv) upon the receipt of any other amounts 
other than sales of inventory or used or obsolete equipment in the ordinary 
course of business, and not otherwise described in the preceding clause (i) 
-(iii), all of such amounts must be applied towards the Company's obligations 
under the loan.  IBM Credit's control over the Company's financial resources 
as well as these prepayment provisions will place a further strain on the 
ability of the Company to fund its working capital needs internally. 
Accordingly, there can be no assurance that the Company will be able to 
successfully fund its working capital needs internally.

     Although the restructured loan provides for an amended working line of 
credit of up to $6.5 million, the Company will only be able to borrow amounts 
up to the "borrowing base" which is defined as fifty percent of the per-share 
value multiplied by the number of shares of Splash Common Stock owned by 
Radius excluding any shares subject to the option granted to IBM Credit. The 
amended working capital line of credit will be reduced to $5.5 million on 
January 9, 1998 and will be further reduced by fifty percent of the value of 
Splash Common Stock shares sold by the Company other than the shares 
representing the option 


                                     -21-

<PAGE>

held by IBM Credit. Also under the terms of the amended working capital line 
of credit, the Company has the obligation to sell up to 232,151 shares of 
Splash Common Stock at a price approved by IBM Credit and pay seventy-five 
percent of the proceeds to IBM Credit as a "cancellation fee" of the option 
that IBM holds for 174,113 shares of Splash Common Stock. Once the line of 
credit has been reduced to zero, the Company does not expect that it will be 
a source of working capital in the future.

     The restructured loan and amended working capital line of credit also 
imposes certain operating and financial restrictions on the Company and 
requires the Company to maintain certain financial covenants such as minimum 
working capital, restricts the ability of the Company to incur additional 
indebtedness, pay dividends, create liens, sell assets or engage in mergers 
or acquisitions, or make certain capital expenditures.  The failure to comply 
with these covenants would constitute a default under the loan, which is 
secured by substantially all of the Company's assets.  In the event of such a 
default, IBM Credit could elect to declare all of the funds borrowed pursuant 
thereto to be due and payable together with accrued and unpaid interest 
proceeding and to apply all amounts on deposit in the Company's bank 
accounts, which could result in the Company becoming a debtor in a 
bankruptcy.  The loan restrictions could limit the ability of the Company to 
effect future financings or otherwise restrict corporate activities.

     As of September 30, 1997, the Company was not in compliance with all of 
the financial covenants under the restructured loan agreement and amended 
working capital line of credit (specifically, minimum working capital and 
current assets to current liabilities ratio) however, IBM Credit has waived 
such defaults.  See Note 2 to Consolidated Financial Statements.

     In the event that the Splash Common Stock and the working capital line 
of credit are insufficient to fund the Company's working capital needs, the 
Company may need to raise additional capital through public or private 
financings, strategic relationships or other arrangements.  There can be not 
assurance that such additional funding will be available on terms attractive 
to the Company, or at all.  The failure of the Company to raise capital when 
needed would have a material adverse effect on the Company's business, 
operating results and financial condition.  If the additional funds are 
raised through the issuance of equity securities, the percentage ownership of 
the Company of its then-current shareholders would be reduced.  Furthermore, 
such equity securities might have rights, preferences or privileges senior to 
those of the Company's Common Stock.

DEPENDENCE ON AND COMPETITION WITH APPLE

     Historically, substantially all of the Company's products have been 
designed for and sold to users of Apple personal computers.  Although the 
Company has begun to market certain products for the Windows environment, it 
is expected that sales of products for Apple computers will continue to 
represent substantially all of the sales of the Company for fiscal 1998. 
Apple has lost significant market share over the past couple of years and is 
experiencing declining sales in an absolute sense.  The Company's operating 
results would be adversely affected if these trends should continue or if 
other developments were to adversely affect Apple's business.  Furthermore, 
any continued difficulty that may be experienced by Apple in the development, 
manufacturing, marketing or sale of its computers, or other disruptions to, 
or uncertainty in the market regarding, Apple's business, resulting from 
these or other factors could result in further reduced demand for Apple 
computers, which in turn could materially and adversely affect sales of the 
Company's products.  Recently, Apple has announced large losses, management 
changes, headcount reductions, and other significant events which have led to 
uncertainty in the market regarding Apple's business and products.  In 
addition, news reports indicating that Apple may be or may have been the 
target of merger, acquisition, or takeover negotiations, have led or could 
lead to uncertainty in the market regarding Apple's business and products. 
Also, Apple's decision not to renew the licenses to the MacOS with the Mac 
clone manufacturers further limits the market available for the Company's 
Macintosh products.

     As software applications for the color publishing and multimedia markets 
become more available on platforms other than Macintosh, it is likely that 
these other platforms will continue to gain acceptance in these markets.  For 
example, newer versions of the Windows operating environment support high 
performance graphics and video applications similar to those offered on the 
Macintosh.  There is a risk that this trend will reduce the support given to 
Macintosh products by third party developers and could substantially reduce 
demand for Macintosh products and peripherals over the long term.

     A number of the Company's products compete with products marketed by 
Apple.  As a competitor of the Company, Apple could in the future take steps 
to hinder the Company's development of compatible products and slow sales of 
the Company's products.  The Company's business is based in part on supplying 
products that meet the needs of high-end customers that are not fully met by 
Apple's products.  As Apple improves its products or bundles additional 
hardware or software into its computers, it reduces the market for Radius 
products that provide those capabilities.  For example, the Company believes 
that the on-board performance capabilities included in Macintosh Power PC 
products have reduced and continue to reduce overall sales for the Company's 
graphics cards.  In the past, the Company has developed new products as 
Apple's progress has rendered existing Company products obsolete.  However, 
in light of the Company's current financial condition there can be no 
assurance that the 


                                     -22-

<PAGE>

Company will continue to develop new products on a timely basis or that any 
such products will be successful.  In order to develop products for the 
Macintosh on a timely basis, the Company depends upon access to advance 
information concerning new Macintosh products.  A decision by Apple to cease 
sharing advance product information with the Company would adversely affect 
the Company's business.

     New products anticipated from and introduced by Apple could cause 
customers to defer or alter buying decisions due to uncertainty in the 
marketplace, as well as presenting additional direct competition for the 
Company.  For example, the Company believes that Apple's transition during 
1994 to Power PC products caused delays and uncertainties in the marketplace 
and had the effect of reducing demand for the Company's products.  In 
addition, sales of the Company's products have been adversely affected by 
Apple's revamping of its entire product line from NuBus-based to PCI 
Bus-based computers.  In the past, transitions in Apple's products have been 
accompanied by shortages in those products and in key components for them, 
leading to a slowdown in sales of those products and in the development and 
sale by the Company of compatible products.  In addition, it is possible that 
the introduction of new Apple products with improved performance capabilities 
may create uncertainties in the market concerning the need for the 
performance enhancements provided by the Company's products and could reduce 
demand for such products.

COMPETITION

     The markets for the Company's products are highly competitive, and the 
Company expects competition to intensify.  Many of the Company's current and 
prospective competitors have significantly greater financial, technical, 
manufacturing and marketing resources than the Company.  The Company believes 
that its ability to compete will depend on a number of factors, including the 
amount of financial resources available to the Company, its ability to repay 
its indebtedness to IBM Credit, success and timing of new product 
developments by the Company and its competitors, product performance, price 
and quality, breadth of distribution and customer support.  There can be no 
assurance that the Company will be able to compete successfully with respect 
to these factors.  In addition, the introduction of lower priced competitive 
products could result in price reductions that would adversely affect the 
Company's results of operations.   See "Business -- Competition."

DEPENDENCE ON LIMITED NUMBER OF MANUFACTURERS AND SUPPLIERS

     The Company outsources the manufacturing and assembly of its products to 
third party manufacturers.  Although the Company uses a number of 
manufacturer/assemblers, each of its products is manufactured and assembled 
by a single manufacturer.  The failure of a manufacturer to ship the 
quantities of a product ordered by the Company could cause a material 
disruption in the Company's sales of that product.  In the past, most 
recently in the fourth quarter of fiscal 1996, the Company has experienced 
substantial delays in its ability to fill customer orders for displays and 
other products, due to the inability of certain manufacturers to meet their 
volume and schedule requirements and, more recently, due to the Company's 
shortages in available cash.  Such shortages have caused some manufacturers 
to put the Company on a cash or prepay basis and/or to require the Company to 
provide security for their risk in procuring components or reserving 
manufacturing time, and there is a risk that manufacturers will discontinue 
their relationship with the Company.   The Company currently has arranged 
payment terms for certain of its major manufacturers such that certain of the 
Company's major customers pay these manufacturers directly for products 
ordered and shipped.  In the event these customers do not pay these 
manufacturers, there can be no assurance that such manufacturers will not 
cease supplying the Company.  In addition, as a condition to continuing its 
manufacturing arrangement with the Company, the Company granted Mitsubishi 
Electronics, the manufacturer of the Company's PressView products, a security 
interest in all of the Company's technology and intellectual property rights 
related to and incorporated into the Company's PressView products.  There can 
be no assurance that other manufacturers will not require special terms in 
order to continue their relationship with the Company.

     The Company is also dependent on sole or limited source suppliers for 
certain key components used in its products, including certain cables, 
digital video integrated circuits, color-calibrated monitors and other 
products. Certain other components and molded plastic parts are also 
purchased from sole or limited source suppliers. The Company purchases these 
sole or limited source components primarily pursuant to purchase orders 
placed from time to time in the ordinary course of business and has no 
guaranteed supply arrangements with sole or limited source suppliers.  
Therefore, these suppliers are not obligated to supply products to the 
Company for any specific period, in any specific quantity  or at any specific 
price, except as may be provided in a particular purchase order.  Although 
the Company expects that these suppliers will continue to meet its 
requirements for the components, there can be no assurance that they will do 
so, particularly in light of the Company's financial condition. The Company's 
reliance on a limited number of suppliers involves a number of risks, 
including the absence of adequate capacity, the unavailability or 
interruption in the supply of key components and reduced control over 
delivery schedules and costs.  The Company expects to continue to rely on a 
limited number of suppliers for the foreseeable future. If these suppliers 
became unwilling or unable to continue to provide these components the 
Company would have to develop alternative sources for these components which 
could result in delays or reductions in product shipments which could have a 
material adverse effect on the 


                                     -23-

<PAGE>

Company's business, operating results and financial condition.   Certain 
suppliers, due to the Company's shortages in available cash, have put the 
Company on a cash or prepay basis and/or required the Company to provide 
security for their risk in procuring components or reserving manufacturing 
time, and there is a risk that suppliers will discontinue their relationship 
with the Company.

     The introduction of new products presents additional difficulties in 
obtaining timely shipments from suppliers.  Additional time may be needed to 
identify and qualify suppliers of the new products.  Also, the Company has 
experienced delays in achieving volume production of new products due to the 
time required for suppliers to build their manufacturing capacity.  An 
extended interruption in the supply of any of the components for the 
Company's products, regardless of the cause, could have an adverse impact on 
the Company's results of operations.

TECHNOLOGICAL CHANGE; CONTINUING NEED TO DEVELOP NEW PRODUCTS

     The personal computer industry in general, and color publishing and 
video applications within the industry, are characterized by rapidly changing 
technology, often resulting in short product life cycles and rapid price 
declines.  The Company believes that its success will be highly dependent on 
its ability to develop innovative and cost-competitive new products and to 
bring them to the marketplace in a timely manner.  Should the Company fail to 
introduce new products on a timely basis, the Company's operating results 
could be adversely affected.  Technological innovation is particularly 
important for the Company, since its business is based on its ability to 
provide functionality and features not included in Apple's products.  As 
Apple introduces new products with increased functionality and features, the 
Company's business will be adversely affected unless it develops new products 
that provide advantages over Apple's latest offerings.  As a result of the 
Company's financial condition, it has had to significantly reduce its 
research and development expenditures.  For the 1997 fiscal year, the Company 
spent approximately $5.0 million on research and development as compared with 
approximately $7.5 million for the 1996 fiscal year and $19.3 for the 1995 
fiscal year.  Furthermore, as described in "-- Need for Additional Financing; 
Loan Restrictions," the terms of the restructured loan with IBM Credit will 
restrict the Company's ability to fund its working capital needs and, as a 
result, the ability of the Company to maintain historical levels of  research 
and development expenditures.  Continued reduction in the available cash 
resources of the Company could result in the interruption or cancellation of 
research and product development efforts which would have a material adverse 
effect on the business, operating results and financial condition of the 
Company.

     The Company anticipates that the video editing industry will follow the 
pattern of the professional publishing industry in which desktop publishing 
products, including those produced by Radius, replaced more expensive, 
proprietary products, and the Company also anticipates that this evolution 
will lead to an increase in the purchase and use of video editing products, 
in particular digital video editing products for use with digital video 
camcorders.  As a result, the Company has devoted significant resources to 
this product line.  There can be no assurance that this evolution will occur 
in the digital video editing industry as expected by the Company, or that 
even if it does occur that it will not occur at a slower pace than 
anticipated. There can also be no assurance that any digital video editing 
products developed by the Company will achieve consumer acceptance or broad 
commercial success.  In the event that the increased use of such video 
editing products does not occur or in the event that the Company is unable to 
successfully develop and market such products, the Company's business, 
operating results and financial condition would be materially adversely 
affected, particularly in light of the fact that the Company anticipates that 
it will begin to de-emphasize many of its traditional hardware products in 
the future.

DEPENDENCE ON INDIRECT DISTRIBUTION CHANNELS

     The Company's primary means of distribution is through a limited number 
of third-party distributors and master resellers that are not under the 
direct control of the Company.  Furthermore, the Company relies on one 
exclusive or primary distributor for its sales in each of Japan and Europe.  
The Company does not maintain a direct sales force.  As a result, the 
Company's business and financial results are highly dependent on the amount 
of the Company's products that is ordered by these distributors and 
resellers.  Such orders are in turn dependent upon the continued viability 
and financial condition of these distributors and resellers as well as on 
their ability to resell such products and maintain appropriate inventory 
levels.  Furthermore, many of these distributors and resellers generally 
carry the product lines of a number of companies, are not subject to minimum 
order requirements and can discontinue marketing the Company's products at 
any time.  Accordingly, the Company must compete for the focus and sales 
efforts of these third parties. Because certain of the Company's major 
suppliers have arrangements with the Company pursuant to which certain of the 
Company's major customers are responsible for payment of goods sent to the 
Company, the Company is dependent on certain resellers to make payments to 
its suppliers.  In addition, due in part to the historical volatility of the 
personal computer industry, certain of the Company's resellers have from time 
to time experienced declining profit margins, cash flow shortages and other 
financial difficulties.  The future growth and success of the Company will 
continue to depend in

                                     -24-
<PAGE>

large part upon its indirect distribution channels, including its reseller 
channels.  If its resellers or other distributors were to experience 
financial difficulties, the Company's results of operations could be 
adversely affected.

INTERNATIONAL SALES

     Prior to the second fiscal quarter of 1996, the Company's international 
sales were primarily made through distributors and the Company's subsidiary 
in Japan.  Effective April 1, and July 1, 1996 the Company appointed an 
exclusive distributor for Japan and Europe, respectively.  The Company 
expects that international sales, particularly sales to Japan, will represent 
a significant portion of its business activity and that it will be subject to 
the normal risks of international sales such as currency fluctuations, longer 
payment cycles, export controls and other governmental regulations and, in 
some countries, a lesser degree of intellectual property protection as 
compared to that provided under the laws of the United States.  Furthermore, 
a reduction in sales efforts or financial viability of the distributors could 
adversely affect the Company's net sales and its ability to provide service 
and support to Japanese and European customers.  Additionally, fluctuations 
in exchange rates could affect demand for the Company's products.  If for any 
reason exchange or price controls or other restrictions on foreign currencies 
are imposed, the Company's business, operating results and financial 
condition could be materially adversely affected.  Net sales could also be 
adversely affected in the future as a result of the exclusive distributor 
relationships for Japan and Europe because the Company will only recognize as 
net sales a portion of the sales price of any product sold through such 
distributor arrangements. Accordingly, even if sales for such regions 
increase or remain similar to historic levels, the Company would recognize a 
lesser amount of net sales for such regions as compared to historic levels.

     During the third quarter of fiscal 1997, the exclusivity clause in the
agreement with the Japanese distributor was terminated. No other distribution
relationship for Japan has been entered into by the Company.

DEPENDENCE ON KEY PERSONNEL

     The Company's success depends to a significant degree upon the continued 
contributions of its key management, marketing, product development and 
operational personnel and the Company's ability to retain and continue to 
attract highly skilled personnel.  The Company does not carry any key person 
life insurance with respect to any of its personnel.  Competition for 
employees in the computer industry is intense, and there can be no assurance 
that the Company will be able to attract and retain qualified employees.  
Many members of the Company's management have departed within the past year, 
including its former President and Chief Executive Officer and three other 
Vice Presidents, and the Company has also had substantial layoffs and other 
employee departures.  Because of the Company's financial difficulties and the 
very tight labor market for technical personnel, it has become increasingly 
difficult for it to hire new employees and retain key management and current 
employees.  The failure of the Company to attract and retain key personnel 
would have a material adverse effect on the Company's business, operating 
results and financial condition.

DEPENDENCE ON PROPRIETARY RIGHTS

     The Company relies on a combination of patent, copyright, trademark and 
trade secret protection, nondisclosure agreements and licensing arrangements 
to establish and protect its proprietary rights.  The Company has a number of 
patents and patent applications and intends to file additional patent 
applications as it considers appropriate.  There can be no assurance that 
patents will issue from any of these pending applications or, if patents do 
issue, that any claims allowed will be sufficiently broad to protect the 
Company's technology.  In addition, there can be no assurance that any 
patents that may be issued to the Company will not be challenged, invalidated 
or circumvented, or that any rights granted thereunder would provide 
proprietary protection to the Company.  The Company has a number of 
trademarks and trademark applications.  There can be no assurance that 
litigation with respect to trademarks will not result from the Company's use 
of registered or common law marks, or that, if litigation against the Company 
were successful, any resulting loss of the right to use a trademark would not 
reduce sales of the Company's products in addition to the possibility of a 
significant damages award.  Although, the Company intends to defend its 
proprietary rights, policing unauthorized use of proprietary technology or 
products is difficult, and there can be no assurance that the Company's 
efforts will be successful. The laws of certain foreign countries may not 
protect the proprietary rights of the Company to the same extent as do the 
laws of the United States.

     The Company has received, and may receive in the future, communications
asserting that its products infringe the proprietary rights of third parties,
and the Company is engaged and has been engaged in litgiation alleging that
the Company's products infringe others' patent rights.  As a result of such
claims or litigation, it may become necessary or desirable in the future for
the Company to obtain licenses relating to one or more of its products or
relating to current or future technologies, and there

                                     -25-
<PAGE>

can be no assurance that it would be able to do so on commercially reasonable 
terms.  See "Business -- Patents and Licenses" and "Litigation."

IMPACT OF YEAR 2000

     The Year 2000 Issue is the result of computer programs being written 
using two digits rather than four to define the applicable year.  Any of the 
Company's computer programs that have time-sensitive software may recognize a 
date using "00" as the year 1900 rather than the year 2000.  This could 
result in a system failure or miscalculations causing disruptions of 
operations, including, among other things, a temporary inability to process 
transactions, send invoices, or engage in similar normal business activities.

     The Company has been studying this issue but has not yet completed the 
process.  As a result, the Company has no reasonable basis to conclude that 
the Year 2000 Issue will not materially affect future financial results, or 
cause reported financial information not to be indicative of future operating 
results or future financial condition.

SHARES ELIGIBLE FOR FUTURE SALE
     
     Sales of substantial amounts of Common Stock in the public market could 
adversely affect the prevailing market price of the Company's Common Stock. 
The Company estimates that approximately 10 million shares of common stock 
issued to unsecured creditors under the Plan in September 1996 have not yet 
been sold and are eligible for sale under Rule 144.  The tradability of such 
shares of Common Stock could materially and adversely affect the market price 
of the Common Stock.  See "-- Volatility of Stock Price."
     
     As of September 30, 1997, there were 6,683,471 shares of Common Stock 
reserved for issuance upon exercise of outstanding options by employees and 
consultants.  As of such date there were an additional 932,550 shares of 
Common Stock available for issuance under options to be granted to employees 
and consultants and 158,998 shares reserved for issuances for purchases under 
the Company's Employee Stock Purchase Plan.  Additionally, 152,500 shares of 
Common Stock were reserved for issuance under the Company's stock option 
plans for non-employee directors, 47,500 of which were subject to outstanding 
options.  The Company has amended its 1995 Stock Option Plan (the "1995 
Plan") to increase the number of shares available for issuance thereunder by 
2,700,000 shares, subject to shareholder approval at its Annual Meeting of 
Shareholders in February 1998. The Company may also seek to obtain Board 
and/or shareholder approval for grants of options in excess of the amounts 
described above.  All of the shares of Common Stock to be issued upon 
exercise of options granted or to be granted or upon stock purchases will be 
available for sale in the public market.  Such availability will further 
increase the number of freely tradeable shares of Common Stock outstanding 
which could exert downward pressure on the trading price of the Common Stock.

POSSIBLE DELISTING OF COMMON STOCK FROM NASDAQ SMALLCAP MARKET

     The Company's Common Stock is listed on the Nasdaq SmallCap Market 
pursuant to an agreement with the NASD which requires that the Company comply 
with the continued listing requirements for the Nasdaq SmallCap Market. 
Failure to meet the continued listing requirements in the future would 
subject the Common Stock to delisting.  Companies traded on the Nasdaq 
SmallCap Market will be required commencing in March 1998, for example, to 
maintain a minimum bid price of $1.00 per share.  Because the Company's 
Common Stock has not traded over $1.00 per share since November 1996, the 
Common Stock could be delisted from the Nasdaq SmallCap Market.   As a 
result,  the Board of Directors has proposed, subject to shareholder approval 
at the February 1998 annual meeting of shareholders, a significant reverse 
stock split if the trading price of the Company's Common Stock remains below 
$1.00 per share, but there can be no assurance that such a proposal will be 
timely approved by the shareholders, or if approved, that the stock price 
will perform as hoped.  If the Company's Common Stock is delisted, there can 
be no assurance that the Company will meet the requirements for initial 
inclusion on Nasdaq in the future, particularly in light of the fact that 
Nasdaq requires traded securities to have a $4.00 minimum per share bid 
requirement. Moreover, the NASD is considering the elimination of the 
SmallCap Market altogether. Trading, if any, in the listed securities after 
delisting or the elimination of the SmallCap Market would be conducted in the 
over-the-counter market in what are commonly referred to as the "pink 
sheets."  As a result, investors may find it more difficult to dispose of, or 
to obtain accurate quotations as to the value of, the Company's securities.

                                     -26-
<PAGE>

ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The index to the Company's Financial Statements, Financial Schedules, and
the Report of the Independent Auditors appears in Part IV of this Form 10-K.


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

     Not Applicable.


                                     -27-
<PAGE>

                                   PART III
                                       


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     The information concerning the Company's directors required by Item 10 
is incorporated by reference herein to section entitled "Proposal No. 1 
-Election of Directors" of the Proxy Statement The information concerning the 
Company's executive officers required by Item 10 is incorporated by reference 
to Item 4A in Part 1 hereof entitled "Executive Officers of Registrant."
                                       
     With the exception of the information specifically stated as being
incorporated by reference from the Company's  definitive Proxy Statement for
its 1998 Annual Meeting of Shareholders (the "Proxy Statement") in Part III of
this Annual Report on Form 10-K, the Company's Proxy Statement is not to be
deemed as filed as part of this report.  The Proxy Statement will be filed
with the Securities and Exchange Commission within 120 days of the Company's
fiscal year end.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by Item 11 is incorporated herein by reference 
to the sections entitled "Executive Compensation" and "Proposal No. 1 
-Election of Directors--Compensation of Directors" of the Proxy Statement.
                                       
     With the exception of the information specifically stated as being
incorporated by reference from the Company's  definitive Proxy Statement for
its 1998 Annual Meeting of Shareholders (the "Proxy Statement") in Part III of
this Annual Report on Form 10-K, the Company's Proxy Statement is not to be
deemed as filed as part of this report.  The Proxy Statement will be filed
with the Securities and Exchange Commission within 120 days of the Company's
fiscal year end.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

     The information required by Item 12 is incorporated herein by reference 
to the section entitled "Security Ownership of Certain Beneficial Owners and 
Management"  of the Proxy Statement.
                                       
     With the exception of the information specifically stated as being
incorporated by reference from the Company's  definitive Proxy Statement for
its 1998 Annual Meeting of Shareholders (the "Proxy Statement") in Part III of
this Annual Report on Form 10-K, the Company's Proxy Statement is not to be
deemed as filed as part of this report.  The Proxy Statement will be filed
with the Securities and Exchange Commission within 120 days of the Company's
fiscal year end.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 is incorporated herein by reference 
to the section entitled "Certain Transactions" of the Proxy Statement.
                                       
     With the exception of the information specifically stated as being
incorporated by reference from the Company's  definitive Proxy Statement for
its 1998 Annual Meeting of Shareholders (the "Proxy Statement") in Part III of
this Annual Report on Form 10-K, the Company's Proxy Statement is not to be
deemed as filed as part of this report.  The Proxy Statement will be filed
with the Securities and Exchange Commission within 120 days of the Company's
fiscal year end.

                                     -28-
<PAGE>

                                   PART IV


ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
              REPORTS ON FORM 8-K

(a)(1) FINANCIAL STATEMENTS.  The Company's financial statements filed
       herewith are as follows:

                                                                            Page
                                                                            ----
       Report of Ernst & Young LLP, Independent Auditors                     35

       Consolidated Balance Sheets at September 30, 1997 and 1996            36

       Consolidated Statements of Operations for the Years Ended 
       September30, 1997, 1996 and 1995                                      37

       Consolidated Statements of Convertible Preferred Stock and
       Shareholders' Equity for the Years Ended September 30, 1997,
       1996, and 1995                                                        38

       Consolidated Statements of Cash Flows for the Years Ended 
       September 30, 1997, 1996, and 1995                                    39

       Notes to Consolidated Financial Statements                            40


(a)(2) FINANCIAL STATEMENT SCHEDULES.  The Company's financial statement
       schedule filed herewith is as follows:                               Page
                                                                            ----

       Schedule II:  Valuation and Qualifying Accounts                       55

       All other financial statement schedules are omitted because the 
       information called for is not present in amounts sufficient to require 
       submission of the schedules or because the information required is shown 
       either in the financial statements or the notes thereto.

(a)(3) The following exhibits are filed herewith or incorporated by reference
       herein:

EXHIBIT
NUMBER                     EXHIBIT TITLE
-------                    -------------

 2.01    --   Agreement and Plan of Reorganization dated May 20, 1994
              between Radius Inc. and SuperMac Technology, Inc. (1)
 
 2.02    --   Modification Agreement dated July 21, 1994 to Agreement and
              Plan of Reorganization between Radius Inc. and SuperMac
              Technology, Inc. (1)
 
 2.03    --   Agreement and Plan of Reorganization dated July 19, 1994
              between Radius Inc. and VideoFusion, Inc. (2)
 
 2.04    --   First Amendment to Agreement and Plan of Reorganization
              between Radius Inc. and VideoFusion, Inc. dated August 25, 
              1994. (3)
 
 2.05    --   Second Amendment to Agreement and Plan of Reorganization
              between Radius Inc. and VideoFusion, Inc. dated September 6,
              1994. (3)

 2.06    --   Third Amendment to Agreement and Plan of Reorganization
              between Radius Inc. and VideoFusion, Inc. dated May 10, 
              1995. (3)


                                     -29-

<PAGE>

EXHIBIT
NUMBER                     EXHIBIT TITLE
-------                    -------------

 2.07    --   Merger Agreement (the "Merger Agreement") dated as of
              December 21, 1995 among Radius Inc., Splash Technology, Inc.,
              Summit Subordinated Debt Fund, L.P., Summit Ventures IV, L.P.,
              Summit Investors II, L.P., Splash Technology Holdings, Inc. and
              Splash Merger Company, Inc. (4)
 
 2.08    --   Amendment No. 1 to Merger Agreement dated as of January 30,
              1996. (4)
 
 3.01    A    Registrant's Sixth Amended and Restated Articles of
              Incorporation. (5)
 
         B    Certificate of Amendment of Registrant's Sixth Amended and
              Restated Articles of Incorporation. (3)
 
         C    Certificate of Amendment of Registrant's Sixth Amended and
              Restated Articles of Incorporation. (17)
 
         D    Certificate of Determination of Preferences of Series A
              Convertible Preferred Stock of Radius Inc. (17)
 
 3.02    --   Registrant's Bylaws. (6)
 
 4.01    --   Specimen Certificate for shares of Common Stock of the
              Registrant. (7)
 
 4.02    --   Specimen Certificate for shares of Series A Convertible
              Preferred Stock of the Registrant. (17)
 
 4.03    A    Warrant dated September 13, 1995 between IBM Credit
              Corporation and the Registrant. (17)
 
         B    Warrant dated October 13, 1996, between Mitsubishi
              Electronics America, Inc. and the Registrant. (18)
 
 4.04    --   Form of Registration Rights Agreement between the Registrant
              and certain shareholders. (17)
 
         A    The Registrant's Sixth Amended and Restated Articles of
              Incorporation. (5)
 
         B    Certificate of Amendment of Registrant's Sixth Amended and
              Restated Articles of Incorporation. (3)
 
         C    Certificate of Amendment of Registrant's Sixth Amended and
              Restated Articles of Incorporation.  (See exhibit 3.01)
 
         D    Certificate of Determination of Preferences of Series A
              Convertible Preferred Stock of Radius Inc.  (See exhibit 3.01).
 
 4.05    --   The Registrant's Bylaws. (6)
 
 4.06    --   *Non-Plan Stock Option Grant to Charles W. Berger. (8)
 
 4.07    --   Form of Subscription Agreement. (17)
 
 4.08    --   Form of Right. (18)
 
 10.01   A    *Registrant's 401(k) Savings and Investment Plan. (9)
 
         B    *Amendment to Registrant's 401(k) Savings and Investment
              Plan. (3)
 
         C    *Registrant's 401(k) Savings and Investment Plan Loan Policy.
              (3)
 
 10.02   --   *Registrant's 1995 Stock Option Plan. (3)


                                     -30-

<PAGE>

EXHIBIT
NUMBER                     EXHIBIT TITLE
-------                    -------------

 10.03   --   *Form of Stock Option Agreement and Exercise Request as
              currently in effect under 1995 Stock Option Plan. (3)
 
 10.04   --   *Registrant's 1990 Employee Stock Purchase Plan and related
              documents. (10)
 
 10.05   --   *Registrant's 1994 Directors' Stock Option Plan. (3)
 
 10.06   --   Form of Indemnity Agreement with Directors. (7)
 
 10.07   --   Credit Agreement by and among Radius Inc., the certain
              financial institutions, and Silicon Valley Bank, dated March 20,
              1995. (11)
 
 10.08   A    Credit Agreement by and among Radius Inc., the certain
              financial institutions, and International Business Machines Credit
              Corporation, dated February 17, 1995. (11)
 
         B    Acknowledgment, Waiver and Amendment to Radius Inc. Inventory
              and Working Capital Financing Agreement by and between Radius Inc.
              and International Business Machines Credit Corporation dated
              December 14, 1995. (3)
 
 10.09   A    Lease Agreement by and between Registrant and the Equitable
              Life Assurance Society of the United States dated June 22, 1988,
              as amended by the Commencement of Term Agreement dated February
              13, 1989 and Amendment No. One dated July 20, 1989, and related
              documents (1710 Fortune Drive, San Jose, California offices). (7)
 
         B    Second Amendment to Lease dated January 27, 1993 amending
              Lease Agreement by and between Registrant and the Fortune Drive
              Partners (successor in interest to the Equitable Life Assurance
              Society of the United States) dated June 22, 1988 (1710 Fortune
              Drive, San Jose, California offices). (12)
 
 10.10   --   Lease Agreement by and between Registrant and South
              Bay/Copley Associates III Joint Venture dated May 11, 1992;
              Sublease by and between Core Industries, Inc. and Registrant dated
              May 12, 1992; and related documents (2040 Fortune Drive, San Jose
              California offices). (13)
 
 10.11   --   *Employment Agreement by and between Registrant and Charles
              W. Berger dated February 26, 1993 as amended on September 17,
              1993. (14)
 
 10.12   --   Full Recourse Promissory Note with Charles W. Berger. (14)
 
 10.13   --   *SuperMac Technology, Inc.'s 1988 Stock Option Plan ("Option
              Plan"). (15)
 
 10.14   --   *SuperMac Technology, Inc.'s Form of Incentive Stock Option
              Agreement under the Option Plan. (15)
 
 10.15   --   *SuperMac Technology, Inc.'s Form of Supplemental Stock
              Option Agreement under the Option Plan. (15)
 
 10.16   --   *SuperMac Technology, Inc.'s Form of Early Exercise Stock
              Purchase Agreement under the Option Plan. (15)
 
 10.17   --   Distribution Agreement between Radius Inc. and Ingram Micro,
              Inc. dated June 5, 1991 as amended on April 1, 1992, May 31, 1995
              and July 14, 1995.  (16)
 
 10.18   --   Amended and Restated Working Capital and Term Loan Agreement
              dated as of August 30, 1996 between IBM Credit Corporation and the
              Registrant.  (18)
 
 10.19   --   Amended and Restated Working Capital and Term Loan Agreement
              dated as of May 12, 1997 between IBM Credit Corporation and the
              Registrant.  (19)


                                     -31-

<PAGE>

EXHIBIT
NUMBER                     EXHIBIT TITLE
-------                    -------------

 10.20    --   *Employment Agreement by and between Registrant and Mark
               Housley dated December 20, 1996.  (20)
 
 10.21    --   Amended and Restated Working Capital and Term Loan Agreement
               dated as of November 10, 1997 between IBM Credit Corporation and
               the Registrant.
 
 11.01    --   Computation of per share earnings.
 
 21.01    --   List of Registrant's subsidiaries.
 
 23.01    --   Consent of Ernst & Young LLP, Independent Auditors.
 
 27.01    --   Financial Data Schedule (EDGAR version only)
 
---------------

(1)  Incorporated by reference to exhibits to the Company's Amendment No. 2
     (File No. 33-79732) to Form S-4 filed on July 25, 1994.

(2)  Incorporated by reference to exhibits to the Company's Report on Form 10-
     Q filed on August 17, 1994.

(3)  Incorporated by reference to exhibits to the Company's Report Form 10-K
     filed on December 15, 1995.

(4)  Incorporated by reference to exhibits to the Company's Report on Form 10-Q
     filed on February 13, 1996

(5)  Incorporated by reference to exhibits to the Company's Report on Form 10-K
     filed on December 24, 1990.

(6)  Incorporated by reference to exhibits to the Company's Registration
     Statement on Form S-8 filed on April 29, 1992 (File No. 33-47525).

(7)  Incorporated by reference to exhibits to the Company's Registration
     Statement on Form S-1 (File No. 33-35769) which became effective on
     August 16, 1990.

(8)  Incorporated by reference to exhibits to the Company's Registration
     Statement on Form S-8 filed on November 15, 1993 (File No. 33-71636).

(9)  Incorporated by reference to exhibits to the Company's Report on Form 10-K
     filed on December 28, 1992.

(10) Incorporated by reference to exhibits to the Company's Report on Form 10-K
     filed on December 30, 1991.

(11) Incorporated by reference to exhibits to the Company's Report on Form 10-Q
     filed on May 10, 1995.

(12) Incorporated by reference to exhibits to the Company's Report on Form 10-Q
     filed on August 18, 1993.

(13) Incorporated by reference to exhibits to the Company's Report on Form 10-Q
     filed on August 12, 1992.

(14) Incorporated by reference to exhibits to the Company's Report on Form 10-K
     filed on January 3, 1994.

(15) Incorporated by reference to exhibits to SuperMac Technology, Inc.'s
     Registration Statement on Form S-1, as amended (File No. 33-46800), which
     became effective on May 15, 1992.

(16) Incorporated by reference to exhibits to the Company's Report on Form 10-Q
     filed on August 15, 1995.

(17) Incorporated by reference to the Company's Registration Statement on Form 
     S-1 (File No. 333-12417) filed on September 20, 1996.


                                     -32-

<PAGE>

(18) Incorporated by reference to Amendment No. 1 to the Company's Registration 
     Statement on Form S-1 (File No. 333-12417) filed on November 12, 1996.

(19) Incorporated by reference to exhibits to the Company's Report on Form 10-Q 
     filed on August 12, 1997.

(20) Incorporated by reference to exhibits to the Company's Report on Form 10-Q 
     filed on February 11, 1997.


* management contracts or compensatory plans required to be filed as an
exhibit to Form 10-K.
---------------



(b)  REPORTS ON FORM 8-K.  The following report on Form 8-K was filed during 
     the last quarter of fiscal 1997:

     A report pursuant to Items 2, 5, and 7 of Form 8-K was filed by the 
Company on August 25, 1997 describing the sale of 996,875 shares of Splash 
Technology Holdings, Inc.  Common Stock owned by the Company.  A pro forma 
balance sheet reflecting the sale of such shares as of June 30, 1997 was 
included therewith.

(c)  EXHIBITS - See (a) (3) above.

(d)  FINANCIAL STATEMENT SCHEDULES - See (a)(2) above.


                                     -33-

<PAGE>

                                  SIGNATURES

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

                                       RADIUS INC.


                                       By: /s/ Mark Housley
                                           ------------------------------------
                                           Mark Housley
                                           Chairman of the Board of Directors,
                                           Chief Executive Officer and President


                               POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Mark 
Housley and Henry V. Morgan, jointly and severally, his true and 
attorneys-in-fact, each with the power of substitution, for him in any and 
all capacities, to sign amendments to this Report on Form 10-K, and to file 
the same, with all exhibits thereto and other documents in connection 
therewith, with the Securities and Exchange Commission, hereby ratifying and 
confirming all that said attorneys-in-fact, or his or her substitute or 
substitutes, may do or cause to be done by virtue hereof.

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>
<CAPTION>

NAME                                          TITLE                                DATES
----                                          -----                                -----
<S>                               <C>                                       <C>

PRINCIPAL EXECUTIVE OFFICER:


/s/ Mark Housley                  Chairman of the Board of Directors,       January 9, 1998
------------------------------    Chief Executive Officer and President
Mark Housley                  

PRINCIPAL FINANCIAL OFFICER
AND CHIEF ACCOUNTING OFFICER:


/s/ Henry V. Morgan               Senior Vice President,                    January 9, 1998
------------------------------    Chief Financial Officer and Secretary
Henry V. Morgan               

DIRECTORS:


/s/ Michael D. Boich              Director                                  January 9, 1998
------------------------------
Michael D. Boich


/s/ Charles W. Berger             Director                                  January 9, 1998
------------------------------
Charles W. Berger


/s/ John C. Kirby                 Director                                  January 9, 1998
------------------------------
John C. Kirby

</TABLE>


                                     -34-


<PAGE>
              REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND SHAREHOLDERS
RADIUS INC.

We have audited the accompanying consolidated balance sheets of Radius Inc. 
as of September 30, 1997 and 1996, and the related consolidated statements of 
operations, convertible preferred stock and shareholders' equity, and cash 
flows for each of the three years in the period ended September 30, 1997.  
Our audits also included the financial statement schedule listed in the Index 
at Item 14 (a).  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 generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and significant 
estimates made by management, as well as evaluating the overall financial 
statement presentation.  We believe that our audits provide a reasonable basis 
for our opinion.

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the consolidated financial position of Radius 
Inc. at September 30, 1997 and 1996,  and the consolidated results of its 
operations and its cash flows for each of the three years in the period ended 
September 30, 1997, in conformity with generally accepted accounting 
principles.  Also, in our opinion, the related financial statement schedule, 
when considered in relation to the basic financial statements taken as a whole, 
presents fairly in all material respects the information set forth therein.

                                             /s/  ERNST & YOUNG LLP

San Jose, California
November 4, 1997






                                     -35-

<PAGE>

CONSOLIDATED BALANCE SHEETS

September 30  (in thousands)
<TABLE>
<CAPTION>
                                                                                 1997                  1996
                                                                                 ----                  ----
<S>                                                                            <C>                   <C>
ASSETS
Current assets:
 Cash and cash equivalents                                                        $  773             $  2,974
 Accounts receivable, net of allowance for doubtful accounts
  of $4,758 in 1997 and $2,132 in 1996                                             2,168                8,123
 Inventories                                                                         805               12,852
 Investment in Splash Technology Holdings, Inc. - current portion                 22,093                    -
 Prepaid expenses and other current assets                                           184                  366
 Income tax receivable                                                                 -                  514
                                                                               ---------            ---------
 Total current assets                                                             26,023               24,829

Investment in Splash Technology Holdings, Inc. - noncurrent portion                    -               19,152
Property and equipment, net                                                          249                1,495
Deposits and other assets                                                              -                   50
                                                                               ---------            ---------
                                                                               $  26,272            $  45,526
                                                                               ---------            ---------
                                                                               ---------            ---------

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                                               $  4,511             $  5,004
 Accrued payroll and related expenses                                              1,320                2,678
 Accrued warranty costs                                                              538                  478
 Other accrued liabilities                                                         2,690                2,545
 Accrued income taxes                                                              2,111                2,227
 Accrued restructuring and other charges                                           2,033                  425
 Short-term borrowings                                                             4,638                1,922
 Obligations under capital leases - current portion                                  273                1,074
                                                                               ---------            ---------
 Total current liabilities                                                        18,114               16,353

Long-term borrowings                                                                   -               21,940
Obligations under capital leases-noncurrent portion                                    -                  273

Commitments and contingencies

Convertible preferred stock, no par value, 750 shares
 authorized and issued and outstanding in 1996                                         -                3,000
Shareholders' Equity:
 Preferred stock, no par value, 2,000 authorized; none
  issued and outstanding in 1997                                                       -                    -
 Common stock, no par value; 100,000 shares authorized;
  issued and outstanding--55,017 shares in 1997 and
  54,408 shares in 1996                                                          168,994              168,746
 Accumulated deficit                                                            (182,972)            (183,968)
 Unrealized gain on available-for-sale securities                                 22,093               19,152
 Accumulated translation adjustment                                                   43                   30
                                                                               ---------            ---------

 Total shareholders' equity                                                        8,158                3,960
                                                                               ---------            ---------
                                                                               $  26,272            $  45,526
                                                                               ---------            ---------
                                                                               ---------            ---------
</TABLE>
See accompanying notes.


                                     -36-

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS

For years ended September 30
(in thousands, except per share data)
<TABLE>
<CAPTION>
                                                             1997           1996           1995
                                                             ----           ----           ----
<S>                                                     <C>            <C>             <C>
Net sales                                               $  26,276      $  88,129       $308,133
Commissions and royalties                                   4,874          2,161              -
                                                        ---------      ---------       --------
     Total net sales                                       31,150         90,290        308,133

Cost of sales                                              31,032         77,382        302,937
                                                        ---------      ---------       --------
     Gross profit                                             118         12,908          5,196
                                                        ---------      ---------       --------
Operating expenses:
 Research and development                                   5,002          7,478         19,310
 Selling, general and administrative                       21,355         25,886         90,068
                                                        ---------      ---------       --------
     Total operating expenses                              26,357         33,364        109,378
                                                        ---------      ---------       --------
Loss from operations                                     ( 26,239)       (20,456)      (104,182)
Other income (expense), net                                30,600         24,032         (3,045)
Interest expense                                           (2,777)        (3,736)        (3,023)
Litigation settlement                                           -              -        (12,422)
                                                        ---------      ---------       --------
Income (loss) before income taxes                           1,584           (160)      (122,672)
Provision for income taxes                                    316            815          9,070
                                                        ---------      ---------       --------

Net income (loss)                                        $  1,268        $  (975)     $(131,742)
                                                        ---------      ---------       --------
                                                        ---------      ---------       --------

Preferred stock dividend                                      272              -              -
                                                        ---------      ---------       --------
Net income (loss) applicable to
common shareholders                                        $  996        $  (975)     $(131,742)
                                                        ---------      ---------       --------
                                                        ---------      ---------       --------

Net income (loss) per common share                        $  0.02       $  (0.05)      $  (8.75)
                                                        ---------      ---------       --------
                                                        ---------      ---------       --------
Shares used in computing net income
(loss) per common share                                    55,223         21,251         15,049
                                                        ---------      ---------       --------
                                                        ---------      ---------       --------
</TABLE>

See accompanying notes.


                                     -37-

<PAGE>

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS'
EQUITY

FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           Shareholder's Equity
                                                                          -------------------------------------------------------
                                                                                     Accumulated      Unrealized
                                                                                       Deficit          Gain on
                                                          Convertible                    and          Available-        Total
                                                           Preferred      Common     Translation       for-Sale     Shareholders'
                                                             Stock         Stock     Adjustment       Securities       Equity
                                                          -----------     ------     -----------      ----------    -------------
<S>                                                       <C>             <C>        <C>              <C>           <C>
Balance at September 30, 1994                               $     -      $ 87,017    $ (51,326)         $     -      $  35,691
 Issuance of 214 shares of common stock
  under Stock Option Plans                                        -         1,254            -                -          1,254
 Issuance of 162 shares of common stock
  under Employee Stock Purchase Plan                              -         1,298            -                -          1,298
 Issuance of 212 shares of common stock
  pursuant to business acquisition                                -         2,857            -                -          2,857
 Settlement of Litigation                                         -        12,022            -                -         12,022
 Issuance of 2,509 shares of common stock
  through private placement                                       -        21,365            -                -         21,365
 Currency translation adjustment                                  -             -          138                -            138
 Net loss                                                         -             -     (131,742)               -       (131,742)
                                                             ------      --------    ---------        ---------      ---------
Balance at September 30, 1995                                     -       125,813     (182,930)               -        (57,117)
 Issuance of 120 shares of common stock
  under Stock Option Plans                                        -           406            -                -            406
 Issuance of 14 shares of common stock under
  Employee Stock Purchase Plan                                    -            24            -                -             24
 Issuance of 36,294 shares of common
  stock to Creditors                                              -        42,503            -                -         42,503
 Issuance of 750 shares of preferred stock to IBM             3,000             -            -                -              -
 Issuance of 837 shares of common stock
  in partial settlement of litigation                             -             -            -                -              -
 Unrealized gain on available-for-sale securities                 -             -            -           19,152         19,152
 Currency translation adjustment                                  -             -          (33)               -            (33)
 Net loss                                                         -             -         (975)               -           (975)
                                                             ------      --------    ---------        ---------      ---------
Balance at September 30, 1996                                 3,000       168,746     (183,938)          19,152          3,960
 Issuance of 526 shares of common stock
  under Stock Option Plans                                        -           200            -                -            200
 Issuance of 83 shares of common stock under
  Employee Stock Purchase Plan                                    -            48            -                -             48
 Redemption of 750 shares of preferred stock
  held by IBM                                                 (3000)            -            -                -              -
 Unrealized gain on available-for-sale securities                 -             -            -            2,941          2,941
 Currency translation adjustment                                  -             -           13                -             13
 Dividends paid on convertible preferred stock                    -             -         (272)               -           (272)
 Net income                                                       -             -        1,268                -          1,268
                                                             ------      --------    ---------        ---------      ---------
Balance at September 30, 1997                                $    -      $168,994    $(182,929)       $  22,093      $   8,158
                                                             ------      --------    ---------        ---------      ---------
                                                             ------      --------    ---------        ---------      ---------
</TABLE>

See accompanying notes.


                                     -38-

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
For years ended September 30
(in thousands)

<TABLE>
<CAPTION>
                                                                1997          1996           1995
                                                             ---------      ---------     ----------
<S>                                                          <C>            <C>           <C>
Cash flows from operating activities:
 Net income (loss)                                             $1,268          $(975)     $(131,742)
 Adjustments to reconcile net income (loss) to net cash
 used in operating activities:
   Depreciation and amortization                                  801           1453          4,689
   Gain on the sale of Splash Common Stock in 1997
    and the Color Server Group in 1996                        (30,779)       (20,638)             -
   Non-cash restructuring and other charges                     2,162              -         57,865
   Common stock to be issued                                        -              -         12,022
   Loss on disposal of fixed assets                               500            258              -
 (Increase) decrease in assets:
    Accounts receivable                                         3,342         56,698         (5,471)
    Allowance for doubtful accounts                             2,626         (6,269)         5,954
    Inventories                                                12,047            811        (27,140)
    Prepaid expenses and other current assets                     182          1,970           (862)
    Income tax receivable                                         514              5          8,564
    Deferred income taxes                                           -              -          8,400
   Increase (decrease) in liabilities:
    Accounts payable                                             (493)       (19,874)        33,843
    Accrued payroll and related expenses                       (1,492)        (3,007)        (1,871)
    Accrued warranty costs                                         60         (2,582)           915
    Other accrued liabilities                                     145         (8,235)         5,270
    Accrued income taxes                                         (116)           562            428
    Accrued restructuring and other charges                      (420)       (16,588)       (13,601)
                                                             --------       --------       --------
     Total adjustments                                        (10,921)       (15,436)        89,005
                                                             --------       --------       --------
      Net cash used in operating activities                    (9,653)       (16,411)       (42,737)
                                                             --------       --------       --------

Cash flows from investing activities:
 Capital expenditures                                             (55)          (175)        (1,894)
 Deposits and other assets                                         50            467           (238)
 Net proceeds from the sale of Splash Common Stock in
  1997 and the Color Server Group in 1996                      30,779         20,163              -
                                                             --------       --------       --------
      Net cash provided by (used in) investing activities      30,774         20,455         (2,132)
                                                             --------       --------       --------
Cash flows from financing activities:
 Principal payment of short-term borrowings, net                2,716         (4,782)        11,394
 Principal payment of long-term borrowings, net               (21,940)             -              -
 Redemption of preferred stock and related dividend            (3,272)             -              -
 Issuance of common stock                                         248            430         23,917
 Principal payments under capital leases                       (1,074)        (1,478)        (1,679)
                                                             --------       --------       --------
      Net cash provided by (used in)
       financing activities                                   (23,322)        (5,830)        33,632
                                                             --------       --------       --------
Net decrease in cash and cash equivalents                      (2,201)        (1,786)       (11,237)
Cash and cash equivalents, beginning of year                    2,974          4,760         15,997
                                                             --------       --------       --------
Cash and cash equivalents, end of year                       $    773       $  2,974       $  4,760
                                                             --------       --------       --------
                                                             --------       --------       --------
</TABLE>

See accompanying notes.


                                     -39-


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ONE.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
  ORGANIZATION AND BASIS OF PRESENTATION
  
       The consolidated financial statements include the accounts of
  Radius Inc. ("Radius" or the "Company") and its wholly-owned
  subsidiaries after elimination of significant intercompany transactions
  and balances.
       
  FINANCIAL STATEMENT 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,
  liabilities, revenues and expenses. Such estimates include the level of
  allowance for potentially uncollectible receivables and sales returns;
  inventory reserves for obsolete, slow-moving, or non-salable inventory;
  and estimated cost for installation, warranty and other customer
  support obligations. Actual results could differ from these estimates.
  
  MANAGEMENT'S BUSINESS RECOVERY PLANS
  
       As shown in the accompanying consolidated financial statements,
  the Company has incurred recurring operating losses.  In addition, as
  of September 30, 1997, the Company was not in compliance with all of
  the  financial covenants under its credit agreement dated May 12, 1997
  with IBM Credit.  See Note 2.
  
       The Company's relatively limited cash resources have restricted
  the Company's ability to purchase inventory which in turn has limited
  its ability to procure and sell products and has resulted in additional
  costs for expedited deliveries. The adverse effect on the Company's
  results of operations due to its limited cash resources can be expected
  to continue until such time as the Company is able to return to
  profitability, or generate additional cash from other sources.
  
       During fiscal 1996 and 1997, management implemented a number of
  actions to address its cash flow and operating issues, including:
  restructuring its outstanding indebtedness to trade creditors and its
  secured creditor; refocusing its efforts on providing solutions for
  high end digital video and graphics customers; discontinuing sales of
  mass market and other low value added products; divesting a number of
  businesses and product lines; significantly reducing expenses and
  personnel headcount; and subleasing a significant portion of its
  current facility lease given its reduced occupancy requirements.
       
       During fiscal 1998, additional funds may be needed to finance
  ongoing operations and to implement the Company's development plans and
  for other purposes.  The Company plans to generate cash from operations
  and by divesting certain liquid assets and is investigating possible
  financing and strategic partnering opportunities. Regarding the
  Company's Splash Technology Holdings, Inc. ("Splash") securities (the
  "Splash Common Stock"), after the completion of the sale of 996,875
  shares during fiscal 1997 and 40,000 shares in December 1997, the
  Company continues to own 530,139 shares of Splash Common Stock (net of
  the option to buy 174,113 shares held by IBM Credit exercisable at a
  nominal price).  These securities are "restricted securities" under
  Rule 144 promulgated under the Securities Act and are currently
  available for sale, subject to certain volume, manner of sale notice
  and availability of public information requirements of such rule.  The
  closing price of Splash Common Stock at fiscal year end 1997 was $38.75
  per share resulting in unrealized gain on available-for-sale securities
  of approximately $22.1 million.  As of December 31, 1997, the per share
  price of Splash Common Stock was $22.50 resulting in an aggregate value
  of the Company's investment of approximately $11.9 million.  There can
  be no assurance the Company will be able to realize this value in the
  Splash Common Stock or that such financing or strategic partnering
  opportunities will materialize.  There can also be no assurance that
  additional financing will be available when needed or, if available,
  that the terms of such financing will not adversely affect the
  Company's results of operations.  See Note 2.
  
  FISCAL YEAR
  
       The Company's fiscal year ends on the Saturday closest to
  September 30 and includes 52 weeks in all fiscal years presented.
  During fiscal 1995, the Company changed its fiscal year end from the
  Sunday closest to September 



                                     -40-

<PAGE>

  30 to the Saturday closest to September 30 for operational efficiency
  purposes.  For consistency of presentation, all fiscal periods in this Form
  10-K are reported as ending on a calendar month end.
  
  FOREIGN CURRENCY TRANSLATION
  
       The Company translates the assets and liabilities of its foreign
  subsidiaries into dollars at the rates of exchange in effect at the end
  of the period and translates revenues and expenses using rates in
  effect during the period.  Gains and losses from these balance sheet
  translations are accumulated as a separate component of shareholders'
  equity.  Foreign currency transaction gains or losses, which are
  included in the results of operations, are not material.
  
  INVENTORIES
  
       Inventories are stated at the lower of cost or market.  Cost is
  determined using standard costs that approximate cost on a first-in,
  first-out basis.  The Company reviews the levels of its inventory in
  light of current and forecasted demand to identify and provide reserves
  for obsolete, slow-moving, or non-salable inventory.  Inventories
  consist of the following (in thousands):

                                        September 30,
                                     --------------------
                                      1997        1996
                                     -----       --------
      Raw materials                  $   -       $    124
      Work in process                  176          4,488
      Finished goods                   629          8,240
                                     -----       --------
                                     $ 805       $ 12,852
                                     -----       --------
                                     -----       --------
  
  PROPERTY AND EQUIPMENT
  
       Property and equipment is stated at cost and consists of the
  following (in thousands):
  
                                       September 30,
                                     -------------------
                                      1997       1996
                                     -------   ---------
      Computer equipment             $18,170   $  18,091
      Machinery and equipment            553      10,660
      Furniture and fixtures             626       5,793
      Leasehold improvements             439         770
                                     -------   ---------
                                      19,788      35,314
      Less accumulated depreciation
         and amortization            (19,539)    (33,819)
                                     -------   ---------
                                     $   249   $   1,495
                                     -------   ---------
                                     -------   ---------


       Depreciation has been provided for using the straight-line method
  over estimated useful lives of three to five years.  Equipment under
  capital leases and leasehold improvements have been fully amortized.
  
  CARRYING VALUE OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
  DISPOSED OF
  
      In accordance with FASB Statement No. 121, Accounting for the
  Impairment of Long-Lived Assets and for Long- Lived Assets to be
  Disposed Of, the Company records impairment losses on long-lived assets
  when events and circumstances indicate that the assets might be
  impaired and the undiscounted cash flows estimated to be generated by
  those assets are less than the carrying amounts of those assets.  Based
  on the Company's estimate of future undiscounted cash flows, the
  Company expects to recover the carrying amounts of its long-lived
  assets.  Nonetheless, it is reasonably possible that the estimate of
  undiscounted cash flows may change in the near term resulting in the
  need to write-down those assets to fair value.
      
  REVENUE RECOGNITION
  
      Revenue is recognized when products are shipped.  Sales to certain
  resellers are subject to agreements allowing certain rights of return
  and price protection on unsold merchandise held by these resellers.
  The Company provides for 


                                      -41-

<PAGE>

  estimated returns at the time of shipment and for price protection following 
  price declines.  Revenue earned under royalty or commission agreements is 
  recognized in the period in which it is earned.
  
  WARRANTY EXPENSE
  
      The Company provides at the time of sale for the estimated cost to
  repair or replace products under warranty.  The warranty period
  commences on the end user date of purchase and is normally one year for
  displays and digital video products and for the life of the product for
  graphics cards.
  
  ADVERTISING EXPENSES
      
      The Company expenses advertising expenses as incurred.
  
  NET INCOME (LOSS) PER SHARE
  
      Net income (loss) per share is computed using the weighted average
  number of common shares and dilutive common stock equivalents
  outstanding.
  
      Assuming the conversion of accounts payable and other creditor debt
  into common stock in the fourth quarter of fiscal 1996 had occurred at
  the beginning of fiscal 1996, the supplemental loss per share for
  fiscal 1996 would have been $0.02 per share.
      
      In February 1997, the Financial Accounting Standards Board issued
  Statement No. 128, "Earnings per Share" (FAS 128), which is required to
  be adopted on December 31, 1997.  At that time, the Company will be
  required to change the method currently used to compute earnings per
  share and to restate all prior periods.  The application of the FAS 128
  new "basic earnings per share"  calculation results in basic earnings
  (loss) per share that is not materially different from net income
  (loss) per common share as reported as of September 30, 1997, 1996 and
  1995.  The Company does not expect the new diluted calculation to be
  materially different from fully diluted earnings per share.
  
  CASH AND CASH EQUIVALENTS
  
       The Company considers all highly liquid investments with a
  maturity from date of purchase of three months or less to be cash
  equivalents; investments with maturities between three and twelve
  months are considered to be short-term investments.  Cash equivalents
  are carried at cost which approximates market.  There were no short-
  term investments as of September 30, 1997 or 1996.   Approximately $0.1
  million of the $0.8 million of cash at September 30, 1997 was
  restricted under various letters of credit.
  
  OFF BALANCE-SHEET RISK AND CONCENTRATION OF CREDIT RISK
  
       The Company sells its products to direct computer resellers in the
  United States and to distributors in various foreign countries.  The
  Company performs on-going credit evaluations of its customers and
  generally does not require collateral.  The Company maintains reserves
  for potential credit losses.
  
  RELATED PARTIES
  
       IBM Credit was a related party through August 1997 as a result of
  its ownership interests in the Company.  See Notes 2, 10 and 11.  Also,
  during the calendar year 1995, IBM Credit's parent corporation,
  International Business Machines Corporation, manufactured systems
  products (specifically Mac clones) for the Company for which it was
  paid approximately $20 million through the IBM credit facility.
       
       SCI Technology, Inc. ("SCI") and Mitsubishi Electronics America,
  Inc. ("Mitsubishi") were related parties due to board membership and/or
  stock ownership with respect to the Company.  As of December 24, 1997,
  SCI and Mitsubishi no longer own significant interests in the Company,
  nor participate through board membership.  SCI and Mitsubishi are
  suppliers to the Company.  During fiscal 1997, 1996 and 1995 purchases
  from SCI were approximately $10.0 million, $25.2 million and $10.0,
  respectively, and purchases from Mitsubishi were approximately $13.1
  million, $14.1 million and $30.0 million, respectively.  As of
  September 30, 1997 and 1996, the Company had 


                                      -42-
<PAGE>

  accounts payable amounting to approximately $0.1 million and $0.1 million 
  to SCI, respectively, and approximately $0.5 million and $1.5 million to 
  Mitsubishi, respectively.
       
  FAIR VALUE DISCLOSURES
  
       The carrying values and fair values of various financial
  instruments are summarized as follows as of September 30, 1997 (in
  thousands):
                    
       
                                    Carrying Value           Fair Value
                                    --------------           ----------
  
      Cash and cash equivalents         $     773              $  773
      Investment in Splash Technology
       Holdings, Inc. (See Note 10)        22,093              22,093
      Short-term borrowings                (4,638)             (4,638)

  
       The fair value of short-term borrowings are estimated to
  approximate their carrying value as the borrowings are subject to
  variable interest rates.
  
       Estimated fair value amounts have been determined by the Company
  using available market information and appropriate valuation
  methodologies.  However, considerable judgment is required in
  interpreting market data to develop the estimates of fair value.
  Accordingly, the estimates presented herein are not necessarily
  indicative of the amounts that the Company could realize in a current
  market exchange.
  
  RECLASSIFICATIONS
  
       Certain amounts in the September 30, 1996 and 1995 financial
  statements have been reclassified to conform to the current year
  presentation.
  
NOTE TWO.  BORROWINGS
  
  LINE OF CREDIT ARRANGEMENT
  
       In February 1995, the Company and IBM Credit Corp. ("IBM Credit")
  entered into a $30.0 million Inventory and Working Capital Financing
  Agreement (the "Loan Agreement"). The Loan Agreement permitted advances
  for inventory and working capital up to the lesser of $30.0 million or
  85% of eligible receivables ("Inventory and Working Capital Advances").
  In September 1995, IBM Credit advanced an additional $20.0 million
  under the Loan Agreement to finance the manufacturing of the Company's
  MacOS compatible products (the "MacOS Advances").
       
       Immediately prior to the consummation of the restructuring of its
  unsecured and secured debt in September 1996 (the "Plan"), amounts
  outstanding to IBM Credit were approximately $26.4 million (See Note 11). 
  In connection with the Plan, IBM Credit received 750,000 shares of
  the Company's Series A Convertible Preferred Stock and warrants to
  purchase 600,000 shares of Common Stock in consideration of the
  cancellation of $3.0 million of indebtedness to IBM Credit and for an
  additional advance of approximately $470,000.  In addition, IBM Credit
  restructured the terms of the remaining approximately $23.4 million
  indebtedness into a working line of credit and a term loan.  The term
  loan was repaid and the Convertible Preferred Stock was redeemed in
  August 1997 with the proceeds from the sale of Splash Common Stock.
       
       The agreement with IBM Credit was amended on November 10, 1997 to
  increase the working capital line of credit from $5.0 million to $6.5
  million.  Under the terms of the amended working capital line of credit,
  the maximum amount available for borrowing will decrease to $5.5 million
  on January 9, 1998 and will be further reduced by  mandatory pre-
  payments which arise from the sale of additional shares of Splash Common
  Stock until the working capital line of credit is fully repaid.  The
  borrowing base under the amended working capital line of credit is fifty
  percent of the value of the Splash Common Stock held by the Company net
  of IBM Credit's option to purchase 174,113 shares at a nominal price.
  Amounts outstanding under the amended working line of credit bear
  interest at the prime rate plus 1.75% (10.25% as of September 30, 1997).
       
       The restructured loan with IBM Credit is subject to mandatory
  prepayment as follows:  (i) upon the disposition of any assets of the
  Company outside of the ordinary course of business, all net proceeds to
  the Company 


                                      -43-


<PAGE>


  must be applied towards the Company's obligations under the
  loan; (ii) upon the closing of any financing, 10% of the proceeds must
  be applied towards the Company's obligations under the loan; (iii) upon
  the thirtieth day following the end of each fiscal quarter, an amount
  of no less than 50% of operating cash flow for such prior fiscal
  quarter must be applied towards the Company's obligations under the
  loan; and (iv) upon the receipt of any other amounts from other than
  sales of inventory or used or obsolete equipment in the ordinary course
  of business, and not otherwise described in the preceding clauses (i) -
  (iii), all of such amounts must be applied towards the Company's
  obligations under the loan.  In addition, the Company is required to
  deposit its revenues in accounts controlled by IBM Credit.  At any
  time, regardless of whether the Company is in default of its
  obligations to IBM Credit, IBM Credit is permitted to apply these
  amounts towards the repayment of the Company's obligations to IBM
  Credit.  As a result of IBM Credit's control over the Company's cash
  flow, and these prepayment and redemption provisions, together with the
  other terms and covenants of the restructured loan agreement, the
  Company's ability to generate working capital or to undertake a variety
  of other merger, disposition or financing activities is substantially
  restricted.
       
       As of September 30, 1997, approximately $4.6 million in working
  capital line of credit was outstanding under the Loan Agreement and is
  included as short-term borrowings in the accompanying Consolidated
  Balance Sheet.

       On August  25, 1997 and August 29, 1997, the Company sold an
  aggregate of 875,000  and 121,875 shares, respectively, of the
  1,741,127 shares of Splash Common Stock owned by the Company.  These
  shares were sold pursuant to an underwritten public offering of an
  aggregate of 3,250,000 shares of Common Stock of Splash by Splash and
  certain other stockholders of Splash. The shares of Splash Common Stock
  were sold to the underwriters at a price of $30.875 per share (net of
  underwriting discount) for aggregate net proceeds to the Company of
  $30.8 million.  The Company used such proceeds as follows: (i) $21.9
  million to repay all outstanding indebtedness of the Company under its
  term loan agreement with IBM Credit; (ii) $3.3 million to redeem all of
  the Company's outstanding Series A Convertible Preferred Stock (all of
  which shares were held by IBM Credit) and pay accrued dividends; and
  (iii) $5.5 million towards the repayment of principal outstanding of
  $6.8 million on the working capital line of credit with IBM Credit.
  After the completion of these transactions, the Company continued to
  own 570,139  shares of Splash Common Stock (net of the option to buy
  174,113 shares held by IBM Credit exercisable at a nominal price.  See
  Note 10).
       
       During December 1997 the Company sold 40,000 shares of Splash
  Common Stock at an average price of $29.11 for a total of $1,164,340.
  The Company continues to own 704,252 shares of Splash Common Stock
  which are "restricted securities" under Rule 144 promulgated under the
  Securities Act and are available for sale currently, subject to certain
  volume, manner of sale, notice and availability of public information
  requirements of such rule. IBM Credit retains an option to 174,113 of
  these shares.
       
       The Company has granted to IBM Credit a security interest in
  substantially all of its assets to secure the Company's various
  obligations to IBM Credit.  The Company has also granted to Mitsubishi
  Electronics a security interest (securing an amount up to $4.4 million)
  in all of the Company's technology and intellectual property rights
  related to and incorporated into the Company's PressView products.
       
       As of September 30, 1997, the Company was not in compliance with
  all of the financial covenants under the amended loan agreement dated
  May 12, 1997 (specifically, current assets to current liabilities ratio
  and minimum working capital); however, IBM Credit has waived such
  defaults.  The loan agreement was further amended in November 1997 and
  as of December 31, 1997, the Company expects not to be in compliance
  with the financial covenants of the new amended loan agreement.
       
       In addition, the Company entered into a Business Loan Agreement on
  March 20, 1995 with Silicon Valley Bank. The agreement, which expired
  on March 19, 1996, allowed the Company to issue letters of credit as a
  sub-facility under a $5.0 million foreign accounts receivable revolving
  line of credit subject to an interest rate of up to the prime rate plus
  1.25%.  The amounts outstanding under this agreement were repaid in
  January 1996.  The weighted average interest rates in fiscal 1996 and
  1995 were 9.9% and 13.0%, respectively.
       
       One of the Company's subsidiaries had a revolving line of credit
  with a bank in Japan, the outstanding balance having been paid in full
  during the third quarter of fiscal 1996.  The weighted average interest
  rates in fiscal 1996 and 1995 were 2.1% and 4.9%, respectively.


                                      -44-


<PAGE>


NOTE THREE.  COMMITMENTS AND CONTINGENCIES
     
  LEASES
  
       The Company leases facilities under operating leases and certain
  computer equipment and office furniture under capital leases.
  Depreciation expense for assets under capital leases is included in
  depreciation and amortization expense.  The cost and net book value of
  these capital lease assets included in property and equipment are (in
  thousands):
  
     At September 30,                   Cost     Net Book Value
                                     -------     --------------
       1997                          $ 7,437      $   0
       1996                            7,437        250
       
       Future minimum lease payments at September 30, 1997,  under
  capital leases and noncancelable operating leases are as follows (in
  thousands):
  
<TABLE>
<CAPTION>                                             

                                                                       Gross                           Net  
                                                         Capital     Operating         Sublease      Operating
                                                         Leases        Leases           Income        Leases   
                                                         -------     ---------         ---------     ---------
  <S>                                                    <C>         <C>               <C>           <C>
  1998                                                    $280         $1,097             $842         $255
  1999                                                                    156              155            1
                                                         -------       ------            -----       ---------         
      Total Minimum Lease Payments                         280          1,253                          $256
                                                                       ------                        ---------
                                                                       ------                        ---------
      Total sublease income                                                               $997
                                                                                         -----
                                                                                         -----
  Amount representing interest                              (7)
                                                          -----
  
Present value of minimum lease payments                    273
  Amount due within one year                              (273)
                                                          -----
  Amount due after one year                               $  0
                                                          -----
                                                          -----
</TABLE>

       Rent expense charged to operations amounted to approximately $0.6
  million, $1.5 million and $3.5 million for the fiscal years ended
  September 30, 1997, 1996 and 1995, respectively.  The rent expense
  amounts for fiscal 1997, 1996 and 1995 exclude a provision for
  remaining lease obligations on excess facilities.
  
       Sublease income for fiscal 1997, 1996 and 1995 was approximately
  $1.3 million, $1.2 million and $0.6 million, respectively.
  
  CONTINGENCIES
  
       (a)  On November 16, 1995, Electronics for Imaging, Inc. ("EFI")
  filed a suit in the United States District Court in the Northern
  District of California alleging that the Company infringes a patent
  allegedly owned by EFI.  Although the complaint does not specify which
  of the Company's products allegedly infringe the patent, subsequent
  pleading indicates that EFI alleges that the Company's Color Server
  products allegedly infringe.  In January 1996, the Company completed
  the divestiture of the Color Server Group.

       The Company has filed an answer denying all material allegations,
  and has filed counterclaims against EFI alleging causes of action for
  interference with prospective economic benefit, antitrust violations,
  and unfair business practices.  EFI's motion to dismiss or sever the
  Company's amended counterclaims was granted in part and the ruling
  permitted the Company to file an amended counterclaim for antitrust
  violations.  The Company has filed an amended antitrust claim.  The
  Company believes it has meritorious defenses to EFI's claims and is
  defending them vigorously.  In addition, the Company believes it has
  indemnification rights with respect to EFI's claims.  A motion for
  summary judgment based on these indemnification rights disposing of
  EFI's claims was filed, and the court granted this motion finding the
  Company immune from suit under the patent after February 22, 1995.  The
  Company expects to vigorously defend the remaining claims of EFI and to
  vigorously prosecute the claims it has asserted against EFI.  In the
  opinion of management, based on the facts known at this time, although
  the eventual outcome of this case is unlikely to have a material
  adverse effect on the results of operations or financial position of
  the Company, the costs of defense, regardless of outcome, may have a
  material adverse effect on the results of operations or financial
  position of the Company.  In addition, in connection with the
  divestiture of its Color Server business, the Company has certain


                                   -45-


<PAGE>



  indemnification obligations for which approximately $2.0 million
  remains held in escrow at September 30, 1997 to secure such obligations
  in the event that the purchaser suffers any losses resulting from this
  litigation.
  
       (b)  The Company was named as one of approximately 42 defendants
  in Shapiro et al. v. ADI Systems, Inc. et al., Superior Court of
  California, Santa Clara County, case no. CV751685, filed August 14,
  1995.  Radius was named as one of approximately 32 defendants in Maizes
  & Maizes et al. v. Apple Computer et al., Superior Court of New Jersey,
  Essex County, case no. L-13780-95, filed December 15, 1995.  Plaintiffs
  in each case purport to represent alleged classes of similarly situated
  persons and/or the general public, and allege that the defendants
  falsely advertised that the viewing areas of their computer monitors
  are larger than in fact they are.  The Company was served with the
  Shapiro complaint on August 22, 1995 and was served with the Maizes
  complaint on January 5, 1996.  Defendants' petition to the California
  State Judicial Council to coordinate the Shapiro case with similar
  cases brought in other California jurisdictions was granted in part and
  the coordinated proceedings are being  held in Superior Court of
  California, San Francisco County.  An amended consolidated complaint
  was filed on March 26, 1996.
  
       Although the Company believes it has meritorious defenses to the
  plaintiffs' claims, due to the costs of defense, on March 11, 1997, the
  Company along with all but two of the other named defendants agreed to
  settle the suits, subject to final court approval, which the court
  tentatively approved on June 30, 1997.  The settlement provides that
  class members are eligible for a $13 rebate per monitor purchased
  during the class period on applicable new purchases over a three year
  period, subject to specific limitations.  Class members who are
  consumers and do not elect to use the rebate fully can thereafter elect
  to receive a $6 refund per monitor (up to a maximum of $30 per consumer
  class member) during the following six months.  The Company is
  responsible only to class members who purchased Radius branded monitors
  during the class period of May 1, 1991 to May 1, 1995.  Additionally,
  the Company will pay its share of publication and administration costs
  associated with the implementation of the settlement, pay its share of
  plaintiffs' stipulated attorneys' fees and will agree to abide by
  certain limitations in the description of its monitors.   This
  settlement remains subject to final court approval.
       
       (c)  On July 18, 1997, Intelligent Electronics, Inc. and its
  affiliates filed a suit in the United States District Court for the
  District of Colorado alleging a breach of contract and related claims
  in the approximate amount of $800,000, maintaining that the Company
  failed to comply with various return, price protection, inventory
  balancing and marketing development funding undertakings.  In 1997, the
  Company filed an answer to the complaint and cross claimed against the
  plaintiffs and in October 1997 additionally cross claimed against
  Deutsche Financial, Inc., a factor in the account relationship between
  the Company and the plaintiffs, seeking the recovery of approximately
  $2 million.  The Company continues to investigate these claims as well
  as cross claims and expects to vigorously defend and prosecute them as
  applicable.
       
       (d)  The Company is involved in a number of other judicial and
  administrative proceedings incidental to its business.  The Company
  intends to defend such lawsuits vigorously and although adverse
  decisions (or settlements) may occur in one or more of such cases, the
  final resolution of these lawsuits, individually or in the aggregate,
  is not expected to have a material adverse effect on the financial
  position of the Company.  However, depending on the amount and timing
  of an unfavorable resolution of these lawsuits, it is possible that the
  Company's future results of operations or cash flows could be
  materially adversely affected in a particular period.  In addition, the
  costs of defense, regardless of the outcome, could have a material
  adverse effect on the results of operations and financial condition of
  the Company.
  
       (e) In September 1992, the Company and certain of its officers and
  directors were named as defendants in a securities class action
  litigation brought  in the United States District Court for the
  Northern District of California that sought unspecified damages,
  prejudgment and postjudgment interest, attorneys' fees, expert witness
  fees and costs, and equitable relief.  In July 1994, SuperMac and
  certain of its officers and directors, several venture capital firms
  and several of the underwriters of SuperMac's May 1992 initial public
  offering and its February 1993 secondary offering were named as
  defendants in a class action litigation brought in the same court that
  sought unspecified damages, prejudgment and postjudgment interest,
  attorneys' fees, experts' fees and costs, and equitable relief
  (including the imposition of a constructive trust on the proceeds of
  defendants' trading activities).
       
       In June 1995, the Court approved the settlement of both
  litigations and entered a Final Judgment and Order of Dismissal.  Under
  the settlement of the litigation brought in 1992 against the Company,
  the Company's insurance carrier paid $3.7 million in cash and the
  Company is required to issue 128,695 shares of its Common Stock to a
  class action settlement fund.  In the settlement of the litigation
  brought in 1994 against SuperMac, the Company paid $250,000 in cash and
  is required to issue into a class action settlement fund 707,609 shares
  of its Common Stock.  The number of shares required to be issued by the
  Company increased by 100,000 since the price of the Common Stock 


                                   -46-


<PAGE>

  was below $12 per share during the 60-day period following the initial
  issuance of shares.  In connection with these settlements, the Company
  recorded a charge of $12.4 million in the Consolidated Statement of
  Operations in 1995 reflecting settlement costs not covered by insurance
  as well as related legal fees.
       
       As of September 30, 1997, the Company had issued 836,304 of its
  Common Stock due to the settlement and approximately 100,000 shares
  remained to be issued.
  
NOTE FOUR.  CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
  
  SERIES A CONVERTIBLE PREFERRED STOCK
  
       All 750,000 shares of Series A Convertible Preferred Stock were
  redeemed by the Company in September 1997.
  
  COMMON STOCK
  
       In June 1995, the Company sold approximately 2.5 million shares of
  its Common Stock in a series of private placements to a small number of
  investors unaffiliated with the Company.  Proceeds from the offerings,
  net of commission and other related expenses were $21.4 million.  The
  net proceeds were used for working capital.  See also Note Eleven -
  Stock Issued to Creditors.
  
  STOCK OPTIONS
  
       The Company's 1986 Stock Option Plan, as amended (the "1986
  Plan"), authorized the issuance of up to 2,975,000 shares of common
  stock upon the exercise of incentive stock options or nonqualified
  stock options that may  be granted to officers, employees, directors,
  consultants and independent contractors.  Under the 1986 Plan, options
  are exercisable for a term of up to ten years after the date of grant.
  The 1986 Plan expired in October 1996 and provided for options to be
  granted at prices ranging from 50% to 100% of the fair market value of
  the common stock on the date of grant, as determined by the Board of
  Directors.  Vesting of shares is also determined by the Board of
  Directors at the date of grant.  Outstanding grants of options to
  purchase 448,730 shares of Common Stock continue to be exercisable
  according to the terms of the grants, and all unused shares under the
  1986 Plan are reserved for issuance under the 1995 Stock Option Plan.
  
       The Company's 1995 Stock Option Plan (the "1995 Plan") authorizes
  the issuance of up to 4,786,283 shares of common stock upon the
  exercise of incentive stock options or nonqualified stock options that
  may be granted to officers, employees (including directors who are also
  employees), consultants and independent contractors.  Shares available
  for grant under the 1995 Plan include 1,219,663 shares which were not
  issued under the 1986 Plan.  Under the 1995 Plan, options are
  exercisable for a term of up to ten years after the grant date.
  Options may be granted at prices ranging from 85% to 100% of the fair
  market value of the common stock on the date of grant, as determined by
  the Board of Directors.  Vesting of shares is also determined by the
  Board of Directors at the date of grant.  As of September 30, 1997,
  3,369,130 options were outstanding under the 1995 Plan.  The 1995 Plan
  will expire in December 2005.
       
       Pursuant to the 1994 merger with SuperMac Technologies, Inc.,
  Radius assumed 975,239 outstanding options originally issued under the
  SuperMac 1988 Stock Option Plan (the "SuperMac Plan").  These options
  will be administered in accordance with the SuperMac Plan until all
  options are exercised or expired.  As of September 30, 1997, 15,761
  options remain outstanding under the SuperMac Plan and are exercisable
  for a term of up to ten years after the date of grant.
  
       The Company has also reserved 190,000 shares of common stock for
  issuance to non-employee directors pursuant to options granted under
  the 1994 Directors' Stock Option Plan (the "1994 Plan"), including
  90,000 shares which were not issued under the Company's 1990 Directors'
  Stock Option Plan.  Such options may only be nonqualified stock
  options, must be exercised within ten years from the date of grant, and
  must be granted in accordance with a non-discretionary formula.  Under
  this formula, each new director receives an option to purchase 10,000
  shares when that director is first appointed to the Board and an option
  to purchase 2,500 shares on each anniversary of such director's
  appointment.  As of September 30, 1997, 37,500 options were outstanding
  under this 

                                     -47-


<PAGE>

  plan at exercise prices ranging from $0.3438 to $10.875 per share.  Of the 
  options granted under the 1994 Plan, 1,875 are exercisable at September 30, 
  1997.

      Prior to the approval of the 1994 Plan, the 1990 Directors' Stock 
  Option Plan (the "Prior Plan") was in effect.  As of September 30, 1997, the 
  Prior Plan had 10,000 options outstanding at $9.75.  Such options are 
  nonqualified stock options, must be exercised within five years from the date 
  of grant, and were granted in accordance with a non-discretionary formula.  
  Options unissued under the Prior Plan become available for grant under the 
  1994 Plan.
       
      In March 1993, the Company granted a nonqualified stock option to one 
  officer to purchase a total of 250,000 shares of common stock outside the 
  Company's 1986 Stock Option Plan at an exercise price of $7.75 per share.  
  This stock option was subsequently repriced to $0.4688.  This option is 
  exercisable for a term of ten years and vests over a fifty month period 
  commencing on the date of grant.  During fiscal 1994, 150 of these shares 
  were exercised by the officer, and as of September 30, 1997, the remaining 
  249,850 shares were exercisable.
       
      In June 1995, the Company repriced approximately 232,000 of then 
  outstanding options to an exercise price of $12.00 per share, the fair market 
  value of the Company's Common Stock on the date of the repricing.
       
      In December 1995, the Company repriced approximately 930,000 of then 
  outstanding options for an exercise price of $2.375 per share, the fair 
  market value of the Company's Common Stock on the date of repricing.
        
      In January 1997, the Company repriced approximately 1,005,183 of then 
  outstanding options for an exercise price of $ 0.4688 per share, the fair 
  market value of the Company's Common Stock on the date of the repricing.
        
      During fiscal 1997, the Company granted, outside of the Company's Stock 
  Option Plans, 1,000,000, 500,000, 500,000, and 275,000 nonqualified stock 
  options to Messers. Housley, Morgan, Petracca and Capece, respectively (all 
  are officers of the Company) for exercise prices of $0.4063, $0.4063, 
  $0.3125, and $0.2813, respectively, the fair market value of the Company's 
  Common Stock on the relevant dates. These options are exercisable for a term 
  of ten years and vest over a two year period commencing on the date of grant.
     
      The following table summarizes the consolidated activity under all of 
  the Company's plans:

<TABLE>
<CAPTION>

                                                                                              Weighted
                                                    Shares Under                               Average
                                                       Option            Exercise Price     Exercise Price
                                                    ------------         --------------     --------------
<S>                                                 <C>                  <C>                <C>
  Outstanding at September 30, 1994                  2,266,726           $0.42 - $32.18        $11.50
    Granted                                            825,561           $7.37 - $13.62        $10.20
    Exercised                                         (213,791)          $0.42 - $13.12        $ 5.85
    Canceled                                          (871,106)          $0.42 - $29.82        $12.44
                                                    -----------                                      
  Outstanding at September 30, 1995                  2,007,390           $1.36 - $28.96 (a)    $10.26
    Granted                                          1,205,465           $1.28 - $ 4.44        $ 2.36
    Exercised                                         (111,522)          $1.36 - $ 2.37        $ 2.37
    Canceled                                        (1,933,170)          $1.36 - $25.58        $ 7.07
                                                    -----------                                      
  Outstanding at September 30, 1996                  1,168,163           $1.28 - $17.25 (a)    $ 4.34
    Granted                                          7,122,107           $0.28 - $ 0.59        $ 0.40
    Exercised                                         (525,790)          $0.34 - $ 0.47        $ 0.47
    Canceled                                          (928,510)          $0.28 - $17.25        $ 2.80
                                                    -----------                                      
  Outstanding at September 30, 1997                  6,835,971           $0.28 - $10.87 (a)    $ 0.42
                                                    -----------                                      
                                                    -----------

</TABLE>

  (a) Adjusted to reflect option repricing occurring in June 1995, December 
      1995 and January 1997.

                                      -48-

<PAGE>

  
      The following table summarizes information concerning outstanding and 
  exercisable options at September 30, 1997:

<TABLE>
<CAPTION>

                                      Options Outstanding                    Options Exercisable
                      ----------------------------------------------   -------------------------------
                                         Weighted
                                          Average         Weighted                          Weighted
     Range of            Options         Remaining        Average           Options         Average
     Exercise          Outstanding      Contractual       Exercise        Exercisable       Exercise
      Prices          (in thousands)       Life            Price        (in thousands)       Price
  --------------      -------------    -------------    ------------   ----------------   ------------
  <S>                 <C>              <C>              <C>            <C>                 <C>
  $0.28 - $ 0.34          1,184          9.6 Years         $0.31             367              $0.32
  $0.41 - $ 0.59          5,637          8.2 Years         $0.47           2,260              $0.46
  $1.94 - $10.87             15          2.5 Years         $8.63               9              $9.38
  --------------         ------          ---------         -----          ------              -----
  $0.28 - $10.87          6,836          8.4 Years         $0.42           2,636              $0.44
                         ------                                           ------ 
                         ------                                           ------ 
</TABLE>
      
      In October 1996, the Company adopted FASB Statement No. 123, Accounting 
  for Stock-Based Compensation ("FAS 123").  Under FAS 123, the Company may 
  continue following existing accounting rules or adopt a new fair value method 
  of valuing stock-based awards.  The Company has elected to continue to follow 
  APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and 
  related interpretations in accounting for its stock options plans and the 
  Employee Stock Purchase Plan and not adopt the alternative fair value method 
  of accounting provided under FAS 123.  Under APB 25, because the exercise 
  price of the Company's employee stock options equals the market price of the 
  underlying stock on the date of grant, no compensation expense is recognized.
     
      Pro forma information regarding net income and earnings per share is 
  required by FAS 123, which also requires that the information be determined 
  as if the Company has accounted for its employee stock options granted 
  subsequent to September 30, 1995 under the fair value method of that 
  Statement.  The weighted-average grant-date fair value of options granted in 
  fiscal 1997 was $0.30.  The fair value of options was estimated at the date 
  of grant using a Black-Scholes option pricing model with the following 
  weighted-average assumptions for fiscal years 1996 and 1997: risk free 
  interest rate of approximately 6%; a dividend yield of 0%; volatility factors 
  of the expected market price of the Company's Common Stock of 1.077; and a 
  weighted-average expected life of the option of four years.
     
      For purposes of pro forma disclosures, the estimated fair values of the 
  options are amortized to expense over the related vesting periods.  The 
  Company's pro forma net income (loss) for 1997 and 1996 was not materially 
  different from reported amounts.
     
      Since FAS 123 is applicable only to options granted subsequent to 
  September 30, 1995, its pro forma effect will not be fully reflected until 
  fiscal year 2001.
       
  EMPLOYEE STOCK PURCHASE PLAN

      The Company has an employee stock purchase plan under which 
  substantially all employees may purchase common stock through payroll 
  deductions at a price equal to 85% of its fair market value as of certain 
  specified dates.  Stock purchases under this plan are limited to 10% of an 
  employee's compensation, and in no event may exceed $21,250 per year.  The 
  Company suspended the operation of its employee stock purchase plan in fiscal 
  1997.  At September 30, 1997, 158,998 shares remain available for issuance 
  under the plan.

                                      -49-

<PAGE>

NOTE FIVE.  FEDERAL AND STATE INCOME TAXES

       The provision (benefit) for income taxes consists of the following:

                             Year ended September 30,
                           ---------------------------
                           1997        1996       1995
                           ----        ----       ----
                                   (in thousands)
     Federal:

       Current            $  50       $   -    $     -
       Deferred               -           -      7,170
                          -----       -----    -------
                             50           -      7,170
     Foreign:

       Current              251         765        650

     State:

       Current               15          50         20
       Deferred               -           -      1,230
                          -----       -----    -------
                             15          50      1,250
                          -----       -----    -------
                          $ 316       $ 815    $ 9,070
                          -----       -----    -------
                          -----       -----    -------

      Deferred income taxes reflect the net tax effects of temporary 
  differences between the carrying amounts of assets and liabilities for 
  financial reporting purposes and the amounts used for income tax purposes.  
  Significant components of the Company's deferred tax assets and liabilities 
  are as follows:

                                                                September 30,
                                                              -----------------
                                                              1997        1996
                                                              ----        ----
                                                                 (in thousands)
  Deferred tax assets:
      Net operating loss carryforwards                    $  19,687   $  25,232
      Inventory valuation differences                         4,835       6,364
      Restructuring reserves                                  1,182       3,536
      Reserves and accruals not currently tax deductible      7,360       3,424
      Depreciation                                              396       2,390
      Capitalized research & development expenditures         4,399       2,144
      Other                                                   2,726       2,703
                                                          ---------   ---------
      Total deferred tax assets                              40,585      45,793
      Valuation allowance for deferred tax assets           (40,585)    (38,295)
                                                          ---------   ---------
      Deferred tax assets                                 $       -   $   7,498
                                                          ---------   ---------
                                                          ---------   ---------
  Deferred tax liabilities:

      Valuation of investment portfolio                   $       -       7,498
                                                          ---------   ---------
      Total deferred tax liabilities                              -       7,498
                                                          ---------   ---------
      Net deferred tax assets                             $       -   $       -
                                                          ---------   ---------
                                                          ---------   ---------
     
      FASB Statement 109, Accounting for Income Taxes, provides for the 
  recognition of deferred tax assets if realization of such assets is more 
  likely than not. The Company's valuation allowance reduced the deferred tax 
  asset to the amount realizable. The Company has provided a full valuation  
  allowance against its net deferred tax assets due to uncertainties 
  surrounding their realization. Due to the net losses reported in  prior years 
  and as a result of the material changes in operations, predictability of 
  earnings in future periods is uncertain. The Company will evaluate the 
  realizability of the deferred tax asset on a quarterly basis.

                                      -50-

<PAGE>

      The provision for income taxes differs from the amount computed by 
  applying the statutory federal income tax rate to income before taxes. The 
  sources and tax effects of the differences are as follows:

<TABLE>
<CAPTION>

                                                              Year ended September 30,
                                                      ---------------------------------------
                                                      1997              1996             1995
                                                      ----              ----             ----
                                                                   (in thousands)
<S>                                                <C>               <C>           <C>
  Expected tax at statutory rate                    $  554           $  (56)       $  (42,935)
  Change in valuation allowance                       (504)             241            49,820
  State income tax, net of federal tax benefit          15               50             1,250
  Other                                                251              580               935
                                                    ------          -------       -----------
                                                    $  316           $  815        $    9,070
                                                    ------          -------       -----------
                                                    ------          -------       -----------
</TABLE>
                                                      
      As of September 30, 1997, the Company had net operating loss 
  carryforwards for federal and state income tax purposes of approximately 
  $41,000,000 and $56,000,000, respectively.  The federal loss carryforwards 
  will expire beginning in 2011, if not utilized and the state loss 
  carryforwards will expire beginning in 1998, if not utilized.
     
      As a result of the issuance of Common Stock and Series A Convertible 
  Preferred Stock in exchange for certain liabilities of the Company in 
  September 1996, the Company experienced a "change in ownership" as defined 
  under Section 382 of the Internal Revenue Code. Accordingly, utilization of 
  net operating loss and tax credit carryforwards will be subject to an annual 
  limitation of approximately $2.0 million due to the ownership change 
  limitations provided by the Internal Revenue Code of 1986 and similar state 
  provisions, except under limited circumstances.

NOTE SIX.  STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                Year ended September 30,
                                                       ------------------------------------------
                                                       1997               1996           1995
                                                                    (in thousands)
<S>                                                 <C>             <C>              <C>
   Supplemental disclosure of cash
    flow information:

   Cash paid (received) during the year for:
    Interest                                         $  2,988        $  3,792        $  1,620
                                                    ---------        --------        --------
                                                    ---------        --------        --------
    Income taxes                                     $      8        $    253        $ (8,370)
                                                    ---------        --------        --------
                                                    ---------        --------        --------
   Supplemental schedule of noncash
    investing and financing activities:
    Common and preferred stock issued
    to creditors                                     $      -        $ 45,503        $      -
                                                    ---------        --------        --------
                                                    ---------        --------        --------
    Conversion of short-term borrowings
    to long-term borrowings                          $      -        $ 21,940        $      -
                                                    ---------        --------        --------
                                                    ---------        --------        --------
    Retirement of fully and partially
    depreciated assets                               $      -        $      -        $  4,459
                                                    ---------        --------        --------
                                                    ---------        --------        --------
   
    Common stock issued pursuant to
    acquisition agreement                            $      -        $      -        $  2,857
                                                    ---------        --------        --------
                                                    ---------        --------        --------

</TABLE>

NOTE SEVEN.  EXPORT SALES AND MAJOR CUSTOMERS

      The Company currently operates in one principal industry segment: the 
  design, assembling and marketing of color publishing and digital video 
  computer products.  The Company is highly dependent on the success of Apple 
  products as the Company's products are designed to provide additional 
  functionality to Apple products.

                                      -51-

<PAGE>
     
      The Company's export sales were approximately $4.9 million, $45.8 
  million and $124.5 million in the fiscal years ended September 30, 1997, 1996 
  and 1995, respectively, and included export sales to Europe of approximately 
  $1.8 million, $21.2 million and $57.3 million, respectively.  The Pacific, 
  Asia, and Latin America region sales were approximately $3.1 million, $24.6 
  million and $67.2 million for fiscal years ended September 30, 1997, 1996 and 
  1995, respectively. During fiscal 1996, the Company entered into exclusive 
  distributor arrangements with respect to Japan and Europe and earns royalties 
  and commissions under such arrangements.  For the fiscal year ended September 
  30, 1997, the Company earned approximately $1.3 million and $1.4 million in 
  royalties and commissions from Europe and Japan, respectively, which are 
  included in the above amounts.
     
      One customer accounted for approximately 66.1%, 34.3% and 34.0% of the 
  Company's net sales during the years ended September 30, 1997, 1996 and 1995,
  respectively.

NOTE EIGHT.  RESTRUCTURING AND OTHER CHARGES

  RADIUS FISCAL 1995 RESTRUCTURING AND OTHER CHARGES

      In September 1995, Radius recorded charges of $57.9 million in 
  connection with the Company's efforts to refocus its business on the color 
  publishing and multimedia markets.  The charges primarily included a 
  writedown of inventory and other assets.  Additionally, it included expenses 
  related to the cancellation of open purchase orders, excess facilities and 
  severance.  The charges (in thousands) are included in cost of sales 
  ($47,004), and selling, general and administrative expense ($10,861).  The 
  elements of the total charge as of September 30, 1997 are as follows (in 
  thousands):
  
<TABLE>
<CAPTION>
                                                                          Representing
                                                               --------------------------------------------
                                                                                             Cash Outlays
                                                                                    ---------------------
                                                                          Asset                    
                                                      Provision     Write-Downs      Completed     Future
<S>                                                   <C>           <C>              <C>           <C>
   Adjust inventory levels                            $  33,138       $  32,300         $  838     $    -
   Excess facilities                                      2,004             404          1,600          -
   Cancellation fees and asset write-offs                19,061           5,196         13,865          -
   Employee severance                                     3,662               -          3,642         20
                                                      ---------       ---------      ---------     ------
      Total charges                                   $  57,865       $  37,900      $  19,945     $   20
                                                      ---------       ---------      ---------     ------
                                                      ---------       ---------      ---------     ------
</TABLE>

      The adjustment of inventory levels reflects the discontinuance of
  several product lines.  Revenues and product margins for significant
  product lines discontinued were as follows:  MacOS-compatible systems
  were $21.8 million and $(19.2 million), respectively; and low-margin
  displays were $82.9 million and $19.6 million, respectively.  The
  provision for excess facility costs represents the write-off of
  leasehold improvements and the costs associated with anticipated
  reductions in facilities. The cancellation fees and asset write-offs
  reflect the Company's decision to refocus its efforts on providing
  solutions for the color publishing and multimedia markets.  Employee
  severance costs are related to employees or temporary employees who
  have been or will be released due to the revised business model. As of
  December 31, 1997, substantially all of the 240 positions planned had
  been eliminated in connection with the new business model.  The Company
  has satisfied $19.9 million of the originally anticipated cash outlays
  for this restructuring as of September 30, 1997, of which approximately
  $6.0 million represented cash expenditures and approximately $13.9
  million represented cancellation of indebtedness or claims in
  consideration of the issuance of equity in the Company.  See
  "Management's Business Recovery Plans" at Note 1.  During the quarter
  ended June 30, 1996, approximately $913,000 of restructuring charges
  were reversed and recorded as an expense reduction due to changes in
  estimated requirements.  The restructuring is substantially completed
  and remaining cash outlays relate primarily to the restructuring of the
  Company's international operations.

NOTE NINE.  TECHNOLOGY LICENSING FROM REPLY CORPORATION

      On March 31, 1997, the Company licensed certain technology from
  Reply Corporation ("Reply") that allowed the Company to develop and
  market PCI bus adapter cards featuring Windows compatibility to users
  of Macintosh products.  First customer shipments of these products were
  made during the third fiscal quarter of 1997.  Effective in the third
  fiscal quarter, the Company purchased such technology along with
  certain assets and inventory.  The purchase price of such assets and
  inventory  was approximately $401,000, although, the Company is
  required to pay a royalty fee based upon the number of products sold
  which incorporate such technology.  Radius products 

                                      -52-

<PAGE>

  containing the acquired technology earn a royalty of 5% of net revenue 
  until cumulative royalties exceed $1.5 million, when the rate is reduced 
  to 3%, until cumulative royalties of $2.5 million are paid, after which no
  royalty is due.  As of September 30, 1997, Radius has paid or accrued
  approximately $115,000 in royalties.  Additionally, the Company issued
  a warrant to Reply to purchase 500,000 shares of the Company's Common
  Stock at a price of $1.25 per share exercisable over a forty-two month
  period.  The value of the warrants has been deemed to be immaterial.

NOTE TEN.  BUSINESS DIVESTITURES
       
      COLOR SERVER GROUP.  In January 1996, the Company completed the
  sale of  its Color Server Group ("CSG") to Splash Merger Company, Inc.
  (the "Buyer"), a wholly owned subsidiary of Splash Technology Holdings,
  Inc. ("Splash"), a corporation formed by various investment entities
  associated with Summit Partners.  In fiscal 1996, the Company received
  approximately $21.0 million in cash and, as of September 30, 1997, an
  additional $2.0 million is being maintained in escrow to secure certain
  indemnification obligations.  The Company also received 4,282 shares of
  Splash's 6% Series B Redeemable and Convertible Preferred Stock (the
  "Series B Preferred Stock"). The shares of Series B Preferred Stock
  were converted into shares of Splash's Common Stock outstanding in
  connection with the initial public offering of Splash.  In June 1996,
  the Company granted IBM Credit, its secured lender, an option to
  purchase 428 shares of Series B Preferred (now 174,113 shares of Splash
  Common Stock) in connection with the restructuring of the terms of its
  loan agreement with IBM Credit (also, see Note 11, regarding the
  conversion of accounts payable and other creditor debt to equity in the
  fourth quarter of fiscal 1996.).  These shares of Splash Common Stock
  have been pledged to IBM Credit.  IBM Credit has not exercised its
  option.
       
      On October 8, 1996, Splash completed its initial public offering
  of common stock which reduced the Company's ownership position to
  approximately 14.6 percent. The investment, which is available for
  sale, subject to certain market trading restrictions, is accounted for
  in accordance with FASB Statement No. 115. The unrealized gain of $22.1
  million relating to the remaining 570,139 shares held, based upon the
  closing price of $38.75 per share at fiscal year end 1997 is recorded
  as a component of shareholders' equity at September 30, 1997.
       
      PORTRAIT DISPLAY LABS.  In January 1996, the Company entered into
  a series of agreements with Portrait Display Labs, Inc. ("PDL").  The
  agreements assigned the Company's pivoting technology to PDL and
  canceled PDL's on-going royalty obligation to the Company under an
  existing license agreement in exchange for a one-time cash payment.
  The Company did not receive any material amount of payments under such
  license agreement.  PDL also granted the Company a limited license back
  to the pivoting technology.  Under these agreements, PDL also settled
  its outstanding receivable to the Company by paying the Company
  $500,000 in cash and issuing to the Company 214,286 shares of PDL's
  Common Stock.  The cash proceeds were paid to IBM Credit.  The shares
  of PDL Common Stock are pledged to IBM Credit.  Due to an expected
  recapitalization of PDL, the Company's interests will become deeply
  subordinated to expected new investors in PDL.  Therefore, the Company
  does not anticipate that it will realize any future material benefit
  from its investment in PDL.  These shares are not valued for financial
  purposes.
     
      UMAX DATA SYSTEMS, INC.  In February 1996, the Company sold its MacOS 
  compatible systems business to UMAX Computer Corporation ("UCC"), a company 
  formed by UMAX Data Systems, Inc. ("UMAX").  The Company received 
  approximately $2.3 million in cash and debt relief and 1,492,500 shares of 
  UCC's Common Stock, representing approximately 19.9% of UCC's then 
  outstanding shares of UCC Common Stock.  The cash proceeds were paid to IBM 
  Credit and the shares of UCC Common Stock are pledged to IBM Credit.  Due to 
  Apple's recent reversal in MacOS licensing policy, the value of the Company's 
  investment in UCC is uncertain.  These shares are not valued for financial 
  purposes.
     
      DISPLAY TECHNOLOGIES ELECTROHOME INC.  In December 1995, the
  Company completed the sale of its monochrome display monitor business
  to Display Technologies Electrohome Inc. ("DTE").  DTE purchased
  Radius' monochrome display monitor business and certain assets related
  thereto, for approximately $200,000 in cash and cancellation of $2.5
  million of the Company's indebtedness to DTE.  In addition, DTE and
  Radius canceled outstanding contracts relating to DTE's manufacture and
  sale of monochrome display monitors to Radius.
  
NOTE ELEVEN.  STOCK ISSUED TO CREDITORS
       
      In September 1996, the Company, IBM Credit and its unsecured
  creditors consummated a restructuring of the Company's outstanding
  indebtedness pursuant to which the Company's creditors received equity
  in satisfaction of 

                                      -53-

<PAGE>

  their claims (the "Plan").  The Company issued 36,294,198 shares of Common
  Stock in satisfaction of approximately $45.9 million in unsecured claims 
  (including a $1.0 million reserve for unknown or unresolved claims) and 
  repaid approximately $1.9 million of unsecured claims, most of which were 
  less than $50,000, at an average discount of approximately 75% of the amount 
  of the claim.  Of these shares of Common Stock issued pursuant to the Plan, 
  791,280 were issued to the Radius Creditors Trust for the purpose of 
  satisfying unresolved or unknown claims.  As of September 30, 1997, all 
  shares of Common Stock held by the Radius Creditors Trust had been 
  disbursed to various claimants.  The Company also issued 750,000 shares of 
  its Series A Convertible Preferred Stock (convertible into an aggregate of 
  5,523,030 shares of Common Stock, or 6,075,333 shares in certain 
  circumstances) and warrants to purchase 600,000 shares of Common Stock to 
  IBM Credit in satisfaction of $3.0 million indebtedness and in consideration 
  of restructuring its remaining approximately $23.4 million indebtedness to
  IBM Credit.  The Company also issued warrants to purchase 50,000 shares
  of Common Stock to Mitsubishi in consideration of the extension of open
  credit terms to the Company.  The warrants expire October 13, 2000.
  The Company also issued to its unsecured creditors, who received Common
  Stock, Rights ("Rights") to receive up to an additional 11,046,060
  shares of Common Stock in the event that the Series A Convertible
  Preferred Stock is converted into Common Stock (including 240,824
  Rights issued to the Radius Creditors Trust).  All outstanding shares
  of the Convertible Preferred Stock were redeemed in September 1997.
  Because such Series A Convertible Preferred Stock was redeemed prior to
  conversion of any shares of such Preferred Stock into Common Stock, no
  shares of Common Stock will be issuable pursuant to the Rights.  All
  such Rights have expired.
     
      Considering the value of the Common and Preferred Stock issued or 
  issuable to the creditors, the percentage of the Company's ownership issued 
  to the creditors, the large blocks of stock issued to a certain few 
  creditors, Common Stock warrants issued and other costs, such as cash 
  settlements, legal and accounting expenses and the option to IBM Credit to 
  purchase 10% of the Company's investment in Splash, and considering 
  appropriate discounts on the stock issued, the Company concluded that the 
  value of consideration given up was equal to the indebtedness forgiven.   As 
  a result, the accompanying financial statements do not include any 
  extraordinary gain or loss resulting from the execution of the Plan.

NOTE TWELVE.  FOURTH QUARTER FISCAL 1997 CHARGES

      In September 1997, the Company recorded charges of $8.1 million as a 
  result of its decision to focus its efforts on its color publishing and 
  digital video software product lines while discontinuing the development of 
  its accelerated color graphics products and its DOS on Mac products. These 
  charges included a writedown of inventory of $4.1 million, the establishment 
  of reserves for purchase order commitments by its contract manufacturers of 
  $2.0 million, the establishment of reserves for returns and price protection 
  of $1.9 million, and severance for employees that were released in October 
  1997 of $0.1 million.  Additional charges of $2.5 million were recorded due 
  to changes in estimates to increase the reserve for doubtful accounts by $1.5
  million and to provide for sales tax and other exposures totaling $1.0 
  million. The expected cash outlays in 1998 represented by these charges is 
  approximately $3.0 million.

                                      -54-

<PAGE>


    SCHEDULE II --- VALUATION AND QUALIFYING ACCOUNTS
  (IN THOUSANDS)

<TABLE>
<CAPTION>
                                       Balance at    Charged to    Charged                     Balance
                                       beginning     costs and     to other                    at end of
            Description                of period     expenses      accounts    Deductions(1)   period
            -----------                ---------     --------      --------    -------------   ------ 
ALLOWANCE FOR DOUBTFUL ACCOUNTS:                                                                      
<S>                                     <C>          <C>           <C>          <C>            <C>

   Year ended September 30, 1995        $2,548        $6,837         $0         $  883         $8,502

   Year ended September 30, 1996        $8,502        $   91         $0         $6,461         $2,132

   Year ended September 30, 1997        $2,132        $4,706         $0         $2,080         $4,758

</TABLE>

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

(1) Uncollectable accounts written off.

                                      -55-