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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 JUNE 30, 1999
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
ONEWORLD SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3095680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1144 EAST ARQUES AVE.
SUNNYVALE, CA 94086
(Address of principal executive offices, including zip code)
(408) 523-1100
(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 July 31, 1999 was
4,465,231.
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ONEWORLD SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements........................................................3
Condensed Consolidated Balance Sheets
as of June 30, 1999 and March 31, 1999.....................................................3
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1999 and 1998..........................................4
Condensed Consolidated Statements of Cash Flows
for the three months ended June 30, 1999 and 1998..........................................5
Notes to Condensed Consolidated Financial Statements...........................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk..............................17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................18
Item 2. Changes in Securities and Use of Proceeds..............................................18
Item 3. Defaults Upon Senior Securities........................................................18
Item 4. Submission of Matters to a Vote of Security Holders....................................18
Item 5. Other Information......................................................................18
Item 6. Exhibits and Reports on Form 8-K.......................................................19
SIGNATURES.........................................................................................20
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ONEWORLD SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, 1999 March 31, 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,045 $ 11,175
Accounts receivable, net 23 79
Inventories, net 135 184
Other current assets 337 254
------------ ------------
Total current assets 8,540 11,692
Property and equipment, net 309 268
Other assets 173 168
------------ ------------
Total assets $ 9,022 $ 12,128
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 744 $ 796
Accrued and other liabilities 1,322 1,796
------------ ------------
Total current liabilities 2,066 2,592
------------ ------------
Stockholders' equity:
Convertible preferred stock, $0.001 par value (involuntary
liquidation value of $8,304,900; 5,000,000 shares
authorized, 3,100,000 shares issued and outstanding 3 3
Common stock, $0.001 par value; 30,000,000 shares authorized,
2,527,489 and 2,524,429 shares issued and outstanding 25 25
Additional paid in capital 53,491 53,488
Accumulated deficit (46,563) (43,980)
------------ ------------
Total stockholders' equity 6,956 9,536
------------ ------------
Total liabilities and stockholders equity $ 9,022 $ 12,128
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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ONEWORLD SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
---------- ----------
<S> <C> <C>
Net revenue $ 150 $ 12,365
Cost of revenue 82 9,549
---------- ----------
Gross profit 68 2,816
---------- ----------
Operating expenses:
Research and development 1,001 2,537
Marketing and sales 1,249 2,781
General and administrative 746 1,111
Restructuring costs - 404
---------- ----------
Total operating expenses 2,996 6,833
---------- ----------
Loss from operations (2,928) (4,017)
---------- ----------
Other income, net:
Gain on sale of modem business 268 6,128
Other income, net 84 12
---------- ----------
Total other income, net 352 6,140
---------- ----------
Income (loss) before income taxes (2,576) 2,123
Income tax benefit (provision) (7) 22
---------- ----------
Income (loss) from continuing operations (2,583) 2,145
---------- ----------
Discontinued operations:
Income from discontinued operations - 90
---------- ----------
Net income (loss) $ (2,583) $ 2,235
========== ==========
Basic per share data:
Income (loss) per share from continuing operations $ (1.02) $ 1.25
Income per share from discontinued operations - 0.05
---------- ----------
Net income (loss) per share $ (1.02) $ 1.30
========== ==========
Diluted per share data:
Income (loss) per share from continuing operations $ (1.02) $ 1.24
Income per share from discontinued operations - 0.05
---------- ----------
Net income (loss) per share $ (1.02) $ 1.29
========== ==========
Shares used in basic per share computations 2,524 1,716
Dilutive effect of stock options - 20
---------- ----------
Shares used in diluted per share computations 2,524 1,736
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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ONEWORLD SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (2,583) $ 2,235
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 54 570
Gain on sale of modem operations (268) (6,128)
Changes in operating assets and liabilities:
Accounts receivable, net 56 (1,145)
Inventories, net 49 218
Other current assets (83) 105
Accounts payable (52) 2,816
Accrued and other liabilities (22) (693)
---------- ----------
Net cash used in operating activities:
Continuing operations (2,849) (2,022)
Discontinued operations (184) (184)
---------- ----------
Net cash used by operating activities (3,033) (2,206)
---------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of modem business - 4,000
Purchases of property and equipment (94) (22)
Other assets (6) (2)
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Net cash provided (used) by investing activities (100) 3,976
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FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 3 8
---------- ----------
Net cash provided by financing activities 3 8
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Net increase (decrease) in cash and cash equivalents (3,130) 1,778
Cash and cash equivalents at beginning of period 11,175 3,098
---------- ----------
Cash and cash equivalents at end of period $ 8,045 $ 4,876
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ - $ 198
Income taxes $ 7 $ 19
Non-cash investing and financing activities:
Sale of modem operations in exchange for note receivable from Boca Research, Inc. $ - $ 5,855
Warrants issued to Boca Research, Inc. $ - $ 140
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
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ONEWORLD SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
OneWorld Systems, Inc. ("OneWorld Systems" or the "Company") (founded in
1989 and incorporated in Delaware as Global Village Communication, Inc.)
develops and manufactures products that enhance and simplify wide-area
data communications for the small and medium sized office market. The
Company's OneWorld Network Communications Servers are designed to be
versatile, easy-to-use, cost-effective and expandable solutions that
combine Internet access and routing, remote access, modem pooling and
fax capabilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The interim condensed consolidated financial
statements as of June 30, 1999 and for the three months ended June 30,
1999 and 1998, 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 Form 10-K for the fiscal year ended March 31, 1999.
NET INCOME (LOSS) PER SHARE. Basic earnings per share ("EPS") excludes
dilution and is computed by dividing net income available to common
stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS includes dilution and net income per share
is computed using the weighted average number of common and dilutive
common equivalent shares outstanding during the period. For the three
months ended June 30, 1999 "in-the-money" options of approximately
35,000 and 3,100,000 shares of convertible preferred stock were not
included in the calculation of diluted EPS as they were considered
antidilutive. For the three months ended June 30, 1998 "in-the-money"
dilutive options of approximately 20,000 were included in the
calculation of diluted EPS. In both periods, shares issuable under a
warrant to Boca Research, Inc. (see note 5) were not included in the
calculation of EPS because such warrant was not "in-the-money."
INVENTORIES. Inventories are primarily comprised of finished goods and
are stated at the lower of cost or market. Costs are calculated using
standard cost, which approximates the lower of actual cost (first-in,
first-out method) or market.
3. RESTRUCTURING COSTS
As of June 30, 1999, the Company's total accrued restructuring costs
balance was approximately $106,000 and is primarily comprised of the
remaining lease liabilities on two of its facilities.
On March 31, 1998 the Company announced a fundamental shift in business
strategy to refocus its efforts on its new line of communication servers
for small and medium size offices and a change of its name to OneWorld
Systems, Inc. During the first quarter of fiscal 1999, the Company
recorded a restructuring charge of approximately $404,000. As of June
30, 1999 the accrual balance associated with the March 1998
restructuring was approximately $67,000 and relates primarily to the
remaining lease payments of the Plano, Texas facility.
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. As of June 30, 1999 the accrual
balance associated with the December 1996 restructuring was
approximately $39,000 and relates primarily to the remaining lease
payments on the Marietta, Georgia facility.
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4. 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.
5. SALE OF MODEM OPERATIONS
On June 18, 1998 the Company completed the sale of its modem operations
to Boca Research, Inc. ("Boca"). Included in the sale were substantially
all of the Company's assets related to the Company's single user modem
and software product offerings. Additionally, the Company issued to Boca
a five year Warrant to purchase up to 42,500 shares of the Company's
Common Stock at approximately $10.00 per share. In consideration for
these assets, Boca assumed certain of the Company's liabilities related
to the modem operations, paid the Company $4.0 million in cash, and
delivered a non-interest bearing promissory note for $6.0 million
payable in two equal installments on September 30 and December 31, 1998,
which was recorded at $5.855 million. The difference between the
recorded value and the face value of the note was recognized as interest
income over the life of the note. The loan was fully paid by the end of
the fiscal year ended March 31, 1999.
During the quarter ended June 30, 1998, the Company recorded a gain on
the sale of the modem business of $6.128 million and during the quarter
ended March 31, 1999 recorded an additional gain of $47,000 representing
the release of reserves determined to be fully resolved. During the
quarter ended June 30, 1999, the Company recorded an additional gain on
the sale of the modem business of $268,000 representing the release of
the remaining reserves for contingencies which expired on June 18, 1999.
The cumulative gain on of the sale of the modem business as of June 30,
1999 was a net gain of $6.443 million.
The assets purchased by Boca included products which represented the
overwhelming majority of the Company's revenues and gross profits in
prior years. These products did not contribute to the Company's reported
net revenue or gross profit after June 18, 1998.
6. SUBSEQUENT EVENTS
On June 22, 1999 the Company's stockholders approved the proposed
amendment to the Company's Certificate of Incorporation to authorize the
Board of Directors to adopt a reverse stock split with respect to the
Company's Common Stock. On June 23, 1999 the Board of Directors approved
a one-for-ten reverse split ratio effective July 6, 1999. The effect of
the reverse split has been accounted for retroactively throughout these
financial statements.
On July 6, 1999, in connection with the one-for-ten reverse split, 50%
of the Series A Convertible Preferred Stock (or 1,550,000 shares) was
automatically converted into Common Stock at a conversion ratio of
one-for-one.
On July 7, 1999, the closing price of the Company's Common Stock, as
quoted on the Over The Counter Bulletin Board (the "OTCBB") exceeded a
specific price, resulting in the automatic conversion of an additional
12.5% of the originally outstanding Series A Convertible Preferred Stock
(or 387,500 shares) into Common Stock at a conversion ratio of
one-for-one.
As of July 7, 1999 the number of shares issued and outstanding was:
<TABLE>
<S> <C>
Series A Convertible Preferred Stock, $0.001 par value
(involuntary liquidation preference $3,114,338) 1,162,500
Common Stock, $0.001 par value 4,465,231
</TABLE>
7
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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, 1999. 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
OneWorld Systems, Inc. (the "Company", "we", or "us") was founded in June 1989
and incorporated in Delaware as Global Village Communication, Inc. We develop
and manufacture products that enhance and simplify wide area data communications
for the small and medium sized office market. Our OneWorld Network
Communications Servers are designed to be versatile, easy-to-use, cost-effective
and expandable solutions that combine Internet access and routing, remote
access, on-line service access and fax capabilities.
Since the sale of our single-user modem operations in June 1998, we are focused
entirely on our new family of communication server products targeted to the
small and medium sized office market. These server products combine Internet
access and routing, remote access, fax and shared modem capabilities in a
single, easy-to-use product. These products, known as the OneWorld family of
Network Communications Servers, were announced on June 8, 1998, and began
shipping in September 1998. Our primary source of revenue is now from these
products. Revenue from this product line is dependent upon the commercial
acceptance of the products, which in turn depends on continued development and
technical enhancement of the products, sales and marketing efforts, technical
reviews by independent parties, introductions of new technologies, performance
of our valued added resellers, distributors and suppliers, and announcements by
competitors, among other factors. There can be no assurance we will be
successful in our ongoing development efforts or able to introduce technical
enhancements and/or new features and functionality in a timely manner. Failure
to do so could result in lower customer acceptance of our products and result in
our products falling behind competitors' product capabilities, which would have
a material adverse effect on sales of our products. Many of our competitors have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base than
we do. To sell our new communications server products will require us to
significantly expand our value added reseller distribution channel, which is
different from that of our former single-user modem product business. There can
be no assurance that we will be successful in the continuing development and
maintenance of an effective distribution channel for our new products. There can
be no assurance that the marketplace will accept our communications server
products. If the sales of our new products are below expectations, our business,
financial condition and results of operations will be materially adversely
affected.
With the reliance on revenues from our new communications server products and
our projected expense levels, we do not anticipate profitability in the
short-term. In addition, our industry is continually faced with the threat of
pricing pressure, which could lead to reductions in the average sales prices for
our products and could have a materially adverse affect on gross margins. There
is no assurance that we will ever achieve profitability.
Though we continually seek to further enhance our product offerings and to
develop new products, there can be no assurance that these development efforts
will result in enhanced or timely new product introductions. Furthermore, there
is no certainty that any enhancements or new products will achieve market
acceptance. With the announcement of new or enhanced products that could
potentially replace current products, customers may defer purchasing currently
available products, which could have a materially adverse affect on our
business, financial condition and results of operations. Although we write off
inventory that is considered excess or obsolete, there can be no assurance that
the recorded allowances for such write-offs will be adequate. A material
increase in such write-offs and returns over our expectations could have a
material adverse effect on our business, financial condition and results of
operations.
On June 22, 1999, our stockholders authorized the Board of Directors to amend
our Certificate of Incorporation in order to effect a reverse split with respect
to our Common Stock. On June 23, 1999 the Board of Directors approved a
one-for-ten reverse split with respect to our Common Stock effective July 6,
1999. Subsequent to the one-for-ten reverse split on July 6, 1999, 1,550,000
shares of our Series A Convertible Preferred Stock was automatically converted
into Common Stock at a one-for-one conversion ratio.
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On July 7, 1999, the closing price of our Common Stock, as quoted on the Over
The Counter Bulletin Board (the "OTCBB") exceeded a specific price, resulting in
the automatic conversion of an additional 387,500 shares of our outstanding
Series A Convertible Preferred Stock into Common Stock at a conversion ratio of
one-for-one.
NET REVENUE
On June 18, 1998, we sold our single-user modem operations to Boca Research,
Inc. The modem operations accounted for substantially all of our revenue during
the prior fiscal year. Consequently, the comparisons below should not be relied
upon as predictors of future performance.
Net revenues include revenues from gross shipments, licenses and royalties, less
returns and allowances.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Percentage
(dollars in thousands) 1999 1998 Decrease
--------- --------- ---------
<S> <C> <C> <C>
Total net revenue $ 150 $ 12,365 -99%
</TABLE>
- --------------------------------------------------------------------------------
The decrease in net revenue for the first quarter of fiscal 2000 as compared to
the same period in fiscal 1999 was primarily attributable to the sale of our
modem operations in June 1998. We sold no modem business products after the
close of the transaction with Boca Research on June 18, 1998.
Since we began shipping our new OneWorld Network Communication Server in
September 1998 we have depended on sales of this product line for the
substantial majority of our revenues. Revenues for the quarter ended June 30,
1999 decreased 34% from $227,000 from the prior quarter ended March 31, 1999. In
part this decrease is attributable to a decline in unit sales of our new
Communication Servers (see also "Liquidity and Capital Resources", and "Certain
Factors Which May Affect Future Performance - Market Acceptance of Our New
Products"). The balance of the decrease is attributable to a continuing decline
in revenue from our legacy products retained after the sale of our modem
operations.
International net revenue decreased to $13,000 or 9% of net revenues for the
first quarter of fiscal 2000, from $6.1 million or 49% of net revenue for the
first quarter of fiscal 1999. The decrease in international revenue was
attributable to the sale of our modem operations in June 1998. We are focusing
the sale of our Network Communication Server products in the United States and
Canada only.
Revenue reserves and allowances are established for estimated future returns due
to stock balancing and discontinued and nonsaleable products based on our past
experience and internal forecasts. There can be no assurance that our historical
experience regarding returns and allowances will continue or that our
projections will prove accurate. If we experience returns in excess of these
reserves, our business, financial condition and results of operations could be
materially adversely affected.
COST AND EXPENSES
On June 18, 1998, we sold our modem operations to Boca Research. The modem
operations accounted for substantially all of our gross profit and a significant
portion of our research and development, marketing and sales, and general and
administrative expenses during the prior fiscal year. Consequently, the
comparisons below should not be relied upon as predictors of future performance.
GROSS PROFIT
Cost of revenue primarily consisted of cost of materials, contract manufacturing
costs, manufacturing overhead expenses, royalty payments and warranty expenses.
Our gross profit as a percentage of net revenue was:
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30,
(dollars in thousands) 1999 1998
---------- ----------
<S> <C> <C>
Net revenue $ 150 $ 12,365
Cost of revenue 82 9,549
---------- ----------
Gross profit $ 68 $ 2,816
---------- ----------
Gross profit margin 45% 23%
</TABLE>
- --------------------------------------------------------------------------------
The increase in gross profit margin as a percentage of net revenue, as compared
to the comparable period in the prior fiscal year, was primarily attributable to
the higher margins achieved on our new network server products as compared to
margins achieved on the single-user modem products. Gross profit margins as a
percentage of net revenues decreased to 45% this fiscal quarter from 52% in the
fiscal quarter ended March 31, 1999. The decline is attributable to fixed
manufacturing overhead expenses, which were a greater proportion of total costs
of revenue due to the lower level of unit sales during the current period. Gross
profit margins are likely to fluctuate as a result of the overall volume of
sales, 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.
OPERATING EXPENSES
Operating expenses are comprised of the following:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
-------------------------- --------------------------
% of net % of net
(dollars in thousands) $ revenue $ revenue
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Research and development $ 1,001 667.3% $ 2,537 20.5%
Marketing and sales 1,249 832.7 2,781 22.5
General and administrative 746 497.3 1,111 9.0
Restructuring costs - - 404 3.3
---------- ----------
Total operating expenses $ 2,996 $ 6,833
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT
Research and development expenses decreased 61% to $1.0 million for the first
quarter of fiscal 2000 from $2.5 million in the comparable quarter of fiscal
1999. The decrease in research and development expenses is primarily related to
a reduction in personnel and other costs and costs resulting from the sale of
the single-user modem operations to Boca Research, Inc. 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 costs have been capitalized
to date.
MARKETING AND SALES
Marketing and sales expenses decreased 55% to $1.2 million in the first quarter
of fiscal 2000 compared to $2.8 million during the same period of fiscal 1999.
The decline in fiscal 2000 expenses was primarily attributable to a reduction in
advertising and promotional expenses, as well as a reduction in personnel costs
associated with the sale of the single-user modem operations.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased 33% to $746,000 from $1.1 million
between the first quarter of fiscal 2000 and the first quarter of fiscal 1999.
General and administrative expenses decreased primarily due to a reduction in
personnel costs associated with the sale of the single-user modem operations.
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RESTRUCTURING COSTS
On March 31, 1998 we announced a fundamental shift in business strategy to
refocus our efforts on our new line of communication servers for small and
medium size offices and a change of our name to OneWorld Systems, Inc. During
the first fiscal quarter of 1999, we recorded a restructuring charge of
approximately $404,000 comprised of additional one-time costs for severance and
employee related costs (approximately $247,000), lease abandonment
(approximately $88,000), and fixed asset write-offs (approximately $69,000)
associated with the transition to OneWorld Systems. As of June 30, 1999 an
accrued balance of $67,000 remained, associated with the lease abandonment.
NET OTHER INCOME
Other net income consisted of the following:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
--------------------------- ----------------------------
% of net % of net
(dollars in thousands) $ revenue $ revenue
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gain on sale of modem business $ 268 178.7% $ 6,128 49.6%
Interest income 84 56.0 14 0.1
Interest expense - - (14) (0.1)
Other income - - 12 0.1
---------- ----------
Total other income, net $ 352 $ 6,140
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
Net other income decreased to approximately $352,000 or 235% of net revenues for
the first fiscal quarter of fiscal 2000 from $6.1 million or 50% of net revenues
for the first fiscal quarter of 1999. Net other income included a gain on sale
of our modem operations of $6.1 million in the first fiscal quarter of 1999 and
an additional $268,000 in the first quarter of fiscal 2000. The current quarter
gain is due to the release of reserves for certain contingencies that expired on
June 18, 1999. In addition to the one time gain on the sale of our modem
operations, interest income earned on cash and investments increased
approximately 500%.
The effective tax rate for the first quarter of fiscal 2000 was approximately
0.3% as compared to 1% in the first quarter of fiscal 1999. The income tax
provision recorded during the first quarter of fiscal 2000 relates to minimum
state income taxes for fiscal year 2000. The income tax benefit recorded during
the first quarter of fiscal 1999 related to refunds of prior period state income
taxes.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents totaled $8.0 million at June 30, 1999,
representing 89% of total assets. Our working capital was $6.5 million at June
30, 1999 as compared to $9.1 million at March 31, 1999, a decrease of $2.6
million. The decrease in working capital was primarily attributable to the net
loss incurred during the quarter.
At June 30, 1999, our principal source of liquidity was $8 million in cash and
short term investments.
We do not expect fiscal 2000 capital expenditures to exceed historical levels.
Our primary source of revenue in the future will be derived from our OneWorld
Network Communications Servers. To date, the Company has not yet established a
significant revenue source from these products. Consequently, during the past
several quarters, we have experienced significant negative cash flows from
operations. Revenue from our new products have not yet reached levels sufficient
to offset operating expenses. As such, we do not expect to be profitable in the
short-term and expect to continue to incur significant negative cash flows from
operations. However, we currently believe that existing cash and revenue for the
new server products should enable us to meet our short term cash requirements.
The preceding sentence is a forward-looking statement, and actual results could
differ materially from those indicated. Failure to meet our expectations for
revenue and gross profit from our new products, operating expenses in excess of
expectations, or other unforeseen expenditures would have a material adverse
impact on our business, financial condition and results of operations. We may be
required to issue additional debt or equity securities which
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could substantially dilute the ownership of existing stockholders. Any shortfall
in funding could result in us having to curtail the introduction or development
of new products and our entry into new markets, any of which could have a
material adverse affect on our business, financial condition and results of
operations.
YEAR 2000 ISSUES
We are aware of the potential for Year 2000 software failures. We have
commenced, but have not yet completed, evaluation of the Year 2000 issue, and
are in the process of identifying the areas in which we may have exposure in the
systems we use to operate our business, the systems used by key suppliers and
customers, and the products we produce.
During the quarter ended June 30, 1999, we completed the upgrade to our
corporate information system which we believe will ensure that it is Year 2000
compliant. In addition, we have determined that certain of our
telecommunications systems and desktop computer applications programs are not
year 2000 compliant and will have to be upgraded or replaced. We are continuing
the implementation of a corrective plan of action.
Concurrent with performing the above steps, we will make certain investments in
systems, applications and products to address Year 2000 issues. We have not
tracked internal resources dedicated to the resolution of the Year 2000 issue
and, therefore, are unable to quantify internal costs incurred to date that are
associated with the Year 2000 issue. We have, however, hired external
consultants to resolve internal information system issues related to the
resolution of the Year 2000 issue. Approximately $75,000 of consulting fees
related to the upgrade of our internal information system was recorded during
the first fiscal quarter of 2000. Expenditures to resolve Year 2000 issues are
not expected to be material, and are expected to be as part of normal
operations.
We are also in the process of reviewing our Year 2000 exposure from our
customers, suppliers and other business partners. There can be no assurance that
all the systems of our customers, suppliers and other business partners will be
Year 2000 compliant on a timely basis, or at all. If these third parties'
systems are not compliant, we could experience delays in customers' orders or in
obtaining supplies, materials and finished products from our vendors, which
could have a material adverse affect on our business, financial condition and
results of operations.
We have commenced efforts to ensure that all products that we currently produce
will be fully Year 2000 compliant. We believe that hardware-related Year 2000
problems have been identified and resolved. Preliminary internal testing of our
software has been completed with no issues detected. We do, however, intend to
hire external consultants to conduct more comprehensive formal testing of our
software products which may reveal Year 2000 issues which we have not identified
thus far. We believe that any costs incurred to bring our products into
compliance will not have a material impact on our financial position, results of
operation or cash flows. Despite our efforts, in the worst-case scenario,
non-Year 2000 compliant products could result in the loss of or delay in market
acceptance of our products, which would likely result in a material adverse
effect upon our business, financial condition and results of operations. If such
a scenario were to occur, our contingency plan would be to work internally and
with outside consultants as needed to make such products Year 2000 compliant as
soon as possible. There can be no assurance, however, that such a contingency
plan will provide a timely or effective solution to any such Year 2000 issues.
Our plan to complete our Year 2000 modifications is based upon management's best
estimates, which were derived utilizing numerous assumptions of future events,
including continued availability of certain resources and other factors. There
can be no assurance that these estimates will be achieved, and actual results
could differ materially from those plans. Specific factors that might cause such
material differences include the availability and cost of personnel trained in
this area, and the ability to locate and correct all relevant computer code.
CERTAIN FACTORS WHICH MAY AFFECT FUTURE PERFORMANCE
In addition to the other information contained herein, one should carefully
consider the following factors in evaluating the Company.
MARKET ACCEPTANCE OF OUR NEW PRODUCTS
In June 1998, we sold our single-user modem business to Boca Research, Inc.
Since that time, we have been dependent on our new OneWorld Network
Communications Server products, introduced in September 1998, foras our primary
source of revenue. The market for these types of products, especially in our
target segment of small and medium sized businesses, is developing and may never
become still developing a viable market. The purchase price of our products can
represent a significant investment for
12
<PAGE> 13
our customers. In addition, many of our potential customers may perceive
OneWorld as a new company, and may be hesitant to purchase our products. Because
of these and other factors, potential customers may delay their decision to
purchase our products or may choose not to purchase. Failure of the market to
accept our new products would result in our inability to achieve forecasted
levels of sales and would have a material adverse affect on our business,
financial condition and results of operations.
PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
We believe that our future success will depend on our ability to enhance our
current products and 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, we must adapt our products to the
evolving technological standards of the various computer platforms and new
technical standards resulting from increases in data transmission speed and
Internet technology evolution. Any failure 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 our
results of operations. Due in part to the factors described above, we are
subject to the risk that inventories may rapidly become obsolete or that the
quantities carried of certain products exceed current or projected demand. In
addition products as complex as those offered by us may contain undetected
errors or defects when first introduced or as new versions are released. There
can be no assurance that, despite our testing and trials 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 OR TECHNOLOGIES
Since the environment in which we operate is characterized by rapid new product
and technology introductions and generally falling prices for existing products,
our customers may from time to time postpone purchases in anticipation of such
new product introductions or lower prices. If the market views such anticipated
changes as significant, then this may have the effect of temporarily slowing
overall market demand and adversely affecting our operating results.
DEPENDENCE ON MANUFACTURERS
We purchase fully manufactured and tested units from a "turnkey" manufacturing
subcontractor. We believe that although there are a number of alternative
contract manufacturers that could produce our products, it could take a
significant period of time and result in significant additional expense to
qualify an alternative subcontractor and commence manufacturing in the event of
a reduction or interruption of production. Therefore, we are highly dependent,
on a short-term basis, on the continued relationship with our "turnkey"
manufacturing subcontractor and any reduction, interruption, or termination of
this relationship could have a material adverse effect on our operating results.
Components and manufacturing services are obtained from our supplier on an
as-needed basis.
We have been, and will continue to be, dependent on sole or limited source
suppliers for certain key components used in our products, particularly chip
sets designed and manufactured by Rockwell International and Motorola. We
generally purchase sole or limited source components pursuant to purchase orders
placed from time to time in the ordinary course of business and have no
guaranteed supply arrangements with any sole or limited source suppliers.
Certain component suppliers, such as Rockwell, are also modem manufacturers and,
accordingly, could elect to satisfy their internal supply requirements rather
than fulfill our purchase requirements. In the past we have experienced delays
in product development and difficulties in manufacturing sufficient product to
meet demand due to the inability of certain suppliers to meet our requirements
for key components, and failure to meet such requirements in the future could
have a material adverse effect on our results of operations.
RELIANCE ON VALUE ADDED RESELLERS
We distribute our new OneWorld Network Communications Servers through national
and regional value added resellers (VARs) and corporate resellers, particularly
those with a focus on serving the small and medium size office market. We intend
to increase the number of participating value added resellers by implementing
recruiting, training and support programs aimed at these resellers. There can be
no assurance that we will be successful in attracting new value added resellers
to distribute our products, or that this distribution channel will be a
successful one for us. Failure to attract new value added resellers or their
inability to sell the products would cause our sales to fall below expectations,
and our business, financial condition and results of operations would be
materially adversely affected. Moreover, these VARs may not actively pursue
sales opportunities for our products due to inexperience with our products or
otherwise. If these VARs fail to actively promote our products, our ability to
generate revenue will be materially adversely affected.
13
<PAGE> 14
COMPETITION
The market for our products is intensely competitive and is characterized by
rapidly changing technology, evolving industry communication standards and
frequent new product introductions. A number of competitors, including Cisco
Systems, Shiva, 3Com and Castelle, among others, offer products that compete
with one or more of our communications server products. Our fax server products
compete primarily with dedicated fax servers, stand-alone fax machines,
electronic mail, and centralized fax systems and software produced by
independent manufacturers such as Castelle, AVT and Omtool. Our remote access
servers compete with products from Shiva (recently acquired by Intel), 3Com, and
others who provide dedicated remote access servers and modem pools. Our Internet
access and routing servers compete with competitors such as Cisco and 3Com and
many others who provide a wide range of Internet access devices for all sizes of
companies. In addition, these products also compete with a number of smaller
competitors who are focused on the small to medium sized business market,
including Ramp Networks, Netopia and others. Other companies in the personal
computer industry, such as modem vendors, remote access server vendors,
communications software vendors, fax machine manufacturers and personal computer
manufacturers, could seek to expand their product offerings by designing and
selling products using competitive technology that could render our products
obsolete or have a material adverse effect on sales of current and future
products.
Many of our competitors have substantially greater financial, technical, sales,
marketing and other resources, as well as greater name recognition and a larger
customer base, than we. In addition, the market for our server products can be
subject to significant price competition. We may face increasing pricing
pressures from current competitors. Accordingly, there can be no assurance that
we will be able to provide products that compare favorably with the products of
competitors or that competitive pressures will not require us to further reduce
prices. Any material reduction in our products' prices could negatively affect
gross profit as a percentage of net revenue and could require us to increase
unit sales in order to maintain net revenue. There can be no assurance, however,
that we would be able to increase unit sales or make up for a shortfall. Any
failure to increase unit sales or make up for a shortfall in net revenue would
have a material adverse effect on our financial condition and results of
operations.
14
<PAGE> 15
DEPENDENCE ON KEY PERSONNEL
Our future success depends to a significant extent on our 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 our results of operations. We also believe that our
future success will depend in large part on our ability to attract and retain
additional key employees. Competition for such personnel in the computer
industry is intense, and there can be no assurance that we will be successful in
attracting and retaining such personnel. If we were to fail to replace or retain
our key employees or attract additional key employees, our results of operations
could be materially adversely effected.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We rely primarily on a combination of copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. We have no patents or patent applications pending. We seek
to protect our hardware, software, documentation and other written materials
under trade secret and copyright laws, which afford only limited protection. We
seek to protect our brand names under trademark and unfair competition laws.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use proprietary
information. Policing unauthorized use of our products is difficult, and while
we are unable to determine the extent to which piracy of our software products
exists, software piracy can be expected to be a persistent problem. In addition,
the laws of some foreign countries do not protect our proprietary rights to as
great an extent as do the laws of the United States. There can be no assurance
that our means of protecting our proprietary rights will be adequate or that
competitors will not independently develop similar technology.
Due to the rapid pace of innovation within the communications software industry,
we believe that success in technological leadership is likely to depend more
upon the technological, creative, and marketing skills of our personnel, our
continued innovation, and customer support than on the various legal means of
protecting existing technology.
We are aware of products or services in addition to our own that are currently
marketed under the trademark "OneWorld". There can be no assurance that
litigation with respect to these trademarks will not be instituted by any third
parties. If any such litigation were successful, we 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 our
product. In any event, even if we were successful in any such litigation, the
associated legal and other costs could be substantial. As is customary in our
industry, we from time to time receive communications from third parties
asserting that our 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 our Common Stock has been volatile and trading volumes have
been relatively low. Factors such as variations in our revenue, operating
results and cash flow and announcements of technological innovations or price
reductions by us, our competitors, or providers of alternative products could
cause the market price of our Common Stock to fluctuate substantially. In
addition, the stock markets have experienced significant price and volume
fluctuations that have particularly 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 our
Common Stock.
Effective February 25, 1999 we were delisted from the Nasdaq National Market(R).
Our Common Stock is currently is traded on the Over the Counter Bulletin Board
("OTCBB"). Because of the structure of this market, our Common Stock may be
subject to an increase in stock price volatility.
15
<PAGE> 16
ANTI-TAKEOVER PROVISIONS
Our Board of Director's has the authority to issue up to 5,000,000 shares of
Preferred Stock (of which 3,100,000 shares have been issued and are outstanding
- - see also "Management Discussion and Analysis of Financial Condition and
Results of Operations - Overview") 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 our 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 we have no present intention to
issue additional 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
our outstanding voting stock. In addition, we are 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. Furthermore,
certain provisions of our Certificate of Incorporation may have the effect of
delaying or preventing changes in control of our management, which could
adversely affect the market price of our Common Stock.
UNCERTAIN INTERNATIONAL DEMAND
We are concentrating sales of our new OneWorld Network Communications Servers
only in the United States and Canada and currently have no near term plans for
addressing other international markets for these products. If we were to offer
our OneWorld Network Communications Servers internationally, there can be no
assurance that we will be able to attain international demand for our products
or that our distributors will be able to effectively meet that demand. Risks
inherent in our international business activities generally include unexpected
changes in regulatory requirements, tariffs and other trade barriers, costs and
risks of localizing products for foreign countries, longer accounts receivable
payment cycles, difficulties in managing international operations and
distributors, potentially adverse tax consequences, repatriation of earnings,
the burdens of complying with a wide variety of foreign laws and changes in
demand resulting from fluctuations in exchange rates. In addition, the laws of
certain foreign countries do not provide protection for our intellectual
property to the same extent as do the laws of the United States.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from interest rate changes, foreign currency
fluctuations, and changes in the market value of our investments.
INTEREST RATE RISK
We invest our excess cash in debt instruments of the U.S. Government and its
agencies, and its agencies, and in high-quality corporate issuers and by policy,
limit the amount of credit exposure to any one issue. We attempt to protect and
preserve our invested funds by limiting default, market and reinvestment risk.
Investments in both fixed and floating rate interest earning instruments carry a
degree of interest rate risk. Fixed rate securities may have their fair market
value adversely impacted due to a rise in interest rates, while floating rate
securities may produce less than expected if interest rates fall. Due in part to
these factors, our future investment income may fall short of expectations due
to changes in interest rates and we may suffer losses in principal if forced to
sell securities that have declined in market value due to changes in interest
rates.
The effect of interest rate fluctuations on us during the first quarter of
fiscal 2000 were not material, nor do we currently anticipate it will so be
during the remainder of this fiscal year.
FOREIGN CURRENCY RISK
We pay expenses of our international operations in local currencies. Our
international operations are subject to risks typical of an international
business, including but not limited to: differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility. Accordingly, our future
results could be materially adversely impacted by changes in these or other
factors.
We are also exposed to foreign exchange rate fluctuations as they relate to
foreign sales. While our international sales are denominated in US Dollars, as
exchange rates vary, the effective price, that is the price as translated into
local currency, of our product to a foreign customer may vary. This change in
price could in turn impact the overall level of our foreign sales, or cause us
to adjust our US Dollar price to compensate for the change. Accordingly, our
future results could be materially adversely impacted by changes in these or
other factors.
The effect of foreign exchange rate fluctuations on us during the first quarter
of fiscal 2000 were not material, nor do we currently anticipate it will be so
during the remainder of this fiscal year.
INVESTMENT RISK
We currently have no equity investments.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 22, 1999, our stockholders authorized the Board of Directors to amend
our Certificate of Incorporation to effect a reverse split with respect to our
Common Stock. On June 23, 1999 the Board of Directors approved a one-for-ten
reverse split with respect to our Common Stock effective July 6, 1999.
Subsequent to the one-for-ten reverse split on July 6, 1999, 1,550,000 shares of
our Series A Convertible Preferred Stock was automatically converted into Common
Stock at a one-for-one conversion ratio.
On July 7, 1999, the closing price of our Common Stock, as quoted on the Over
The Counter Bulletin Board (the "OTCBB") exceeded a specific price, resulting in
the automatic conversion of an additional 387,500 shares of our outstanding
Series A Convertible Preferred Stock into Common Stock at a conversion ratio of
one-for-one.
As of July 7, 1999 the number of shares of our capital stock issued and
outstanding was:
<TABLE>
<S> <C>
Series A Convertible Preferred Stock, $0.001 par value
(involuntary liquidation preference $3,114,338) 1,162,500
Common Stock, $0.001 par value 4,465,231
</TABLE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held a Special Meeting of Stockholders on June 22, 1999. At this meeting, the
following matters were approved by the stockholders by the votes indicated:
<TABLE>
<CAPTION>
Broker
Matter: For Against Abstain Non-Vote
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
To approve and adopt alternative amendments to the 41,855,716 745,322 177,910 -
Company's Certificate of incorporation (only one of
which will be implemented by the Board of Directors)
to effectuate either a one-for-seven, one-for-ten, or a
one-for-fourteen reverse stock split with respect to all
issued and outstanding shares of the Company's
Common Stock.
To transact other such business as may properly come 25,700,416 422,286 16,656,248 -
before the meeting.
</TABLE>
ITEM 5. OTHER INFORMATION - Not applicable.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
- ------- -----------------------
3.1(a)(+) Amended and Restated Certificate of Incorporation of OneWorld
Systems, Inc.
3.1(b)(++) Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of OneWorld Systems, Inc., dated March
3, 1999
3.1(c)(++) Certificate of Amendment to Amend and Restate Certificate of
Incorporation of OneWorld Systems, Inc., dated June 25, 1999
3.2(*) Form of Bylaws of Global Village Communication, Inc.
4.1 Reference is made to Exhibits 3.1 and 3.2
4.9++ Warrant to purchase 425,000 Shares of Common Stock granted by the
Company to Boca Research, inc. dated as of June 18, 1998
4.10(++) Unit Purchase Agreement between the Company and other parties named
therein, dated as of March 3, 1999
4.11(++) Investor Rights Agreement dated as of March 3, 1999 by and among the
parties to the Unit Purchase Agreement
10.1(*) Form of Indemnity Agreement entered into between the Company and its
directors and officers, with related schedule
10.2+ 1991 Stock Option Plan, as amended (the "Option Plan")
10.3(*) Form of Incentive Stock Option under the Option Plan
10.4(*) Form of Supplemental Stock Option under the Option Plan
10.5(*) 1993 Employee Stock Purchase Plan
10.10(*) Distribution Agreement between the Company and Ingram Micro, dated
as of February 16, 1993
10.12+ 1994 Non-Employee Directors' Stock Option Plan, as amended
10.16(*)x Lease agreement between Herman Christensen, Jr. and Raymond P.
Christensen and the Company dated July 14, 1994
10.17(*)x Management Incentive Plan
27.1 Financial Data Schedule
(*) Filed as an exhibit to the Registrant's Registration Statement
on Form S-1 (Registration No 33-73878 as amended) and hereby
incorporated by reference herein.
+ Filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q filed with the Commission on November 13, 1998, and hereby
incorporated by reference herein.
++ Filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q filed with the Commission on August 12, 1998, and hereby
incorporated by reference herein.
(+) Filed as an exhibit to the Registrant's Annual Report on Form
10-K/A filed with the Commission on July 2, 1998, and hereby
incorporated by reference herein.
(++) Filed as an exhibit to the Registrant's Annual Report on Form
10-K filed with the Commission on June 29, 1999, and hereby
incorporated by reference herein.
x The Company has requested confidential treatment with respect to
portions of this document.
(b) Reports on Form 8-K
On April 29, 1999 the Company filed a Form 8-K in which the Company
announced the resignation of Eugene Eidenberg from the Company's Board
of Directors and the appointment of Roger Roberts, former CEO of Citrix
Systems to the Company's Board of Directors
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OneWorld Systems, Inc.
Date: August 12, 1999 /S/Neil Selvin
-----------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 12, 1999
/S/Marc E. Linden
-----------------------------------------
Senior Vice President Finance and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
20
<PAGE> 21
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
3.1(a)(+) Amended and Restated Certificate of Incorporation of OneWorld
Systems, Inc.
3.1(b)(++) Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of OneWorld Systems, Inc., dated March
3, 1999
3.1(c)(++) Certificate of Amendment to Amend and Restate Certificate of
Incorporation of OneWorld Systems, Inc., dated June 25, 1999
3.2(*) Form of Bylaws of Global Village Communication, Inc.
4.1 Reference is made to Exhibits 3.1 and 3.2
4.9++ Warrant to purchase 425,000 Shares of Common Stock granted by the
Company to Boca Research, inc. dated as of June 18, 1998
4.10(++) Unit Purchase Agreement between the Company and other parties named
therein, dated as of March 3, 1999
4.11(++) Investor Rights Agreement dated as of March 3, 1999 by and among the
parties to the Unit Purchase Agreement
10.1(*) Form of Indemnity Agreement entered into between the Company and its
directors and officers, with related schedule
10.2+ 1991 Stock Option Plan, as amended (the "Option Plan")
10.3(*) Form of Incentive Stock Option under the Option Plan
10.4(*) Form of Supplemental Stock Option under the Option Plan
10.5(*) 1993 Employee Stock Purchase Plan
10.10(*) Distribution Agreement between the Company and Ingram Micro, dated
as of February 16, 1993
10.12+ 1994 Non-Employee Directors' Stock Option Plan, as amended
10.16(*)x Lease agreement between Herman Christensen, Jr. and Raymond P.
Christensen and the Company dated July 14, 1994
10.17(*)x Management Incentive Plan
27.1 Financial Data Schedule
(*) Filed as an exhibit to the Registrant's Registration Statement
on Form S-1 (Registration No 33-73878 as amended) and hereby
incorporated by reference herein.
+ Filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q filed with the Commission on November 13, 1998, and hereby
incorporated by reference herein.
++ Filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q filed with the Commission on August 12, 1998, and hereby
incorporated by reference herein.
(+) Filed as an exhibit to the Registrant's Annual Report on Form
10-K/A filed with the Commission on July 2, 1998, and hereby
incorporated by reference herein.
(++) Filed as an exhibit to the Registrant's Annual Report on Form
10-K filed with the Commission on June 29, 1999, and hereby
incorporated by reference herein.
x The Company has requested confidential treatment with respect to
portions of this document.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,045
<SECURITIES> 0
<RECEIVABLES> 54
<ALLOWANCES> (31)
<INVENTORY> 0
<CURRENT-ASSETS> 8,540
<PP&E> 3,510
<DEPRECIATION> (3,201)
<TOTAL-ASSETS> 9,022
<CURRENT-LIABILITIES> 2,066
<BONDS> 0
0
3
<COMMON> 25
<OTHER-SE> 6,956
<TOTAL-LIABILITY-AND-EQUITY> 9,022
<SALES> 150
<TOTAL-REVENUES> 150
<CGS> 82
<TOTAL-COSTS> 82
<OTHER-EXPENSES> 2,996
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,576)
<INCOME-TAX> 7
<INCOME-CONTINUING> (2,583)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,583)
<EPS-BASIC> (1.02)
<EPS-DILUTED> (1.02)
</TABLE>
