SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
Commission File Number 0-17977
BOUNDLESS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
13-3469637
(I.R.S. Employer Identification No.)
9430 Research Blvd.
Bldg. IV, Suite 200
Austin, TX
(Address of principal executive offices)
78759-6543
(Zip Code)
(512) 349-5800
(Registrant's telephone number, including area code)
SunRiver Corporation
(Registrant's former name if changed since last report)
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
As of July 14, 1997, the Registrant had 49,469,532 shares of Common Stock, $.01
par value per share outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December
31, 1996..............................................................3
Consolidated Statements of Operations (unaudited)
for the three and six months ended June 30, 1997 and 1996.............4
Consolidated Statements of Cash Flows (unaudited)
for the six months ended June 30, 1997 and 1996.......................5
Notes to Consolidated Financial Statements (unaudited).........................6
2
<PAGE>
BOUNDLESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................... $ 1,922 $ 5,213
Trade accounts receivable, net ............................................... 12,429 22,046
Inventories .................................................................. 14,736 18,525
Deferred income taxes ........................................................ -- --
Prepaid expenses and other current assets .................................... 1,472 256
-------- --------
Total current assets ................................................ 30,559 46,040
Property and equipment, net ........................................................... 11,026 11,474
Goodwill, net ......................................................................... 8,967 9,505
Other assets .......................................................................... 2,287 2,506
-------- --------
$ 52,839 $ 69,525
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ................................................................ $ 9,650 $ 13,950
Current portion of long-term debt ............................................ 7,684 8,009
Accounts payable ............................................................. 7,219 10,892
Accrued expenses ............................................................. 5,613 6,345
Deferred revenue ............................................................. 195 180
Net liabilities of discontinued operation .................................... 257 3,492
-------- --------
Total current liabilities ........................................... 30,618 42,868
Long-term liabilities:
Long-term debt, less current maturities 8,000 13,382
Deferred income taxes ........................................................ -- --
Other ........................................................................ 780 918
-------- --------
Total long-term liabilities ......................................... 8,780 14,300
-------- --------
Total liabilities ................................................... 39,398 57,168
Commitments and contingencies
Mandatorily redeemable preferred stock of subsidiary .................................. 3,555 3,555
Stockholders' equity:
Preferred stock .............................................................. __ __
Common stock ................................................................. 491 486
Additional paid-in capital ................................................... 31,750 31,440
Accumulated deficit .......................................................... (22,355) (23,124)
-------- --------
Total stockholders' equity .......................................... 9,886 8,802
-------- --------
$ 52,839 $ 69,525
======== ========
The accompanying notes are an integral part of
these condensed consolidated financial statements
3
</TABLE>
<PAGE>
BOUNDLESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue ............................................... $ 47,111 $ 70,591 $ 23,186 $ 32,919
Cost of revenue ....................................... 36,288 55,920 17,821 26,257
-------- -------- -------- --------
Gross margin ................................. 10,823 14,671 5,365 6,662
Operating expenses:
Sales and marketing .......................... 3,566 4,998 1,783 2,820
General and administrative ................... 3,132 3,551 1,504 1,807
Research and development ..................... 1,393 2,314 668 1,015
-------- -------- -------- --------
Total operating expenses ............ 8,091 10,863 3,955 5,642
-------- -------- -------- --------
Operating income ........... 2,732 3,808 1,410 1,020
Other (income) expense:
Interest expense, net ........................ 1,697 1,934 890 888
Other ........................................ (109) 262 (104) 53
-------- -------- -------- --------
Total other expense ................. 1,588 2,196 786 941
-------- -------- -------- --------
Income before income taxes and
discontinued operations ...................... 1,144 1,612 624 79
Income tax expense .................................... 127 630 127 220
-------- -------- -------- --------
Income before discontinued operations ................. 1,017 982 497 (141)
Loss from discontinued operations ..................... -- (1,485) -- (723)
-------- -------- -------- --------
Net income ............................................ 1,017 (503) 497 (864)
Dividend on preferred stock of subsidiary ............. 249 248 125 124
-------- -------- -------- --------
Earnings available for common shareholders ............ $ 768 $ (751) $ 372 $ (988)
======== ======== ======== ========
Weighted average common shares
outstanding ........................................... 48,731 46,251 48,899 46,575
======== ======== ======== ========
Earnings per common share:
Continuing operations ........................ $ 0.02 $ 0.02 $ 0.01 $ (0.01)
Discontinued operations ...................... $ 0.00 $ (0.03) $ 0.00 $ (0.02)
-------- -------- -------- --------
Earnings per common share ............................. $ 0.02 $ (0.01) $ 0.01 $ (0.03)
======== ======== ======== ========
The accompanying notes are an integral part of
these condensed consolidated financial statements
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOUNDLESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
For the Six Months Ended June 30,
1997 1996
------- -------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 1,017 $ 982
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Loss from discontinued operations ....................... -- (1,485)
Depreciation and amortization ........................... 1,734 1,824
Deferred revenues ....................................... 15 (535)
Provision for doubtful accounts ......................... 118 (276)
Provision for excess and obsolete inventory ............. 618 993
Estimated value of compensatory warrants ................ -- 161
Changes in assets and liabilities:
Trade accounts receivable ............................... 9,499 30
Inventories ............................................. 3,171 (3,063)
Other assets ............................................ (1,645) 943
Accounts payable and accrued expenses ................... (8,026) 1,437
------- -------
Net cash provided by operating activities ................................. 6,501 1,011
------- -------
Cash flows from investing activities:
Capital expenditures ............................................. (100) (1,061)
------- -------
Net cash used in investing activities ..................................... (100) (1,061)
------- -------
Cash flows from financing activities
Proceeds from issuance of common stock ........................... 2 2,986
Decrease in short-term debt, net ................................. -- (30)
Proceeds from debt issuance ...................................... 1,513 1,654
Purchase of treasury stock ....................................... -- (1,305)
Net change in revolving loan payable ............................. (5,500) 2,000
Payment on term loan ............................................. (5,698) (3,470)
Payments on capital leases ....................................... (9) (57)
------- -------
Net cash provided by (used in) financing activities ....................... (9,692) 1,778
------- -------
Net increase (decrease) in cash and cash equivalents ...................... (3,291) 1,728
Cash and cash equivalents at beginning of period .......................... 5,213 369
------- -------
Cash and cash equivalents at end of period ................................ $ 1,922 $ 2,097
======= =======
The accompanying notes are an integral part of
these condensed consolidated financial statements
5
</TABLE>
<PAGE>
BOUNDLESS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
(Unaudited)
1. Condensed Consolidated Financial Statements
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of only normal occurring
accruals) considered necessary for a fair presentation have been
included. Certain prior period amounts in these financial statements
have been reclassified to conform to current period presentation.
Operating results for the three-month period ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information refer to the
consolidated financial statements and footnotes thereto in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
2. Background
Boundless Corporation (the Company) is engaged, through its subsidiary,
Boundless Technologies, Inc. (Boundless), in designing and
manufacturing computer terminals and network computers for business
use. The Company's general strategy is to provide access to corporate
computing environments, including mainframes, LANs, WANs, intranets and
the Internet. Boundless principally designs, assembles, sells and
supports (i) General Display Terminals, (ii) Network Computers and
(iii) other terminal products that are used in multi-user, personal
computer and mini-computer-based environments. The Company receives a
royalty from a partnership (the GAI Partnership) formed by Boundless
and General Automation, Inc. (GAI) and managed by GAI. The GAI
Partnership designs, integrates, sells and supports multi-user computer
systems that can manage large volumes of data running Boundless' and
GAI's versions of a data-based system licensed from Pick Systems.
3. Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in first-out basis. The major components of
inventories are as follows:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
<S> <C> <C>
Raw materials and purchased components........ $ 10,795 $ 12,845
Finished goods................................ 3,382 4,942
Demonstration equipment....................... 207 396
Service parts................................. 352 342
--------------- --------------
$ 14,736 $ 18,525
=============== ==============
6
</TABLE>
<PAGE>
4. Equity
At June 30, 1997 and December 31, 1996, stockholders' equity consisted
of the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
<S> <C> <C>
Preferred stock, $0.01 par value, 1,000,000 shares $ __ $ __
authorized, none issued....................................
Common stock $0.01 par value, 100,000,000 shares
authorized, 48,796,000 and 48,572,000 shares issued
at December 31, 1996 and 1995, respectively................ 491 486
Additional paid-in capital.......................................... 31,750 31,440
Accumulated deficit................................................. (22,355) (23,124)
----------------- ---------------
Total stockholders' equity................................. $ 9,886 $ 8,802
================= ===============
</TABLE>
5. Financings
Regulation S Offerings
- ----------------------
The company completed two offerings of securities under Regulation S of
the Securities Act of 1933 (a "Regulation S Offering") subsequent to
December 31, 1996 described below:
o In February 1997, the Company received gross proceeds of $1,000
by selling convertible notes, bearing interest at 8%, convertible
by December 31, 1998 into common stock. As of June 30, 1997, $200
had been converted into 242,857 common shares.
o In March 1997, the Company received gross proceeds of $400 by
selling convertible notes, bearing interest at 8%, convertible by
December 31, 1998 into common stock. In connection with this
offering, the Company issued warrants to purchase 50,454 shares
of common stock at an exercise price of $1.375 per share,
exercisable through February 28, 2002. These warrants were valued
at approximately $19. As of June 30, 1997, $200 had been
converted into 254,532 common shares.
6. Employee Stock Options Granted
Options to purchase 1,300,000 (of which 1,100,000 replaced existing
options) and 704,200 shares of common stock of the Company were granted
under the 1995 Incentive Plan with exercise prices of $1.03 and $1.00
respectively. The options vest in 1997 through 2001, and are
exercisable through the year 2002.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The numbers and percentages contained in this Item 2 are approximate. Dollar
amounts are stated in thousands.
For the Three and Six Month Period Ending June 30, 1997
- -------------------------------------------------------
Revenue - Revenue for the quarter ended June 30, 1997 was $23,186, as compared
to $32,919 for the quarter ended June 30, 1996. Year-to-date revenue was
$47,111 for 1997 versus $70,591 in 1996.
Sales of the Company's General Display Terminals declined from $27,692 for the
quarter ended June 30, 1996 to $20,334 for the quarter ended June 30, 1997; and
for the six month period revenue declined $17,926 to $39,560. The decline for
7
<PAGE>
the latest quarter is principally attributable to declines of $3,876 and $4,413
in sales to VT and Dorio distributors and Digital Equipment Corporation
(Digital), respectively, offset by increased sales of $1,414 to IBM. The Digital
Acquisition agreement required Digital to purchase 80,000 units in the first
year. As a result, the Company believes that the significant purchases by
Digital during the fourth quarter of 1996 to meet this volume commitment leaves
Digital with inventory levels sufficient to meet its terminal needs for the
remainder of 1997. Therefore, 1997 sales of the Company's text terminals are not
expected to reach the levels achieved in 1996. The VT and Dorio terminals are
based on a proprietary architecture and, as a result, its users requiring
flexibility are prone to more quickly move to alternative platforms. Finally,
demand for the General Display Terminals continues to decline as competing
technologies, including Network Computers, are gaining market share. For these
reasons, sales of General Display Terminals for 1997 are not expected to reach
the levels achieved in 1996.
Based on independent research results, the Company's share of the 1996 text
terminal market worldwide, in the U.S., and in Europe regions increased to 36%,
34% and 43%, respectively. As a result, the Company has the second largest
market share worldwide and in the U.S., and the largest market share in Europe.
However, this research projects continued decline in the text terminal market.
Sales of X Windows-based Network Graphics Displays declined $802 to $546 for the
quarter ended June 30, 1997, from $1,348 for the quarter ended June 30, 1996.
This decline was anticipated and relates to specific projects undertaken by NCR
during 1995, and completed during 1996. Year-to-date 1997 revenue declined 51%
to $2,701 from $5,463 for the comparable period in 1996. The Company believes
that sales of Network Graphics Displays will continue to decline as demand is
satisfied by the more capable Network Computers.
On May 12, 1997, the Company launched a new line of advanced Network Computers
comprising both Thin Client devices and network administration software marketed
under the trade names Viewpoint(R) TC and Viewpoint(R) Administrator,
respectively. The company is targeting the approximately 35 million users of
Text Terminals and X terminals many of whom are currently transitioning or
intending to transition to graphical applications that include Windows, the
Intranet and Java. In addition, the Company is targeting users of older, less
capable PCs that are unable to run the latest Windows applications, including
those users in business and education. The Company believes its unique ability
to customize its Viewpoint TC products to meet specific end-customer needs will
give it a sustainable competitive advantage. Historically, this ability has been
of great value to the Company's terminal customers and the Company believes that
this strategy will be equally advantageous in the corporate Network Computer
marketplace. Finally, the Company projects that Microsoft's recent support of
the thin-client computing concept for accessing Windows applications, as
employed by the Company in its Viewpoint TC, will greatly increase market
acceptance for its products.
Revenues from the Company's Network Computers are expected to increase
during the third and fourth quarters with the availability of new Viewpoint TC
models and Viewpoint Administrator software. On the basis of the growing demand
for Network Computers, the versatility of its new Viewpoint TC Thin Client
product line, the significant number of end-user trials of the new products now
in progress and the Company's strong OEM relationships, the Company expects that
significant orders will be placed and delivered during the second half of this
year. Additionally, Network Computer orders booked in prior quarters, and
currently in backlog, will begin shipping in the third quarter, including most
of an order for 2,500 units. Finally, the Company expects the growing
international demand for its Network Computers to be a significant factor in its
Network Computer revenues.
Net revenue from the Company's repairs and spare parts business decreased 47%,
or $759, from $1,614 for the quarter ended June 30, 1996 to $855 for the quarter
ended June 30, 1997. The decline was due to reduced spares sales to NCR and
Digital, resulting from a change in NCR's field support strategy and inventory
purchasing habits and the overall decline in unit sales to Digital. For the six
months ended June 30, 1997, repairs and spare parts sales were $1,911 versus
$3,534 in 1996. Due to new designs and engineering changes resulting in fewer
components and increased reliability, the Company does not anticipate that
repair and spare parts revenue will meet prior period levels.
8
<PAGE>
GAI Partnership royalties for the quarter ending June 30, 1997, were $419 versus
$1,069 in 1996. The GAI Partnership agreement provides for the payment of
royalties to the Company as a percentage of partnership revenues, commencing May
1995, as follows: months 1-12, 12%; months 13-24, 10%; months 25-36, 9%; months
37-48, 8%; and months 49-60, 7%. Year-to-date royalties were $963 for 1997
versus $1,730 in 1996. Royalties have declined versus prior periods due to the
continuing decline in price for computer hardware. The Company anticipates this
trend to continue.
IBM was the most significant customer for the Company's products, accounting for
17% of revenue for the quarter ended June 30, 1997. Although both Digital and
NCR are expected to remain significant customers for the Company's products,
neither is expected to account for revenues of the Company comparable to 1996.
The loss of NCR or Digital as a customer, and as a distribution channel for the
Company's products, would have a material adverse effect on the Company's
results of operations and liquidity.
Gross Margin - Gross margin for the three and six months ended June 30, 1997
were $5,365 (23% of revenue) and $10,823 (23% of revenue) respectively, as
compared to gross margin of $6,662 (20% of revenue) and $14,670 (21% of revenue)
for 1996. The decline in gross margin is wholly attributable to the decline in
revenue. The increase in gross margin as a percent of revenue stems primarily
from cost reductions and reduced warranty expense for the VT and Dorio products;
offsetting declines in spare parts margin resulting from the sale of spares to
Digital under a parts purchase agreement contained within the Digital
Acquisition.
In a continuing effort to maintain and improve margins in an industry otherwise
characterized by commodity pricing, management has focused on quality,
flexibility, and product cost reductions. In addition, sales of the Company's
Network Computers, which carry margins greater than its General Display
Terminals, are expected to positively impact the Company's gross margin.
However, there can be no assurance, given the recent introduction of this new
technology, that the Company's Network Computers will improve gross margin.
From time-to-time margins are adversely affected by industry shortages of key
components. The Company emphasizes product cost reductions in its research and
development activities and frequently reviews its supplier relationships with
the view to obtaining the best component prices available.
Total Operating Expenses - For the quarter ended June 30, 1997, operating
expenses were $3,955 (17% of revenue), compared to expenses for 1996 of $5,642
(17% of revenue). For the six months ended June 30, 1997, operating expenses
were $8,091 (17% of revenue), compared to expenses for 1996 of $10,863 (15% of
revenue). As a result of a reorganization of the Company, including a
reduction-in-force affecting 130 employees at Boundless and the discontinuation
of operations at OTW, management expects that operating expenses will decline in
1997.
Sales and Marketing Expenses - Sales and marketing expenses decreased 36.8% from
$2,820 (9% of revenue) for the quarter ended June 30, 1996 to $1,783 (8% of
revenue) for the quarter ended June 30, 1997. Expenses for the six-month period
were $3,566 in 1997 versus $4,998 in 1996. The decline stems from reductions in
corporate advertising, marketing consulting, and expenses related to the
integration of the VT and Dorio product line into Boundless.
The Company promotes its products by means of a balanced mix of media
advertising, direct mail, telemarketing, public relations and cooperative
channel marketing programs. The Company's installed base of over five million
units is the primary target market for its new line of Viewpoint TC Network
Computers. The Company plan to reach this market is based on direct mail,
telemarketing and advertising and an aggressive public relations campaign,
including several domestic and international press tours. The Company will also
participate in several key trade shows during third and fourth quarters.
General and Administrative Expenses - General and administrative expenses
decreased from $1,807 (5% of revenue), to $1,504 (6% of revenue) for the three
months ended June 30, 1996 and 1997, respectively. Year-to-date expenses for
1997 were $3,132 as compared to 1996 expenses of $3,551. The decline is a result
of the reduction-in-force, previously discussed, as well as reductions in legal
and accounting fees.
9
<PAGE>
Research and Development Expenses - Research and development expenses for the
second quarter decreased 34% from $1,015 in 1996 to $668 in 1997. Research and
development expenses for the six months ended June 30, 1997 were $1,393 compared
to $2,314 for 1996. The decline stems from the reduction-in-force, including the
shutdown of the Company's Orlando, Florida, facility, as well as expenses
incurred during 1996 to integrate the VT and Dorio product into Boundless.
Other Charges - Other expenses for the quarter ended June 30, 1997 were $786
compared to $941 for the comparable period in 1996. Other charges for the six
months ended June 30, 1997 were $1,588 versus $2,196 in 1996. Interest expense
(net of interest income) amounted to $890 for the quarter ended June 30, 1997
compared to $888 for 1996.
Income Tax Expense - There is no provision for income tax expense for the
quarter ended June 30, 1997 due to net operating loss carry forwards available
resulting from the discontinuation of operations at OTW.
Loss From Discontinued Operations - The Company recorded a loss relating to the
discontinuation of OTW of $723 and $1,485 for the three and six months ended
June 30, 1996, respectively. Since commencing business in 1995 OTW incurred net
losses; and consumed significant amounts of cash. The discontinuation of OTW was
a material component of the Company's restructuring program and is intended to
allow the Company to focus on its core businesses conducted by Boundless.
Net Income - For the quarter ended June 30, 1997, net income was $497 (2% of
revenue), compared to net loss of $864 for the quarter ended June 30, 1996. 1997
year-to-date net income was $1,017 (2% of revenue) as compared to a net loss of
$503 in 1996. Despite an anticipated decline in revenues in 1997, the Company
believes that it will be profitable in 1997 as a result of its restructuring
programs and introduction of its Network Computers.
Impact of Inflation - The Company has not been adversely affected by inflation
because technological advances and competition within the microcomputer industry
have generally caused prices of products sold by the Company to decline. The
Company has flexibility in its pricing and could, if necessary, pass along price
changes to most of its customers.
LIQUIDITY AND CAPITAL RESOURCES
The discussion below regarding liquidity and capital resources should be read
together with the information included in the Notes to Consolidated Financial
Statements.
As of June 30, 1997, the Company had negative working capital of $59.
Historically, the Company has relied on cashflow from operations, bank
borrowings and sales of its common stock to finance its working capital, capital
expenditures and acquisitions. As a result of positive cash flows, the Company
has not borrowed under its revolving credit facility since the fourth quarter of
1996; and has paid ahead $2,318 against its term loan obligations.
The Company is highly leveraged. As of June 30, 1997, the Company had a negative
tangible net worth of $1,367 and total liabilities of $42,953. The Company's
cash requirements at June 30, 1997 included repayment of the remaining balance
of $7,682, plus interest, of the term loan in five quarterly installments;
repayment of a revolving loan of $8,450, plus interest, due September 1998;
payment of an $8,000 note, plus interest, payable to NCR on January 31, 1999;
payment of $3,555 to NCR if it exercises a put option at any time in 1999; and
annual payments to NCR of $498 in cash or the Company's Common Stock.
Borrowing under the revolving loan is based on a borrowing base formula of up to
80% of eligible receivables, plus 50% of delineated eligible inventory, plus 30%
of non-delineated eligible inventory. Up to $7,500 is available under the
revolving loan for letters of credit. As a result of the borrowing-base formula,
the credit available to the Company could be adversely restricted in the event
the Company's sales decline.
10
<PAGE>
With the exception that the Company will be required to refinance the NCR Note,
which is secured by a mortgage on the Company's Hauppauge facility, by its
January 31, 1999 due date, the Company believes that cash generated from
operations and available under the Chase Credit Line will be sufficient to pay
its other obligations as they become due. In the event there is a decline in the
Company's sales and earnings and/or a decrease in availability under the Chase
Credit Line, the Company's cash flow would be adversely affected. Accordingly,
the Company may not have the necessary cash to fund all of its obligations.
Net cash provided by operating activities for the six months ended June 30, 1997
was $6,501; due principally to reductions in receivables of $9,499 and inventory
of $3,171. These reductions were partially offset by a decrease in payables and
accrued expenses of $8,026. Net cash used in investing activities was comprised
of capital expenditures of $100. Net cash used in financing activities was
$9,692, including payments of $5,698 and $5,500 made to reduce the balance of
the Company's term and revolving loans, respectively; offset by proceeds of
$1,513 from the issuance of convertible debt.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Form 10-Q contains forward-looking statements and information that are
based on management's beliefs as well as assumptions made by and information
currently available to management. When used in this document, the words
"anticipate," "believe," "estimate," and "expect," and similar expressions are
intended to identify forward-looking statements. Such statements reflect the
Company's current views with respect to future events and are subject to certain
risks, uncertainties and assumptions, including the specific risk factors
described in the Company's Form ]0-K for the year ended December 31, 1996.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated or expected. The Company does not intend
to update these forward-looking statements and information.
NEW ACCOUNTING STANDARDS
In March 1997, the FASB issued Statement 128, "Earnings Per Share" ("Statement
128"), which requires a calculation of "Basic" and "Diluted" earnings per share.
Basic earnings per share include no dilution. The Company does not expect
Statement 128 to have a significant impact on its calculation of earnings per
share.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 2, 1997, shareholders representing 26,439,380 shares (approximately
52.9%) of the 50,016,629 shares of the Company's Common Stock, outstanding and
in escrow pending conversion, consented in writing to amending the Registrant's
certificate of incorporation as follows:
o to increase the total number of shares of Common Stock which the Registrant
has authority to issue from 60,000,000 to 100,000,000; and
o to change the name of the Company from SunRiver Corporation to Boundless
Corporation.
An Information Statement relating to the foregoing was distributed on May 5,
1997 to stockholders of record as of April 9, 1997, as required by Regulation
14C under the Securities Exchange Act of 1934, and the amendments became
effective May 27, 1997.
Item 5. Other Information
11
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Effective May 1997, Mr. Robert James resigned as President and CEO of
Boundless Technologies, Inc. Effective June 30, 1997 Mr. Wayne Schroeder
resigned as Director and Secretary of the Company. He remains as Vice President
- - Finance and Chief Financial Officer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11: Statement Concerning Computation of Per Share Earnings is hereby
incorporated by reference to "Condensed Consolidated Statements of Operations"
of Part I- Financial information, Item 1- Financial Statements, contained in
this Form 10-Q.
Exhibit 27: Financial Data Schedule for the quarter ended June 30, 1997.
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997
Boundless Corporation
By: /s/Wayne Schroeder
_______________________________________
Wayne Schroeder
Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,922
<SECURITIES> 0
<RECEIVABLES> 12,873
<ALLOWANCES> 444
<INVENTORY> 14,736
<CURRENT-ASSETS> 30,559
<PP&E> 14,902
<DEPRECIATION> 3,876
<TOTAL-ASSETS> 52,839
<CURRENT-LIABILITIES> 30,618
<BONDS> 8,000
3,555
0
<COMMON> 491
<OTHER-SE> 9,395
<TOTAL-LIABILITY-AND-EQUITY> 52,839
<SALES> 47,111
<TOTAL-REVENUES> 47,111
<CGS> 36,288
<TOTAL-COSTS> 36,288
<OTHER-EXPENSES> 9,679
<LOSS-PROVISION> 118
<INTEREST-EXPENSE> 1,697
<INCOME-PRETAX> 1,144
<INCOME-TAX> 127
<INCOME-CONTINUING> 1,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,017
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
