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, 2003
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From __________ to __________
Commission File Number 0-21484
TARANTELLA, INC.
(Exact name of registrant as specified in this charter)
| CALIFORNIA | 94-2549086 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 425 Encinal Street, Santa Cruz, California | 95060 | |
| (Address of principal executive office) | (Zip Code) |
Registrant’s telephone number, including area code (831) 427-7222
Indicate by check mark whether the registrant (1) has filed all reports 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 ¨ No x
As of December 31, 2003, registrant had 15,279,271 shares of Common Stock outstanding.
FORM 10-Q
For the Quarterly Period Ended June 30, 2003
Table of Contents
| Page | ||||
| Part I. Financial Information | ||||
| Item 1. | Financial Statements | |||
| a) Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2003 and 2002 | 3 | |||
| b) Condensed Consolidated Balance Sheets, as of June 30, 2003 and September 30, 2002 (restated) | 4 | |||
| c) Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2003 and 2002 | 5 | |||
| d) Notes to Condensed Consolidated Financial Statements | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | ||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 31 | ||
| Item 4. | Controls and Procedures | 32 | ||
| Part II. Other Information | ||||
| Item 1. | Legal Proceedings | 33 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 33 | ||
| Item 3. | Defaults Upon Senior Securities | 33 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 33 | ||
| Item 5. | Other Information | 33 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 33 | ||
| Signatures | 35 | |||
2
Item I. Financial Statements
TARANTELLA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| (Unaudited) | ||||||||||||||||
| Net revenues: |
||||||||||||||||
| Licenses |
$ | 3,059 | $ | 2,940 | $ | 8,996 | $ | 9,224 | ||||||||
| Services |
693 | 710 | 1,931 | 1,590 | ||||||||||||
| Total net revenues |
3,752 | 3,650 | 10,927 | 10,814 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Licenses |
(14 | ) | 127 | 124 | 356 | |||||||||||
| Services |
305 | 360 | 854 | 867 | ||||||||||||
| Total cost of revenues |
291 | 487 | 978 | 1,223 | ||||||||||||
| Gross margin |
3,461 | 3,163 | 9,949 | 9,591 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
1,062 | 1,322 | 2,955 | 4,375 | ||||||||||||
| Selling, general and administrative |
3,308 | 4,642 | 10,709 | 15,733 | ||||||||||||
| Restructuring charge |
101 | — | 1,248 | 1,718 | ||||||||||||
| Total operating expenses |
4,471 | 5,964 | 14,912 | 21,826 | ||||||||||||
| Operating loss |
(1,010 | ) | (2,801 | ) | (4,963 | ) | (12,235 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income, net |
4 | 36 | 50 | 477 | ||||||||||||
| Other income (expense), net |
(118 | ) | 444 | (69 | ) | (894 | ) | |||||||||
| Gain (loss) on sale of divisions to Caldera |
— | 445 | — | (2,593 | ) | |||||||||||
| Gain on sale of Caldera common stock |
— | 3,141 | — | 4,491 | ||||||||||||
| Loss on equity investment in Caldera |
— | — | — | (4,010 | ) | |||||||||||
| Total other income (expense) |
(114 | ) | 4,066 | (19 | ) | (2,529 | ) | |||||||||
| Income (loss) before income taxes |
(1,124 | ) | 1,265 | (4,982 | ) | (14,764 | ) | |||||||||
| Income tax expense (benefit) |
122 | — | 280 | (760 | ) | |||||||||||
| Net income (loss) |
$ | (1,246 | ) | $ | 1,265 | $ | (5,262 | ) | $ | (14,004 | ) | |||||
| Other comprehensive income: |
||||||||||||||||
| Unrealized gain on available for sale securities |
$ | 71 | $ | 5 | $ | 177 | $ | 70 | ||||||||
| Foreign currency translation adjustment |
28 | 8 | 6 | 24 | ||||||||||||
| Total other comprehensive income |
99 | 13 | 183 | 94 | ||||||||||||
| Comprehensive income (loss) |
$ | (1,147 | ) | $ | 1,278 | $ | (5,079 | ) | $ | (13,910 | ) | |||||
| Earnings (loss) per share: |
||||||||||||||||
| Basic |
$ | (0.14 | ) | $ | 0.16 | $ | (0.63 | ) | $ | (1.74 | ) | |||||
| Diluted |
$ | (0.14 | ) | $ | 0.15 | $ | (0.63 | ) | $ | (1.74 | ) | |||||
| Shares used in earnings (loss) per share calculation: |
||||||||||||||||
| Basic |
8,764 | 8,114 | 8,403 | 8,069 | ||||||||||||
| Diluted |
8,764 | 8,548 | 8,403 | 8,069 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2003 |
September 30, |
|||||||
| (As restated, see note 2) |
||||||||
| (In thousands) | (Unaudited) | |||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 4,594 | $ | 7,055 | ||||
| Available-for-sale equity securities |
400 | 223 | ||||||
| Trade receivables, net of allowance for doubtful accounts of $759 at June 30, 2003 and $340 at September 30, 2002 |
3,106 | 2,686 | ||||||
| Caldera and other receivables |
321 | 229 | ||||||
| Prepaids and other current assets |
811 | 780 | ||||||
| Total current assets |
9,232 | 10,973 | ||||||
| Property and equipment, net |
897 | 1,214 | ||||||
| Restricted cash |
— | 500 | ||||||
| Acquired intangible assets, net |
1,381 | — | ||||||
| Goodwill |
2,364 | — | ||||||
| Other assets |
387 | 567 | ||||||
| Total assets |
$ | 14,261 | $ | 13,254 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities: |
||||||||
| Trade payables |
$ | 656 | $ | 448 | ||||
| Royalties payable |
21 | 202 | ||||||
| Royalties payable— former New Moon shareholders |
1,784 | — | ||||||
| Income taxes payable |
591 | 581 | ||||||
| Accrued restructuring charges |
542 | 871 | ||||||
| Other payables—Caldera |
— | 400 | ||||||
| Accrued expenses and other current liabilities |
4,454 | 3,963 | ||||||
| Deferred revenues |
1,679 | 945 | ||||||
| Total current liabilities |
9,727 | 7,410 | ||||||
| Long-term deferred revenues |
49 | 33 | ||||||
| Total long-term liabilities |
49 | 33 | ||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, authorized 20,000 shares; no shares issued and outstanding |
— | — | ||||||
| Common stock, no par value, authorized 100,000 shares; issued and outstanding 9,948 shares at June 30, 2003 and 8,206 shares at September 30, 2002 |
124,597 | 120,844 | ||||||
| Accumulated other comprehensive income |
300 | 117 | ||||||
| Accumulated deficit |
(120,412 | ) | (115,150 | ) | ||||
| Total shareholders’ equity |
4,485 | 5,811 | ||||||
| Total liabilities and shareholders’ equity |
$ | 14,261 | $ | 13,254 | ||||
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| (In thousands) | (Unaudited) | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (5,262 | ) | $ | (14,004 | ) | ||
| Adjustments to reconcile net loss to net cash used for operating activities: |
||||||||
| Depreciation and amortization |
595 | 714 | ||||||
| Foreign currency exchange loss (gain) |
(18 | ) | 36 | |||||
| Gain on sale of marketable security |
— | |||||||