<PAGE>   1

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark one)

        [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended JULY 31, 2001
                                       OR
        [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

           For the transition period from ____________to ____________

                         Commission file number 0-29911

                           CALDERA INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)


          Delaware                                      87-0662823
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

                             240 West Center Street
                                Orem, Utah 84057
              (Address of principal executive office and zip code)

                                 (801) 765-4999
              (Registrant's telephone number, including area code)


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 filing requirements
for the past 90 days.

YES [X] NO [ ]

AS OF SEPTEMBER 14, 2001, THERE WERE 57,061,709 SHARES OF THE ISSUER'S COMMON
STOCK OUTSTANDING.


<PAGE>   2



                           CALDERA INTERNATIONAL, INC.

                                TABLE OF CONTENTS


<Table>
<Caption>
                                                                                                   Page
                                                                                                  Number
                                                                                                  ------
<S>                                                                                               <C>

PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements
          Condensed Consolidated Balance Sheets as of July 31, 2001 and
            October 31, 2000......................................................................   3
          Condensed Consolidated Statements of Operations and
            Comprehensive Loss for the three and nine months ended
            July 31, 2001 and 2000................................................................   4
          Condensed Consolidated Statements of Cash Flows for the nine
            months ended July 31, 2001 and 2000...................................................   5
          Notes to Condensed Consolidated Financial Statements....................................   7
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations...  15
Item 3.   Quantitative and Qualitative Disclosures About Market Risk..............................  19
          Risk Factors............................................................................  20
PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings.......................................................................  29
Item 2.   Changes in Securities and Use of Proceeds...............................................  29
Item 3.   Defaults Upon Senior Securities.........................................................  29
Item 4.   Submission of Matters to a Vote of Security Holders.....................................  29
Item 5.   Other Information.......................................................................  29
Item 6.   Exhibits and Reports on Form 8-K........................................................  29
Item 7.   Signatures..............................................................................  30
</Table>


                                      -2-
<PAGE>   3


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


<Table>
<Caption>
                                                                           July 31,       October 31,
                                                                             2001             2000
                                                                         ------------    ------------
                                                                          (unaudited)
<S>                                                                      <C>             <C>

                                    ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                           $     25,407    $     36,560
     Available-for-sale securities                                             11,936          54,179
     Accounts receivable, net of allowance for doubtful accounts of
       $318 and $312, respectively                                             16,161           1,545
     Other current assets                                                       4,820           1,700
                                                                         ------------    ------------
       Total current assets                                                    58,324          93,984
                                                                         ------------    ------------

PROPERTY AND EQUIPMENT:
     Computer and office equipment                                              6,156           1,322
     Leasehold improvements                                                     2,060             342
     Furniture and fixtures                                                       456           1,097
                                                                         ------------    ------------
                                                                                8,672           2,761
     Less accumulated depreciation and amortization                            (2,095)         (1,172)
                                                                         ------------    ------------
       Net property and equipment                                               6,577           1,589
                                                                         ------------    ------------

EQUITY INVESTMENT IN AFFILIATE                                                     --           4,957
                                                                         ------------    ------------

OTHER ASSETS:
     Goodwill, net                                                             61,315              --
     Intangibles, net                                                          35,562              --
     Other assets, net                                                          3,423           6,988
                                                                         ------------    ------------
       Total other assets                                                     100,300           6,988
                                                                         ------------    ------------

       Total assets                                                      $    165,201    $    107,518
                                                                         ============    ============


                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                    $      4,080    $      2,415
     Payable to Tarantella, Inc.                                                  876             898
     Accrued liabilities                                                       15,084           1,665
     Deferred revenue                                                           7,558             326
     Royalties payable                                                          2,087              --
     Income taxes payable                                                         901              --
     Other current liabilities                                                    906              --
                                                                         ------------    ------------
       Total current liabilities                                               31,492           5,304
                                                                         ------------    ------------

LONG-TERM LIABILITIES:
     Note payable to Tarantella, Inc., net of discount                          7,445              --
     Other long-term liabilities                                                1,070              --
                                                                         ------------    ------------
       Total long-term liabilities                                              8,515              --
                                                                         ------------    ------------

MINORITY INTEREST                                                                 173              --
                                                                         ------------    ------------

STOCKHOLDERS' EQUITY:
     Preferred stock, $0.001 par value; 25,000 shares authorized,
       none outstanding                                                            --              --
     Common stock, $0.001 par value; 175,000 shares authorized,
       57,062 and 39,444 shares outstanding, respectively                          57              39
     Additional paid-in capital                                               217,166         155,649
     Deferred compensation                                                     (1,681)         (3,715)
     Accumulated other comprehensive income (loss)                               (139)            300
     Accumulated deficit                                                      (90,382)        (50,059)
                                                                         ------------    ------------
       Total stockholders' equity                                             125,021         102,214
                                                                         ------------    ------------

       Total liabilities and stockholders' equity                        $    165,201    $    107,518
                                                                         ============    ============
</Table>


     See accompanying notes to condensed consolidated financial statements.

                                      -3-
<PAGE>   4


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED STATEMENTS OF
                        OPERATIONS AND COMPREHENSIVE LOSS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<Table>
<Caption>
                                                                        Three Months Ended July 31,  Nine Months Ended July 31,
                                                                            2001          2000          2001           2000
                                                                        -----------    ------------  ----------    ------------
                                                                               (unaudited)                 (unaudited)
<S>                                                                      <C>           <C>           <C>           <C>
REVENUE:
  Products                                                               $   16,059    $      631    $   17,908    $    2,149
  Services                                                                    2,798           557         3,601           953
                                                                         ----------    ----------    ----------    ----------
    Total revenue                                                            18,857         1,188        21,509         3,102
                                                                         ----------    ----------    ----------    ----------

COST OF REVENUE:
  Products                                                                    2,936           464         4,602         1,492
  Services                                                                    3,069           767         4,387         1,371
                                                                         ----------    ----------    ----------    ----------
    Total cost  of revenue                                                    6,005         1,231         8,989         2,863
                                                                         ----------    ----------    ----------    ----------

GROSS MARGIN (DEFICIT)                                                       12,852           (43)       12,520           239
                                                                         ----------    ----------    ----------    ----------

OPERATING EXPENSES:
  Sales and marketing (exclusive of non-cash compensation of
    $110, $419, $276 and $1,325, respectively)                               13,029         4,625        23,408        10,504
  Research and development (exclusive of non-cash compensation of
    $125, $241, $366 and $846, respectively)                                  6,662         1,111        10,757         3,391
  General and administrative (exclusive of non-cash compensation of
    $156, $383, $340 and $1,830, respectively)                                2,691         1,986         5,772         4,490
  In-process research and development                                         1,500            --         1,500            --
  Cost-sharing arrangement with Tarantella, Inc.                                 --            --           602            --
  Write-down of investments                                                   2,600            --         6,910            --
  Amortization of goodwill and intangibles                                    5,332            --         5,332            --
  Non-cash compensation                                                         391         1,043           982         4,001
                                                                         ----------    ----------    ----------    ----------
    Total operating expenses                                                 32,205         8,765        55,263        22,386
                                                                         ----------    ----------    ----------    ----------

LOSS FROM OPERATIONS                                                        (19,353)       (8,808)      (42,743)      (22,147)
                                                                         ----------    ----------    ----------    ----------

EQUITY IN LOSS OF AFFILIATE                                                      --            --          (648)           --
                                                                         ----------    ----------    ----------    ----------

OTHER INCOME (EXPENSE):
  Interest income                                                               852         1,288         3,460         2,150
  Other income (expense), net                                                   (83)           --          (102)           (1)
                                                                         ----------    ----------    ----------    ----------
    Other income, net                                                           769         1,288         3,358         2,149
                                                                         ----------    ----------    ----------    ----------

LOSS BEFORE INCOME TAXES                                                    (18,584)       (7,520)      (40,033)      (19,998)

PROVISION FOR INCOME TAXES                                                     (241)          (11)         (290)          (38)
                                                                         ----------    ----------    ----------    ----------

NET LOSS                                                                 $  (18,825)   $   (7,531)   $  (40,323)   $  (20,036)
                                                                         ==========    ==========    ==========    ==========

DIVIDENDS RELATED TO CONVERTIBLE PREFERRED STOCK                         $       --    $       --    $       --    $  (12,253)
                                                                         ==========    ==========    ==========    ==========

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                             $  (18,825)   $   (7,531)   $  (40,323)   $  (32,289)
                                                                         ==========    ==========    ==========    ==========

BASIC AND DILUTED NET LOSS PER COMMON SHARE                              $    (0.34)   $    (0.19)   $    (0.89)   $    (1.05)
                                                                         ==========    ==========    ==========    ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                   55,766        39,037        45,074        30,822
                                                                         ==========    ==========    ==========    ==========

OTHER COMPREHENSIVE LOSS:
  Net loss attributable to common stockholders                           $  (18,825)   $   (7,531)   $  (40,323)   $  (32,289)
  Unrealized gain (loss) on available-for-sale securities                        --           458          (153)          458
  Foreign currency translation adjustment                                       (80)           13           (82)            1
                                                                         ----------    ----------    ----------    ----------
COMPREHENSIVE LOSS:                                                      $  (18,905)   $   (7,060)   $  (40,558)   $  (31,830)
                                                                         ==========    ==========    ==========    ==========
</Table>


     See accompanying notes to condensed consolidated financial statements.

                                      -4-
<PAGE>   5


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<Table>
<Caption>
                                                                                           Nine Months Ended July 31,
                                                                                              2001            2000
                                                                                          ------------    ------------
                                                                                                   (unaudited)
<S>                                                                                       <C>             <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                                $    (40,323)   $    (20,036)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Write-down of investments                                                                    6,910              --
    Amortization of goodwill and intangibles                                                     5,332              --
    In-process research and development                                                          1,500
    Depreciation and amortization                                                                1,331             372
    Non-cash compensation                                                                          982           4,001
    Equity in loss of affiliate                                                                    648              --
    Loss on disposal of assets                                                                     165
    Amortization of debt discount                                                                  123
    Issuance of common stock for services                                                           --             135
    Changes in operating assets and liabilities, net of effects of acquisitions:
      Accounts receivable, net                                                                  (7,192)           (848)
      Other current assets                                                                        (154)         (1,416)
      Other assets                                                                                (587)            (13)
      Accounts payable                                                                           1,577             967
      Payable to Tarantella, Inc.                                                                  (22)             --
      Accrued liabilities                                                                        5,121           1,480
      Deferred revenue                                                                          (3,532)             30
      Royalties payable                                                                           (569)             --
      Income taxes payable                                                                         (76)             --
      Other current liabilities                                                                   (689)             --
      Other long-term liabilities                                                                   63              --
                                                                                          ------------    ------------
        Net cash used in operating activities                                                  (29,392)        (15,328)
                                                                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of equipment                                                                         (1,162)         (1,272)
  Acquisitions, net of acquisition costs and cash received                                     (23,005)             --
  Purchase of available-for-sale securities                                                     (5,866)        (56,005)
  Proceeds from available-for-sale securities                                                   47,636              --
  Acquisition of investment in non-marketable security                                              --          (2,000)
                                                                                          ------------    ------------
        Net cash provided by (used in) investing activities                                     17,603         (59,277)
                                                                                          ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings from majority stockholder                                                              --             300
  Repayment of borrowings from majority stockholder                                                 --            (300)
  Repayments of long-term debt                                                                      --              (9)
  Proceeds from sale of common stock, net of offering costs                                         --          73,281
  Proceeds from sale of Series B convertible preferred stock, net of offering costs                 --          29,791
  Minority interest in subsidiary                                                                  173              --
  Proceeds from sale of common stock through ESP program                                           126              --
  Proceeds from exercise of common stock options                                                   303             176
                                                                                          ------------    ------------
        Net cash provided by financing activities                                                  602         103,239
                                                                                          ------------    ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                           (11,187)         28,634
EFFECT OF FOREIGN EXCHANGE RATES ON CASH                                                            34               1
CASH AND CASH EQUIVALENTS, beginning of period                                                  36,560             122
                                                                                          ------------    ------------
CASH AND CASH EQUIVALENTS, end of period                                                  $     25,407    $     28,757
                                                                                          ============    ============
</Table>



     See accompanying notes to condensed consolidated financial statements.

                                      -5-
<PAGE>   6



                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (IN THOUSANDS)


<Table>
<Caption>
                                                                                        Nine Months Ended July 31,
                                                                                            2001           2000
                                                                                        ------------   ------------
                                                                                               (unaudited)
<S>                                                                                     <C>            <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

        Cash paid for income taxes                                                      $        377   $         41
        Unrealized gain on available-for-sale securities                                $         --   $        458


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
        FINANCING ACTIVITIES:

        Issuance of non-interest bearing note to Tarantella, Inc. in acquisition        $      8,000   $         --

        Issuance of common shares and the acquisition of a license fee for
               non-marketable securities                                                $         --   $      1,999

        Conversion of 6,596 shares of common stock to 6,596 shares of Series A
               convertible preferred stock                                              $         --   $          7

        Conversion of 6,596 shares of Series A convertible preferred stock and
               5,000 shares of Series B convertible preferred stock to 11,596
               shares of common stock                                                   $         --   $         12

        Dividends related to Series B convertible preferred stock                       $         --   $     12,253

        Issuance of common shares in exchange for investment in Lineo, Inc.             $         --   $     10,000

        Distribution to majority stockholder for fair value of shares issued in
               excess of the carryover basis of the investment in Lineo, Inc.           $         --   $    (10,000)

        Distribution to majority stockholder for license rights                         $         --   $       (451)

        Contribution of additional shares of Lineo, Inc. from majority stockholder      $         --   $      1,966
</Table>


     See accompanying notes to condensed consolidated financial statements.


                                      -6-
<PAGE>   7


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


(1) ORGANIZATION AND DESCRIPTION OF BUSINESS

         Caldera Systems, Inc. ("Caldera Systems"), was incorporated as a Utah
corporation on August 21, 1998, and was reincorporated as a Delaware corporation
on March 6, 2000. On May 7, 2001, Caldera Systems was acquired by a newly formed
holding company, Caldera International, Inc. ("Caldera"). Caldera Systems
developed and marketed software and provided related services that enabled the
development, deployment and management of Linux-based specialized servers and
Internet devices that extended the eBusiness infrastructure. Caldera Systems
sold and distributed its software and related products indirectly through
distributors and solutions providers, which include value-added resellers
("VARs"), original equipment manufacturers ("OEMs"), and systems integrators, as
well as directly to end-user customers. These sales occurred throughout the
United States and in certain international locations.

         On May 7, 2001, Caldera acquired all of the assets and operations of
the server and professional services groups of Tarantella, Inc. ("Tarantella"),
formerly The Santa Cruz Operation, Inc., pursuant to an Agreement and Plan of
Reorganization, dated as of August 1, 2000 as amended (see Note 3). Under the
Agreement, Caldera acquired the tangible and intangible assets used in the
server and professional services groups, including all of the capital stock of
certain Tarantella subsidiaries. Additionally, each share of existing Caldera
Systems common stock, as well as options to purchase shares of Caldera Systems
common stock, were converted into an equal number of shares of Caldera common
stock and options to purchase shares of Caldera common stock.

         The acquired operations of Tarantella provide server software for
networked business computing and is a leading producer of UNIX server operating
systems. In addition, these operations provide professional services to
implement and maintain UNIX system software products. The acquisition provides
Caldera with international offices and a Linux/UNIX distribution channel with
resellers worldwide.

(2) SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
of Caldera and subsidiaries (collectively the "Company") have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the following disclosures, when
read in conjunction with the financial statements and the notes thereto included
in the Company's most recent Form 10-K as well as the Company's Form S-4 Joint
Proxy Statement/Prospectus, are adequate to make the information presented not
misleading.

         The condensed consolidated financial statements reflect all adjustments
that, in the opinion of management, are necessary to present fairly the
financial position and results of operations of the Company as of the balance
sheet dates and for the periods presented. Operating results for the three and
nine months ended July 31, 2001 are not necessarily indicative



                                      -7-
<PAGE>   8


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


of the results that may be expected for the year ending October 31, 2001. In
addition, operating results for the three and nine months ended July 31, 2001,
are not directly comparable to the corresponding prior year periods due to the
significant acquisition that occurred May 7, 2001.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

PRINCIPLES OF CONSOLIDATION

         The condensed consolidated financial statements include the accounts of
Caldera and its wholly and majority owned subsidiaries after elimination of
intercompany accounts and transactions.

REVENUE RECOGNITION

         The Company's revenue is derived primarily from two sources: (i)
product license revenue, derived primarily from product sales to resellers and
end users, including large scale enterprises and royalty revenue, derived
primarily from initial license fees and ongoing royalties from product sales by
source code OEMs (original equipment manufacturers); and (ii) service and
support revenue, derived primarily from providing software updates, support and
education and consulting services to end users.

         The Company recognizes product revenue upon shipment if a signed
contract exists, the fee is fixed and determinable, collection of resulting
receivables is probable and product returns are reasonably estimable, except for
sales to distributors, which are recognized upon sale by the distributor to
resellers or end users.

         For contracts involving multiple obligations (e.g. deliverable and
undeliverable products, maintenance and other services), the Company allocates
revenue to each component of the contract based on objective evidence of its
fair value, which is specific to the Company. The fair value of each element is
based on the price sold separately. The Company recognizes revenue allocated to
undelivered products when the criteria for product revenue set forth above have
been met.

         The Company recognizes revenue from maintenance fees for ongoing
customer support and product updates ratably over the period of the maintenance
contract. Payments for maintenance fees are generally made in advance and are
non-refundable. For revenue allocated to education and consulting services or
derived from the separate sale of such services, the Company recognizes revenue
as the related services are performed.

         The Company recognizes product revenue from royalty payments upon
receipt of quarterly royalty reports from OEMs related to their product sales.

         The Company performs ongoing credit evaluations of its customers'
financial condition and does not require collateral. The Company maintains
allowances for potential credit losses and such losses have been within
management's expectations.


                                      -8-
<PAGE>   9

                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


HEDGING OF FOREIGN CURRENCY TRANSACTIONS

         The Company utilizes foreign currency forward exchange contracts to
hedge foreign currency market exposures of underlying assets, liabilities and
other obligations. The Company does not use forward exchange contracts for
speculative or trading purposes. The Company's accounting policies for these
instruments are based on the Company's designation of such instruments as
hedging transactions. The criteria the Company uses for designating an
instrument as a hedge include the instrument's effectiveness in risk reduction
and one-to-one matching of forward exchange contracts to underlying
transactions. Gains and losses on currency forward contracts that are designated
and effective as hedges of firm commitments are deferred and recognized in
income in the same period that the underlying transactions are settled. Gains
and losses on currency forward contracts that are designated and effective as
hedges of existing transactions are recognized in income in the same period as
losses and gains on the underlying transactions are recognized and generally
offset. Gains and losses on any instruments not meeting the above criteria would
be recognized in income in the current period. The Company transacts business in
various foreign currencies. At July 31, 2001, the Company had one foreign
exchange contract with a maturity of 30 days, to sell approximately $0.7 million
in U.S. dollars.

NET LOSS PER COMMON SHARE

         Basic net loss per common share ("Basic EPS") is computed by dividing
net loss available to common stockholders by the weighted average number of
common shares outstanding. Diluted net loss per common share ("Diluted EPS") is
computed by dividing net loss by the sum of the weighted average number of
common shares and the dilutive potential common share equivalents then
outstanding. Potential common share equivalents consist of shares issuable upon
the exercise of stock options and shares issuable upon the conversion of Series
A and Series B convertible preferred stock for the periods during which they
were outstanding. There were approximately 9.6 million and approximately 6.8
million outstanding options to purchase common shares as of July 31, 2001 and
2000, respectively that were not included in the computation of diluted net loss
per common share as their effect would have been anti-dilutive, thereby
decreasing the net loss per common share.

(3) ACQUISITIONS

ACQUISITION FROM TARANTELLA, INC.

         In May 2001, the Company acquired significant assets and operations
from Tarantella, Inc. in exchange for: (i) the issuance of 16 million shares of
common stock (1.6 million of which are being held in escrow); (ii) the issuance
of options to purchase up to an aggregate of 1.7 million shares of common stock
in exchange for options to purchase Tarantella common stock held by people who
became employees of Caldera; (iii) $23 million in cash, including the
forgiveness of $7 million previously advanced to Tarantella; and (iv) a
non-interest bearing promissory note in the amount of $8 million that will be
paid in quarterly installments of $2 million beginning July 2002. In addition,
if the OpenServer line of business generates revenue in excess of specified
thresholds during the three-year period following the acquisition, Caldera will
pay Tarantella 45% of the excess revenue. The following table summarizes the
components of the consideration paid to Tarantella (in thousands except per
share amounts):

<Table>
<S>                                                                                          <C>
Consideration paid:
     Fair value of Caldera Systems common stock (16,000,000 shares at $3.47 per share)       $     55,520
     Fair value of options to purchase 1,661,365 shares of common stock to be issued in
       exchange for 3,322,730 outstanding Tarantella options                                        4,201
     Cash                                                                                          23,000
     Note payable (discounted at 6.5%)                                                              7,322
     Direct expenses                                                                                3,744
                                                                                             ------------
         Total consideration                                                                 $     93,787
                                                                                             ============
</Table>



                                      -9-
<PAGE>   10


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


         The Company has accounted for the acquisition of the assets and
operations from Tarantella using the purchase method of accounting. Under this
method, the total purchase price, including direct fees and expenses, was
allocated to the tangible and intangible assets acquired and the liabilities
assumed based upon their respective fair values. The following table summarizes
the allocation of the consideration to the tangible and intangible assets
acquired and liabilities assumed (in thousands):

<Table>
<S>                                                                                <C>
Purchase price allocation:
  Liabilities assumed net of tangible assets acquired                              $     (5,482)
  Accrual for severance payments, non-essential facilities and related costs             (3,011)
  Intangible assets acquired:
    Distribution/reseller channel                                                        26,700
    Existing technology (consisting primarily of UnixWare and OpenServer)                 5,800
    Acquired in-process research and development                                          1,500
    Trade name and trademarks                                                               800
    Distribution agreement                                                                1,400
    Goodwill                                                                             66,080
                                                                                   ------------
      Total                                                                        $     93,787
                                                                                   ============
</Table>

         A one-time charge of $1.5 million related to the fair value of the
in-process research and development was recorded during the three months ended
July 31, 2001. Charges to operations for the three months ended July 31, 2001,
for the amortization of goodwill and other intangible assets of approximately
$5.3 million was also recorded. In July 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets." Under SFAS 142, goodwill and other
intangible assets with indefinite lives are no longer amortized, but rather are
assessed annually for impairment. Caldera will adopt SFAS 142 effective November
1, 2001, the beginning of fiscal year 2002, and as a result amortization of
goodwill and intangible assets is expected to decrease to approximately $1.7
million per quarter beginning in the first quarter of fiscal 2002.

WHATIFLINUX TECHNOLOGY FROM ACRYLIS, INC.

         In May 2001, the Company acquired the WhatIfLinux technology from
Acrylis, Inc. WhatIfLinux technology provides Open Source users and system
administrators with Internet-delivered tools and services for faster, more
reliable software management. In consideration for the assets acquired from
Acrylis, the Company issued 1.25 million shares of common stock with a quoted
market price of $1.95 per share, or approximately $2.4 million, and paid $1.0
million in cash. The Company has accounted for the acquisition of the
WhatIfLinux technology using the purchase method of accounting and recorded
charges to operations for the amortization of intangible assets of approximately
$0.4 million for the three months ended July 31, 2001. The following table
summarizes the components of the consideration paid to Acrylis (in thousands
except per share amounts):

<Table>
<S>                                                                                         <C>
Consideration paid:
     Fair value of Caldera Systems common stock (1,250,000 shares at $1.95 per share)       $      2,438
     Cash                                                                                          1,000
     Direct expenses                                                                                 100
                                                                                            ------------
         Total consideration                                                                $      3,538
                                                                                            ============
</Table>



                                      -10-
<PAGE>   11


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


         The following tables set forth certain pro forma financial information
had the acquisitions discussed in above been completed as of November 1, 1999:

<Table>
<Caption>
                                                 Three Months
                                                 Ended July 31,    Nine Months Ended July 31,
                                                      2000            2001            2000
                                                 --------------   ------------    ------------
<S>                                               <C>             <C>             <C>

Revenue                                           $     26,787    $     68,107    $    112,868
Net loss from continuing operations                    (23,736)        (56,493)        (69,541)
Net loss to common stockholders                        (23,736)        (56,493)        (69,541)
Basic and diluted net loss per common share       $      (0.42)   $      (0.99)   $      (1.45)
</Table>


(4) EQUITY INVESTMENT IN EBIZ ENTERPRISES, INC

         During the three months ended January 31, 2001, the Company's ownership
interest in Ebiz Enterprises, Inc. ("Ebiz") was diluted to approximately 12
percent as a result of Ebiz issuing new shares in connection with an acquisition
and the conversion of convertible securities. As a result of these transactions,
on January 5, 2001, the Company discontinued the use of the equity method of
accounting for its investment in Ebiz. Subsequent to January 5, 2001, the
Company accounted for the investment in Ebiz as an available-for-sale security
in accordance with Statement of Financial Accounting Standards ("SFAS") 115.
Under SFAS 115, the Company carried its investment at fair market value using
quoted trading prices and recorded any unrecognized gains or losses as a
component of other comprehensive income (loss).

         During the three months ended April 30, 2001, the Company determined
that the quoted trading price of the Ebiz common stock on the Over the Counter
Bulletin Board was not reflective of the realizable value of the Company's
investment in Ebiz. Due to certain factors, including Ebiz's continuing losses
and lack of adequate funding, the Company determined that its investment in Ebiz
would most likely not be realized and an impairment write-down was necessary.
Accordingly, the investment was written down from the January 31, 2001 balance
of approximately $4.3 million to an estimated net realizable value of $0.65 per
common share, or $2.6 million at April 30, 2001, resulting in an impairment
charge of approximately $1.7 million. The remaining investment was also
reclassified from available-for-sale securities to investment in non-affiliates.

         During the quarter ended July 31, 2001, Ebiz's financial condition has
continued to decline. The Company determined that the remaining investment in
Ebiz would most likely not be realized, and the investment has been written down
from the April 30, 2001 balance of $2.6 million to $0 as of July 31, 2001. The
impairment charge of $2.6 million has been recorded in the condensed
consolidated statement of operations for the three and nine months ended July
31, 2001.

(5) INVESTMENTS IN NON-MARKETABLE SECURITIES

         The Company accounts for each of its investments in non-marketable
securities using the cost method, as the Company has no ability to exercise
significant influence over any of the entities. The Company's management
routinely assesses its investments for impairment and adjusts the carrying
amount to estimated realizable values when impairment has occurred.


                                      -11-
<PAGE>   12


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


During the nine months ended July 31, 2001, the Company determined that the
carrying value of the investment in Evergreen of $3.6 million would most likely
not be realized and an impairment charge was necessary. The investment has been
recorded at its estimated realizable value of $1.0 million and the Company
recorded an impairment charge of $2.6 million in the accompanying condensed
consolidated statements of operations for the nine months ended July 31, 2001.

(6) COMMITMENTS AND CONTINGENCIES

LITIGATION

         Four lawsuits have been filed against the Company, certain of its
officers and directors, and the underwriters of the Company's Initial Public
Offering in the United States District Court for the Southern District of New
York by parties alleging violations of the securities laws. The complaints
allege certain improprieties regarding the circumstances surrounding the
underwriters' conduct during the IPO and the failure to disclose such conduct in
the registration statement. Over 100 other issuers, and their underwriters and
officers and directors, have been sued in similar cases pending in the same
court.

         The Company is not aware of any improper conduct by the Company, its
officers and directors, or its underwriters, and the Company denies any
liability relating thereto. The court recently adjourned the requirement that
the Company file an answer to the complaints pending further notification from
the court. The Company has notified its underwriters and insurance companies of
the existence of the claims.

(7) STOCKHOLDERS' EQUITY

STOCK-BASED COMPENSATION

         The Company accounts for its stock options issued to directors,
officers and employees under Accounting Principles Board Opinion No. 25 and
related interpretations ("APB 25"). Under APB 25, compensation expense is
recognized if an option's exercise price on the measurement date is below the
quoted market price of the Company's common stock. During the three months ended
July 31, 2001, the Company granted 4.4 million stock options with an average
exercise price of $2.25 per share. None of these stock option grants were at
prices that were below the quoted market price on the date of grant. As of July
31, 2001, there were approximately 9.6 million stock options outstanding with a
weighted average exercise price of $3.31 per share. Subsequent to July 31, 2001,
Caldera granted approximately 3.5 million stock options at a weighted average
exercise price of $0.75 per share. None of these grants were at prices below the
quoted market price of the stock on the date of the grant.

         During the nine months ended July 31, 2000, the Company granted
approximately 3.9 million stock options with exercise prices that were below the
estimated fair market value on the measurement date resulting in approximately
$6.8 million in deferred compensation.


                                      -12-

<PAGE>   13

                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


         Amortization of deferred compensation was approximately $0.4 million
and $1.0 million, respectively, during the three months ended July 31, 2001 and
2000 and approximately $1.0 million and $4.0 million, respectively, during the
nine months ended July 31, 2001 and 2000.

         During the nine months ended July 31, 2001, the Company eliminated
approximately $1.1 million in deferred compensation for employees who terminated
employment with Caldera. This deferred compensation had been included as a
component of stockholder's equity and would have been amortized as non-cash
compensation if the employees had not been terminated.

EMPLOYEE STOCK PURCHASE PLAN

         The 2000 Employee Stock Purchase Plan was adopted by the board of
directors on February 15, 2000 and was approved by the stockholders on March 1,
2000. The plan became effective upon the closing of the Company's initial public
offering. The plan is designed to allow eligible employees of Caldera and its
participating subsidiaries to purchase shares of Caldera common stock, at
semi-annual intervals, through periodic payroll deductions. A total of 500,000
shares of common stock have been reserved for issuance under the plan. The share
reserve increases on the first trading day of each calendar year beginning with
the 2001 calendar year by 1% of the total number of shares of common stock
outstanding on the last day of the immediately preceding year but no such annual
increase will exceed 750,000 shares. In no event, however, may a participant
purchase more than 750 shares, nor may all participants in the aggregate
purchase more than 125,000 shares on any semi-annual purchase date.

         In July 2000, the board of directors amended the plan to increase the
maximum number of shares of common stock authorized for issuance over the term
of the plan by an additional 1,500,000 shares. The stockholders approved this
increase on April 27, 2001. The board of directors also amended the plan to
eliminate the cap on the number of shares each participant may purchase in each
offering period, increased the aggregate shares that may be purchased by all
employees on any semi-annual purchase date to 350,000 shares from 125,000
shares, and changed the purchase interval date to May 31 and November 30,
starting with the May 31, 2001 purchase interval.

         On April 30, 2001, 54,467 shares of common stock of the Company were
purchased through the plan at a price of $1.68 per share and on May 31, 2001,
21,396 shares were purchased at a price of $1.55 per share.

(8) SEGMENT INFORMATION

         SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information", requires disclosures related to components of a company for which
separate financial information is available and evaluated regularly by the
Company's chief operating decision makers in deciding how to allocate resources
and in assessing performance. It also requires segment disclosures about
products and services as well as geographic areas. For the periods presented in
the accompanying financial statements, the Company has determined that it did
not have any reportable segments.

         Revenue attributed to geographic locations for the three and nine
months ended July 31, 2001 and 2000 is as follows (in thousands):



                                      -13-
<PAGE>   14


                  CALDERA INTERNATIONAL, INC. AND SUBSIDIARIES

                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (CONTINUED)


<Table>
<Caption>
                                           Three Months Ended July 31,    Nine Months Ended July 31,
                                               2001           2000           2001           2000
                                           ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>

Revenue:
     United States                         $      8,209   $        713   $     10,346   $      2,158
     Canada and Latin America                       876             58            897            160
     Asia                                         2,305            259          2,715            443
     Europe, Middle East and Africa               7,467            158          7,551            341
                                           ------------   ------------   ------------   ------------
         Total revenue                     $     18,857   $      1,188   $     21,509   $      3,102
                                           ============   ============   ============   ============
</Table>


(9) SUBSEQUENT EVENT

PROPOSED STOCK CONSOLIDATION

         The board of directors of the Company has unanimously approved
submitting to the stockholders a proposal to consolidate the issued and
outstanding common stock of the Company on the basis of one share for each six
shares previously outstanding. This action was taken by the board to seek to
increase the pool of potential investors in the common stock and to pre-empt any
action that might be taken by Nasdaq to delist the common stock. The Company's
stock has traded below the minimum $1.00 bid price required by Nasdaq since late
July. The low trading price has increased the difficulty of attracting analysts
for the common stock and the interest of institutional investors in acquiring
shares. The board hopes that the proposed stock consolidation will result in an
increase in the per share price that will assist in addressing these concerns.
The proposed stock consolidation will not be implemented until after a
stockholders' meeting, which the Company intends to schedule in the near future.



                                      -14-
<PAGE>   15


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following discussion should be read in conjunction with our
condensed consolidated financial statements and notes thereto, included
elsewhere in this quarterly filing, our annual report on Form 10-K for the year
ended October 31, 2000 filed with the Securities and Exchange Commission and our
Form S-4 Joint Proxy Statement/Prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties and include
terminology such as "estimates", "anticipates", "continue", "expects",
"intends", "believes" and similar expressions. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those set forth under "Risk Factors" and
elsewhere in this quarterly filing.

OVERVIEW

         We began operations in 1994 as Caldera, Inc. In July 1996, through an
asset purchase, Caldera, Inc. acquired an additional business unit that was not
engaged in developing and marketing Linux software. Caldera, Inc. subsequently
made the strategic determination to separate its two business lines into
separate entities and, under an Asset Purchase Agreement dated as of September
1, 1998, as amended, sold the assets relating to its business of developing and
marketing Linux software to Caldera Systems, Inc., a newly formed corporation.
Caldera Systems subsequently completed an initial public offering in March of
2000. On May 7, 2001, Caldera Systems completed its acquisition of the assets
and operations of the server and professional services groups of Tarantella
pursuant to an Agreement and Plan of Reorganization, dated August 1, 2001 and as
subsequently amended. In order to facilitate this acquisition, Caldera
International, Inc. was formed and Caldera Systems became a wholly owned
subsidiary of Caldera International. Former holders of shares and options to
purchase shares of Caldera Systems received an equal number of shares and
options to purchase shares in Caldera International. As used herein, Caldera, or
the Company, refers to Caldera International, its subsidiaries, and its two
predecessors, Caldera Systems and the portion of Caldera, Inc. related to the
Linux software business.

         Historically, we have experienced substantial fluctuations in our
revenue from period to period relating to the introduction of new products and
new versions of our existing products. Prior to the acquisition of the Unix and
OpenServer product lines from Tarantella, substantially all of our revenue was
derived from sales of Linux products and related services. Currently, the
majority of our revenue is derived from sale of OpenServer and UnixWare products

RESULTS OF OPERATIONS

         The acquisition of the assets and operations from Tarantella
significantly increased the net revenue and operating expenses of the Company.
The three and nine-month periods ended July 31, 2001 are not directly comparable
to the three and nine-month periods of the prior year because of the significant
changes in the operations of the Company as a result of the acquired operations.

THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2001 AND 2000

Revenue

         The Company's revenue is derived primarily from product sales, license
fees and service fees, which include engineering services, consulting, support
and training. Our revenue was $18.9 million for the three-month period ended
July 31, 2001 and $1.2 million for the same period during fiscal 2000, an
increase of $17.7 million. Revenue was $21.5 million for the nine-month period
ended July 31, 2001 and $3.1 million for the same period during fiscal 2000, an
increase of $18.4 million. During the three and nine-month periods in 2001,
approximately 85% and 83% of


                                      -15-
<PAGE>   16


our revenue was generated from the sale of products and 15% and 17% was
generated from services. During the same periods in fiscal 2000, approximately
53% and 69% of our revenue was generated from the sale of products and 47% and
31% was generated from services. Revenue from international customers was
approximately 56% and 52% of total revenue for the three and nine-month periods
in fiscal 2001, and 40% and 30% of total revenue during the same periods in
fiscal 2000. The significant increase in revenue, as well as the percentage of
product revenue to total revenue, was attributable almost solely to the
operations acquired from Tarantella.

         Products. Our revenue from the sale of products was $16.1 million for
the three-month period ended July 31, 2001 and $0.6 million for the same period
in fiscal 2000, an increase of $15.5 million. Products revenue was $17.9 million
for the nine-month period ended July 31, 2001 and $2.1 million for the same
period in fiscal 2000, an increase of $15.8 million. The increase in products
revenue for both the three and nine-month periods was attributable to the sale
of OpenServer and UnixWare products acquired from Tarantella.

         Services. Our services revenue was $2.8 million for the three-month
period ended July 31, 2001 and $0.6 million for the same period ended fiscal
2000, an increase of $2.2 million. Services revenue was $3.6 million for the
nine-month period ended July 31, 2001 and $1.0 million for the same period in
fiscal 2000, an increase of $2.6 million. The increase in services revenue for
both the three and nine-month periods was attributable to revenue generated by
the support and professional services groups acquired from Tarantella.

Cost of Revenue

         Cost of Products Revenue. Our cost of products revenue was $2.9 million
for the three-month period ended July 31, 2001 and $0.5 million for the same
period in fiscal 2000, an increase of $2.4 million. Cost of products revenue was
$4.6 million for the nine-month period ended July 31, 2001 and $1.5 million for
the same period in fiscal 2000, an increase of $3.1 million. Cost of products
revenue as a percentage of products revenue was 18% and 26% for the three and
nine-month periods ended July 31, 2001, and 74% and 69% for the same periods in
fiscal 2000. The significant improvement in cost of products revenue as a
percentage of products revenue is attributed to the large number of internet
orders and electronic distribution from products sold by the operations acquired
from Tarantella.

         Cost of Services Revenue. Our cost of services revenue was $3.1 million
for the three-month period ended July 31, 2001 and $0.8 million for the same
period in fiscal 2000, an increase of $2.3 million. Cost of services revenue was
$4.4 million for the nine-month period ended July 31, 2001 and $1.4 million for
the same period in fiscal 2000, an increase of $3.0 million. Cost of services
revenue as a percentage of services revenue was 110% and 122% for the three and
nine-month periods ended July 31, 2001, and 138% and 144% for the same periods
in fiscal 2000. The higher cost of services revenue as a percentage of services
revenue in prior periods was attributed to initial infrastructure and other
costs of establishing our services offerings. While these margins reflect an
improvement over prior periods, our services revenue does not cover our direct
costs of providing services.

Operating Expenses

         Sales and Marketing. Our sales and marketing expenses were $13.0
million for the three-month period ended July 31, 2001 and $4.6 million for the
same period in fiscal 2000, an increase of $8.4 million. Sales and marketing
expenses were $23.4 million for the nine-month period ended July 31, 2001 and
$10.5 million for the same period in fiscal 2000, an increase of $12.9 million.
The increase was primarily attributable to increased personnel and related costs
as a result of the acquisition of the operations from Tarantella as well as
spending related to the branding of Caldera International.


                                      -16-
<PAGE>   17


         Research and Development. Our research and development expenses were
$6.7 million for the three-month period ended July 31, 2001 and $1.1 million for
the same period in fiscal 2000, an increase of $5.6 million. Our research and
development expenses were $10.8 million for the nine-month period ended July 31,
2001 and $3.4 million for the same period in fiscal 2000, an increase of $7.4
million. The increase in research and development expenses was attributable to
increased personnel and related costs as a result of the acquisitions of the
WhatIfLinux technology from Acrylis and operations from Tarantella.

         General and Administrative. Our general and administrative expenses
were $2.7 million for the three-month period ended July 31, 2001 and $2.0
million for the same period in fiscal 2000, an increase of $0.7 million. General
and administrative expenses were $5.8 million for the three-month period ended
July 31, 2001 and $4.5 million for the same period in fiscal 20000, an increase
of $1.3 million. The increase was primarily attributable to increased personnel
and related costs to support the expanded operations as a result of the
acquisition of the operations from Tarantella.

         In-process Research and Development. In connection with the acquisition
of the assets and operations from Tarantella, we recorded a charge of $1.5
million for the fair value of in-process research and development. The amount
allocated to the in-process research and development represents the estimated
purchased in-process technology for projects that have not yet reached
technological feasibility and which have no alternative future use.

         Write-down of Investments. During the three-month period ended July 31,
2001, the Company determined that the current carrying value of its investment
in Ebiz would most likely not be realized and impairment charges were necessary.
The investment in Ebiz has been written down to $0 and the Company recorded an
impairment charge of $2.6 million in the accompanying condensed consolidated
statement of operations for the three months ended July 31, 2001. During the
nine-month period ended July 31, 2001, the Company recorded impairment charges
totaling approximately $6.9 million consisting of $4.3 million related to Ebiz
and $2.6 million related to Evergreen.

         Amortization of Goodwill and Intangible Assets. The Company recorded
$5.3 million in non-cash charges for the amortization of goodwill and intangible
assets in connection with the acquisition of the assets and operations from
Tarantella and the WhatIfLinux technology acquired from Acrylis, Inc. As a
result of the Company's adoption of SFAS 142, effective November 1, 2001, the
beginning of fiscal year 2002, the amortization of goodwill and intangible
assets is expected to decrease to approximately $2.1 million per quarter
beginning in the first quarter of fiscal 2002.

         Non-cash Compensation. In connection with stock options granted to
employees, the Company recorded approximately $0.4 million of non-cash
compensation during the three-month period ended July 31, 2001. During the
three-month period ended July 31, 2000, the Company recorded $1.0 million of
non-cash compensation. During the nine-month periods ended July 31, 2001 and
2000, the Company recorded $1.0 million and $4.0 million of non-cash
compensation, respectively. The significant decrease in non-cash compensation is
a result of the Company using an accelerated method to expense deferred
compensation over the expected vesting life of the underlying stock options.

Other Income (Expense), net

         Other income (expense), net, consists primarily of interest income
received on cash and equivalents and investments. Interest income was $0.9
million during the three-month period ended July 31, 2001, and $1.3 million
during the same period in fiscal 2000. Interest income was $3.5 million during
the nine-month period ended July 31, 2001 and $2.2 million during the same


                                      -17-
<PAGE>   18


period in fiscal 2000. The decrease in interest income is attributable to lower
cash, cash equivalents and available-for-sale security balances.

Provision for Income Taxes

         For the three-month periods ended July 31, 2001 and 2000, the provision
for income taxes was approximately $0.2 million and $11,000, respectively. For
the nine-month periods ended July 31, 2001 and 2000, the provision for income
taxes was approximately $0.3 million and $38,000, respectively. The provision
for income taxes was primarily related to earnings in foreign subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

         Since inception as a separate legal entity in August 1998, we have
funded our operations primarily through loans from our major stockholder and
through sales of common and preferred stock.

         As of July 31, 2001, we had cash, cash equivalents and
available-for-sale securities of $37.3 million and working capital of $26.8
million. Decreases in cash and cash equivalents and working capital from October
31, 2000 were the result of cash used in operations of $29.4 million, cash paid
to Tarantella and Acrylis of $23.0 million which were offset by sales of
available-for-sale securities of $47.6 million.

         Our net cash used in operations during the nine-month period ended July
31, 2001 was $29.4 million. Cash used in operations was primarily attributable
to the net loss of $40.3 million. The net loss was partially offset by non-cash
charges for the amortization of deferred compensation, amortization of goodwill
and intangible assets, a charge for in-process research and development,
depreciation and amortization, the write-down of our investments and equity in
loss of affiliate.

         Our investing activities have historically consisted of equipment
purchases, investing in strategic partners and the purchase and the purchase and
sale of available-for-sale securities. During the three months ended July 31,
2001, we acquired assets and operations from Tarantella and the WhatIfLinux
technology from Acrylis and paid $23.0 million, net of cash acquired. During the
nine-month period ended July 31, 2001, we sold $47.6 million in
available-for-sale securities, resulting in cash provided by investing
activities of $17.6 million. We anticipate that we will experience an increase
in the level of our capital expenditures, lease commitments and investment
activities as we grow our operations.

         Our financing activities provided approximately $0.6 million during the
nine-month period ended July 31, 2001 as a result of the exercise of vested
stock options, the purchase of shares of common stock through Caldera's employee
stock purchase program and from minority stockholders in Caldera KK.

         As of July 31, 2001, we had no outstanding debt obligations.

         Caldera's accounts receivable balance increased from $1.5 million as of
October 31, 2000 to $16.2 million as of July 31, 2001. The significant increase
was attributable directly to increased revenue as a result of our acquisition of
assets and operations from Tarantella. The allowance for doubtful accounts was
$0.3 million as of July 31, 2001, which represented two percent of the total
accounts receivable balance.

         Management believes that its current cash and cash equivalents will be
sufficient to meet capital expenditures and working capital requirements for at
least the next twelve months. However, Caldera may need to raise additional
funds to support more rapid expansion, respond to competitive pressures, acquire
complimentary businesses or technologies, and respond to



                                      -18-
<PAGE>   19


unanticipated requirements or to fund the operations acquired from Tarantella.
Management cannot assure you that additional funding will be available in
amounts or on terms acceptable to the Company. If sufficient funds are not
available or are not available on acceptable terms, the ability to fund
expansion, take advantage of acquisition opportunities, develop or enhance our
services or products, or otherwise respond to competitive or operational
pressures would be significantly limited.

RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the FASB issued SFAS No. 141, "Business Combinations",
and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141
prospectively prohibits the pooling of interest method of accounting for
business combinations initiated after June 30, 2001. SFAS No. 142, which
supercedes APB Opinion No. 17, "Intangible Assets", establishes new standards
for goodwill acquired in a business combination and eliminates amortization of
goodwill and instead sets forth methods to periodically evaluate goodwill for
impairment. The adoption of SFAS No. 142 will require the Company to test its
goodwill for impairment under the new standard beginning in the first quarter of
fiscal 2002, which could have an adverse effect on the Company's future results
of operations if an impairment occurs. The Company will adopt SFAS 142 effective
November 1, 2001, the beginning of fiscal year 2002, and as a result
amortization of goodwill and intangible assets is expected to decrease to
approximately $2.1 million per quarter beginning in the first quarter of fiscal
2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

         Caldera has maintained many of the foreign offices and operations
associated with the assets acquired in May 2001 from Tarantella. As a result, a
substantial portion of Caldera's revenue is derived from sales to customers
outside the United States. A significant portion of this international revenue
is denominated in U.S. dollars. However, a substantial portion of the operating
expenses related to the foreign-based sales are denominated in foreign
currencies and therefore operating results are affected by changes in the U.S.
dollar exchange rate in relation to foreign currencies such as the U.K. pound
sterling and the euro, among others. If the U.S. dollar weakens compared to the
U.K. pound sterling and the euro, then operating expenses of foreign operations
will be higher when translated back into U.S. dollars and additional funds may
be required to meet these obligations. Caldera's revenue can also be affected by
general economic conditions in the United States, Europe and other international
markets. Caldera's results of operations may be significantly affected in the
short term by fluctuations in foreign currency exchange rates or general
economic conditions.

         Caldera is aware of the issues associated with the new European
economic and monetary union (the "EMU"). One of the changes resulting from this
union required EMU member states to irrevocably fix their respective currencies
to a new currency, the Euro, on January 1, 1999. On that day, the euro became a
functional legal currency within these countries. During the subsequent two
years, business in the EMU member states will have been conducted in both the 25
existing national currencies, such as the franc or deutsche mark, and the euro.
As a result, companies operating in or conducting business in EMU member states
will need to ensure that their financial and other software systems are capable
of processing transactions and properly handling these currencies, including the
euro. Management is in the process of revising its current business practices
and products to address Europe's conversion to the euro. Caldera is still
determining all of the costs related to addressing this issue, and there can be
no assurance that this issue and its related costs will not have a materially
adverse affect on Caldera's business, operating results and financial condition.


                                      -19-
<PAGE>   20


         Because the EMU member states fixed the value of their respective
national currencies to the Euro, the dispositive exchange rate for determining
the effects of foreign currency fluctuation on the results of operations of a
U.S. company earning significant revenues from Europe is the U.S. dollar-euro
exchange rate. The overall trend since the adoption of the euro in January 1999
has been a devaluation compared to the U.S. dollar. Historically, Caldera has
not been materially affected by fluctuations in the U.S. dollar-euro exchange
rates because the level of activity denominated in euros has not been
significant.

INTEREST RATE RISK

         The primary objective of Caldera's cash management strategy is to
invest available funds in a manner that assures maximum safety and liquidity and
maximizes yield within such constraints. A portion of the securities in which
Caldera invests may be subject to market risk, which means that a change in
prevailing rates or market conditions may adversely affect the principal amount
of the investment. To minimize this risk, Caldera invests in a broad range of
short-term fixed income securities with varying maturities. Caldera does not
borrow money for short-term investment purposes. We anticipate that the amounts
we hold in interest rate sensitive instruments will decrease as our cash and
cash equivalents and amounts held in available-for-sale securities are utilized
in our business.

INVESTMENT RISK

         Caldera has invested in equity instruments of privately held and public
companies in the high-technology industry for business and strategic purposes.
Investments in privately held companies are included under the caption
Investments in the consolidated balance sheet and are accounted for under the
cost method if Caldera's ownership is less than 20 percent and Caldera is not
able to exercise influence over operations. Caldera's only investment to date in
a public company is in Ebiz Enterprises, Inc. Caldera's investment policy is to
regularly review the assumptions and operating performance of these companies
and to record impairment losses when events and circumstances indicate that
these investments may be impaired. During the nine months ended July 31, 2001,
Caldera recorded impairment charges of approximately $6.9 million for
investments that were deemed to have experienced other than temporary declines
in market value.

         The stock market in general, and the market for shares of technology
companies in particular, has experienced extreme price fluctuations. In
addition, factors such as new product introductions by the Company or its
competitors may have a significant impact on the market price of the Company's
common stock. Furthermore, quarter-to-quarter fluctuations in the Company's
results of operations caused by changes in customer demand may have a
significant impact on the market price of the Company's stock. These conditions
could cause the price of the Company's stock to fluctuate substantially over
short periods

RISK FACTORS

WE ARE A NEW COMPANY WITH A LIMITED OPERATING HISTORY, WHICH MAY MAKE IT
DIFFICULT FOR YOU TO ASSESS THE RISKS RELATED TO OUR BUSINESS.

         Although we began operations in 1994, during the past 24 months we have
substantially revised our business plan to focus on Linux for eBusiness, made
additions to our product line, hired a significant number of new employees,
including key members of our management team, and completed two acquisitions. In
May 2001, we acquired the server software and professional services groups of
Tarantella, which had employees, operations, revenue and expenses significantly
greater than our historical operations. Prior to the acquisition from
Tarantella, our sales were primarily from our OpenLinux products, which were
historically developed for first-time Linux users who predominantly had
experience using Windows desktop environments. We



                                      -20-
<PAGE>   21


do not anticipate that these will continue to be a significant part of our
business as we continue to shift focus to corporate users. As a company in a new
and rapidly evolving industry, we face risks and uncertainties relating to our
ability to successfully implement our strategy. You must consider the risks,
expenses and uncertainties that a company like ours, operating with an unproven
business model, faces in a new and rapidly evolving market such as the market
for Linux software. These risks also include our ability to:

         o        broaden awareness of the Caldera brand;

         o        maintain our current, and develop new, strategic relationships
                  with technology partners and solution providers;

         o        attract, integrate and retain qualified management personnel;

         o        attract, integrate and retain qualified personnel for the
                  expansion of our sales, professional services, engineering,
                  marketing and customer support organizations;

         o        continue to develop and upgrade product offerings tailored for
                  business;

         o        respond effectively to competitive pressures; and

         o        generate revenue from the sale of our software products,
                  services, education programs and training.

         If we cannot address these risks and uncertainties or are unable to
execute our strategy, we may not be successful.

WE MIGHT FAIL TO SUCCESSFULLY INTEGRATE THE BUSINESS RECENTLY ACQUIRED FROM
TARANTELLA.

         In May 2001, we completed the acquisition of assets and operations from
Tarantella. This acquisition significantly increased our personnel, products,
operations, and geographic locations. One of our key issues is the integration
of the business, personnel, and operations acquired from Tarantella, including
the integration of our historical Linux product offerings with UNIXWare product
offerings acquired from Tarantella. This product line integration will involve
consolidation of products with duplicative functionality, coordination of
research and development activities, and convergence of the technologies
supporting the various products.

         Other business integration issues could arise, including:

         o        maintaining brand recognition for key products of the server
                  business, such as UNIXWare and OpenServer, while migrating
                  customer identification to our brands;

         o        resolving channel conflicts that may arise between historical
                  third-party distributor and our electronic solution provider
                  channels and the channels of the UNIX-based business;

         o        coordinating, integrating and streamlining geographically
                  dispersed operations; and

         o        coping with customers' uncertainty about continued support for
                  duplicative products.

         Management and employee integration issues could also arise, including:

         o        resolving differences between the corporate cultures of our
                  company and the newly acquired operations;

         o        employee turnover; and


                                      -21-
<PAGE>   22


         o        integrating the management teams of both companies
                  successfully.

         Operational issues could arise, including potential problems in
integrating:

         o        management information systems;

         o        telephone systems; and

         o        customer data.

         The integration is also expensive. In addition, management's focus on
the integration is likely to interrupt our business activities, including the
development of products and technologies integrating the Linux and UNIX product
offerings. Any of these risks could harm future revenue and results of
operations.

WE HAVE NOT BEEN PROFITABLE AND WE EXPECT OUR LOSSES TO CONTINUE.

         We have not been profitable. The operations recently acquired from
Tarantella have not recently been profitable and their revenue has been
declining. If our revenue declines or grows at a slower rate than anticipated or
we are unable to efficiently reduce operating expenses, we may not achieve or
sustain profitability or generate positive cash flow. For the three months ended
July 31, 2001, we incurred a net loss of approximately $18.8 million. As a
result of the acquisition of the operations from Tarantella, we expect to
continue to incur net losses because those operations have incurred losses in
the recent past and we anticipate incurring significant expenses in connection
with the integration of the businesses, developing our products, hiring and
training employees, expanding our market reach, building awareness of our brand
and integrating the products formerly offered by Tarantella. We may find it
necessary to accelerate expenditures relating to product development and support
and our sales and marketing efforts beyond our current expectations or otherwise
increase our financial commitment to creating and maintaining brand awareness
among potential customers. If we are unable to achieve positive cash flow from
operations, we will not be able to implement our business plan or we will need
additional funding, which may not be available to us.

OUR PRODUCT AND SERVICE OFFERINGS MAY NOT BE ACCEPTED.

         We face risks and uncertainties relating to our ability to successfully
implement our strategy. Our business model is based on an expectation that we
can create and develop demand from the corporate community for product and
service offerings, which will include both UNIX and Linux products and services.
There is no current market for business solutions combining both Linux and
UNIX-based products and services. At present, the business community favors
Microsoft and other non-Linux operating systems. Our success will depend on
market acceptance of the products we currently offer and the development of
additional products that are accepted by the market.

         In order for our product offering to be accepted we must:

         o        broaden awareness of the Caldera brand;

         o        maintain our current, and develop new, strategic relationships
                  with technology partners and solution providers;

         o        continue to develop and upgrade product offerings tailored for
                  business; and

         o        respond effectively to competitive pressures.



                                      -22-
<PAGE>   23


OUR WORKFORCE HAS INCREASED SIGNIFICANTLY AND WE WILL FACE MANY DIFFICULTIES IN
MANAGING A LARGER COMPANY.

         On completion of the Tarantella transaction, our workforce increased to
619 people. Key personnel have little experience managing this type of growth.
This growth is likely to strain our management control systems and resources,
including decision-making, responsibility and accountability management,
support, accounting and financial reporting, and management information systems.
We will need to continue to improve our financial and management controls and
our reporting systems and procedures to manage our employees and expanded
operations.

IF WE ARE UNABLE TO RETAIN KEY PERSONNEL IN AN INTENSELY COMPETITIVE
ENVIRONMENT, OUR OPERATIONS COULD BE ADVERSELY AFFECTED.

         We will need to retain our management, technical, and support
personnel. Competition for qualified professionals in the software industry is
intense, and we may be unable to retain sufficient professionals to operate our
business. Departures of existing personnel could be disruptive to our business
and can result in the departure of other employees.

         The loss or departure of any officers or key employees could harm our
ability to implement our business plan and could adversely affect our
operations. Our future success depends to a significant extent on the continued
service and coordination of our management team, particularly Ransom H. Love,
our President and Chief Executive Officer. We do not maintain key person
insurance for any member of our management team.

YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
FLUCTUATIONS IN OUR OPERATING RESULTS OR THE FAILURE OF OUR OPERATING RESULTS TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS MAY NEGATIVELY
IMPACT OUR STOCK PRICE.

         Our quarterly operating results have varied in the past. Fluctuations
in our quarterly operating results or our failure to meet the expectations of
analysts or investors, even in the short-term, could cause our stock price to
decline. You should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. Factors that may affect our
quarterly results include:

         o        the interest level of electronic solution providers in
                  recommending our Linux and UNIX business solutions to end
                  users;

         o        the introduction, development, timing, competitive pricing and
                  market acceptance of our products and services and those of
                  our competitors;

         o        changes in general economic conditions, such as recessions,
                  that could affect capital expenditures and recruiting efforts
                  in the software industry in general and in the Linux
                  environment in particular;

         o        the magnitude and timing of marketing initiatives;

         o        changing business attitudes toward Linux and UNIX as viable
                  operating systems compared to other competing systems;

         o        the maintenance and development of our strategic relationships
                  with technology partners and solution providers;

         o        the attraction, retention and training of key personnel; and

         o        our ability to manage our expanded operations.



                                      -23-
<PAGE>   24


         As a result of the factors listed above and elsewhere, it is possible
that our results of operations may be below the expectations of public market
analysts and investors in any particular period. This could cause our stock
price to decline. In addition, we plan to increase our operating expenses to
expand our sales and marketing, administration, consulting and training,
maintenance and technical support and research and development groups. If
revenue falls below our expectations and we are unable to quickly reduce our
spending in response, our operating results would be lower than expected and our
stock price may fall.

WE RELY ON OUR INDIRECT SALES CHANNEL FOR DISTRIBUTION OF OUR PRODUCTS, AND ANY
DISRUPTION OF OUR CHANNEL AT ANY LEVEL COULD ADVERSELY AFFECT THE SALES OF OUR
PRODUCTS.

         We have a two-tiered distribution channel. The relationships we have
developed with distributors allow us to offer our products and services to a
much larger customer base than we would otherwise be able to reach through our
own direct sales and marketing efforts. Some electronic solution providers also
purchase solutions through our distributors, and we anticipate they will
continue to do so as we expand our product offerings. Because we usually sell
indirectly through distributors, we cannot control the relationships through
which solution providers or equipment integrators purchase our products. In
turn, we do not control the presentation of our products to end-users.
Therefore, our sales could be affected by disruptions in the relationships
between our distributors and electronic solution providers or between electronic
solution providers and end users. Also, distributors and electronic solution
providers may choose not to emphasize our products to their customers. Any of
these occurrences could diminish the effectiveness of our distribution channel
and lead to decreased sales.

OUR BUSINESS MODEL, WHICH RELIES ON A COMBINATION OF OPEN SOURCE SOFTWARE AND
PROPRIETARY TECHNOLOGY, IS UNPROVEN.

         Our business model incorporates as integral elements of our product
offerings both commercial products and open source software. We know of no
company that has built a profitable business based in whole or in part on open
source software. By incorporating open source components in our product
offerings, we face many of the same risks that other open source companies
experience, including the inability to offer warranties and indemnities on
products and services. The open source components included in our products are
available for free from other sources. In addition, by including proprietary
technology in our products that is not freely downloadable we may run counter to
the perception of Linux as an open source model and may alienate the Linux
community. Negative reaction such as this, if widely shared by our customers,
developers or the open source community, could harm our reputation, diminish our
brand and decrease our revenue. Our business will fail if we are unable to
successfully implement our business model.

         Our business model also depends upon incorporating contributions from
the open source community into our products. The viability of our product
offerings depends in large measure upon the efforts of the open source community
in enhancing products and making them compatible for use across multiple
software and hardware platforms. There are no guarantees that the open source
community will embrace these products such that programmers will contribute
sufficient resources for their development. If the open source community does
not embrace products that we view as integral to providing eBusiness solutions,
we will be required to devote significant resources to develop these products on
our own.

BECAUSE OUR LINUX PRODUCTS HAVE RELATIVELY SHORT LIFE CYCLES, WE MUST DEVELOP
AND INTRODUCE NEW LINUX PRODUCTS TO SUSTAIN OUR LEVEL OF SALES.

         Our Linux software products have a limited life cycle and it is
difficult to estimate when they will become obsolete. If we do not develop and
introduce new Linux products before our existing Linux products have completed
their life cycles, we will not be able to sustain our level of



                                      -24-
<PAGE>   25


sales. In addition, for us to succeed, many customers must adopt our new Linux
products early in the product's life cycle. If we do not attract sufficient
customers early in a product's life, we may not realize the amount of revenue
that we anticipate for the product or recover our development costs. We cannot
be sure that we will continue to be successful in marketing our key products.

WE RELY ON INDEPENDENT DEVELOPERS IN THE OPEN SOURCE COMMUNITY, SUCH AS LINUS
TORVALDS, IN ORDER TO RELEASE UPGRADES OF OUR LINUX-BASED PRODUCTS.

         Many of the components of our software products, including the Linux
kernel, the core of the Linux operating system, are developed by independent
developers in the open source community and are available for inclusion in our
products without cost. Linus Torvalds, the original developer of the Linux
kernel, and a small group of independent engineers have in the past developed
and upgraded the Linux kernel. Neither Mr. Torvalds nor any significant
contributor to the Linux kernel is an employee of ours, and none of these
individuals are required to further update the Linux kernel. If these
independent developers and others in the open source community do not further
develop the Linux kernel and other open source software included in our products
on a timely basis, or at all, our ability to enhance our product offerings will
suffer. As a consequence, we will be forced to rely to a greater extent on our
own development efforts or license commercial software products as replacements,
which would increase our expenses and delay enhancements to our products. For
example, in the past we have sometimes been unable to upgrade all open source
components of a product in connection with a proposed release because these
independent developers had not yet made enhancements. Any failure on the part of
the kernel developers to further develop and enhance the kernel could also
stifle the development of additional Linux applications.

IF THE MARKET FOR LINUX BUSINESS SOLUTIONS DOES NOT GROW AS WE ANTICIPATE, WE
MAY NOT BE ABLE TO CONTINUE OUR BUSINESS PLAN AND GROW OUR BUSINESS.

         Our strategy for marketing Linux solutions to businesses depends in
part upon our belief that many businesses will follow a trend away from the use
of networked computers linked by centralized servers and move toward the use of
distributed applications through thin appliance servers, or specialized servers,
Internet access devices and application service providers. We also are relying
on electronic solution providers making these technologies available on Linux
and Linux then becoming a desirable operating system under these circumstances.
However, if businesses, which at present favor Microsoft and other non-Linux
operating systems, do not adopt these trends in the near future, or if Linux is
not viewed as a desirable operating system in connection with these trends, a
significant market for our products may not develop. Factors that may keep
businesses from adopting these trends include:

         o        costs of installing and implementing new hardware devices;

         o        costs of porting legacy systems into new platforms;

         o        security concerns regarding manipulation of data through
                  application service providers;

         o        limited adoption of Linux among businesses generally;

         o        previous significant investments in competing systems;

         o        lack of adequate Linux-trained professionals and support
                  services;

         o        lack of standards among Linux products and applications; and

         o        lack of acceptance of the Internet as a medium for
                  distributing business applications.



                                      -25-
<PAGE>   26


         Even if these trends toward distributed applications are adopted, if
the development of Linux products and Linux applications is not sufficient, a
significant market for Linux business solutions such as ours may not
materialize.

WE OPERATE IN A HIGHLY COMPETITIVE MARKET AND FACE SIGNIFICANT COMPETITION FROM
A VARIETY OF CURRENT AND POTENTIAL SOURCES, INCLUDING RED HAT AND SUN
MICROSYSTEMS; MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE GREATER
FINANCIAL AND TECHNICAL RESOURCES THAN WE DO; THUS, WE MAY FAIL TO COMPETE
EFFECTIVELY.

         Our principal competitors in the Linux market include:

         o        Red Hat;

         o        Wind River Systems;

         o        Sun Microsystems;

         o        Corel;

         o        MacMillan;

         o        SuSE; and

         o        VA Linux.

         In additional, due to the open source nature of Linux, anyone can
freely download Linux and many Linux applications and modify and re-distribute
them with few restrictions. For example, solution providers upon whom we depend
for the distribution of our products could instead create their own Linux
solutions to provide to their customers. Also, established companies and other
institutions could easily produce competing versions of Linux software.

         Additionally, we have a number of competitors outside the Linux market
that offer server products that are more established than ours. Many of these
competitors have access to greater resources that we do. These competitors
include AT&T, Novell, Sun Microsystems, and Microsoft. More recently, the major
competitive alternative to our UNIX and Linux products is Microsoft's NT. While
we believe that our server products retain a competitive advantage in a number
of targeted application areas, the expansion of Microsoft's and our other
competitor's offerings may restrict the overall market available for our server
products, including some markets where we have been successful in the past.

OUR FOREIGN-BASED OPERATIONS AND SALES CREATE SPECIAL PROBLEMS, INCLUDING THE
IMPOSITION OF GOVERNMENTAL CONTROLS AND FLUCTUATIONS IN CURRENCY EXCHANGE RATES
THAT COULD HURT OUR RESULTS.

         As a result of the purchase of the assets and operations from
Tarantella, we have significantly more foreign operations than we have had in
the past, including development facilities, sales personnel and customer support
operations in Europe, Latin America and Southeast Asia. These foreign operations
are subject to certain inherent risks, including:

         o        potential loss of developed technology through piracy,
                  misappropriation, or more lenient laws regarding intellectual
                  property protection;

         o        imposition of governmental controls, including trade
                  restrictions;

         o        fluctuations in currency exchange rates and economic
                  instability;

         o        longer payment cycles for sales in foreign countries;


                                      -26-
<PAGE>   27


         o        difficulties in staffing and managing the foreign operations;

         o        seasonal reductions in business activity in the summer months
                  in Europe and other countries; and

         o        political unrest, particularly in areas in which we have
                  facilities.

         In addition, certain operating expenses will be denominated in local
currencies, creating risk of foreign currency translation losses that could harm
our financial results and cash flows. If we generate profits or losses in
foreign countries, our effective income tax rate could also be increased.

         In Latin America and Southeast Asia in particular, several countries
have suffered and may be especially susceptible to recessions and economic
instability which may lead to increased governmental ownership or regulation of
the economy, higher interest rates, increased barriers to entry such as higher
tariffs and taxes, and reduced demand for goods manufactured in the United
States.

WE ARE VULNERABLE TO CLAIMS THAT OUR PRODUCTS INFRINGE THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS, PARTICULARLY BECAUSE OUR PRODUCTS ARE COMPRISED OF MANY
DISTINCT SOFTWARE COMPONENTS DEVELOPED BY THOUSANDS OF INDEPENDENT PARTIES.

         We may be exposed to future litigation based on claims that our
products infringe the intellectual property rights of others. This risk is
exacerbated by the fact that most of the code in our products is developed by
independent parties over whom we exercise no supervision or control and who,
themselves, might not have the same financial resources as us to pay damages to
a successful litigant. Claims of infringement could require us to re-engineer
our products or seek to obtain licenses from third parties in order to continue
offering our products. In addition, an adverse legal decision affecting our
intellectual property, or the use of significant resources to defend against
this type of claim could place a significant strain on our financial resources
and harm our reputation.

FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY WOULD RESULT IN
SIGNIFICANT HARM TO OUR BUSINESS.

         While much of the code for our products is open source, our success
depends significantly on our ability to protect our trademarks, trade secrets
and certain proprietary technology contained in our products. We rely on a
combination of copyright and trademark laws, and on trade secrets and
confidentiality provisions and other contractual provisions to protect our
proprietary rights. These measures afford only limited protection. Some
trademarks that have been registered in the United States have been licensed to
us, and we have other trademark applications pending in the United States.
Effective trademark protection may not be available in every country in which we
offer our products and services. Our means of protecting our proprietary rights
in the United States or abroad may not be adequate, and competitors may
independently develop similar technologies. Our future success will depend in
part on our ability to protect our proprietary rights. Despite our efforts to
protect our proprietary rights and technologies, unauthorized parties may
attempt to copy aspects of our products or to obtain and use trade secrets or
other information that we regard as proprietary. Legal proceedings to enforce
our intellectual property rights could be burdensome and expensive and could
involve a high degree of uncertainty. These legal proceedings may also divert
management's attention from growing our business. In addition, the laws of some
foreign countries do not protect our proprietary rights as fully as do the laws
of the United States. If we do not enforce and protect our intellectual
property, our business may suffer substantial harm.



                                      -27-
<PAGE>   28


WE COULD LOSE REVENUE AS A RESULT OF SOFTWARE ERRORS OR DEFECTS.

         Software programs frequently contain errors or defects, especially when
first introduced or when new versions are released. We could lose revenue as a
result of errors or defects in our software products. We cannot assure you that
errors will not be found in new products or releases. Although we have both
product liability and errors and omissions insurance, we might incur losses in
excess of the dollar limits or beyond the scope of coverage of our policies.
While we test our products prior to release, the fact that most of the
components of our software offerings are developed by independent parties over
whom we exercise no supervision or control makes it particularly difficult to
identify and remedy any errors or defects that could exist. Any errors could
result in loss of revenue, or delay in market introduction or acceptance,
diversion of development resources, damage to our reputation or increased
service costs.

OUR COMPETITIVE POSITION COULD DECLINE IF WE ARE UNABLE TO OBTAIN ADDITIONAL
FINANCING TO ACQUIRE BUSINESSES OR TECHNOLOGIES THAT ARE STRATEGIC FOR OUR
SUCCESS, OR OTHERWISE EXECUTE OUR BUSINESS STRATEGY, OR IF WE FAIL TO
SUCCESSFULLY INTEGRATE ANY ACQUISITIONS WITH OUR CURRENT BUSINESS.

         We believe that our current cash and cash equivalents will be
sufficient to fund our working capital and capital expenditure requirements for
at least the next twelve months. However, we may need to raise additional funds
to support more rapid expansion, respond to competitive pressures, acquire
complementary businesses or technologies or respond to unanticipated
requirements. We cannot assure you that additional funding will be available to
us in amounts or on terms acceptable to us. If sufficient funds are not
available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of acquisition opportunities, develop or enhance our
services or products, or otherwise respond to competitive pressures would be
significantly limited.

         If appropriate opportunities arise, we intend to acquire businesses,
technologies, services or products that we believe are strategic for our
success. The market for eBusiness solutions such as Linux products is new and is
rapidly evolving and our competitive position could decline if we are unable to
identify and acquire businesses or technologies that are strategic for our
success in this market.

THE GROWTH OF OUR BUSINESS WILL BE DIMINISHED IF THE INTERNET IS NOT ACCEPTED AS
A MEDIUM FOR COMMERCE AND BUSINESS NETWORKING APPLICATIONS.

         An important part of our business strategy is to develop and market our
products for the support of secure business networks hosted on the Internet. In
addition, we plan to sell our products and provide a significant amount of
technical support and education via our website. If the Internet is not accepted
as a medium for commerce and business networking applications, demand for our
products and services will be diminished. A number of factors may inhibit
Internet usage, including:

         o        inadequate network infrastructure;

         o        lack of knowledge and training on Internet use and benefits;

         o        consumer concerns for Internet privacy and security;

         o        lack of availability of cost-effective, high-speed service;

         o        interruptions in Internet commerce caused by unauthorized
                  users;

         o        changes in government regulation relating to the Internet; and

         o        Internet taxation.



                                      -28-
<PAGE>   29


         If Internet usage grows, the infrastructure may not be able to support
the demands placed on it by that growth and its performance and reliability may
decline. Websites have experienced interruptions as a result of delays or
outages throughout the Internet infrastructure. If these interruptions continue,
Internet usage may decline.

FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE.

         The market price of our common stock could decline as a result of sales
of a large number of shares of our common stock in the market, or the perception
that such sales could occur. As a result of the registration that occurred in
connection with the Tarantella transaction, we have a large number of shares of
common stock outstanding and available for resale. This also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. Certain holders of our common stock also have
certain demand and piggyback registration rights obligating us to register their
shares under the Securities Act for sale, including the rights held by the
selling stockholders.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Four lawsuits have been filed against the Company, certain of its
officers and directors, and the underwriters of the Company's Initial Public
Offering in the United States District Court for the Southern District of New
York by parties alleging violations of the securities laws. The complaints
allege certain improprieties regarding the circumstances surrounding the
underwriters' conduct during the IPO and the failure to disclose such conduct in
the registration statement. Over 100 other issuers, and their underwriters and
officers and directors, have been sued in similar cases pending in the same
court.

         The Company is not aware of any improper conduct by the Company, its
officers and directors, or its underwriters, and the Company denies any
liability relating thereto. The court recently adjourned the requirement that
the Company file an answer to the complaints pending further notification from
the court. The Company has notified its underwriters and insurance companies of
the existence of the claims.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


                                      -29-
<PAGE>   30


     (a) Exhibits

         None.

     (b) Reports on Form 8-K

         On May 14, 2001, the Company filed a report on Form 8-K announcing the
completion of the acquisition of the server and professional services groups
from Tarantella.

         On June 6, 2001, the Company filed a report on Form 8-K that included
the conference call dialogue from the Company's quarterly earnings release
conference call.

ITEM 7. SIGNATURES

         Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

Date: September 14, 2001                  CALDERA SYSTEMS, INC.

                                          By: /s/ Robert K. Bench
                                              -----------------------------
                                              Robert K. Bench
                                              Chief Financial Officer
                                              (Principal Financial Officer)



                                      -30-