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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
FORM 10-K
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2002
 
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 000-23597
 
EXTENDED SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
 
Delaware
  
82-0399670
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
5777 North Meeker Avenue, Boise, ID        83713
                    (Address of principal executive office)                    (Zip Code)        
 
Registrant’s telephone number, including area code: (208) 322-7575
 
Securities registered pursuant to Section 12(b) of the Act: None
 
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
 
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  ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
 
The aggregate market value of the voting stock held by nonaffiliates of the Registrant, based upon the closing price of such stock as of September 4, 2002, as reported by The Nasdaq Stock Market, was approximately $27 million. Shares of common stock held by each officer and director and by each person who own 5% or more of the outstanding shares of common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive.
 
As of September 4, 2002, there were 14,208,568 shares outstanding of the Registrant’s common stock.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on October 24, 2002, are incorporated by reference in Part III of this Form 10-K to the extent stated herein.
 

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EXTENDED SYSTEMS INCORPORATED
 
FISCAL YEAR 2002 FORM 10-K ANNUAL REPORT
 
Table of Contents
 
         
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PART I.
          
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Item 2.
      
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Item 3.
      
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Item 4.
      
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PART II.
          
Item 5.
      
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Item 6.
      
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Item 7.
      
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Item 7A.
      
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Item 8.
      
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Item 9.
      
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PART III.
          
Item 10.
      
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Item 11.
      
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Item 12.
      
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Item 13.
      
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PART IV.
          
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Forward-Looking Statements
 
In addition to historical information, this Form 10-K contains forward-looking statements. In this Form 10-K, the words “expects,” “anticipates,” “believes,” “intends,” “will” and similar expressions identify forward-looking statements, which are based upon information currently available to us, speak only as of the date hereof and are subject to certain risks and uncertainties. We assume no obligation to update any forward-looking statements. Our actual results may differ materially from the results discussed in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results and Market Price of Stock.” You should carefully review the risk factors described in other documents that we file from time to time with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q to be filed in fiscal 2003. All period references are to our fiscal years ended June 30, 2003, 2002, 2001 and 2000, unless otherwise indicated.
 
PART I
 
Item 1.    Business
 
SIGNIFICANT EVENTS
 
On August 30, 2002, we completed our acquisition of ViaFone, Inc., a leading provider of real-time, mobile platform and out-of-the-box mobile applications that connect field sales and service employees with critical business systems, information and processes of their enterprise. ViaFone merged with and into a subsidiary of Extended Systems, and all outstanding shares of ViaFone common and preferred stock were exchanged for approximately 3,000,000 newly issued shares of Extended Systems common stock valued at approximately $11.7 million in a tax-free transaction. This transaction will be accounted for by the purchase method of accounting pursuant to Statement of Financial Accounting Standards No. 141, “Business Combinations.” Accordingly, the results of operations of ViaFone will be included in our consolidated statement of operations after the completion date of the acquisition.
 
On June 12, 2002, we completed the sale of Extended Systems Singapore Pte Ltd., our wholly owned Singapore subsidiary, to Brookhaven Asia Ltd., a holding company co-owned by the existing management team of Extended Systems Singapore Pte Ltd. We received $987,000 in cash for all of the outstanding shares of Extended Systems Singapore. The Singapore entity will act as an independent distributor providing marketing, sales, and support for Extended Systems’ products in Southeast Asia, and also plans to build product solutions based on intellectual property licensed from Extended Systems. As a result of the sale, our Singapore subsidiary is accounted for as discontinued operations, accordingly, such amounts for all periods in this Annual Report on Form 10-K, including the financial statements and related notes, have been reclassified to reflect the discontinued operations.
 
We originally acquired Extended Systems Singapore Ltd., formerly Parallax Research Ltd., in November 1998. The Singapore operation was instrumental in driving our infrared hardware business, and in managing our relationships with third party contract manufacturers in Asia. As we have continued to focus our efforts on our mobile and wireless enterprise software solutions, revenue from our hardware products has been a declining percentage of our net revenue. As a result, the Singapore entity was no longer strategic to our business.
 
During our fourth quarter ended June 30, 2002, we completed a restructuring plan to reduce costs and improve operating efficiencies and, as a result, we recorded a restructuring charge to continuing

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operations of $213,000 in fiscal 2002. The restructuring charge consisted primarily of costs related to the termination of 25 employees in research and development, marketing and sales, administration and manufacturing. Approximately 85% of the terminated employees were in the United States and 15% were in Europe and Asia. All of the restructuring charge was paid in April 2002.
 
In August of 2002, we continued our efforts to streamline operations and implemented an additional restructuring program. As a result, we expect to record a restructuring charge of approximately $200,000 in our first quarter of fiscal 2003 consisting primarily of severance payments and related costs for approximately 19 terminated employees in manufacturing, administration and research and development functions, primarily in the United States.
 
OVERVIEW
 
Founded in 1984, we are a corporation incorporated under the laws of the state of Delaware with our headquarters located in Boise, Idaho.
 
We provide mobile information management products designed to increase enterprise productivity and competitiveness. Enterprises and users are increasingly relying on mobile devices to access time-sensitive and critical information and enable personal information management, enterprise automation and mobile workforce management. Our mobile information management products empower users to access, collect and synchronize information on demand from various locations and from a variety of devices. These devices include mobile phones, pagers and personal digital assistants, which operate using the Palm OS, Windows CE, PocketPC, Symbian OS, and RIM-based device platforms.
 
Our mobile information management products feature:
 
•
 
data synchronization and device management software and applications;
•
 
mobile application development platforms and tools;
•
 
mobile applications for sales and pharmaceutical professionals that connect to back-end enterprise applications;
•
 
short range wireless connectivity technology based on Bluetooth and Infrared Data Association standards; and
•
 
embedded client/server relational database management systems (RDBMS) for stand-alone, networked, Internet and mobile database applications.
 
We design our products and technologies to provide cost-effective and reliable mobile computing to enterprises, users, manufacturers of mobile devices, application developers and telecommunications service providers. Our products enable:
 
•
 
users to synchronize information between mobile devices and personal computers or enterprise systems for offline access of enterprise data such as email, calendar, and mission-critical database information;
•
 
users to access enterprise information from a mobile device on a real-time online basis;
•
 
users and enterprises to increase their efficiency and productivity by using their mobile devices for a variety of new tasks; and
•
 
device manufacturers and application developers to design products to better meet the needs of enterprises and users, and telecommunications service providers to enhance their revenue opportunities.
 
We have relationships with or sell our products to leading mobile communications and computing companies and corporate enterprises, including 3Com, Agilent, British Airways, Casio, DaimlerChrysler, Ericsson, Fujitsu, Hewlett-Packard, IBM, Microsoft, Motorola, NEC, One2One, Orange, Palm, Psion, Red-M, Sharp, Siemens, Symbol and Toshiba.

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INDUSTRY BACKGROUND
 
The use of mobile devices has increased tremendously as handheld computers, mobile phones, pagers and personal digital assistants have achieved popular acceptance and become more advanced and powerful. Improvements in mobile technology and wireless infrastructure are facilitating greater bandwidth, thereby enabling both data and voice transmission. IDC, a leading provider of technology intelligence and market data, predicts that the United States population of mobile workers will reach 104.6 million by 2006.
 
Meanwhile, competition and deregulation in the wireless communications industry have resulted in downward pressure on wireless service rates. Consequently, service providers are attempting to maximize revenue opportunities by developing new services and encouraging usage, while simultaneously reducing the costs associated with customer turnover and the deployment of new services. As a result, mobile device manufacturers and application developers face pressure from service providers to increase the usability and value of their devices and applications. Many of these manufacturers and developers seek to utilize data communications capabilities to do so. However, the absence of common standards for data communications has historically prevented the widespread adoption and promotion of data communications across the mobile communications industry. To address this situation, industry consortia were formed to develop industry-wide standards and protocols for wireless communication. These consortia have developed various complementary protocols, including Bluetooth protocols for short-range radio-frequency communication, IrDA infrared communication protocols created by the Infrared Data Association, SyncML data synchronization protocols and the Wireless Application Protocol (WAP). Service providers, device manufacturers and application developers are integrating these data communication capabilities to improve functionality and deliver an array of mobile communications products and services.
 
Enterprises seek to increase productivity through the easy, secure and cost-effective management of information access, collaboration and the use of mobile devices. Increasingly, users need secure, reliable and efficient access to critical information on demand. In addition, users need access to enterprise network information from many locations, both within and outside enterprise facilities, and through various mobile devices. As a result, mobile devices are being used for:
 
•
 
Personal information management. Users employ mobile devices in conjunction with their primary computers for tasks such as contact management, scheduling and e-mail access.
•
 
Enterprise automation. Enterprises deploy mobile devices for tasks within the enterprise such as inventory control and management, quality assurance and data entry and access.
•
 
Mobile workforce management. Enterprises deploy mobile devices for tasks outside the enterprise such as sales force automation, real-time collaboration and data access.
 
Unfortunately, providing flexible information access has historically been a cumbersome and expensive proposition and typically required that users make a wired connection to the network wherever and whenever they required access. In addition, with the increased use of mobile devices, many users currently must employ several devices simultaneously. Although they all may require access to the same information, these devices often run applications on separate platforms. For example, a mobile worker using a laptop for corporate e-mail may also use a personal digital assistant with personal contact information, and a mobile phone with an embedded directory, each of which functions with different operating systems, platforms and data delivery formats. To facilitate user productivity, this information must be synchronized, accessed and managed across devices and applications. Thus, users require simple, secure tools to access, collect, and synchronize information.
 
Enterprises, users, device manufacturers, application developers and service providers require a solution that provides data management and wireless connectivity between disparate mobile devices,

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and between mobile devices and the information and applications which reside on personal computers or the enterprise network. Ideally, this type of solution should allow:
 
•
 
enterprises to provide cost-effective and seamless access to information regardless of location;
•
 
enterprises to implement end-to-end security to ensure corporate data remains protected;
•
 
users to increase their productivity by connecting a variety of mobile devices to access and manage information;
•
 
device manufacturers and application developers to enhance the value and usability of their devices and applications, facilitating greater market acceptance and increased use; and
•
 
telecommunications service providers to take advantage of data communication capabilities to drive increased usage and user loyalty.
 
OUR SOLUTION
 
We develop and market mobile information management products that enable secure, reliable and efficient access, collection and synchronization of information on demand. We have designed our products to:
 
•
 
Enable mobile data management. Our mobile data management products enable enterprises and users to access, synchronize and manage information between mobile devices and personal computers or enterprise networks. We believe enterprises can reduce their initial capital investment in computer hardware and software and their network administrative costs by using our technology to deploy applications on mobile devices. Using our products, users can manage information between their mobile devices and personal computers; enterprise groupware applications, such as Microsoft Exchange and Lotus Domino; enterprise applications, such as Siebel and SAP; or enterprise databases via LDAP, JDBC, XML data sources, and ODBC or OLEDB-compliant database connectors. In addition, enterprises can securely and efficiently deploy and manage a variety of mobile devices and extend their applications and databases across a distributed network and over the Internet.
•
 
Increase productivity and usability of mobile devices. Our mobile information management products improve the management of information and applications and provide convenient, wireless connectivity. These products enable users to share data and information between their mobile devices while accessing information from the Internet, personal computers or enterprise networks on demand. Enterprises can utilize devices to extend their network applications cost-effectively to other applications. We believe our mobile information management products help mobile users and enterprises increase their productivity by using mobile devices for a variety of new tasks, thereby increasing their use of these devices.
•
 
Increase value and usage of mobile devices and communications services. Our platforms and technologies provide the tools to enable device manufacturers and application developers to design and enhance products to meet the needs of both enterprises and users. Because our technology enables cost-effective communication and the ability to easily manage many disparate devices, we believe device manufacturers and application developers are able to increase the value of the products they sell, thereby encouraging increased adoption of those products. In addition, we believe the increased adoption of mobile devices will, in turn, drive increased usage of and loyalty to providers of mobile communications services, thereby increasing service providers’ revenue opportunities and minimizing their costs.
•
 
Enable wireless connectivity. Our products facilitate enterprise automation and effective mobile workforce management by providing wireless connectivity between disparate mobile devices and between mobile devices and personal computers or enterprise networks. Our products enable mobile workers to access networks or peripherals within enterprise facilities and enable enterprises to extend applications to users beyond the network environment and over the Internet, without physical connections.

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OUR STRATEGY
 
Our objective is to become the leading provider of mobile information management products. To achieve this objective, we have adopted the following strategies:
 
•
 
Continue to develop and maintain a broad array of mobile information management products, technologies and services that demonstrate our technical excellence. We are committed to building and maintaining a full range of mobile information management products, technologies, and services that address the data management and wireless connectivity needs of enterprises and users across a broad range of mobile devices. Our products support the current leading mobile device platforms, including the Palm OS, Windows CE, Symbian EPOC, RIM and SyncML-based mobile device platforms and we intend to develop additional device support in the future. Further, we are committed to designing our technology and products to be compatible with new and emerging protocols, such as GSM, GPRS, CDPD, CDMA, 1XRTT, 3G, iMode and Mobitex networks. By continuing to provide a broad range of products, we believe that we can successfully meet the mobile information needs of users and enterprises, while enhancing the ability of service providers, device manufacturers, and application developers to increase the value of their own products and services. We actively work with industry consortia to develop wireless standards and protocols. These consortia are comprised of industry leaders, device manufacturers and software developers, and we actively participate on the leading standards boards and technical committees of these consortia. For example, we were a founding member of the Infrared Data Association, which developed the IrDA protocol. As a result of our efforts in IrDA, we were invited by the founders of Bluetooth to participate in the Bluetooth early adopter group and were accepted as an associate member of the Bluetooth Special Interest Group, while contributing on the Bluetooth Architecture review board. Extended Systems is also a promoting member of the SyncML Initiative. We believe our leadership in these consortia will continue to make our mobile information management products and technologies an integral part of mobile communications solutions.
•
 
Focus resources on building customer intimacy with top enterprise customers. We have invested substantial resources to develop our worldwide marketing, sales and support infrastructure. Although our products are appropriate for enterprises of all sizes, we believe large multi-national enterprises are the most lucrative market for our products. We intend to continue to focus resources to sell to large enterprises and to international markets that are adopting the use of mobile communications most rapidly. In addition, our products are currently included in or bundled with the mobile devices of industry leaders such as Ericsson, Motorola and Palm. We believe the integration of our technology in leading mobile devices provides a significant opportunity to reach the enterprises and mobile workers who are the primary users of these devices.
•
 
Demonstrate industry leadership by continuing to leverage alliances with leading mobile device manufacturers and applications developers. We believe it is critical to focus on continuing to demonstrate industry leadership through alliance validation. We maintain relationships with leading hardware and software vendors, including Ericsson, Hewlett-Packard, IBM, Microsoft, Motorola, Nokia, and Symbian. We believe that these relationships will enable us to develop leading-edge products and technology and influence the development of new platforms and protocols. We also believe these relationships will continue to help us achieve broader distribution of our products and technologies, making them pervasive in the mobile information management market. For example, we collaborate with Compaq Global Services to package our XTNDConnect Server software as part of its iPAQ mobile device solution thereby enabling large enterprise customers worldwide to enhance the development of custom enterprise software applications that deliver enterprise data to mobile devices.
•
 
Acquire and integrate complementary businesses and technologies into our mobile strategy. In order to broaden our product offering and extend our distribution channels, we have in the past and intend in the future to pursue acquisitions of, and investments in, companies with complementary products, technologies or distribution networks. For example, we just recently completed the

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acquisition of ViaFone, a leading provider of real-time, mobile platform and out-of-the-box mobile applications that bridge field sales and service employees with the critical business systems, information and processes of their enterprise. In February 2002, we acquired AppReach, a small firm specializing in the development of enterprise software that extends customer relationship management (CRM) applications to mobile and wireless devices. In August 1999, we acquired Advance Systems Limited, a developer of server-based synchronization software for portable computing devices and high-end mobile phones. In October 1998 and November 1998, we completed acquisitions of Rand Software, a developer of data synchronization software, and Parallax Research, a developer of infrared connectivity products. In April 1997, we acquired Counterpoint Systems Foundry, a developer of connectivity software. The Counterpoint acquisition formed the basis for our Infrared and Bluetooth technology.
 
OUR PRODUCTS
 
We design, develop, sell and support products that enable companies to extend enterprise applications securely and efficiently to mobile and wireless environments. Our mobile information management segment includes mobile data management and wireless connectivity solutions.
 
Mobile Data Management Products
 
Our mobile data management and synchronization software enables IT departments to securely integrate and manage the myriad of mobile devices and applications that are becoming increasingly important to the corporate enterprise. The cross-platform support of the XTNDConnect product line provides IT managers and developers with a single mobile data management solution for multiple devices, connections and applications.
 
Product
  
Description
  
Target
Customers/Relationships
Mobile Data Management and Synchronization Software:
 
XTNDConnect Server

  
A software application that:
 
•     allows information to be transferred directly between enterprise network applications and mobile devices through wired or wireless connections;
•     provides IT staff centralized control, data security and management for mobile devices;
•     supports Palm OS, Windows CE, Pocket PC, Symbian, RIM, and SyncML-based mobile devices;
•     manages data and applications on mobile devices with backup/restore, installation, configuration and reporting capabilities;
  
•     Enterprises that are deploying mobile devices or enabling applications for mobile deployment.
•     Application developers who design vertical mobile applications. Examples of vertical markets include
manufacturing, healthcare, finance, insurance, legal and transportation.
•     XTNDConnect Server serves as the foundation for IBM’s Mobile Connect product and IBM WebSphere’s synchronization server.

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Product
  
Description
  
Target
Customers/Relationships
   
•     enables users to easily synchronize data with servers, including Microsoft Exchange and Lotus Notes and with ODBC or OLEDB-compliant databases such as DB2, Oracle, Sybase and Advantage Database Server; and
•     assures the secure transfer of corporate data to and from mobile devices using Certicom encryption.
 
We added XTNDConnect Server to our product line when we acquired Advance Systems in fiscal 2000.
    
XTNDConnect PC


  
A software application that:
 
•     allows a user to manage and synchronize personal information such as contacts, calendar, tasks, email, and notes between a mobile device and popular personal computer applications;
•     supports devices including Palm OS, Windows CE, Pocket PC, Casio PocketViewer, and various mobile phones from Sony Ericsson and Siemens; and
•     supports many popular personal computer applications including Microsoft Outlook, Lotus Notes, Lotus Organizer, Act!, Goldmine, and Palm’s desktop.
 
We added this product to our product line when we acquired Rand Software in fiscal 1999.
  
•     Enterprises and users through electronic commerce.
•     Original equipment manufacturers, such as personal digital assistant and mobile phone manufacturers.
•     Sony Ericsson and Siemens bundle XTNDConnect PC with select mobile phones.
•     XTNDConnect is the foundation for Lotus’ EasySync Pro.

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Product
  
Description
  
Target
Customers/Relationships
Client/Server Database Products:
 
XTNDConnect Mobile Objects

  
An embedded server that:
 
•     streamlines the development of mobile and desktop applications and provides the ability to extend existing enterprise applications to mobile devices;
•     provides an easy-to-use, cross-platform solution that gives application developers an environment for building custom mobile applications;
•     provides security through Streamline SecurityTM, which is a patent-pending security design based on Certicom’s Elliptical Curve security technology;
•     provides cross-platform support for Pocket PC, Palm and Windows devices; and
•     supports client application development for AppForge, Code Warrior and embedded Visual Studio.
  
Application developers who design vertical mobile applications.
Advantage Database Server

  
A high performance client/server database management system for standalone, networked, mobile and Internet database applications that:
 
•     provides developers the flexibility to combine SQL statements and relational data access methods with the performance and control of navigational commands;
•     includes native SQL support as well as a client interface, supporting common application development tools such as Delphi, Visual Objects and Visual Basic, as well as any applications with an ODBC interface; and
  
Application developers who design vertical applications.

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Product
  
Description
  
Target
Customers/Relationships
   
•      works in both Novell NetWare and Windows NT server environments and improves multi-user performance by efficiently allocating database operations between the client and the server.
    
Advantage Development Tool Kits
  
Software tools used by database application developers to develop, debug and deploy reliable applications running in an Advantage Database Server environment.
  
Application developers who design vertical applications.
 
Wireless Connectivity Product Solutions
 
Our wireless connectivity product solutions permit users to wirelessly connect and exchange data using either Bluetooth short-range radio frequency or IrDA infrared technology, thereby eliminating cables, connectors and physical attachments.
 
Our wireless connectivity product solutions consist of:
 
•
 
Embedded short-range wireless Bluetooth protocol software;
•
 
Embedded IrDA protocol software, test systems and Windows application software;
•
 
SyncML client software development kits; and
•
 
IrDA wireless connectivity hardware.
 
Product
  
Description
  
Target
Customers/Relationships
Embedded Short-Range Wireless Bluetooth Protocol Software:
XTNDAccess Blue SDK–Embedded Bluetooth Protocol Software

  
A Bluetooth software development kit that:
 
•      provides an efficient way to add reliable Bluetooth radio communications to any embedded device including personal digital assistants, mobile phones, pagers, digital cameras, portable office equipment, watches, medical equipment; industrial automation products and more;
•      is on the Bluetooth Qualified Product List, certified for Object Push, File Transfer, Dial-up Networking, LAN Access, FAX, Cordless
  
•      Original equipment manufacturers that integrate Bluetooth into their products.
•      Licensed by Palm Computing for inclusion in releases of Palm OS.
•      Licensed by Motorola to implement Bluetooth transport technology in Motorola products.
•      Licensed by Hewlett-Packard to implement Bluetooth technology in various imaging devices
•      Ported to run on Fujitsu’s picoJava-II based chip.
•      Licensed by NEC for implementation in a

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Product
  
Description
   
Target
Customers/Relationships
   
Telephone, Headset and Intercom profiles;
•      provides support for Multi-transport OBEX and IrMC; and
•      includes source code and complete documentation for implementing Bluetooth into mobile devices.
   
Bluetooth printer adapter and in a Bluetooth ISDN terminal adapter (AtermITX92BT).
Bluetooth Windows Applications

  
A Bluetooth software development kit that:
 
•      provides an efficient way to implement Bluetooth wireless technology in Windows-based devices;
•      supports leading Bluetooth hardware manufacturers including Broadcom, Cambridge Silicon Radio, Ericsson and SiliconWave;
•      includes lower level Windows protocols, support for Dial-up Networking and LAN profiles, as well as applications for Object Push, File Transfer and Synchronization profiles; and
•      via XTNDConnect PC, enables file synchronization between a PC and a Palm Windows CE (Pocket PC), or a Casio Pocket Viewer device.
   
•      Original equipment manufacturers who are producing Bluetooth devices and need them to communicate with Windows-based PC’s.
•      PC manufacturers and PC card and USB peripheral manufacturers who need to bundle Bluetooth software to provide a complete solution.

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Product
  
Description
  
Target
Customers/Relationships
XTNDAccess SyncML SDK

  
A client toolkit that:
 
•      provides an efficient way to implement the SyncML synchronization protocol for a wide range of devices including cell phones, smart phones and personal digital assistants;
•      works with out-of-the-box client/server and PC Sync applications such as our XTNDConnect Server and XTNDConnect PC software; and
•      certified compliant by the SyncML Initiative.
  
Device manufacturers for mobile phones and personal digital assistants.
XTNDConnect Blue SDK for Windows CE


  
A Bluetooth software development kit that:
 
•      enables mobile device manufacturers to use Bluetooth functionality in their Windows-based products and Pocket PC devices; and
•      has portable source code that enables manufacturers to compile it for specific processors or display sizes.
  
•      Original equipment manufacturers who develop Windows CE-based products, such as handhelds, industrial equipment, automotive systems and medical devices.
Embedded IrDA Protocol Software, Test Systems and Windows Applications Software:
 
XTNDAccess IrDA Software
  
A complete IrDA infrared software development kit that provides an efficient way to add reliable IrDA-compliant communications to any embedded device including digital cameras and handheld organizers such as mobile phones, watches and the Palm Organizer.
  
•      Original equipment manufacturers that integrate IrDA into their products.
•      Palm has included this software in their Palm OS and all devices starting with the Palm III.

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Product
  
Description
  
Target
Customers/Relationships
IrDA Infrared Test Tools
  
A stand-alone testing and certification system for IrDA-enabled devices. We added wireless connectivity tools to our product line in 1999 through the acquisition of Genoa’s IrDA testing tools.
  
Original equipment manufacturers for the design, development and testing of infrared implementation in mobile devices.
IrDA Wireless Connectivity Hardware:
 
XTNDAccess hardware products

  
XTNDAccess hardware products enable mobile users to link portable and stationary devices together for mobile information management applications such as synchronization, file transfer, access to local area networks, intranets and the Internet all without a single physical connection. We have engineered the hardware, embedded software stacks, Windows drivers and user applications included with each wireless connectivity hardware product. Products include:
 
•     XTNDAccess IrDA PC Adapter: a wireless link between a mobile device and a desktop personal computer with a serial port.
•     XTNDAccess IrDA Network Adapter: a wireless access point for connection to a local area network.
•     XTNDAccess IrDA USB Adapter: a wireless link between a mobile device and a desktop personal computer with a USB port.
•     XTNDAccess IrDA Printer Adapter: a wireless link between a mobile device and a printer with a parallel port.
  
•     Original equipment manufacturers that incorporate or bundle our products with personal digital assistants, mobile phones, pagers, laptop computers, digital cameras, watches and other mobile devices.
•     Enterprise customers through our distributors and through e-commerce to
support the use of XTNDConnect Server for Palm, Pocket PC, CE and EPOC-based mobile devices.

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OUR TECHNOLOGY
 
We focus our technology development efforts on mobile data management software and wireless connectivity software. Important technology features of our products are described below.
 
Mobile Data Management Software Technologies:
 
XTNDConnect Server. Our technology allows the update and exchange of data with enterprise server applications such as Microsoft Exchange, Lotus Notes and any databases accessible via ADO (OLE DB), ODBC or via our custom SDK, and helps system administrators manage mobile devices with IT application deployment, backup, restore, installation, configuration and reporting. Technological features of XTNDConnect Server meet the following needs of IT organizations:
 
•
 
management and configuration of users and mobile devices using our administration program, which supports Microsoft Management Console plug-in technology for remote monitoring;
•
 
customized synchronization using enhanced filtering technologies, which is particularly useful for synchronization using wireless protocols such as Mobitex, GSM, GPRS, CDMA, CDPD, 1XRTT, 3G, or iMode;
•
 
advanced security implementing elliptical curve encryption technologies that permit highly-secure connections, while consuming minimal bandwidth and battery power on the mobile device;
•
 
broad communications options enabling any wired, wireless or cellular connection, including physical or wireless TCP/IP, GSM, CDMA, iDEN, Internet, PPP, cradle, IrDA or Bluetooth; and
•
 
support for Microsoft Exchange, Lotus Notes or any database accessible via ADO (OLE DB), ODBC or via our custom SDK, custom plug-ins to support proprietary applications and our proprietary replication wizard for synchronization of database records.
 
XTNDConnect PC. XTNDConnect PC is a desktop synchronization solution with technology that allows users to synchronize common data types (such as contacts, calendar, email, and notes) between mobile devices and popular applications on their personal computer. Our technology incorporates a single engine to synchronize information between personal computer applications (such as Microsoft Outlook, Lotus Notes, Lotus Organizer and ACT!) and mobile devices (such as Palm OS, Windows CE, Pocket PC, Casio Pocket Viewer and Siemens and Ericsson mobile phones). In addition, we have extended our synchronization technology through our Internet alliances to online personal information managers and provide support for devices using industry-accepted synchronization standards (such as IrMC and SyncML). Data record translation capabilities synchronize many disparate device formats and application data types, for example, allowing joint synchronization with Palm OS, Microsoft Windows CE and Pocket PC devices. Auto-Connect technology permits the automatic synchronization of devices upon connection and can be supported on Bluetooth and IrDA, as well as cable and cradle connections.
 
XNTDConnect Mobile Objects. Our software is a distributed-object solution that enables mobile/handheld and PC applications to directly interact with centrally located server-based objects. The technology supports client development and client application development for AppForge, CodeWarrior and eMbedded Visual Studio. Cross-platform support is provided for Pocket PC, Palm and Windows devices. For unstable network environments there is live database access with store and forward architecture. XTNDConnect Mobile Objects also supports Streamline Security, which is a patent-pending security design based on Certicom’s Elliptical Curve security technology. Streamlined Security uses a one-pass authentication model instead of the five-pass model that is common with secure socket layer (SSL) security. Streamlined Security is therefore optimal for wireless networks because

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the user is authenticated in one pass. In addition, if the user connection is lost, the server recognizes the device automatically without re-authentication once connectivity is regained. This is accomplished by a sessionless key that is placed on the device upon initial authentication. In comparison, the SSL model requires the user to endure the five-pass model again upon reconnection, which can take 15 seconds per pass.
 
Advantage Database Server. We have developed algorithms for burst-mode transmission of data records across the LAN or WAN. Advantage Database Server has an advanced filter optimization engine, enhanced locking algorithms and support for a wide variety of communications protocols. Its transaction processing engine is subject to a patent that we hold.
 
Wireless Connectivity Software Technologies:
 
Multi-transport OBEX. Multi-transport OBEX, or Object Exchange, allows disparate mobile devices to exchange abstract information types (objects) without pre-existing configuration of drivers, file type or protocols between the devices. Our Multi-transport OBEX is agnostic to the type of physical connection, isolating the communications media from the applications using the connection and allowing synchronization through a wireless connection such as Bluetooth or IrDA or through a physical connection such as USB or serial.
 
IrMC Mobile Communications. IrMC mobile communications form the basis for universal data exchange synchronization among devices such as laptop and handheld computers, mobile phones and pagers and personal digital assistants. We have ported this software to the Bluetooth protocol stacks, implementing several of the key Bluetooth profile identifiers for original equipment manufacturers. The IrMC Level 4 Sync Server is a required profile for mobile devices and was adapted from our work with the Infrared Data Association.
 
XTNDAccess Blue SDK. Bluetooth radio communications technology allows high-speed interconnection, over distances of up to 10 meters, of personal digital assistants, personal computers and mobile phones, without the use of cables, connectors or docking cradles. With its small memory footprint, we believe XTNDAccess Blue SDK is one of the market’s first embedded implementations of Bluetooth stacks for small, inexpensive mobile devices such as personal digital assistants, pagers, cameras and mobile phones. XTNDAccess Blue SDK includes an embedded operating system application of all modules from Hardware Control Interface to the OS abstraction layer. Within this protocol set is software for functions such as a Hardware Control Interface Driver, Service Discovery Protocol, RFCOMM, OBEX API and TCS Binary.
 
XTNDConnect Blue SDK for Windows. XTNDConnect Blue SDK for Windows is a software development kit that enables PC and mobile device manufacturers, PC hardware manufacturers and application developers to quickly develop Bluetooth solutions for Windows-based products. The SDK provides a full set of tools for developing wireless communication applications for Windows 2000, Windows 98SE, Windows ME, and Pocket PC operating systems. Components of the software development kit include a:
 
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wireless toolkit including APIs and sample development applications;
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Bluetooth protocol stack for Windows 2000, 98SE and ME;
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driver development kit including sample drivers for USB, PCMCIA and UART radios; and
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developer’s guide.
 
XTNDAccess SyncML SDK. XTNDAccess SyncML SDK is a client toolkit that enables developers to implement the SyncML synchronization protocol for a wide range of embedded devices. Designed for client devices such as cell phones, smart phones, and personal digital assistants, the kit provides a complete set of tools including portable source code, easy-to-use APIs and comprehensive documentation.

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OUR NEW PRODUCTS AND TECHNOLOGY ACQUIRED FROM VIAFONE
 
The product solution set we acquired from ViaFone consists of the OneBridge Mobility Suite, which is a collection of software products that connects field sales and service employees with the critical business systems, information, and processes of their enterprise. The OneBridge Mobility Suite includes both the OneBridge Mobility Platform and OneBridge Mobile Business Applications.
 
OneBridge Mobility Platform
 
OneBridge Mobility Platform is a Java and XML-based development application framework that is designed to streamline the development process for building mobile applications that access information from many back-office applications, including enterprise resource planning (ERP), customer relationship management (CRM), and e-mail from voice and data interfaces. Product features of OneBridge Mobility Platform include the following:
 
 
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the ability to access information stored in complex multi-vendor enterprise information systems through a set of integrated connectors and adapters that support direct access to Siebel, SAP, Oracle, Lotus Notes, Microsoft Exchange, LDAP, JDBC and XML data sources;
 
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dynamic markup rendering for deploying mobile applications on thin client devices such as Palm, PocketPC, RIM Blackberry or any other equipment that supports WAP, HTML, or iMode;
 
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support for offline operation, server side synchronization and alerts on Palm and PocketPC devices;
 
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the ability to access enterprise information through a voice interface via any telephone, either land line or cellular;
 
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an integrated tools suite that allows for back-end integration logic and presentation logic to be managed from a single toolkit;
 
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open and extensible APIs and interfaces that allow customization of applications in Java, XSL, JavaScript, VBScript, and COM; and
 
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a multi-tiered deployment architecture that allows for different components of the mobile applications to run on different remote computers based on security, scalability, and integration needs.
 
ViaFone designed the OneBridge Mobility Platform to provide the following benefits to customers:
 
 
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Security. Full DMZ and shared DMZ/Private Network configurations enable maximum security when the mobile applications using the OneBridge Mobility Platform access information over the Internet.
 
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Scalability. Because OneBridge servers are stateless from the network perspective, applications can virtually support any number of users by easily adding another computer and distributing the load using any IP load-balancing technique.
 
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Integration. OneBridge’s support for multiple operating systems and platforms enables the computer running the integration logic to be distributed and eventually use a different operating system than the one providing the presentation logic to devices. This allows for maximum flexibility and versatility when it comes to interfacing with complex multi-vendor data systems.
 
OneBridge Mobile Business Applications
 
OneBridge Mobile Business Applications consist of a set of pre-built application modules that are designed to leverage the power of the OneBridge Mobility Platform and provide a rapidly deployable functionality. The OneBridge Mobile Business Applications provide real-time and offline access to personal information management (PIM), CRM and ERP information through pre-defined modules that

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are configured to access Siebel, SAP, Microsoft Exchange and Lotus Notes systems. The available applications consist of the following:
 
OneBridge Mobile Professional. OneBridge Mobile Professional enables access to Microsoft Exchange and Lotus Notes personal information management information (Email, Calendar, Contacts and Expense Reporting) from a broad range of mobile devices.
 
OneBridge Mobile Sales. OneBridge Mobile Sales provides access to Activities, Opportunities, Customers, Contacts, and Orders directly from Siebel, and/or SAP systems. Information can be either accessed in real time or downloaded to a Pocket PC-enabled device via physical product cradle or over the Internet.
 
OneBridge Mobile Pharma. OneBridge Mobile Pharma optimizes time utilization and visit efficiency for pharmaceutical sales representatives. It provides Call Report, Samples Management, Prescription Data and Product Information functionality that accesses Siebel, ePharma, Microsoft Exchange, Lotus Notes and Oracle databases from any Pocket PC device.
 
OneBridge Mobile Portal. Designed specifically for telecommunications service providers, OneBridge Mobile Portal is a customizable, multilingual mobile portal management engine that enables telecommunications providers to build, deploy and manage mobile portals for their consumer and corporate subscribers quickly and easily. With Mobile Portal, service providers use a Web browser interface and drag-and-drop functionality to create portal menus for users that feature service providers’ content and application partners.
 
RESEARCH AND DEVELOPMENT
 
As of June 30, 2002, we had 79 full-time equivalent employees devoted to our research and development activities, primarily at our facilities in Boise, Idaho; Bristol, England; and Corvallis, Oregon. Our acquisition of ViaFone added an additional 14 engineers located in Brisbane, California and Toronto, Canada. We believe our success depends upon our ability to develop, introduce and manufacture new products and enhance existing products, allowing us to offer our customers products that achieve increasing levels of capability, performance and reliability. Our research and development efforts are currently focused on:
 
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data synchronization;
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mobile device management;