<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997

                                       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: 000-23260

                       GLOBAL VILLAGE COMMUNICATION, INC.

             (Exact name of registrant as specified in its charter)

         DELAWARE                                       94-3095680
   (State or other jurisdiction of          (I.R.S. employer identification No.)
    incorporation or organization)

                              1144 EAST ARQUES AVE.
                               SUNNYVALE, CA 94086
          (Address of principal executive offices, including zip code)

                                 (408) 523-1000
              (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 such filing
requirements for the past 90 days. Yes [X] No [ ]

The number of shares of Common Stock outstanding as of December 31, 1997 was
17,014,237.

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


<PAGE>   2
                       GLOBAL VILLAGE COMMUNICATION, INC.

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

        a) Condensed Consolidated Balance Sheets as of December 31, 1997 
           and March 31, 1997 ..............................................   3
                                                                            
        b) Condensed Consolidated Statements of Operations
           for the three and nine months ended December 31, 1997 and 1996 ...  4

        c) Condensed Consolidated Statements of Cash Flows
           for the nine months ended December 31, 1997 and 1996 .............  5

        d) Notes to Condensed Consolidated Financial Statements .............  6

Item 2. Management's Discussion and Analysis of Financial Condition 
               and Results of Operations ....................................  9

PART II. OTHER INFORMATION

Item 1. Legal Proceedings .................................................   19

Item 2. Changes in Securities .............................................   19

Item 3. Defaults Upon Senior Securities ...................................   20

Item 4. Other Information .................................................   20

Item 5. Exhibits and Reports on Form 8-K ..................................   20

SIGNATURES ................................................................   20
</TABLE>



                                       2
<PAGE>   3
                          PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                       GLOBAL VILLAGE COMMUNICATION, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                           December 31, 1997     March 31, 1997
                                              (unaudited)           (audited)
                                           -----------------     ---------------
<S>                                        <C>                   <C>    
ASSETS
Current assets:
  Cash and cash equivalents                    $ 5,623              $ 9,687
  Accounts receivable, net                       9,402                4,324
  Inventories, net                               2,882                2,071
  Income tax receivable                             --                7,665
  Other current assets                             488                  343
                                               -------              -------
    Total current assets                       $18,395              $24,090

Property and equipment, net                      4,599                6,929
Investment in AirMedia, Inc.                        --                4,043
Other assets                                        54                  138
                                               -------              -------
    Total assets                               $23,048              $35,200
                                               =======              =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                             $11,753              $15,971
  Accrued and other liabilities                  6,107                7,638
  Line of credit borrowings                         --                4,241
                                               -------              -------
    Total current liabilities                  $17,860              $27,850

Stockholders' equity                             5,188                7,350
                                               -------              -------
    Total liabilities and stockholders' 
      equity                                   $23,048              $35,200
                                               =======              =======
</TABLE>



     See accompanying Notes to Condensed Consolidated Financial Statements



                                       3
<PAGE>   4
                       GLOBAL VILLAGE COMMUNICATION, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                 Three months ended December 31,      Nine months ended December 31,
                                                                    1997               1996              1997               1996
                                                                 ---------           ----------         --------          --------
<S>                                                               <C>                <C>                <C>               <C>     
Net revenue                                                       $ 16,185           $ 10,466           $ 49,192          $ 71,207
Cost of revenue                                                     11,358             25,451             33,712            68,939
                                                                  --------           --------           --------          --------
      Gross profit (deficit)                                         4,827            (14,985)            15,480             2,268
                                                                  --------           --------           --------          --------
Operating expenses:
      Research and development                                       2,099              3,132              7,243             9,575
      Marketing and sales                                            3,634             11,653             10,637            25,234
      General and administrative                                       812              2,564              3,263             5,930
      Restructuring costs                                               --              1,297                 --             1,297
      Loss from investment in Global Center, Inc.                       --                 --                 --             2,191
                                                                  --------           --------           --------          --------
      Total operating expenses                                       6,545             18,646             21,143            44,227
                                                                  --------           --------           --------          --------
      Loss from operations                                          (1,718)           (33,631)            (5,663)          (41,959)
Loss from sale of investment in AirMedia,                               --                 --             (2,074)               --
Gain from sale of investment in Global Center, Inc.                     --                 --              3,691                --
Other income, net                                                      111                 80                412               633
                                                                  --------           --------           --------          --------
      Loss before income taxes                                      (1,607)           (33,551)            (3,634)          (41,326)
      Income tax benefit                                                --             (2,605)                --            (5,401)
                                                                  --------           --------           --------          --------
      Loss from continuing operations                               (1,607)           (30,946)            (3,634)          (35,925)
                                                                  ========           ========           ========          ========
Discontinued operations:
      Loss from discontinued operations                                 --                 --                 --             (1,822)
      Gain (loss) on disposal of discontinued operation, 
          net of taxes                                               1,331             (9,800)             1,331             (7,667)
                                                                  --------           --------           --------           --------
Net Loss                                                          $   (276)          $(40,746)          $ (2,303)          $(45,414)
                                                                  ========           ========           ========           ========
Basic earnings per share:
      Loss from continuing operations                             $  (0.09)          $  (1.85)          $  (0.21)          $  (2.14)
      Income (loss) from discontinued                                 0.07              (0.59)              0.07              (0.57)
                                                                  --------           --------           --------           --------
Net loss per share                                                $  (0.02)          $  (2.44)          $  (0.14)          $  (2.71)
                                                                  ========           ========           ========           ========
Basic weighted average shares outstanding                           16,981             16,725             16,965             16,771
                                                                  ========           ========           ========           ========
Diluted earnings per share:
      Loss from continuing operations                             $  (0.09)             (1.85)             (0.21)             (2.14)
      Income (loss) from discontinued operation                       0.07              (0.59)              0.07              (0.57)
                                                                  ========           ========           ========           ========
Net loss per share                                                $  (0.02)             (2.44)             (0.14)             (2.71)
                                                                  ========           ========           ========           ========
Diluted weighted average shares outstanding                         16,981             16,725             16,965             16,771
                                                                  ========           ========           ========           ========
</TABLE>


     See accompanying notes to Condensed Consolidated Financial Statements


                                       4
<PAGE>   5
                       GLOBAL VILLAGE COMMUNICATION, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                Nine months Ended December 31,
                                                                      1997           1996
                                                                   ----------      ---------
<S>                                                                <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                        $(2,303)       $(45,414)
    Adjustments to reconcile net loss to net cash used in
      operating activities:
        Depreciation and amortization                                 2,512           2,592
        Deferred income taxes                                            --           3,234
        (Gain) loss on GlobalCenter, Inc. investment                 (3,691)          2,191
        Loss from sale of investment in AirMedia, Inc.                2,074              --
        Non cash restructuring costs                                     --           1,176
        Loss on disposal of property and equipment                      121              --
    Changes in assets and liabilities:
        Accounts receivable, net                                     (5,078)          7,017
        Inventories                                                    (811)         (1,995)
        Income taxes receivable                                       7,665          (8,344)
        Other current assets                                           (145)          1,246
        Accounts payable                                             (4,218)         13,052
        Accrued and other liabilities                                (1,476)            248
        Income taxes payable                                             --            (335)
                                                                    -------         -------
    Net cash used in operating activities of: 
        Continuing operations                                        (5,350)        (25,332)
        Discontinued operations                                         (55)          4,814
                                                                    -------         -------
            Net cash used in operating activities                    (5,405)        (20,518)
                                                                    -------         -------
 CASH FLOWS FROM INVESTING ACTIVITIES:
        Proceeds from sale of investment in GlobalCenter, Inc.        3,691              --
        Proceeds from sale of investment in AirMedia, Inc.            1,969              --
        Purchases of property and equipment                            (303)         (1,598)
        Other assets                                                     84              (1)
        Purchases of short-term investments                              --         (23,217)
        Proceeds from sales and maturities of short-term                 --          45,035
        investments
        Investment in AirMedia, Inc.                                     --          (4,043)
        Investment in GlobalCenter, Inc.                                 --          (1,548)
                                                                    -------         -------
                 Net cash provided by investing activities            5,441          14,628
                                                                    -------         -------
Cash flows from financing activities:
    Repayments under line of credit                                  (4,241)          8,000
    Payments on repurchases of Common Stock                              --          (1,161)
    Proceeds from issuance of Common Stock, net                         141            785
                                                                    -------         -------
            Net cash used in financing activities                    (4,100)          7,624
                                                                    -------         -------
    Effect of exchange rate changes on cash and cash                     --            (247)
      equivalents
                                                                    -------         -------
Net increase (decrease) in cash and cash equivalents                 (4,064)          1,487
Cash and cash equivalents at beginning of period                      9,687          15,900
                                                                    =======         =======
Cash and cash equivalents at end of period                          $ 5,623         $17,387
                                                                    =======         =======
SUPPLEMENTAL DISCLOSURES:
    Cash paid during the period for:
         Interest                                                   $   172               8
         Income taxes                                               $    --         $    44
    Non-cash investing and financing activities:
         Non-cash net assets contributed to GlobalCenter, Inc.      $    --         $   643
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.



                                       5
<PAGE>   6
                       GLOBAL VILLAGE COMMUNICATION, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

The interim condensed consolidated financial statements as of December 31, 1997
and for the three and nine months ended December 31, 1997 and 1996, include all
adjustments (consisting of only normal recurring adjustments) that in the
opinion of management are necessary to present fairly the financial information
set forth therein, in accordance with generally accepted accounting principles.
Certain reclassifications have been made for consistent presentation. These
financial statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1997.

The Company's interim results are subject to fluctuation. As a result, the
Company believes the results of operations for the interim periods are not
necessarily indicative of the results to be expected for any future period.


2.  NET INCOME (LOSS) PER SHARE

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share", which modified the computation and presentation of
earnings per share (EPS) in a manner comparable to international guidelines. The
new standard requires the Company to present both "basic" and "diluted" EPS data
on the face of the income statement for all periods presented. This replaced
"primary" and "fully diluted" EPS, as prescribed by Accounting Principles Board
(APB) No. 15, "Earnings Per Share".

Basic EPS excludes dilution from common stock equivalents and is computed by
dividing income (loss) available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects
potential dilution from common stock equivalents and is calculated by dividing
net income (loss) by the weighted average number of common and common equivalent
shares outstanding during the period. No common stock equivalents are considered
in periods such as those presented in which a net loss is reported because such
common stock equivalents are antidilutive.

All prior periods have been restated, as required, to reflect the adoption of
this standard. The following table sets forth the results of that restatement:





                                       6
<PAGE>   7



RESTATED COMPUTATION OF NET INCOME (LOSS) PER SHARE 
(In thousands, except per share data) 
(unaudited)
<TABLE>
<CAPTION>
                                                  June 30,  September 30,  December 31,
THREE MONTHS ENDED:                                 1997        1997          1997
                                                  --------  -------------  ------------     
<S>                                               <C>       <C>            <C>      
Net loss from continuing operations                $(1,975)   $   (52)      $ (1,607)
                                                   -------    -------       --------
Discontinued Operations:
  Loss from discontinuing operations                    --         --             --
  Gain (loss) on disposal of discontinued
    operations, net of taxes                            --         --       $  1,331
                                                   -------    -------       --------
Net income (loss)                                  $(1,975)   $   (52)      $   (276)
                                                   =======    =======       ========
Shares used in the computation of net income
  (loss) per share:                                 
  Basic                                             16,934     16,979         16,981
  Dilutive effect of stock options                      --         --             --
                                                   -------    -------       --------
  Diluted                                           16,934     16,979         16,981
                                                   =======    =======       ========
Basic earnings per share:
  Loss from continuing operations                  $ (0.12)   $ (0.00)         (0.09)
  Income (loss) from discontinued operations            --         --           0.07
                                                   -------    -------       --------
Net income (loss)                                  $ (0.12)   $ (0.00)      $  (0.02)
                                                   =======    =======       ========
Diluted earnings per share:
     Loss from continuing operations               $ (0.12)   $ (0.00)      $  (0.09)
     Income (loss) from discontinued operations         --         --           0.07
                                                   -------    -------       --------
Net income (loss)                                  $ (0.12)     (0.00)         (0.02)
                                                   =======    =======       ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31:                                 1995         1996        1997
                                                   -------      -------     --------
<S>                                                <C>         <C>          <C>      
Net income (loss) from continuing operations       $(6,206)    $ 12,148     $(35,852)
                                                   -------     --------     --------
Discontinued Operations:
  Loss from discontinuing operations               $(1,466)    $ (3,312)    $ (1,822)
  Gain (loss) on disposal of discontinued
    operations, net of taxes                            --           --       (2,207)
                                                   -------     --------     --------
     Net income (loss)                             $(7,672)    $  8,836     $(39,881)
                                                   =======     ========     ========
Shares used in the computation of net income
  (loss) per share:
     Basic                                          14,633       16,529       16,844
     Dilutive effect of stock options                   --        1,332           --
                                                   -------     --------     --------
     Diluted                                        14,633       17,861       16,844
                                                   =======     ========     ========
Basic earnings per share:
    Income (loss) from continuing operations       $ (0.42)    $   0.73     $  (2.13)
    Income (loss) from discontinued operations       (0.10)       (0.20)       (0.24)
Net income (loss)                                  $ (0.52)    $   0.53     $  (2.37)
                                                   =======     ========     ========
Diluted earnings per share:
     Income (loss) from continuing operations      $ (0.42)        0.68        (2.13)
     Income (loss) from discontinued operations      (0.10)       (0.19)       (0.24)
                                                   -------     --------     --------
Net income (loss)                                  $ (0.52)        0.49        (2.37)
                                                   =======     ========     ========
</TABLE>





                                       7
<PAGE>   8

3.  INVENTORIES

Inventories are stated at standard cost, which approximates the lower of cost
(first-in, first-out method) or market. Inventories consisted of (in thousands):

<TABLE>
<CAPTION>
                                   December 31, 1997              March 31, 1997
                                   -----------------              --------------
<S>                                <C>                            <C>    
Purchased parts                         $    --                      $   199
Work in process                              --                          369
Finished goods                            2,882                        1,503
                                       --------                      -------
                                       $  2,882                      $ 2,071
                                       ========                      =======
</TABLE>


4. LINE OF CREDIT

The Company has a line of credit agreement with a bank which expires in April
1999. Borrowings under the agreement bear interest at the bank's prime rate plus
2.5%. The total borrowings are limited to the lesser of $5,000,000 or 60% of
eligible receivables, as defined, and are collateralized by all of the Company's
assets. The agreement contains various financial covenants and restrictions,
including restrictions on the Company's ability to pay dividends or to effect
mergers or acquisitions. As of December 31, 1997, there were no borrowings under
this line of credit and the Company was in compliance with all covenants and
restrictions.


5. SALE OF INVESTMENTS

In September 1997, the Company agreed to sell its equity stake in GlobalCenter,
Inc. ("GlobalCenter") to an existing shareholder of GlobalCenter for
approximately $3.7 million in cash. As a result, the Company recorded a gain of
$3.7 million.

In July 1997, the Company sold substantially all of its investment in AirMedia,
Inc. ("AirMedia") to an existing shareholder of AirMedia for approximately $2.0
million in cash. As a result, the Company recorded a loss of $2.1 million on the
sale of the investment in AirMedia in the second quarter of fiscal 1998.


6. DISCONTINUED OPERATIONS

In the second quarter of fiscal 1997, the Company adopted a formal plan to
discontinue its enterprise network server operation based in the United Kingdom
(formerly, the Company's ISDN Division). The disposition of the division has
been accounted for as a discontinued operation in accordance with Accounting
Principles Board (APB) No. 30 and prior period financial statements have been
restated to reflect the discontinuation of the enterprise network server
operation.

During fiscal 1997 the Company reserved approximately $2.0 million for
contingent liabilities associated with the disposition of the operation. During
the quarter ended December 31, 1997, the Company determined that some of these
contingencies had been resolved and as a result released $1.3 million of the
reserve.




                                       8
<PAGE>   9

7. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
This Statement establishes standards for reporting and displaying comprehensive
income and its components in the financial statements. It does not, however,
require a specific format for the statement, but requires the Company to display
an amount representing total comprehensive income for the period in that
financial statement. The Company is in the process of determining its preferred
format. This Statement is effective for the Company's fiscal year ending March
31, 1999.

Also, in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The Statement establishes standards for
the manner in which public business enterprises report information about
operating segments in annual financial statements and requires those enterprises
to report selected information about operating segments in interim financial
reports issued to stockholders. This Statement is effective for financial
statements for years beginning after December 15, 1997, and the Company has not
yet determined the impact of adopting the additional reporting requirements.


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

The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited consolidated financial statements and notes thereto for the
fiscal year ended March 31, 1997. This report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those anticipated in forward-looking
statements as a result of the risk factors and other cautionary disclosures set
forth below and elsewhere in this report.

OVERVIEW

Global Village Communication, Inc. ("Global Village" or the "Company") is a
leader in the design, development and marketing of easy-to-use integrated
communications products for users of personal computers with Windows, Macintosh,
OS/2 and DOS operating systems. The Company's products enable mobile, home
office and networked computer users in small-to medium-sized organizations to
access the Internet and other information services, connect to a remote
organization's internal network, send and receive faxes and e-mail from their
computers and communicate efficiently with colleagues, customers and suppliers.

Global Village produces modems, telecommunications servers, and proprietary
communications software for both individual users and network users.

The Company's individual-use system products include TelePort modems for
Macintosh and Windows desktop computer users, PC Card modems (including
PowerPort) for Macintosh PowerBook and Windows portable computer users and
internal modems provided to Apple Computer Inc. ("Apple") on an Original
Equipment Manufacturer ("OEM") basis. The Company's products for Macintosh and
Windows based personal computers are characterized by a highly integrated,
proprietary software and hardware design which makes computer communications
easy for the average user.



                                       9
<PAGE>   10

The Company's line of network products includes FaxWorks Server NT and FaxWorks
Pro LAN, software for providing fax services to office workgroups utilizing
Windows NT, Windows 3.1, and OS/2 operating systems. The OneWorld series of
telecommunication server systems for Macintosh provides shared fax, dial-out
modem, and remote network access capabilities to small workgroups.

The Company's core software technologies, FaxWorks communications software for
Windows, OS/2 and DOS operating systems, GlobalFax communications software for
Macintosh systems, and embedded software underlying Global Village's server
systems, provide a consistent, user-friendly interface across individual and
network product lines. For Windows, the Company also provides integrated
communication software to OEMs.

The Company has in the past experienced and in the future may experience
significant fluctuations in annual and quarterly operating results that may be
caused by many factors including, among others, the introduction or enhancement
of products by Apple, IBM-compatible personal computer (PC) manufacturers, the
Company or its competitors; customer acceptance of, and transition to, 56Kbps
products, including the Company's 56Kbps product line; uncertainty surrounding
the introduction and customer acceptance of the proposed ITU 56K standard; the
sales rates of Apple Macintosh personal computers and PCs; the size and timing
of individual orders; market price reductions; product returns; market
acceptance of new products and technology; risks related to delays in product
development; introductions of new technologies or standards; seasonality of
revenues; customer order deferrals, accelerations, and payments of accounts
receivable in anticipation of new products; changes in the Company's operating
expenses; the Company's ability to establish distribution channels for new
products; performance of the Company's distributors and suppliers; mix of
products sold; quality control of the Company's products; and general economic
conditions. As a result, the Company believes that period-to-period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as an indication of future performance.

Moreover, the industry in which the Company competes generally is subject to
short product life cycles. In this regard, the Company traditionally has
experienced a reduction in the average selling prices of its products as the
time from product introduction elapses. The Company routinely institutes
significant price reductions and/or rebates with respect to its products and
expects that competitive pressures will continue to necessitate price
reductions. In particular, the Company expects the trend of reduced average
selling prices for its individual use products to continue during fiscal 1998.
There can be no assurance that the trend of reduced average selling prices will
not accelerate in the future.

In May 1996, Apple announced a repair program for its Powerbook 5300 and 190
laptop computers which was effectively a recall of defective Apple Macintosh
computers. As a result of the repair program, the Company experienced
significantly reduced sales of its products. Sales of such products have not
returned to the levels achieved prior to Apple's announcement and the Company
does not believe that it will achieve such sales levels in the foreseeable
future. The Company therefore expects that revenues and/or gross margins from
its products for the Apple Macintosh family could decrease in future periods,
which would have a material adverse effect on the Company's business and results
of operations unless the Company can generate sufficient revenues and/or gross
margins from other products to compensate for any shortfall in revenues from its
Apple platform products. In the near-term, the Company expects to see continued
weakness in the Macintosh market. The Company believes its ability to return to
growth depends in part on the success of new product developments. There can be
no assurance that these efforts will be successful. Furthermore, the success of
these efforts may not be known for a number of quarters. Any price reduction or
decrease in sales volume could have a material adverse effect on the Company's
results of operations.




                                       10
<PAGE>   11

Because the Company generally ships products within a short period after receipt
of an order, the Company typically does not have a material backlog of unfilled
orders, and revenues in any quarter are substantially dependent on orders booked
in that quarter. The Company's expense levels are based in part on its
expectations as to future revenues. Therefore, the Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall of demand in relation to the
Company's expectations or any material delay of customer orders would have an
almost immediate adverse impact on the Company's results of operations and
liquidity. Fluctuations in operating results may also result in volatility in
the price of the Company's Common Stock.

To date, a substantial majority of the Company's revenue has been attributable
to sales of its TelePort and PowerPort product lines for the Apple Macintosh
family of computers, and the Company expects that sales of these products will
account for a majority of its revenue for the foreseeable future. The Company's
future financial performance will depend in part on the successful development,
introduction and customer acceptance of new and enhanced versions of its
products, the Company's ability to successfully reduce or control various
operating expenses as well as the Company's ability to build distribution
channels and generate increased sales of products for Windows based computers,
or other products. Though the Company continually seeks to further enhance its
product offerings and to develop new products, there can be no assurance that
these development efforts will result in enhanced or new products being
introduced on a timely basis, or that any such product enhancements or new
products will achieve market acceptance. In addition, the announcement by the
Company of new products with the potential to replace current products may cause
customers to defer purchasing the Company's current products which could have a
material adverse effect on the Company's results of operations. As a result of
changing technology and market factors, the Company is subject to the risk that
its inventories may rapidly become obsolete or that the Company may carry
quantities of certain products that exceed current or projected demand. While
the Company has written down inventory that it considers to be excess or
obsolete, there can be no assurance that the Company's write downs will be
adequate, and a material increase in such write downs and returns over
historical rates would have a material adverse effect on the Company's results
of operations and working capital.

The Company's manufacturing operations consist primarily of turnkey managers,
program managers, quality assurance, packaging and shipping personnel. For
substantially all of its hardware assemblies, the Company purchases fully
manufactured and tested units from CMC, a "turnkey" manufacturing subcontractor.
Components and manufacturing services from the Company's suppliers are obtained
on an as-needed basis. To date, the Company's turnkey manufacturer has provided
credit to the Company as part of its relationship to manufacture the Company's
products. While the Company believes its relationship with its turnkey
manufacturer is good, if such party were to change its policies regarding
providing credit to the Company, the Company could be required to expend
additional funds for the production of its products, which could materially
adversely affect the Company's financial condition. While the Company believes
that there are a number of alternative contract manufacturers that could produce
the Company's products, it could take a significant period of time and result in
significant additional expense to qualify alternative subcontractors and
commence manufacturing in the event of a reduction or interruption of
production. Therefore, the Company is highly dependent on its continued
relationship with its primary "turnkey" manufacturing subcontractor and any
change or reduction or interruption or termination of this relationship could
have a material adverse effect on the operating results of the Company.

The Company is dependent on sole or limited source suppliers for certain key
components and services used in its products particularly the modem chip sets
designed and manufactured by Rockwell International and Texas Instruments. The
Company has no guaranteed supply arrangements with its sole or limited source
suppliers. The Company at times in the past has experienced delays in its
ability 




                                       11
<PAGE>   12

to manufacture sufficient product to meet demand due to the inability of
certain suppliers to meet the Company's volume and schedule requirements. There
can be no assurance that any sole or limited source supplier will meet the
Company's volume and scheduling requirements in the future. Any failure of such
a supplier to meet such requirements could have a material adverse effect on the
Company's business and results of operations and working capital.

The following table sets forth, for the periods indicated, the percentage
relationship to net revenue of certain items in the Company's consolidated
statements of operations.

<TABLE>
<CAPTION>
                                               Three Months Ended            Nine months Ended
                                                  December 31,                  December 31,
                                               1997          1996           1997        1996
                                             ----------- -----------     ----------- -----------
                                             (unaudited) (unaudited)     (unaudited) (unaudited)
<S>                                          <C>         <C>             <C>         <C> 
Net revenue                                    100%          100%          100%          100%
Cost of revenue                                 70           243            69            97
                                              ----          ----          ----          ----
Gross profit                                    30          (143)           31             3
                                              ----          ----          ----          ----
Operating expenses:
     Research and development                   13            30            15            13
     Marketing and sales                        22           111            21            36
     General and administrative                  5            25             7             8
     Loss from investment in
     GlobalCenter, Inc.                         --            --            --             3
     Restructuring costs                        --            12            --             2
                                              ----          ----          ----          ----
     Total operating expenses                   40           178            43            62
                                              ----          ----          ----          ----
Loss from operations                           (10)         (321)          (12)          (59)
Loss on sale of investment in
     AirMedia, Inc.                             --            --            (4)           --
Gain on sale of investment in 
     GlobalCenter, Inc.                         --            --             8            --
Other income, net                               --             1             1             1
                                              ----          ----          ----          ----
Loss before income taxes                       (10)         (320)           (7)          (58)
Income tax benefit                              --            25            --            (8)
                                              ----          ----          ----          ----
Loss from continuing operations                (10)         (295)           (7)          (50)
Discontinued operations:
     Loss from discontinued operations          --            --            --            (3)
     Gain (loss) on disposal of
       discontinued operations,
       net of taxes                              8           (94)            3            (11)
                                              ----          ----          ----          ----
Net income (loss)                               (2)%        (389)%          (4)%         (64)%
                                              ====          ====          ====          ====
</TABLE>


NET REVENUE

Net revenue includes revenue from gross shipments, licenses and royalties, less
reserves for returns and allowances. Net revenue increased 55% to $16.2 million
for the third quarter of fiscal 1998 from $10.5 million for the third quarter of
fiscal 1997. For the nine months ended December 31, 1997, net revenue decreased
31% to $49.2 million compared to $71.2 million during the same period ended
December 31, 1996. The increase in net revenues for the third quarter of fiscal
1998 as compared to the third quarter of fiscal 1997 is primarily attributable
to a decrease in actual and anticipated product returns for certain products
from resellers and distributors. The decrease in net revenue for the nine months
ended December 31, 1997 as compared to the same period of the prior year was
primarily attributable to decreased shipments of Teleport and Powerport
products. Shipments of these products were adversely affected by continued
weakness in the market for Apple Computer products and the technology transition
to 56Kbps modems. Lower unit shipments of Apple's computers reduced demand for
the Company's products. In addition, during the nine month period ended December
31, 1997, the Company's OEM revenue from Apple was lower than in the comparable
period of fiscal 1997.




                                       12
<PAGE>   13

International revenue increased slightly to $2.2 million or 14% of net revenues
for the third quarter of fiscal 1998 compared to $1.9 million or 18% for the
third quarter of fiscal 1997. For the nine months ended December 31, 1997,
international revenue totaled $6.3 million or 13% of total net revenue compared
to $10.2 million or 14% of total net revenue for the same period in the prior
year. The decrease in international revenue for the nine month period ended
December 31, 1997 is due to the continued weakness in the market for Apple
Computer products and the slow transition to 56Kbps modems.

Revenue reserves and allowances are established for estimated future returns due
to stock balancing and discontinued and nonsaleable products based on the
Company's past experience and internal forecasts. There can be no assurance that
the Company's historical experience regarding returns and allowances will
continue or that its projections will prove accurate. If the Company experiences
returns in excess of its reserves, the Company's results of operations could be
materially, adversely effected.

COST AND EXPENSES

Cost of revenue primarily consists of cost of materials, contract manufacturing
costs, manufacturing overhead expenses, royalty payments and warranty expenses.
The Company's gross profit as a percentage of net revenue increased to 30% for
the third quarter of fiscal 1998, from (143%) for the third quarter of fiscal
1997. Gross profit as a percentage of net revenue increased to 31% for the nine
month period ended December 31, 1997, from 3% for the nine month period ended
December 31, 1996. The increase in gross profit margins in the third quarter of
fiscal 1998 and in the nine months ended December 31, 1997, as compared to the
same periods in fiscal 1997, were primarily due to significant inventory
reserves for returns of slow moving products and inventory write-downs recorded
in the third quarter of fiscal 1997. Gross profit margins are likely to
fluctuate as a result of the sales mix between lower and higher margin products,
the nature and amount of licensing and royalty income, and changes in
distribution channels, as well as changes in component and production costs,
price reductions and reserve requirements. In particular, the Company expects
that over the next several quarters, pricing pressures will continue, the mix of
products will change, and new products will be introduced by the Company's
competitors, all of which may have an adverse effect on the gross margins from
the Company's products

Research and development expenses decreased 32% to $2.1 million or 13% of net
revenues for the third quarter of fiscal 1998 from $3.1 million or 30% of net
revenues in the comparable quarter of fiscal 1997. For the nine months ended
December 31, 1997, research and development expenses declined 25% to $7.2
million or 15% of net revenues from $9.6 million or 13% in the comparable fiscal
1997 period. The decline in research and development expenses in the three and
nine month periods of fiscal 1998 are primarily related to a reduction in
personnel costs and increased control of discretionary expenditures.

Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as incurred
until technological feasibility has been established, in compliance with SFAS
No. 86, "Accounting for the Costs of Software to be Sold, Leased, or Otherwise
Marketed." Historically, software development has been substantially completed
concurrently with the establishment of technological feasibility, and,
accordingly, no such costs have been capitalized to date.

Marketing and sales expenses decreased 69% to $3.6 million or 22% of net
revenues in the third quarter of fiscal 1998 compared to $11.7 million or 111%
of net revenues during the same period of fiscal 1997. For the nine months ended
December 31, 1997, marketing and sales expenses decreased 




                                       13
<PAGE>   14

58% to $10.6 million or 21% of net revenues from $25.2 million or 36% of net
revenues for the same period in the prior year. The decline in marketing and
sales expenses in the three and nine month periods of fiscal 1998 is primarily
due to reduced advertising and promotion expenses and to a reduction in
personnel costs.

General and administrative expenses decreased 69% to $.8 million or 5% of net
revenues in the third quarter of fiscal 1998 from $2.6 million or 7% of net
revenues in fiscal 1997. For the nine months ended December 31, 1997, general
and administrative expenses decreased 44% to $3.3 million or 7% of net revenues
from $5.9 million or 8% of net revenues for the same period in the prior year.
The decline in general and administrative expenses in the three and nine month
periods ended December 31, 1997 is primarily due to a reduction in legal, bad
debt reserve, telecommunications and other discretionary expenditures.

In July 1997, the Company sold substantially all of its investment in AirMedia,
Inc. for approximately $2.0 million in cash and recorded a loss of $2.1 million
on the sale of the investment in AirMedia in the second quarter of fiscal 1998.

In December 1996, the Company announced a restructuring plan to streamline its
operations, reduce its workforce and enable the Company to improve its operating
results. The Company recorded a restructuring charge of $1.3 million related
primarily to severance costs, fixed assets write-offs and lease abandonments.

In April 1996, Global Village announced that it had incorporated its Internet
Services Division as a standalone business called GlobalCenter, Inc. At the same
time, the Company announced that UUNET Technologies, Inc. had acquired an equity
interest in GlobalCenter, Inc. At that time, the Company no longer had the
ability to exercise significant control over GlobalCenter. Accordingly, the
Company no longer consolidated the results of GlobalCenter and began to account
for its investment using the equity method of accounting. As a result of the
refinancing and operating performance of GlobalCenter during the first quarter
of fiscal 1997, the Company recorded an investment loss of $2.2 million and
reduced the book value of its investment to zero. In December 1996, GlobalCenter
entered into a definitive merger agreement whereby GlobalCenter and
Phoenix-based Primenet Services for the Internet, Inc. merged, reducing the
Company's percentage ownership below 10%. Accordingly, in the third quarter of
fiscal 1997, the Company began accounting for its investment in GlobalCenter
using the cost method of accounting. In September 1997, the Company agreed to
sell its equity stake in GlobalCenter for approximately $3.7 million in cash and
recorded a gain of $3.7 million in the second quarter of fiscal 1998.

Net other income was $.1 million for the third quarter of fiscal 1998 unchanged
from $.1 million for the third quarter of fiscal 1997. For the nine months ended
December 31, 1997, net other income was $.4 million compared to $.6 million for
the same period in the prior year.

During fiscal 1997, the Company adopted a formal plan to discontinue its
enterprise network server operation and accounted for its disposition as a
discontinued operation in accordance with Accounting Principles Board (APB)
Opinion No. 30. During fiscal 1997 the Company reserved approximately $2.0
million for contingent liabilities associated with the disposition of the
operation. During the quarter ended December 31, 1997, the Company determined
that some of these contingencies had been resolved and as a result released $1.3
million of the reserve.




                                       14
<PAGE>   15

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents totaled $5.6 million at December 31,
1997, representing 24% of total assets. The Company's working capital was
approximately $.5 million at December 31, 1997 as compared to a deficit of $3.8
million at March 31, 1997, an improvement of $4.3 million. The increase in
working capital was primarily due to the sale of the Company's investments in
AirMedia, Inc. and GlobalCenter, Inc. (See Note 5).

At December 31, 1997, the Company's principal source of liquidity was $5.6
million in cash and an unused line of credit which allows the Company to borrow
up to the lower of $5.0 million or 60% of eligible accounts receivable (see Note
4).

The Company does not expect fiscal 1998 capital expenditures to exceed
historical levels and may be reduced. During the past several quarters, the
Company has experienced significant negative cash flows and could do so in
future quarters. In addition, the Company anticipates that sales to Apple in the
fourth quarter of fiscal 1998 will be substantially reduced, which will have a
material adverse affect on the Company's financial condition and results of
operations. However, the Company currently believes that its existing cash and
funds available under its credit facility will enable the Company to meet its
short-term needs. The preceding are forward-looking statements. The Company's
funding requirements may change at any time due to various factors, including
the results and timing of the Company's launch of new products and services, the
Company's relationship with its turnkey manufacturer, the Company's operating
results, the Company's ability to reduce or control various operating expenses
through cost containment measures or operating reductions, the success of the
Company's marketing efforts, technological advances and competition. In the
longer term, the Company may be required to raise additional capital, which
could require the Company to issue additional debt or equity securities which
could be substantially dilutive to the ownership of existing stockholders. There
can be no assurance that any such funding will be available on acceptable terms
or at all. Any shortfall in funding could result in the Company having to
curtail the introduction or development of new products, its entry into new
markets and its other marketing efforts, any of which could have a material
adverse affect on the Company's business, financial condition and results of
operations.

CERTAIN ADDITIONAL FACTORS THAT MAY AFFECT FUTURE PERFORMANCE

In addition to the other information in this Quarterly Report, one should
carefully consider the following factors in evaluating the Company.

PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE

The market for personal computer communications products is characterized by
continual change and improvement in hardware and software technology resulting
in short product life cycles. The Company's success will depend on its ability
to enhance its current products, develop new products on a timely and
cost-effective basis that meet changing customer needs and respond to emerging
industry standards and other technological changes. In particular, the Company
must adapt its products to the evolving technological standards of the various
computer platforms and new technical standards resulting from increases in data
transmission speed and wireless communication, as well as new form factors. For
example, recently an ITU standard for 56K modems has been proposed. Any failure
by the Company to anticipate or respond adequately to changes in technology and
customer preferences, or any significant delay in product development or
introduction, would have a material adverse effect on the Company's results of
operations. Due in part to the factors described above, the Company is subject
to the risk that its inventories may rapidly become obsolete or that the Company
may carry 




                                       15
<PAGE>   16

quantities of certain products that exceed current or projected
demand. While the Company writes-down inventory that it considers to be
excessive or obsolete, the Company has in the past recorded inventory
write-downs in excess of available reserves. There can be no assurance that the
Company's recorded allowances for such write-downs will be adequate in the
future, and material write-downs could have a material adverse effect on the
Company's results of operations. In addition, products as complex as those
offered by the Company may contain undetected errors or defects when first
introduced or as new versions are released. There can be no assurance that
despite testing by the Company and by current and potential customers, errors
will not be found in new products after commencement of commercial shipments
resulting in a delay in market acceptance or a recall of such products.

MARKET ANTICIPATION OF NEW PRODUCTS, NEW TECHNOLOGIES OR STANDARDS, OR LOWER
PRICES

Since the environment in which the Company operates is characterized by rapid
new product and technology introductions and generally falling prices for
existing products, the Company's customers may from time to time postpone
purchases in anticipation of such new product introductions or lower prices. If
such anticipated changes are viewed as significant by the market, such as the
introduction of faster modem technologies, then this may have the effect of
temporarily slowing overall market demand and negatively impacting the Company's
operating results. For example, the 56Kbps modem market has been plagued with
customer confusion and general slow acceptance due to the existence of two
competitive technologies, X2 and K56 Flex. Although the Company has made product
offerings using both protocols, consumers appear to be delaying purchases until
a single standard emerges. Recently, an ITU standard for 56K modems has been
proposed. Confusion surrounding this standard or its adoption could result in
continued delay in consumer's purchases of modems. Consequently, delays in the
market acceptance of 56Kbps technology based modems could have a material effect
on the Company's business, financial condition and results of operation.

DEPENDENCE ON APPLE MACINTOSH FAMILY OF COMPUTERS; ADVERSE EFFECT OF REDUCED
APPLE SALES

A substantial majority of the Company's sales to date have been derived from
products designed for use with the Apple Macintosh family of personal computers,
including the Macintosh desktop series of computers and the PowerBook series of
portable computers. Therefore, the Company is substantially dependent on the
sale of Apple Macintosh computers and the development and sale of new Apple
computers. Due to continued weakness in demand for Apple products, expected
continuing pricing pressures and new product introductions by the Company's
competitors, the Company expects that revenues from its products for the Apple
Macintosh family could remain flat or decrease in future periods, which would
have a material adverse effect on the Company's business and results of
operations unless the Company can generate sufficient revenues from other
products to compensate for any shortfall in revenues from its Apple products.
The market for personal computers is extremely competitive and rapidly changing.
There can be no assurance that personal computers competing with the Apple
Macintosh family of computers will not displace the Macintosh products or reduce
their growth as such personal computers are enhanced in their functionality,
evolve to support technologically superior applications or otherwise become
economically more attractive.

Apple in the past has experienced difficulty in making the transition associated
with the development, manufacturing, marketing, and sale of certain new
computers. In this regard, the Company anticipates that there will be ongoing
transitions within the Apple product line. These transitions will subject the
Company to the risks that (i) potential customers will defer purchases of
current products as a result of, among other things, speculation or premature
announcements about new products, discontinuance of product lines or corporate
restructuring; (ii) the products will not be successfully received in the
marketplace; and (iii) Apple will be unable to adequately meet demand for the
new products. The 




                                       16
<PAGE>   17
inability of Apple to successfully develop, manufacture, market, sell or make
the transition to new products, including, among others, new PowerBook products
and new desktop computers, would have a material adverse effect on the Company's
results of operations. In addition, sales of the Company's products in the past
have been adversely affected by the announcement by Apple of new products with
the potential to replace existing products.

DEPENDENCE ON RELATIONSHIP WITH APPLE

The Company relies on its working relationship with Apple, which has included
and includes collaborative product development, sharing of information, product
sales to Apple and licensing of Apple technology. Apple is not contractually
obligated to continue such collaborative development or information sharing
activities and could discontinue such activities at any time. In addition, Apple
is not contractually obligated to renew its licenses with the Company or
purchase the Company's products. Apple is collaborating with other vendors of
communications products that compete with the Company's products, and Apple may
elect not to renew its licenses with the Company in the future. The Company has,
in the past, experienced interruptions in the sale of its products to Apple, and
there is no guarantee these sales will continue. In particular, the Company
expects that sales to Apple in the fourth quarter of fiscal 1998 will be
substantially reduced which will have a short-term material adverse effect on
the Company's results. The Company believes that this situation may be a
temporary reduction in sales to Apple. The preceding are forward-looking
statements. The Company's strategy of developing products compatible with the
Macintosh family of products is substantially dependent on the Company's ability
to gain pre-release access to, and to develop expertise in, current and future
Macintosh product developments by Apple. There can be no assurance that Apple
will continue to cooperate with the Company, and the inability of the Company to
maintain and further develop its relationship with Apple would have a material
adverse effect on the Company's results of operations. There can be no assurance
that Apple will not initiate product repair/recall programs in the future for
its Macintosh computers, which if it did, would have an adverse impact on the
revenues of the Company.

COMPETITION

The market for the Company's products is intensely competitive and characterized
by rapidly changing technology, evolving industry communication standards and
frequent new product introductions. A number of competitors offer products that
compete with one or more of the Company's products. Other companies in the
personal computer industry, such as modem vendors, remote access server vendors,
communications software vendors, microprocessor and chip set suppliers,
networking equipment suppliers, fax machine manufacturers, personal computer
manufacturers, paging companies and telecommunications companies could seek to
expand their product offerings by designing and selling products using
competitive technology that could render the Company's products obsolete or have
a material adverse effect on sales of the Company's products.

Apple currently offers products that compete directly or indirectly with the
Company's products and can be expected to introduce additional competitive
products in the future. Apple currently bundles modems and communications
software with some of its computers and the Company anticipates that Apple will
continue to bundle such products in the future. In addition, Apple may further
enhance communications functionality within its desktop or portable computers.
Any such additional bundling or enhancement by Apple could have a material
adverse effect on the Company's results of operations.

Many of the Company's competitors have substantially greater financial,
technical, sales, marketing and other resources, as well as greater name
recognition and a larger customer base, than the Company. In addition, the
market for the Company's products is characterized by significant price
competition, and the Company expects that it will face increasing pricing
pressures from its current competitors. 




                                       17
<PAGE>   18
Accordingly, there can be no assurance that the Company will be able to provide
products that compare favorably with the products of the Company's competitors
or that competitive pressures will not require the Company to further reduce its
prices. Any material reduction in the prices of the Company's products would
negatively affect gross profit as a percentage of net revenue and would require
the Company to increase unit sales in order to maintain net revenue.

RELIANCE ON DISTRIBUTORS

A majority of the Company's net revenue is derived from sales to distributors
that are not under the direct control of the Company. These distributors carry
multiple product lines and could reduce their support of the Company's products
in favor of a competitor's products or for any other reason. The loss of any of
the Company's major distributors would have a material adverse effect on the
Company's results of operations. Under certain conditions, the Company offers
stock balancing and price protection programs to its distributors. Therefore,
the Company is exposed to the risk of product returns and price protection
allowances from distributors and direct reseller customers. There can be no
assurance that the Company's recorded allowances for returns will be adequate
and a material increase in returns over historical rates would have a material
adverse effect on the Company's results of operations.

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends to a significant extent on its senior
management and other key employees, including key development personnel. The
loss of the services of any of these individuals or group of individuals could
have a material adverse effect on the Company's results of operations. The
Company believes that its future success will depend in large part on its
abilities to attract and retain additional key employees. Competition for such
personnel in the computer industry is intense, and there can be no assurance
that the Company will be successful in attracting and retaining such personnel.
If the Company were to fail to replace or retain its key employees or attract
additional key employees, the Company's results of operations could be
materially adversely effected. The Company has no employment agreements with any
of its key employees.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company relies primarily on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
its proprietary rights. The Company has no patents or patent applications
pending. The Company seeks to protect its hardware, software, documentation and
other written materials under trade secret and copyright laws, which afford only
limited protection.

The Company seeks to protect its brand names under trademark and unfair
competition laws. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult,
and while the Company is unable to determine the extent to which piracy of its
software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to as great an extent as do the laws of the United
States. There can be no assurances that the Company's means of protecting its
proprietary rights will be adequate or that the Company's competitors will not
independently develop similar technology.

The Company is aware of products in addition to its own that are marketed under
the trademarks "PowerPort," "TelePort," "GlobalFax," "Focal Point" and
"OneWorld." The Company also is aware of 



                                       18
<PAGE>   19

a company that operates under the name Global Villages and provides
computer-related services. There can be no assurance that litigation with
respect to these trademarks will not be instituted by any such parties or by
others. If any such litigation were successful, the Company could be required to
pay damages and cease all use of a particular trademark. There can be no
assurance that any loss of the right to use a trademark would not reduce sales
of the Company's products. In any event, even if the Company were successful in
any such litigation, the legal and other costs associated with such litigation
could be substantial. As is customary in the Company's industry, the Company
from time to time receives communications from third parties asserting that the
Company's products infringe, or may infringe, the proprietary rights of third
parties or seeking indemnification against such infringement. There can be no
assurance that any such claims would not result in protracted and costly
litigation.

VOLATILITY OF STOCK PRICE

The market price of the Company's Common Stock has been volatile and trading
volumes have been relatively low. Factors such as variations in the Company's
revenue, operating results and cash flow and announcements of technological
innovations or price reductions by the Company, its competitors, Apple, PC
manufacturers, or providers of alternative products could cause the market price
of the Company's Common Stock to fluctuate substantially. In addition, the stock
markets have experienced significant price and volume fluctuations that
particularly have affected technology-based companies and resulted in changes in
the market prices of the stocks of many companies that have not been directly
related to the operating performance of those companies. Such broad market
fluctuations may adversely affect the market price of the Company's Common
Stock.

ANTI-TAKEOVER PROVISIONS

The Company's Board of Director's has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of the Company's Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. While the Company has no
present intention to issue shares of Preferred Stock, any such issuance could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. In addition, the
Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which could have the effect of delaying or
preventing a change of control of the Company. Furthermore, certain provision of
the Company's Certificate of Incorporation may have the effect of delaying or
preventing changes in control or management of the Company, which could
adversely affect the market price of the Company's Common Stock.


                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

        Not applicable.


ITEM 2.  CHANGES IN SECURITIES

        Not applicable.




                                       19
<PAGE>   20

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        Not applicable.


ITEM 4. OTHER INFORMATION

        Not applicable.


ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits

             11.1 Computation of Net Income (Loss) Per Share
             27.1 Financial Data Schedule

        (b)  Reports on Form 8-K

        The Company did not file any reports on Form 8-K during the quarter
        ended December 31, 1997.


                                   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.

                                        Global Village Communication, Inc.


Date:    February 17, 1998              /S/ Neil Selvin
                                        ----------------------------------------
                                        President and Chief Executive Officer

Date:    February 17, 1998              /S/Marc E. Linden
                                        ----------------------------------------
                                        Senior Vice President Finance
                                        and Business Development;
                                        Chief Financial Officer





                                       20
<PAGE>   21

                                 EXHIBIT INDEX

Exhibit #           Description
---------           -----------
   11.1             Computation of net income (Loss) Per Share
   27.1             Financial Data Schedule







                                       21