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 March 31, 2004
| ¨ | 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 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 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 to this Form 10-K. ¨
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 April 30, 2004 was 27,390,646.
FORM 10-Q
For the Quarterly Period Ended March 31, 2004
Table of Contents
| Page | ||||||
| Part I. Financial Information | ||||||
| Item 1. | Financial Statements | |||||
| 3 | ||||||
|
b) Condensed Consolidated Balance Sheets, |
4 | |||||
| 5 | ||||||
| 7 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 34 | ||||
| Item 4. | Controls and Procedures | 34 | ||||
| Part II. Other Information | ||||||
| Item 1. | Legal Proceedings | 35 | ||||
| Item 2. | Changes in Securities and Use of Proceeds | 35 | ||||
| Item 3. | Defaults Upon Senior Securities | 35 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 35 | ||||
| Item 5. | Other Information | 35 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 36 | ||||
| Signatures and certifications | 37 | |||||
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended March 31, |
Six Months Ended March 31, |
|||||||||||||||
| 2004 |
2003 (As restated, see Note 2) |
2004 |
2003 (As restated, see Note 2) |
|||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Net revenues: |
||||||||||||||||
| Licenses |
$ | 2,159 | $ | 3,433 | $ | 4,525 | $ | 5,795 | ||||||||
| Services |
978 | 797 | 2,080 | 1,380 | ||||||||||||
| Total net revenues |
3,137 | 4,230 | 6,605 | 7,175 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Licenses |
202 | 82 | 370 | 138 | ||||||||||||
| Services |
394 | 291 | 724 | 549 | ||||||||||||
| Total cost of revenues |
596 | 373 | 1,094 | 687 | ||||||||||||
| Gross margin |
2,541 | 3,857 | 5,511 | 6,488 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
1,205 | 906 | 2,166 | 1,893 | ||||||||||||
| Selling, general and administrative |
4,867 | 3,740 | 9,452 | 7,401 | ||||||||||||
| Restructuring |
(8 | ) | — | 11 | 1,147 | |||||||||||
| Total operating expenses |
6,064 | 4,646 | 11,629 | 10,441 | ||||||||||||
| Operating loss |
(3,523 | ) | (789 | ) | (6,118 | ) | (3,953 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income (expense), net |
2 | 14 | (5 | ) | 46 | |||||||||||
| Other income (expense), net |
(61 | ) | 63 | (111 | ) | 49 | ||||||||||
| Total other income (expense) |
(59 | ) | 77 | (116 | ) | 95 | ||||||||||
| Loss before income taxes |
(3,582 | ) | (712 | ) | (6,234 | ) | (3,858 | ) | ||||||||
| Income tax expense |
97 | 98 | 195 | 158 | ||||||||||||
| Net loss |
(3,679 | ) | (810 | ) | (6,429 | ) | (4,016 | ) | ||||||||
| Other comprehensive income (loss): |
||||||||||||||||
| Unrealized gain (loss) on available for sale securities |
689 | (177 | ) | 764 | 106 | |||||||||||
| Foreign currency translation adjustment |
52 | (18 | ) | 121 | (22 | ) | ||||||||||
| Total other comprehensive income (loss) |
741 | (195 | ) | 885 | 84 | |||||||||||
| Comprehensive loss |
$ | (2,938 | ) | $ | (1,005 | ) | $ | (5,544 | ) | $ | (3,932 | ) | ||||
| Net loss per share: |
||||||||||||||||
| Basic and diluted |
$ | (0.18 | ) | $ | (0.10 | ) | $ | (0.39 | ) | $ | (0.49 | ) | ||||
| Shares used in net loss per share calculation: |
||||||||||||||||
| Basic and diluted |
20,232 | 8,240 | 16,440 | 8,223 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In thousands) |
March 31, 2004 |
September 30, 2003 |
||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 16,575 | $ | 3,151 | ||||
| Available-for-sale equity securities |
1,396 | 632 | ||||||
| Trade receivables, net of allowances of $0.3 million at March 31, 2004 and $0.5 million at September 30, 2003 |
3,190 | 2,980 | ||||||
| Other receivables |
181 | 175 | ||||||
| Prepaids and other current assets |
591 | 720 | ||||||
| Total current assets |
21,933 | 7,658 | ||||||
| Property and equipment, net |
666 | 734 | ||||||
| Acquired intangible assets, net |
1,330 | 1,262 | ||||||
| Goodwill |
2,395 | 2,391 | ||||||
| Other assets |
403 | 343 | ||||||
| Total assets |
$ | 26,727 | $ | 12,388 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Trade payables |
$ | 540 | $ | 1,043 | ||||
| Line of credit |
— | 319 | ||||||
| Royalties payable |
1 | 22 | ||||||
| Royalties payable - former New Moon shareholders |
1,713 | 1,725 | ||||||
| Income taxes payable |
534 | 549 | ||||||
| Accrued restructuring charges |
416 | 854 | ||||||
| Accrued expenses and other current liabilities |
4,453 | 3,615 | ||||||
| Deferred revenues |
2,514 | 1,757 | ||||||
| Total current liabilities |
10,171 | 9,884 | ||||||
| Long-term deferred revenues |
1,205 | 36 | ||||||
| Total long-term liabilities |
1,205 | 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 27,288 at March 31, 2004 and 11,959 shares at September 30, 2003 |
145,716 | 126,749 | ||||||
| Deferred stock compensation |
(540 | ) | — | |||||
| Accumulated other comprehensive income |
1,438 | 553 | ||||||
| Accumulated deficit |
(131,263 | ) | (124,834 | ) | ||||
| Total shareholders’ equity |
15,351 | 2,468 | ||||||
| Total liabilities and shareholders’ equity |
$ | 26,727 | $ | 12,388 | ||||
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended March 31, |
||||||||
| (In thousands) |
2004 |
2003 (As restated, see note 2) |
||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (6,429 | ) | $ | (4,016 | ) | ||
| Adjustments to reconcile net loss to net cash used for operating activities: |
||||||||
| Depreciation and amortization |
525 | 381 | ||||||
| Foreign currency exchange loss (gain) |
78 | (32 | ) | |||||
| Loss on disposal of property and equipment |
2 | 82 | ||||||
| Amortization of deferred stock compensation |
166 | — | ||||||
| Stock compensation expense |
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