UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended December 31, 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 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 ¨ No x
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 registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The number of shares outstanding of the registrant’s common stock as February 27, 2004 was 26,957,851.
FORM 10-Q
For the Quarterly Period Ended December 31, 2003
Table of Contents
| Page | ||||||
| Part I. |
Financial Information | |||||
| Item 1. | ||||||
| 3 | ||||||
| b) Condensed Consolidated Balance Sheets, as of December 31, 2003 and September 30, 2003 |
4 | |||||
| 5 | ||||||
| 7 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||||
| Item 3. | 31 | |||||
| Item 4. | 31 | |||||
| Part II. |
Other Information | |||||
| Item 1. | 32 | |||||
| Item 2. | 32 | |||||
| Item 3. | 32 | |||||
| Item 4. | 32 | |||||
| Item 5. | 32 | |||||
| Item 6. | 33 | |||||
| Signatures and certifications | 34 | |||||
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 (As restated, |
|||||||
| (Unaudited) | ||||||||
| Net revenues: |
||||||||
| Licenses |
$ | 2,366 | $ | 2,362 | ||||
| Services |
1,102 | 583 | ||||||
| Total net revenues |
3,468 | 2,945 | ||||||
| Cost of revenues: |
||||||||
| Licenses |
168 | 56 | ||||||
| Services |
330 | 258 | ||||||
| Total cost of revenues |
498 | 314 | ||||||
| Gross margin |
2,970 | 2,631 | ||||||
| Operating expenses: |
||||||||
| Research and development |
961 | 987 | ||||||
| Selling, general and administrative |
4,585 | 3,661 | ||||||
| Restructuring charge |
19 | 1,147 | ||||||
| Total operating expenses |
5,565 | 5,795 | ||||||
| Operating loss |
(2,595 | ) | (3,164 | ) | ||||
| Other income (expense): |
||||||||
| Interest income (expense), net |
(7 | ) | 32 | |||||
| Other expense, net |
(50 | ) | (14 | ) | ||||
| Total other income (expense) |
(57 | ) | 18 | |||||
| Loss before income taxes |
(2,652 | ) | (3,146 | ) | ||||
| Income tax expense |
98 | 60 | ||||||
| Net loss |
(2,750 | ) | (3,206 | ) | ||||
| Other comprehensive income: |
||||||||
| Unrealized gain on available for sale securities |
75 | 283 | ||||||
| Foreign currency translation adjustment |
69 | (4 | ) | |||||
| Total other comprehensive income |
144 | 279 | ||||||
| Comprehensive loss |
$ | (2,606 | ) | $ | (2,927 | ) | ||
| Net Loss per share: |
||||||||
| Basic and diluted |
$ | (0.22 | ) | $ | (0.39 | ) | ||
| Shares used in net loss per share calculation: |
||||||||
| Basic and diluted |
12,689 | 8,206 | ||||||
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In thousands) |
December 31, 2003 |
September 30, 2003 |
||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,850 | $ | 3,151 | ||||
| Available-for-sale equity securities |
708 | 632 | ||||||
| Trade receivables, net of allowances of $0.4 million at December 31, 2003 and $0.5 million at September 30, 2003 |
2,894 | 2,980 | ||||||
| Other receivables |
179 | 175 | ||||||
| Prepaids and other current assets |
630 | 720 | ||||||
| Total current assets |
8,261 | 7,658 | ||||||
| Property and equipment, net |
612 | 734 | ||||||
| Acquired intangible assets, net |
1,144 | 1,262 | ||||||
| Goodwill |
2,395 | 2,391 | ||||||
| Other assets |
427 | 343 | ||||||
| Total assets |
$ | 12,839 | $ | 12,388 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Trade payables |
$ | 745 | $ | 1,043 | ||||
| Line of credit |
— | 319 | ||||||
| Royalties payable |
— | 22 | ||||||
| Royalties payable - former New Moon shareholders |
1,723 | 1,725 | ||||||
| Income taxes payable |
546 | 549 | ||||||
| Accrued restructuring charges |
631 | 854 | ||||||
| Accrued expenses and other current liabilities |
4,204 | 3,615 | ||||||
| Deferred revenues |
2,116 | 1,757 | ||||||
| Total current liabilities |
9,965 | 9,884 | ||||||
| Long-term deferred revenues |
472 | 36 | ||||||
| Total long-term liabilities |
472 | 36 | ||||||
| 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 15,279 at December 31, 2003 and 11,959 shares at September 30, 2003 |
129,819 | 126,749 | ||||||
| Deferred stock compensation |
(530 | ) | — | |||||
| Accumulated other comprehensive income |
697 | 553 | ||||||
| Accumulated deficit |
(127,584 | ) | (124,834 | ) | ||||
| Total shareholders’ equity |
2,402 | 2,468 | ||||||
| Total liabilities and shareholders’ equity |
$ | 12,839 | $ | 12,388 | ||||
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended December 31, |
||||||||
| (In thousands) |
2003 |
2002 (As restated, see |
||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (2,750 | ) | $ | (3,206 | ) | ||
| Adjustments to reconcile net loss to net cash used for operating activities: |
||||||||
| Depreciation and amortization |
270 | 212 | ||||||
| Foreign currency exchange loss (gain) |
43 | (6 | ) | |||||
| Loss on disposal of property and equipment |
1 | 79 | ||||||
| Stock compensation expense |
22 | — | ||||||
| Changes in operating assets and liabilities, net of New Moon acquisition: |
||||||||
| Trade receivables |
85 | 507 | ||||||
| Other receivables |
(4 | ) | — | |||||
| Prepaids and other current assets |
90 | 102 | ||||||
| Other assets |
(84 | ) | 262 | |||||
| Trade payables |
(298 | ) | (189 | ) | ||||
| Royalties payable |
(22 | ) | (53 | ) | ||||
| Income taxes payable |
(3 | ) | 222 | |||||
| Accrued restructuring expenses |
(223 | ) | 446 | |||||
| Accrued expenses and other current liabilities |
607 | (606 | ) | |||||
| Deferred revenues |
795 | 3 | ||||||
| Net cash used in operating activities |
(1,471 | ) | (2,227 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(6 | ) | (127 | ) | ||||
| Additional New Moon purchase acquisition costs |
(4 | ) | — | |||||
| Change in royalties payable - former New Moon shareholders |
(2 | ) | — | |||||
| Net cash used in investing activities |
(12 | ) | (127 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Payments on capital lease obligations |
(18 | ) | (2 | ) | ||||
| Line of credit payments |
(319 | ) | — | |||||
| Net proceeds from issuance of common stock and warrants |
2,518 | — | ||||||
| Net cash provided by (used in) financing activities |
2,181 | (2 | ) | |||||
| Effects of exchange rate changes on cash and cash equivalents |
1 | 2 | ||||||
| Increase (decrease) in cash and cash equivalents |
699 | (2,354 | ) | |||||
| Cash and cash equivalents at beginning of period |
3,151 | 7,055 | ||||||
| Cash and cash equivalents at end of period |
$ | 3,850 | $ | 4,701 | ||||
See accompanying notes to condensed consolidated financial statements.
5
TARANTELLA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)