<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 JANUARY 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 SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                     <C>
               Delaware                               87-0617393
    (State or other jurisdiction of     (I.R.S. Employer Identification Number)
    incorporation or organization)
</TABLE>

                             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 March 15, 2001, 39,684,082 shares of the Registrant's common stock were
outstanding.


<PAGE>   2

                              CALDERA SYSTEMS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                 Number
                                                                                                 ------
<S>               <C>                                                                            <C>
PART I.           FINANCIAL INFORMATION
Item 1.           Financial Statements
                  Condensed Consolidated Balance Sheets as of January 31, 2001 and
                    October 31, 2000........................................................       3
                  Condensed Consolidated Statements of Operations and
                    Comprehensive Loss for the three months ended January 31,
                    2001 and 2000...........................................................       4
                  Condensed Consolidated Statements of Cash Flows for the three
                    months ended January 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...................................................      13
Item 3.           Quantitative and Qualitative Disclosures About Market Risk................      20
                  Risk Factors..............................................................      21
PART II.          OTHER INFORMATION
Item 1.           Legal Proceedings.........................................................      34
Item 2.           Changes in Securities and Use of Proceeds.................................      34
Item 3.           Defaults Upon Senior Securities...........................................      34
Item 4.           Submission of Matters to a Vote of Security Holders.......................      34
Item 5.           Other Information.........................................................      34
Item 6.           Exhibits and Reports on Form 8-K..........................................      34
Item 7.           Signatures................................................................      34
</TABLE>


                                     - 2 -
<PAGE>   3

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        January 31,     October 31,
                                                                           2001            2000
                                                                      -------------    -------------
                                                                        (unaudited)
<S>                                                                   <C>              <C>
                                      ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                                         $  28,358,943    $  36,560,267
    Available-for-sale securities                                        50,294,010       54,179,307
    Accounts receivable, net of allowance for doubtful accounts of
      $224,700 and $312,300, respectively                                   839,650        1,544,526
    Note receivable from The Santa Cruz Operation                         7,000,000               --
    Inventories                                                             381,969          389,438
    Other current assets                                                    738,811        1,310,173
                                                                      -------------    -------------
      Total current assets                                               87,613,383       93,983,711
                                                                      -------------    -------------

PROPERTY AND EQUIPMENT:
    Computer equipment                                                    1,399,861        1,321,806
    Furniture and fixtures                                                1,180,060        1,097,048
    Leasehold improvements                                                  343,374          342,015
                                                                      -------------    -------------
                                                                          2,923,295        2,760,869
    Less accumulated depreciation and amortization                       (1,372,943)      (1,171,549)
                                                                      -------------    -------------
      Net property and equipment                                          1,550,352        1,589,320
                                                                      -------------    -------------

INVESTMENTS IN NON-MARKETABLE SECURITIES:
    Affiliate                                                             1,179,704        1,179,704
    Non-affiliates                                                        3,999,497        3,999,497
                                                                      -------------    -------------
                                                                          5,179,201        5,179,201
                                                                      -------------    -------------

EQUITY INVESTMENT IN AFFILIATE                                                   --        4,957,325
                                                                      -------------    -------------

OTHER ASSETS, net                                                         2,297,009        1,808,746
                                                                      -------------    -------------

      Total assets                                                    $  96,639,945    $ 107,518,303
                                                                      =============    =============

                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                  $   2,602,530    $   2,414,359
    Payable to The Santa Cruz Operation                                          --          898,026
    Accrued liabilities                                                   2,551,129        1,664,818
    Deferred revenue                                                        408,866          326,330
                                                                      -------------    -------------
      Total current liabilities                                           5,562,525        5,303,533
                                                                      -------------    -------------

STOCKHOLDERS' EQUITY:
    Preferred stock, $0.001 par value; 25,000,000 shares authorized              --               --
    Common stock, $0.001 par value; 75,000,000 shares authorized,
      39,684,082 and 39,444,457 shares outstanding, respectively             39,684           39,444
    Additional paid-in capital                                          155,307,844      155,649,244
    Deferred compensation                                                (2,789,786)      (3,714,720)
    Accumulated comprehensive (loss) income                              (1,578,683)         299,456
    Accumulated deficit                                                 (59,901,639)     (50,058,654)
                                                                      -------------    -------------
      Total stockholders' equity                                         91,077,420      102,214,770
                                                                      -------------    -------------

      Total liabilities and stockholders' equity                      $  96,639,945    $ 107,518,303
                                                                      =============    =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                     - 3 -
<PAGE>   4

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED STATEMENTS OF
                        OPERATIONS AND COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                               Three Months Ended January 31,
                                                                   2001            2000
                                                               ------------    ------------
                                                                        (unaudited)
<S>                                                            <C>             <C>
REVENUE:
    Software and related products                              $    452,356    $    394,840
    Services                                                        601,304         158,359
                                                               ------------    ------------
      Total revenue                                               1,053,660         553,199
                                                               ------------    ------------

COST OF REVENUE:
    Software and related products                                   226,503         294,802
    Services                                                        950,331         255,284
                                                               ------------    ------------
      Total cost of revenue                                       1,176,834         550,086
                                                               ------------    ------------

GROSS (DEFICIT) MARGIN                                             (123,174)          3,113
                                                               ------------    ------------

OPERATING EXPENSES:
    Sales and marketing (exclusive off non-cash compensation
      of $140,120 and $487,132, respectively)                     5,520,108       2,030,556
    General and administrative (exclusive of non-cash
        compensation of $60,630 and $691,776, respectively)       1,747,820       1,078,510
    Research and development (exclusive of non-cash
        compensation of $133,074 and $363,959, respectively)      1,869,177         964,740
    Cost-sharing arrangement with The Santa Cruz Operation          601,974              --
    Non-cash compensation compensation                              333,824       1,542,867
                                                               ------------    ------------
      Total operating expenses                                   10,072,903       5,616,673
                                                               ------------    ------------

LOSS FROM OPERATIONS                                            (10,196,077)     (5,613,560)
                                                               ------------    ------------

EQUITY IN LOSS OF AFFILIATE                                        (647,689)             --
                                                               ------------    ------------

OTHER INCOME (EXPENSE):
    Interest income                                               1,007,819         113,374
    Other income (expense), net                                      19,662            (547)
                                                               ------------    ------------
      Other income, (expense), net                                1,027,481         112,827
                                                               ------------    ------------

LOSS BEFORE INCOME TAXES                                         (9,816,285)     (5,500,733)

PROVISION FOR INCOME TAXES                                          (26,700)        (12,650)
                                                               ------------    ------------

NET LOSS                                                       $ (9,842,985)   $ (5,513,383)
                                                               ============    ============

DIVIDENDS RELATED TO CONVERTIBLE PREFERRED STOCK               $         --    $(10,000,000)
                                                               ============    ============

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                   $ (9,842,985)   $(15,513,383)
                                                               ============    ============

BASIC AND DILUTED NET LOSS PER COMMON SHARE                    $      (0.25)   $      (0.63)
                                                               ============    ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                       39,588,452      24,779,808
                                                               ============    ============

OTHER COMPREHENSIVE LOSS:
    Net loss attributable to common stockholders               $ (9,842,985)   $(15,513,383)
    Unrealized loss on available-for-sale securities             (1,865,030)             --
    Foreign currency translation adjustment                         (13,109)        (15,766)
                                                               ------------    ------------
COMPREHENSIVE LOSS:                                            $(11,721,124)   $(15,529,149)
                                                               ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                     - 4 -

<PAGE>   5

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<TABLE>
<CAPTION>
                                                                                        Three Months Ended January 31,
                                                                                            2001            2000
                                                                                        ------------    ------------
                                                                                                (unaudited)
<S>                                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                            $ (9,842,985)   $ (5,513,383)
    Adjustments to reconcile net loss to net cash used in operating activities:
       Depreciation and amortization                                                         201,394          93,071
       Non-cash compensation                                                                 333,824       1,542,867
       Equity in loss of affiliate                                                           647,689              --
       Issuance of common stock for services                                                      --         134,664
       Changes in operating assets and liabilities:
          Accounts receivable, net                                                           704,876        (153,296)
          Other receivables                                                                       --         375,000
          Inventories                                                                          7,469          54,994
          Other current assets                                                               571,362         (68,719)
          Other assets                                                                       (38,427)          4,454
          Accounts payable                                                                   188,171          31,072
          Payable to The Santa Cruz Operation                                               (898,026)             --
          Accrued liabilities                                                                886,311         274,363
          Deferred revenue                                                                    82,536         105,455
                                                                                        ------------    ------------
            Net cash used in operating activities                                         (7,155,806)     (3,119,458)
                                                                                        ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                                      (162,426)       (154,958)
    Loan to The Santa Cruz Operation                                                      (7,000,000)             --
    Purchase of available-for-sale securities                                             (8,128,152)             --
    Sale of available-for-sale securities                                                 14,368,676              --
    Deferred acquisition costs                                                              (449,836)             --
    Acquisition of investment in non-marketable security                                          --      (2,000,000)
                                                                                        ------------    ------------
            Net cash used in investing activities                                         (1,371,738)     (2,154,958)
                                                                                        ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings from majority stockholder                                                          --         300,000
    Repayment of borrowings from majority stockholder                                             --        (300,000)
    Repayments of long-term debt                                                                  --          (9,460)
    Proceeds from sale of common stock, net of offering costs                                     --         758,743
    Proceeds from sale of Series B convertible preferred stock, net of offering costs             --      29,790,674
    Proceeds from exercise of common stock options                                           249,950          41,143
                                                                                        ------------    ------------
            Net cash provided by financing activities                                        249,950      30,581,100
                                                                                        ------------    ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                      (8,277,594)     25,306,684
EFFECT OF FOREIGN EXCHANGE RATES ON CASH                                                      76,270         (15,766)
CASH AND CASH EQUIVALENTS, beginning of period                                            36,560,267         121,989
                                                                                        ------------    ------------
CASH AND CASH EQUIVALENTS, end of period                                                $ 28,358,943    $ 25,412,907
                                                                                        ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                     - 5 -
<PAGE>   6

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


<TABLE>
<CAPTION>
                                                                             Three Months Ended January 31,
                                                                                   2001          2000
                                                                               ------------   -----------
                                                                                      (unaudited)
<S>                                                                            <C>            <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     Cash paid for income taxes                                                $      4,223   $         --


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
     FINANCING ACTIVITIES:

     Issuance of common shares and the acquisition of a license fee for
        non-marketable securities                                              $         --   $  1,999,497

     Conversion of 6,596,146 shares of common stock to 6,596,146
        shares of Series A convertible preferred stock                         $         --   $      6,596

     Dividends related to Series B convertible preferred stock                 $         --   $ 10,000,000

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

     Distribution to majority stockholder for fair value of shares issued in
        excess of the carryover basis of the investment in Lineo, Inc.         $         --   $ (9,999,999)

     Reclassification and write-down of equity method investment in
        marketable security                                                    $  2,309,636   $         --
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                     - 6 -
<PAGE>   7

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


(1) ORGANIZATION AND DESCRIPTION OF BUSINESS

         Caldera Systems, Inc. ("Caldera"), was incorporated as a Utah
corporation on August 21, 1998, and was reincorporated as a Delaware corporation
on March 6, 2000. Caldera develops and markets software and provides related
services that enable the development, deployment and management of Linux-based
specialized servers and Internet devices that extend the eBusiness
infrastructure. Caldera sells and distributes its software and related products
indirectly through distributors and solutions providers, which include
value-added resellers ("VARs"), original equipment manufacturers ("OEMs"),
systems integrators, as well as directly to end-user customers. These sales
occur throughout the United States and in certain international locations.

         On August 1, 2000 and as amended on September 13, 2000, December 12,
2000 and February 9, 2001, Caldera Systems, Inc. ("Caldera"), Caldera
International, Inc. ("New Caldera"), and The Santa Cruz Operation, Inc. ("SCO")
entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement"). As a result of the transactions proposed by the Reorganization
Agreement (the "Reorganization"), (i) a newly formed, wholly owned subsidiary of
New Caldera will be merged with and into Caldera, with Caldera being the
surviving corporation, and all outstanding Caldera securities will be converted,
on a share for share basis, into New Caldera securities having identical rights,
preferences and privileges, with New Caldera assuming any and all outstanding
options and other rights to purchase shares of capital stock of Caldera (with
all such New Caldera securities issued to former Caldera security holders
initially representing a fully diluted equity interest of approximately 71.9% in
New Caldera); (ii) SCO and certain of its subsidiaries will contribute to New
Caldera, all of the capital stock held of certain contributed companies as well
as certain assets of SCO collectively representing the server and professional
services groups of SCO, in consideration for the issuance by New Caldera to SCO
of shares of common stock of New Caldera, $0.001 par value ("New Caldera Common
Stock"); (iii) New Caldera will assume or replace, as elected by the option
holders, all options to acquire common stock of SCO held by SCO employees (other
than certain officers of SCO) hired or retained by Caldera and such options will
be converted into options to purchase New Caldera Common Stock on a two SCO
options in exchange for one New Caldera option basis representing in the
aggregate a fully diluted equity interest of approximately 2.8% in New Caldera;
(iv) SCO will receive 16,000,000 shares of New Caldera Common Stock representing
in the aggregate a fully diluted equity interest of approximately 25.3% in New
Caldera; (v) New Caldera will pay to SCO $23 million in cash, of which $7
million was advanced to SCO in January, 2001; (vi) New Caldera will issue to SCO
a non-interest bearing, secured promissory note in the amount of $8 million that
will be payable in quarterly installments of $2 million beginning on the first
day of the fifth


                                     - 7 -
<PAGE>   8

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


fiscal quarter following the closing; and (vii) SCO shall be entitled to receive
from New Caldera earn-out provisions during the three-year period following the
closing representing 45% of the amount by which OpenServer revenues exceed
certain threshold amounts. In conjunction with the Reorganization Agreement, The
Canopy Group, Inc., a major stockholder of Caldera has agreed to loan $18
million to SCO. If the Reorganization is not completed, SCO will be obligated to
repay the $7 million advance to Caldera. Assets of SCO will secure each of these
loans.

(2) SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
of Caldera Systems, Inc. and subsidiary (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 Form 10-K 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
months ended January 31, 2001 are not necessarily indicative of the results that
may be expected for the year ending October 31, 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 owned subsidiaries, Caldera Deutschland GmbH ("Caldera
GmbH") and Caldera Japan ("Caldera KK"), after elimination of intercompany
accounts and transactions.


                                     - 8 -
<PAGE>   9

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


CASH AND CASH EQUIVALENTS

         For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with original maturities of three or
fewer months to be cash equivalents. Cash equivalents primarily consist of
investments in money market mutual funds, commercial paper or other short-term
investments.

AVAILABLE-FOR-SALE SECURITIES

         Available-for-sale securities include investments in debt securities
such as commercial paper, treasury notes and bonds and our investment in Ebiz
Enterprises, Inc. These investments are recorded at fair market value, based on
quoted market prices and unrealized gains and losses are recorded as a component
of comprehensive income (loss). Realized gains and losses, which are calculated
based on the specific identification method, are recorded in operations as
incurred. As of January 31, 2001, available-for-sale securities with original
maturity dates less than one year totaled approximately $15.7 million and
available-for-sale securities with original maturity dates greater than one year
totaled approximately $34.6 million.

INVENTORIES

         Inventories consist primarily of raw materials and completed products.
Inventories are stated at the lower of cost (using the first-in, first-out
method) or market value. As of January 31, 2001 and October 31, 2000,
inventories consisted of raw materials of approximately $219,300 and $201,800,
respectively, and completed products of approximately $162,700 and $187,600,
respectively.

         Provisions, when required, are made to reduce excess and obsolete
inventories to their estimated net realizable values. Due to competitive
pressures and technological innovation, it is possible that estimates of the net
realizable value could change in the near term.

REVENUE RECOGNITION

         The Company generates revenue from software and related products sold
indirectly through distributors and solutions providers and directly to
end-users. The Company also generates services revenue from training royalties
and tuition fees, consulting fees, and customer support fees.

         Revenue from the sale of software and related products is recognized
upon delivery of the product when persuasive evidence of an arrangement exists,
the price is fixed or determinable and collection is probable. All sales into
the distribution channel or to OEM's and VAR's require a binding purchase order.
Prior to November 1, 2000, sales to resellers for which payment was considered
to be substantially contingent on the reseller's success in distributing
individual units of the product or sales to resellers with which Caldera did not
have historical experience were accounted for as consignments and the revenue
was recognized once sell-through verification was received and payments from
customers became due. Prior to October 31, 1999, Caldera


                                     - 9 -
<PAGE>   10

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


did not have any consignment arrangements. During the year ended October 31,
2000, approximately 22% of product revenue was derived on a sell-through basis.

         Effective November 1, 2000, the Company began to defer revenue
recognition for products sold through the distribution channel until the
products have been sold through the channel to the end user. All sales require a
binding purchase order. Direct sales to end-users are evidenced by concurrent
payment for the product via credit card and are governed by a license agreement.
Generally, the only multiple element arrangement of the Company's initial
software sales is certain telephone and e-mail technical support services the
Company provides at no additional charge. These services do not include product
update or upgrade rights. After the initial support period, customers can elect
to enter into separate support agreements. The cost of providing the initial
support services is not significant; accordingly, the Company accrues the
estimated costs of providing the services at the time of revenue recognition.
Revenue from the extended support agreements and maintenance contracts are
deferred and recognized over the period of the contract or as the services are
provided.

         If other significant post-delivery vendor obligations exist or if a
product is subject to customer acceptance, revenue is deferred until no
significant obligations remain or acceptance has occurred. To date, the Company
has not shipped any software and related products subject to acceptance terms or
subject to other post-delivery vendor obligations. Additionally, the Company has
not recognized revenue on any contracts with customers that may include customer
cancellation or termination clauses that indicate a demonstration period or
otherwise incomplete transaction.

         The Company also offers its customers consulting, training and other
services separate from the software sale. The services are not integral to the
functionality of the software and are available from other vendors. This
services revenue is recognized as the services are performed.

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. As of January 31, 2000, there were 6,596,146 and 5,000,000
shares of Series A and Series B convertible preferred stock outstanding,
respectively, and there were 5,472,649 and 5,848,708 outstanding options to
purchase common shares as of January 31, 2000 and 2001, 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.


                                     - 10 -
<PAGE>   11

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(3) EQUITY INVESTMENT IN EBIZ ENTERPRISES, INC

         During the three months ended January 31, 2001, Caldera'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, Caldera discontinued the use of the equity method of
accounting for its investment in Ebiz. Caldera now accounts for the investment
as an available-for-sale security in accordance with Statement of Financial
Accounting Standards ("SFAS") 115. Under SFAS 115, Caldera carries its
investment at fair market value using quoted trading prices and records any
unrecognized gains or losses as a component of other comprehensive income
(loss). As of January 31, 2001, Caldera reduced the carrying value of its
investment to $2.0 million, which was previously recorded at approximately $4.3
million.

         Ebiz' common stock is currently traded on the Over-the-Counter Bulletin
Board. On January 31, 2001, Ebiz common stock closed at $0.50 per share.
Caldera's carrying amount per share of Ebiz' common stock on January 31, 2001
was approximately $1.08 per share. Management believes that this decline in
market value of the stock is not permanent in nature and resulted primarily from
market conditions related to technology stocks and that Caldera's ability to
recover the carrying amount of its investment has not been permanently impaired.
Caldera will continue to evaluate the carrying amount of its investment in Ebiz
on an ongoing basis and will record impairment charges as necessary from
permanent impairment of its investment. Caldera has the intent and wherewithal
to hold its investment in Ebiz long term in order to recover the current decline
in market value.

(4) 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
fair market value of the Company's common stock. During the three months ended
January 31, 2001, the Company granted 507,500 stock options with an average
exercise price of $2.10 per share. None of the stock option grants were at
prices that were below the estimated fair market value on the date of grant. As
of January 31, 2001, there were 5,848,708 stock options outstanding with an
average exercise price of $4.40 per share.

         During the three months ended January 31, 2000, the Company granted
approximately 2.6 million stock options with exercise prices that were below the
estimated fair market value on the measurement date resulting in approximately
$5.5 million in deferred compensation. Amortization of deferred compensation was
approximately $334,000 and $1.5 million, respectively, during the three months
ended January 31, 2001 and 2000.


                                     - 11 -

<PAGE>   12

                     CALDERA SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(5) 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. The Company has determined
that it does not have any separately reportable operating segments. However, the
Company does sell software and related products in geographic locations outside
of the United States.

         Revenue attributed to individual countries based on the location of
sales to unaffiliated customers for the three months ended January 31, 2001 and
2000 is as follows:

<TABLE>
<CAPTION>

                                      Three Months Ended January 31,
                                           2001         2000
                                        ----------   ----------
<S>                                     <C>          <C>
Revenue:
 United States                          $  711,384   $  390,710
 Asia pacific                              284,184       41,923
 Europe                                     40,537       94,325
 Other countries                            17,555       26,241
                                        ----------   ----------
    Total revenue                       $1,053,660   $  553,199
                                        ==========   ==========
</TABLE>


                                     - 12 -
<PAGE>   13


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 as well as our Annual Report on Form 10-K for the year ended
October 31, 2000 filed with the Securities and Exchange Commission. This
discussion contains forward-looking statements that involve risks and
uncertainties. 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., ("Caldera") a newly formed
corporation. Caldera has operated as a separate legal entity engaged in
developing and marketing Linux software since September 1, 1998. Since September
1, 1998, we have invested heavily in the expansion of our sales, marketing and
professional services organizations to support our long-term growth strategy. As
a result, our employee headcount has increased from 28 at September 1, 1998 to
192 at January 31, 2001. We have incurred net losses in each fiscal period since
inception and as of January 31, 2001, had an accumulated deficit of $59.9
million.

         On February 9, 2001, Caldera, Caldera International, or New Caldera,
and The Santa Cruz Operation, Inc. or SCO, entered into an amendment to the
reorganization agreement that was originally entered into on August 1, 2000 and
was subsequently amended on September 13, 2000 and December 12, 2000. The
reorganization agreement provides for a combination with the server and
professional services groups of SCO. If the combination closes, each share of
Caldera common stock will be exchanged for one share of common stock of New
Caldera. SCO will receive 16 million shares of New Caldera (representing
approximately 25.3% of New Caldera on a fully diluted basis), $23 million in
cash (of which $7 million was advanced to SCO on January 26, 2001 in the form of
a 10% interest-bearing promissory note) and a non-interest bearing promissory
note in the amount of $8 million. In addition, if the OpenServer line of
business of the server and professional services groups generates revenue in
excess of specified thresholds during the three-year period following the
completion of the combination, SCO will have earn-out rights entitling SCO to
receive 45% of this excess revenue. SCO employees who join New Caldera will
receive options to purchase approximately 1.8 million shares of common stock of
New Caldera (representing approximately 2.8% of New Caldera on a fully diluted
basis). In the combination, Caldera will become a subsidiary of New Caldera.


                                     - 13 -
<PAGE>   14


         Substantially all of our current revenue is derived from sales of Linux
products and related services. We expect that until the closing of the
Reorganization, the majority of our revenue will continue to be derived from
sales of our eDesktop and eServer products. If the acquisition of the SCO server
and professional services groups is completed, the majority of our revenue will
be derived from sales of OpenServer and UnixWare products as well as from
products resulting from the integration of our Linux products with the
OpenServer and UnixWare products and related applications.

         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. Upon our announcement of an expected
release date for new products or upgrades, we often experience a significant
decrease in sales of our existing products. Additionally, we often experience
the strongest sales for a new product during the first 30 days after its
introduction as we fill advance orders from our distribution channel partners.

         We recognize revenue in accordance with the American Institute of
Certified Public Accountants, or AICPA, Statement of Position 97-2, or SOP 97-2
and Statement of Position 98-9, or SOP 98-9. Accordingly, revenue from the sale
of software and related products is recognized upon delivery of the product when
persuasive evidence of an arrangement exists, the price is fixed or determinable
and collection is probable. All sales into the distribution channel or to OEM's
and VAR's require a binding purchase order. Prior to November 1, 2000, sales to
resellers for which payment was considered to be substantially contingent on the
reseller's success in distributing individual units of the product or sales to
resellers with which Caldera did not have historical experience were accounted
for as consignments and the revenue was recognized once sell-through
verification was received and payments from customers became due. Prior to
October 31, 1999, Caldera did not have any consignment arrangements. During the
year ended October 31, 2000, approximately 22% of product revenue was derived on
a sell-through basis.

         Effective November 1, 2000, the Company began to defer revenue
recognition for products sold through the distribution channel until the
products have been sold through the channel to the end user. All sales require a
binding purchase order. Direct sales to end-users are evidenced by concurrent
payment for the product via credit card and are governed by a license agreement.
Generally, the only multiple element arrangement of our initial software sales
is certain telephone and e-mail technical support services we provide at no
additional charge. These services do not include product update or upgrade
rights. After the initial support period, customers can elect to enter into
separate support agreements. The cost of providing the initial support services
is not significant; accordingly, we accrue the estimated costs of providing the
services at the time of revenue recognition. Revenue from extended support
agreements or maintenance contracts is deferred and recognized over the period
of the contract or as the services are provided.

         If other significant post-delivery vendor obligations exist or if a
product is subject to customer acceptance, revenue is deferred until no
significant obligations remain or acceptance has occurred. To date, we have not
shipped any software and


                                     - 14 -
<PAGE>   15

related products subject to acceptance terms or subject to other post-delivery
vendor obligations. Additionally, we have not recognized revenue on any
contracts with customers that may include customer cancellation or termination
clauses that indicate a demonstration period or otherwise incomplete
transaction.

         We also offer our customers consulting, training and other services
separate from the software sale. The services are not integral to the
functionality of the software and are available from other vendors. This
services revenue is recognized as the services are performed.

         Software and related products revenue is comprised of revenue from the
sale of software and other products such as shipments of incomplete box units or
documentation materials. Services revenue is comprised of training royalties and
tuition fees, consulting fees and customer support fees.

         Cost of software and related products revenue primarily consists of our
costs for production, packaging, fulfillment and shipment of our product
offerings. Additionally, royalties paid to third parties for inclusion of their
software products in our product offerings are included in these costs. Cost of
services revenue is primarily comprised of salaries and related costs of support
services employees.

         Included in sales and marketing expenses are the following:
advertising, channel promotions, marketing development funds, promotional
activities, public relations, trade show and personnel-related expenses such as
salaries, benefits, commissions, recruiting fees, travel and entertainment
expenses.

         Research and development expenses consist of payroll and related costs
for software engineers, technical writers, quality assurance and research and
development management personnel and the costs of materials used by these
employees in the development of new or enhanced product offerings.

         General and administrative expenses are composed of professional fees,
salaries and related costs for accounting, administrative, finance, human
resources, and legal personnel.

RESULTS OF OPERATIONS

THREE-MONTH PERIODS ENDED JANUARY 31, 2001 AND 2000

Revenue

         Our revenue was $1.1 million for the three-month period ended January
31, 2001 and $553,000 for the three-month period ended January 31, 2000. During
the three-month period ended January 31, 2001, approximately 43 percent of our
revenue was generated from the sale of software and related products. During the
three-month period ended January 31, 2000, approximately 71 percent of our
revenue was generated from the sale of software and related products. Revenue
from international customers was approximately 32 percent of total revenue for
the three-month period ended January 31, 2001, and 29 percent of total revenue
for the three-month period ended January 31, 2000.


                                     - 15 -
<PAGE>   16

         Software and Related Products. Our software and related products
revenue was $452,000 for the three-month period ended January 31, 2001 and
$395,000 for the three-month period ended January 31, 2000, an increase of
$57,000, or 15%. The increase during the three-month period ended January 31,
2001 was primarily attributed to the release of Caldera Volution, our second
eBusiness product that was released late in January 2001. During the three-month
period ended January 31, 2001 revenue from corporate and OEM customers exceeded
our revenue from retail sales as Caldera has continued to focus on corporate and
OEM accounts while competition and pricing pressures have continued to weaken
retail sales.

         Services. Our services revenue was $601,000 for the three-month period
ended January 31, 2001 and $158,000 for the three-month period ended January 31,
2000, an increase of $443,000, or 280%. The increase in services revenue over
the same three-month period of the prior year was primarily attributed to our
increased education and training-related offerings as well as from promotional
fees received from our Linux training program.

Cost of Revenue

         Cost of Software and Related Products Revenue. Our cost of software and
related products revenue was $227,000 for the three-month period ended January
31, 2001 and $295,000 for the three-month period ended January 31, 2000, a
decrease of $68,000, or 23%. Cost of software and related products revenue as a
percentage of software and related products revenue was 50% for the three-month
period ended January 31, 2001 and 75% for the three-month period ended January
31, 2000. The decrease as a percentage of software and related products revenue
is attributed to the release of Caldera Volution and our focus on corporate and
OEM accounts, which have a higher gross margin percentage. In addition, we
recorded an inventory reserve of approximately $43,000 during the three-month
period ended January 31, 2000.

         Cost of Services Revenue. Our cost of services revenue was $950,000 for
the three-month period ended January 31, 2001 and $255,000 for the three-month
period ended January 31, 2000, an increase of $695,000, or 272%. The increase in
cost of services revenue was due in part to additional employees and other
internal costs to increase our support offerings as well as for costs related to
our Linux training program. Cost of services revenue as a percentage of services
revenue was 158% for the three-month period ended January 31, 2001 and 161% for
the three-month period ended January 31, 2000.

Operating Expenses

         Sales and Marketing. Our sales and marketing expenses were $5.5 million
for the three-month period ended January 31, 2001 and $2.0 million for the
three-month period ended January 31, 2000, an increase of $3.5 million, or 172%.
The increase was primarily attributed to additional marketing expenses in
anticipation of our acquisition of the server software and professional services
groups of SCO, marketing expenses related to the launch and release of Caldera
Volution, attendance at two major Linux tradeshows and increased personnel
costs.


                                     - 16 -
<PAGE>   17

         General and Administrative. Our general and administrative expenses
were $1.7 million for the three-month period ended January 31, 2001 and $1.1
million for the three-month period ended January 31, 2000, an increase of
$669,000, or 62%. The increase in expenses was mainly attributed to increased
salaries and benefits for additional general and administrative employees and
increased facilities and related costs consistent with our growth in personnel
and overall business.

         Research and Development. Our research and development expenses were
$1.9 million for the three-month period ended January 31, 2001 and $1.0 million
for the three-month period ended January 31, 2000, an increase of $904,000, or
94%. The increase in research and development expenses was primarily attributed
to payroll costs and related benefits for additional employees for software
development and quality assurance as our research and development staff
increased from 36 as of January 31, 2000 to 62 as of January 31, 2001.

         Cost-sharing Arrangement with The Santa Cruz Operation. During August
2000 and after entering into the reorganization agreement with SCO to acquire
the server software and professional services groups, the Company and SCO agreed
that Caldera would reimburse SCO for certain employee payroll and related costs.
Caldera agreed to reimburse SCO for costs related to certain employees that SCO
had identified for termination in a company-wide layoff in September 2000.
Caldera viewed these employees as a critical part of the success of the new
combined company and SCO agreed to retain the employees if Caldera would
reimburse SCO for a portion of their payroll and related costs. At the time
Caldera committed to reimburse SCO for these employee costs, the ultimate amount
was not determinable and both parties agreed that the amount would be determined
prior to the completion of the acquisition. During December 2000, both parties
agreed, pursuant to an amendment to the reorganization agreement, that Caldera
would reimburse SCO $1.5 million relating to services rendered from August
though December 2000. Accordingly, as of October 31, 2000, Caldera accrued
$898,026. The Company recorded the remaining $601,974 during the three-month
period ended January 31, 2001. Caldera made the $1.5 million payment to SCO on
January 26, 2001.

         Non-cash Compensation. In connection with stock options granted to
employees, we amortized approximately $334,000 of deferred compensation during
the three-month period ended January 31, 2001. During the three-month period
ended January 31, 2000, we amortized $1.5 million of deferred compensation.

Equity in Loss of Affiliate

         Through January 5, 2001, Caldera accounted for its investment in Ebiz
Enterprises, Inc. ("Ebiz") using the equity method of accounting. Under the
equity method, Caldera recognized its portion of the net income or net loss of
Ebiz in its consolidated statement of operations. For the three months ended
January 31, 2001, Caldera recognized approximately $431,000 in its statement of
operations that represented its portion of Ebiz's net loss for the period from
October 31, 2000 through January 5, 2001. Additionally, because Ebiz had a
stockholders' deficit at the time of Caldera's investment, Caldera was
amortizing, on a straight-line basis, the difference


                                     - 17 -
<PAGE>   18
between its portion of the Ebiz net stockholders' deficit and Caldera's basis in
the Ebiz common stock. For the three months ended January 31, 2001, Caldera
recognized approximately $217,000 of amortization in connection with its
investment in Ebiz.

         During the three-month period ended January 31, 2001, Caldera's
ownership interest in 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, Caldera discontinued the use of the equity method of accounting for its
investment in Ebiz. Subsequent to January 5, 2001, Caldera has accounted for its
investment as an available-for-sale security in accordance with SFAS 115. Under
SFAS 115, Caldera carries its investment at fair market value using quoted
trading prices. As of January 31, 2001 had an unrecognized loss of approximately
$2.3 million as a component of other comprehensive loss.

Other Income (Expense), net

         Other income (expense), net consists primarily of interest income
received on cash and equivalents. Interest income was $1.0 million during the
three-month period ended January 31, 2001, and $113,000 during the three-month
period ended January 31, 2000. The increase is related to higher cash balances
during the period ended January 31, 2001.

Provision for Income Taxes

         For the three-month periods ended January 31, 2001 and 2000, our
subsidiary, Caldera GmbH, incurred income tax expense of $27,000 and $13,000,
respectively.

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 January 31, 2001, we had cash and cash equivalents and
available-for-sale securities of $78.7 million and working capital of $82.1
million. Decreases in cash and cash equivalents and working capital from October
31, 2000 were the result of cash used in operations of approximately $7.2
million, a cost-sharing payment to SCO of $1.5 million and an advance of $7.0
million to SCO as part of the consideration for the server and professional
services groups.

         Our net cash used in operations during the three-month period ended
January 31, 2001 was $7.2 million. Cash used in operations was primarily
attributed to the net loss of $9.8 million. The net loss was partially offset by
non-cash charges for the amortization of deferred compensation, depreciation and
amortization and equity in loss of affiliate.

         Our investing activities have historically consisted of purchases of
property and equipment and certain intangible assets, investing in strategic
partners and the purchase of available-for-sale securities. During the
three-month period ended January 31, 2001, cash used in investing activities was
$1.4 million. The primary uses of cash during the


                                     - 18 -
<PAGE>   19
three-month period ended January 31, 2001 were for a $7.0 million payment made
to SCO as part of the consideration for the Reorganization as well as costs paid
for capital expenditures and acquisition costs partially offset by the net
proceeds received from the purchase and sale of available-for-sale securities.
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.

         In conjunction with the signing of the reorganization agreement,
Caldera advanced the $7 million cash portion of the purchase price for the
server and professional services groups in the form of a promissory note that
matures on either of the closing of the combination or the date of termination
of the reorganization agreement. The loan was made on January 26, 2001. If the
combination closes, the loan will be treated by Caldera and SCO as part of the
cash portion of the consideration to SCO for the server and professional
services groups. The loan is secured by a first priority security interest in
all of SCO's assets and is convertible at Caldera's option into SCO common stock
at a price per share of $2.44, the closing price of SCO's common stock on
January 26, 2001.

         Our financing activities provided approximately $250,000 during the
three-month period ended January 31, 2001 as a result of the exercise of vested
stock options.

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

         Caldera's accounts receivable balance decreased from $1.5 million as of
October 31, 2000 to $840,000 as of January 31, 2001, a decrease of $705,000. The
decrease in accounts receivable relates to collections of customer balances as
well as an increase in the Company's reserve for sales returns. The allowance
for doubtful accounts decreased from $312,000 as of October 31, 2000 to $225,000
as of January 31, 2001, a decrease of $87,000. As a percentage of total accounts
receivable, the allowance increased slightly from 17 percent as of October 31,
2000 to 21 percent as of January 31, 2001, as Caldera increased its general
provision for uncollectable accounts as a result of concerns related to certain
past due accounts.

         Management believes that its current cash and cash equivalents and
available-for-sale securities 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, respond to unanticipated requirements or to fund the acquired
operations of the server software and professional services groups of SCO if the
acquisition is completed. Management cannot assure you that additional funding
will be available in amounts or on terms acceptable to Caldera. 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 pressures would be
significantly limited.


                                     - 19 -
<PAGE>   20
RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", or SFAS 133. SFAS 133 establishes new
accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. This statement, as amended, became effective for the Company
beginning November 1, 2000. The adoption of this statement did not have a
material impact on our results of operations, financial position or liquidity.

         In December 1999, the Securities and Exchange Commission ("SEC") staff
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements". This pronouncement summarizes certain of the SEC staff's
views in applying generally accepted accounting principles to selected revenue
recognition issues. The Company adopted SAB 101 during the quarter ended January
31, 2001. The adoption of SAB 101 did not have a material impact on our results
of operations, financial position or liquidity.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Caldera's products and services are primarily developed in the United
States and marketed in North America, and to a lesser extent in Europe and
Asia/Pacific regions. As a result, financial results could be affected by
changes in foreign currency exchange rates or weak economic conditions in
foreign markets. Because all of the Caldera's revenue is currently denominated
in U.S. dollars, a strengthening of the dollar could make its Linux products
less competitive in foreign markets.

FOREIGN CURRENCY RISK

         Caldera's German subsidiary, Caldera Deutschland, GmbH, performs
research and development activities. To date, foreign currency fluctuations have
had little effect on Caldera's business because only its German subsidiary's
contracts, payables and receivables are denominated in a foreign currency. As of
January 31, 2001, the assets of Caldera Deutschland were approximately $953,000.
All other transactions of Caldera's business are denominated in the U.S. dollar.
As time passes and as management sees fit, more transactions in Europe and Asia
may be denominated in local currencies. As Caldera expands operations in Europe
and Asia, management will continue to evaluate its foreign currency exposures
and risks and develop appropriate hedging or other strategies to manage those
risks. Management has not revised its current business practices to conform to
Europe's conversion to the euro. Caldera has not modified any of its products to
address Europe's conversion to the euro. Additionally, Caldera has not engaged
in any foreign currency hedging activities.

         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


                                     - 20 -
<PAGE>   21
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. Caldera
has not yet determined 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.

         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 effected 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 will invest in a broad range
of short-term fixed income securities with varying maturities. As of January 31,
2001, available-for-sale securities included money market instruments,
tax-exempt municipal funds, notes, and bonds, US government security backed
instruments and our investment in Ebiz. Caldera does not borrow money for
short-term investment purposes.

INVESTMENT RISK

         Caldera has invested in equity instruments of privately held and public
companies 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 as 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., which is included in the caption available-for-sale securities in the
condensed consolidated balance sheet as of January 31, 2001. 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. To date, no such
impairment losses have been recorded.

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


                                     - 21 -
<PAGE>   22

         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 and hired a significant number of new employees,
including key members of our management team. In January 2000, we released our
server product, eServer. In January 2001, we released our management product,
Volution. Our historical sales have been primarily from our OpenLinux products,
including OpenLinux 2.3 (renamed eDesktop because of its focus on the desktop
environment), which were historically developed for first-time Linux users who
predominantly have experience using Windows desktop environments. 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:

      - broaden awareness of the Caldera Systems brand;

      - maintain our current, and develop new, strategic relationships with
      technology partners and solutions providers;

      - attract, integrate and retain qualified management personnel;

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

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

      - respond effectively to competitive pressures; and

      - generate revenues 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 HAVE NOT BEEN PROFITABLE AND WE EXPECT OUR LOSSES TO CONTINUE

         We have never been profitable and do not expect to achieve
profitability until at least fiscal year 2002. If our revenue declines or grows
at a slower rate than we anticipate, or if our spending levels exceed our
expectations or cannot be adjusted to reflect slower revenue growth, we may not
generate sufficient revenue to achieve or sustain profitability or generate
positive cash flow. For the three months ended January 31, 2001, we incurred a
net loss of approximately $9.8 million. As of January 31, 2001, we had incurred
total net losses of approximately $66.3 million since the inception of our
business in 1994. We expect to continue to incur net losses because we
anticipate incurring significant expenses in connection with developing our
products, hiring and training employees, expanding our market reach and building
awareness of our brand. We forecast our future expense levels based on our
operating plans and our estimates of future revenue. We may find it necessary to
accelerate expenditures relating to product development and support and our
sales and marketing efforts beyond our current


                                     - 22 -
<PAGE>   23

expectations or otherwise increase our financial commitment to creating and
maintaining brand awareness among potential customers.

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 and we expect
them to fluctuate significantly in the future due to a variety of factors that
could affect our revenue or our expenses in any particular quarter.
Historically, we have experienced substantial fluctuations in our software and
related products revenue from period to period relating to the introduction of
new products and new versions of our existing products. For example, revenue
from software and related products for the quarter ended April 30, 1999 was
approximately $482,000 and increased to approximately $1.0 million during the
quarter ended July 31, 1999. Software and related products revenue decreased to
approximately $775,000 during the quarter ended October 31, 1999, further
decreased to approximately $395,000 during the quarter ended January 31, 2000
and then increased to approximately $1.1 million for the quarter ending April
30, 2000. Software and related products revenue then decreased to approximately
$631,000 during the quarter ended July 31, 2000. Software and related products
revenue increased to approximately $845,000 for the quarter ended October 31,
2000 and most recently has decreased to approximately $452,000 during the
quarter ended January 31, 2001. These quarterly revenue fluctuations were
primarily due to the fluctuation of sales of our OpenLinux products, and these
fluctuations in revenue can be expected to continue as a result of fluctuating
sales of all of our products, including our new product offerings.

         Upon our announcement of an expected release date for a new product or
upgrade, we often experience a significant decrease in sales of our existing
products. Additionally, we often experience the strongest sales for a new
product during the first 30 days after its introduction as we fill advance
orders from our distribution channel partners. Fluctuations in our quarterly
operating results 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:

      - the interest level of electronic solutions providers in recommending our
      Linux business solutions to end users;

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

      - 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;

      - the magnitude and timing of marketing initiatives;


                                     - 23 -
<PAGE>   24

      - changing business attitudes toward Linux as a viable operating system
      alternative to other competing systems;

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

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

      - our ability to manage our anticipated growth and expansion.

         As a result of the factors listed above and elsewhere, it is possible
that in some future periods our results of operations may be below the
expectations of public market analysts and investors. 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 in any quarter 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 through which the majority of
our sales occur. These relationships allow us to offer our products and services
to a much larger customer base than we would otherwise be able to reach through
our direct sales and marketing efforts. Some electronic solutions providers also
purchase eBusiness solutions through our distributors, and we anticipate they
will continue to do so as we expand our product offerings for eBusiness. Because
we usually sell indirectly through distributors to electronic solutions
providers, we cannot control the relationships through which they purchase our
products. In turn we do not control the presentation of our products by
electronic solutions providers to end-users. Therefore, our distribution channel
could be affected by disruptions in the relationships between our distributors
and electronic solutions providers or between electronic solutions providers and
end users. Also, distributors and electronic solutions providers may choose not
to emphasize use of our products to their customers. Any of these occurrences
could diminish the effectiveness of our distribution channel and lead to
decreased sales. However, to our knowledge, none of our international
distributors engages in discounting or other business practices unique to their
respective geographic regions that materially affects or could materially affect
our results of operations, although they could do so in the future.

         In particular, we are highly dependent on our relationships with our
distribution partners, such as Ingram Micro, Navarre Corporation and Tech Data,
domestically, and MediaGold in Europe, for the distribution of our products.
Sales to all distributors accounted for approximately 12 percent of our total
revenue for the three-month period ended January 31, 2001. We plan to continue
to develop relationships with new distributors to introduce product and service
offerings into new markets, including into foreign countries. If any of these
distribution partners do not provide opportunities for growth or become closed
to us, or if we are unable to create new distribution channels


                                     - 24 -
<PAGE>   25
for new markets, we will be required to seek alternative channels of
distribution for our products and services. We may be unable to do so, in which
case our business would suffer.

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 company's
experience, including the inability to offer warranties and indemnities on
products and services. In addition, by developing products based on proprietary
technology that is not freely downloadable we may run counter to the perception
of Linux as an open source model and 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 products that we open source. 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 these
products will be embraced by the open source community 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.

THE SALES CYCLE FOR OUR PRODUCTS IS LONG AND WE MAY INCUR SUBSTANTIAL
NON-RECOVERABLE EXPENSES; WE DEVOTE SIGNIFICANT RESOURCES TO SALES THAT MAY NOT
OCCUR WHEN ANTICIPATED OR AT ALL

         The length of time between initial contact with a potential customer
and sale of a product, or our sales cycle, outside the retail channel is
typically complex and lengthy, lasting from three to nine months. These direct
sales also represent our largest orders. Therefore, our revenue for a period is
likely to be affected by the timing of larger orders, which makes the related
revenue difficult to predict. Our revenue for a quarter could be reduced if
large orders forecasted for a certain quarter are delayed or are not realized.
The cycle factors that could delay or defer an order, include:

      - time needed for technical evaluations of our software by customers;

      - customer budget restrictions;

      - customer internal review and testing procedures; and

      - engineering work needed to integrate our software with the customer's
      systems.


                                     - 25 -
<PAGE>   26

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

         Our 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
products before our existing products have completed their life cycles, we will
not be able to sustain our level of sales. In addition, to succeed, many
customers must adopt our new products early in the product's life cycle.
Therefore, 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. 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
enhancements had not yet been made by these independent developers. 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.

OUR RELIANCE ON INDEPENDENT THIRD PARTIES WHO DEVELOP MOST OF THE SOFTWARE
INCLUDED IN OUR PRODUCTS COULD RESULT IN DELAYS OR UNRELIABLE PRODUCTS AND
DAMAGE TO OUR REPUTATION.

         Our products consist of many different software components and
applications, most of which are developed by independent third parties over whom
we have limited or no control. While we use rigid engineering standards in
testing the products or applications that we integrate in our products, we
cannot guarantee that we have selected or will select in the future the most
reliable components available in the market or that we will successfully
integrate the many components of our products. In addition, if any of these
third-party products are not reliable or available, we may have to develop them
ourselves, which would significantly increase our development expenses and delay
our time to market. Our customers could be dissatisfied if any of


                                     - 26 -
<PAGE>   27
these products fail to work as designed or if adequate support is not provided,
which could damage our reputation and lead to potential litigation.

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 solutions providers making these technologies available on Linux
and on Linux then becoming a desirable operating system under these
circumstances. We also plan to market our Linux products for use on these
specialized servers and Internet access devices, which we believe will become
widely used for eBusiness. 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:

      - costs of installing and implementing new hardware devices;

      - costs of porting legacy systems into new platforms;

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

      - limited adoption of Linux among businesses generally;

      - previous significant investments in competing systems;

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

      - lack of standards among Linux products and applications; and

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

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

WE COULD BE PREVENTED FROM SELLING OR DEVELOPING OUR PRODUCTS IF THE GNU GENERAL
PUBLIC LICENSE AND SIMILAR LICENSES UNDER WHICH ARE PRODUCTS ARE DEVELOPED AND
LICENSED ARE NOT ENFORCEABLE

         The Linux kernel and certain other components of our products have been
developed and licensed under the GNU General Public License and similar
licenses. These licenses state that any program licensed under them may be
liberally copied, used, modified and distributed freely, so long as all
modifications are also freely made


                                     - 27 -
<PAGE>   28

available and licensed under the same conditions. We know of no instance in
which a party has challenged the validity of these licenses or in which these
licenses have been interpreted in a legal proceeding. To date, all compliance
with these licenses has been voluntary. It is possible that a court would hold
one or more of these licenses to be unenforceable in the event that someone were
to file a claim asserting proprietary rights in a program developed and
distributed under them. Any ruling by a court that these licenses are not
enforceable, or that Linux operating systems, or significant portions of them,
may not be liberally copied, modified or distributed freely, would have the
effect of preventing us from selling or developing our products, unless we are
able to negotiate a license to use the software or replace the affected
portions. These licenses could be expensive, which could impair our ability to
price our products competitively.

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
intend to 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


                                     - 28 -
<PAGE>   29
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.

WE MAY FACE POTENTIAL LIABILITY FOR MATERIAL PUBLISHED OR MADE AVAILABLE ON OUR
WEB SITE AND OTHER SITES LINKED TO IT

         We may be sued for defamation, civil rights infringement, negligence,
copyright or trademark infringement, personal injury, product liability or other
legal claims relating to information that is published or made available on our
Web site and the other sites linked to it. These types of claims have been
brought, sometimes successfully, against providers of online services in the
past. We could also be sued for the content that is accessible from our web site
and through links to other Internet sites or through content and materials that
may be posted by members in chat rooms or on bulletin boards. Our insurance does
not specifically provide for coverage of these types of claims and therefore may
not adequately protect us against these types of claims. In addition, we could
incur significant costs in investigating and defending such claims, even if we
ultimately are not liable. If any of these events occur, our revenue and the
value of your investment could be materially adversely affected.

WE MUST ACHIEVE RAPID MARKET PENETRATION OF OUR PRODUCTS IN ORDER TO COMPETE
SUCCESSFULLY

         Because the Linux and eBusiness markets are new and emerging, companies
that are early in providing products and solutions for these markets will have
an advantage in building awareness and consumer loyalty. Therefore, in order for
us to successfully market our products on a wide scale, we must rapidly achieve
market penetration. For example, if we are unable to demonstrate the viability
of our products through rapid growth:

      - software developers will be less likely to develop applications for our
      products;

      - we will be unable to achieve economies of scale;

      - we will be less able to negotiate favorable terms with distributors and
      other partners; and

      - customers will be less likely to devote resources to purchasing and
      implementing our products if they are not seen as an industry standard.

         We may lack the economic and managerial resources necessary to promote
this growth. Also, the fact that we rely almost entirely on the success of a few
principal products affects our ability to penetrate diversified markets. In
addition, while we believe our process of self-hosting results in superior
products, it requires time and resources that may delay new product releases and
upgrades. These delays could affect our ability to take advantage of market
opportunities on a timely basis.

OUR BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO SUCCEED

         We believe that broad recognition and a favorable audience perception
of the Caldera Systems brand will be essential to our success. If our brand does
not achieve


                                     - 29 -
<PAGE>   30

broad recognition as the leading provider of Linux solutions for eBusiness, our
success will be limited. We intend to build brand recognition through
advertising our products and services and by marketing www.calderasystems.com as
a premier online resource for eBusiness solutions. During the three months ended
January 31, 2001, we spent approximately $907,000 for advertising. We expect to
significantly increase our advertising expenses in future periods as we build
the Caldera Systems brand and awareness of our products and services. We may
lack the resources necessary to accomplish these initiatives. Even if the
resources are available, we cannot be certain that our brand enhancement
strategy will deliver the brand recognition and favorable audience perception
that we seek. If our strategy is unsuccessful, these expenses may never be
recovered and we may be unable to increase future revenues. Even if we achieve
greater recognition of our brand, competitors with greater resources or a more
recognizable brand could reduce our market share of the emerging Linux market,
as well as the broader market for the provision of eBusiness solutions.

OUR STRATEGY TO PROVIDE SOLUTIONS FOR eBUSINESS DEPENDS UPON OUR ABILITY TO
SUCCESSFULLY INTRODUCE PRODUCTS TAILORED FOR eBUSINESS

         To date, practically all of our sales revenue has come from retail
sales of OpenLinux, which is designed to assist the first-time Linux user who
may be familiar with a Windows, desktop environment. However, our business model
is targeted toward using Linux solutions to facilitate eBusiness. In order for
our strategy of providing Linux solutions for eBusiness to be successful, we
must provide products that meet the needs of solutions providers and their
eBusiness customers. In January 2000, we released our server product, OpenLinux
eServer. In January 2001, we released Volution, our second eBusiness product.
These new products, our primary eBusiness products, may not be adopted by
solutions providers and their customers for any number of reasons, including
lack of customer awareness of our company and our products, malfunction of the
products and failure to meet needs of eBusiness. If our eBusiness products are
not successful, we will fail to execute our strategy and our sales may not grow.

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, in the future,
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.


                                     - 30 -
<PAGE>   31

THE NETWORK SOLUTIONS AND OPERATING SYSTEMS INDUSTRIES ARE INTENSELY COMPETITIVE
AND WE MAY BE UNABLE TO COMPETE EFFECTIVELY WITH PROVIDERS OF SOLUTIONS FOR
MODULAR COMPUTING, PROVIDERS OF LINUX OPERATING SYSTEMS AND OTHER MORE
ESTABLISHED OPERATING SYSTEMS

         We face direct competition in the area of software for specialized
servers. VA Linux and Wind River provide similar solutions embedded into their
hardware offerings. In addition, Sun Microsystems has announced plans to open
source its Solaris Unix operating system in an attempt to attract more
developers to that platform. Many of these competitors are large,
well-established companies that have significantly greater financial resources,
more extensive marketing and distribution capabilities, larger development
staffs and more widely recognized brands and products than we have.

         We also compete with other providers of Linux operating systems,
particularly, Corel, MacMillan, Red Hat, SuSE and TurboLinux. In addition, IBM
and Sun Microsystems have announced plans to invest significant resources into
the development of Linux. Many of these competitors, such as Red Hat, have more
established customer bases and stronger brand names than we do. Also, 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
eBusiness 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. In particular, distributors of UNIX
operating systems could leverage their existing service organizations, due to
the fact that Linux and UNIX operating systems share many common features.

         We compete with providers of other, more established operating systems.
AT&T, Compaq, Hewlett-Packard, IBM, Microsoft, Novell, Olivetti, Sun
Microsystems, and Unisys are each providers of competing operating systems,
which, in most cases, are more established among business users. We also compete
for services revenue with a number of companies that provide technical support
and other professional services to users of Linux operating systems, including
some original equipment manufacturers with which we have agreements. Many of
these companies have larger and more experienced service organizations than we
have, and have the benefit of being earlier market entrants.

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 12 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


                                     - 31 -
<PAGE>   32
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 ACQUISITION OF SCO'S SERVER SOFTWARE AND PROFESSIONAL SERVICES GROUPS MAY
NOT CLOSE, IN WHICH CASE SIGNIFICANT RESOURCES WILL HAVE BEEN WASTED

         The combination is subject to various closing conditions, including
approval by SCO shareholders and approval by our stockholders. If the
combination does not close, our business may suffer from the significant time
and resources expended in negotiating and preparing to execute the combination.
The lost time and resources would detrimentally affect our competitive position,
perhaps materially.

OUR SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY MANAGE GROWTH

         We have recently experienced a period of rapid growth. In order to
execute our business plan, we must continue to grow. We had 28 employees when we
began operations as a separate legal entity in September 1998. As of January 31,
2001, the number had increased to 192. We expect that the number of our
employees will continue to increase for the foreseeable future.

         Our planned growth entails risk. If we do not expand our operations in
an efficient manner, our expenses could grow disproportionately to revenue or
our revenue could decline or grow more slowly than expected, either of which
could negatively affect the value of your investment. Our current and
anticipated future growth, combined with the requirements we will face as a
public company, will place a significant strain on our management, systems and
resources. Our key personnel have limited experience managing this type of
growth. We also need to improve our financial and managerial controls and
reporting systems and procedures and to continue to expand and maintain close
coordination among our technical, accounting, finance and sales and marketing
organizations. If we do not succeed in these efforts, it could reduce our
revenue and the value of your investment.

OUR CURRENT AND POTENTIAL CUSTOMERS MAY FIND IT DIFFICULT TO HIRE AND TRAIN
QUALIFIED EMPLOYEES TO HANDLE INSTALLATION AND IMPLEMENTATION OF OUR PRODUCTS,
WHICH COULD NEGATIVELY AFFECT SALES OF OUR PRODUCTS TO NEW CUSTOMERS AND LEAD TO
DISSATISFACTION AMONG CURRENT CUSTOMERS

         There are limited numbers of individuals that are trained and qualified
to manage Linux systems, including OpenLinux and our other products. End users
and our distribution partners may lack the resources to hire or train such
qualified personnel


                                     - 32 -
<PAGE>   33
to install and implement our products, which could lead to dissatisfaction with
our product among end users and deter potential end users from purchasing our
product.

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 web site. 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:

      - inadequate network infrastructure;

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

      - consumer concerns for internet privacy and security;

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

      - interruptions in internet commerce caused by unauthorized users;

      - changes in government regulation relating to the internet; and

      - internet taxation.

         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. web sites have experienced interruptions as a result of delays or
outages throughout the internet infrastructure. If these interruptions continue,
internet usage may decline.

LOSS OF ANY OF OUR KEY MANAGEMENT PERSONNEL COULD NEGATIVELY IMPACT OUR BUSINESS

         The loss or departure of any of our officers or key employees could
harm our ability to implement our business plan and could lower our revenue. 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, but may elect to do so in future periods.

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. We will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. These sales 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. The shares of our common stock currently outstanding will become
eligible for sale without registration pursuant to Rule 144 under the Securities
Act, subject to certain conditions of Rule 144. Certain holders of


                                     - 33 -
<PAGE>   34
our common stock also have certain demand and piggyback registration rights
enabling them to register their shares under the Securities Act for sale.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

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

    (a) Exhibits

        None

    (b) Caldera Systems, Inc. did not file any reports on Form 8-K during the
        three months ended January 31, 2001:

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:  March 16, 2001                    CALDERA SYSTEMS, INC.

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


                                      -34-