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, 2005
| ¨ | 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, including zip code)
(831) 427-7222
(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 ¨
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 of April 29, 2005 was 27,994,937.
TARANTELLA, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2005
2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share data)
| Three Months Ended March 31, |
Six Months Ended March 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Net revenues: |
||||||||||||||||
| Licenses |
$ | 1,413 | $ | 2,159 | $ | 4,284 | $ | 4,525 | ||||||||
| Services |
1,251 | 978 | 2,394 | 2,080 | ||||||||||||
| Total net revenues |
2,664 | 3,137 | 6,678 | 6,605 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Licenses |
143 | 202 | 293 | 370 | ||||||||||||
| Services |
494 | 394 | 895 | 724 | ||||||||||||
| Total cost of revenues |
637 | 596 | 1,188 | 1,094 | ||||||||||||
| Gross margin |
2,027 | 2,541 | 5,490 | 5,511 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
955 | 1,205 | 1,787 | 2,166 | ||||||||||||
| Selling, general and administrative |
4,434 | 4,781 | 8,357 | 9,317 | ||||||||||||
| Legal settlement and litigation costs |
— | 86 | — | 135 | ||||||||||||
| Restructuring charge (credit) |
— | (8 | ) | — | 11 | |||||||||||
| Total operating expenses |
5,389 | 6,064 | 10,144 | 11,629 | ||||||||||||
| Operating loss |
(3,362 | ) | (3,523 | ) | (4,654 | ) | (6,118 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
18 | 12 | 45 | 13 | ||||||||||||
| Interest expense |
— | (10 | ) | (6 | ) | (18 | ) | |||||||||
| Other expense, net |
(50 | ) | (61 | ) | (18 | ) | (111 | ) | ||||||||
| Total other income (expense) |
(32 | ) | (59 | ) | 21 | (116 | ) | |||||||||
| Loss before provision for income taxes |
(3,394 | ) | (3,582 | ) | (4,633 | ) | (6,234 | ) | ||||||||
| Provision for income taxes |
72 | 97 | 91 | 195 | ||||||||||||
| Net loss |
(3,466 | ) | (3,679 | ) | (4,724 | ) | (6,429 | ) | ||||||||
| Other comprehensive income (loss): |
||||||||||||||||
| Foreign currency translation adjustment |
(4 | ) | 52 | 54 | 121 | |||||||||||
| Unrealized gain on available for sale securities |
— | 689 | — | 764 | ||||||||||||
| Total other comprehensive income (loss) |
(4 | ) | 741 | 54 | 885 | |||||||||||
| Comprehensive loss |
$ | (3,470 | ) | $ | (2,938 | ) | $ | (4,670 | ) | $ | (5,544 | ) | ||||
| Net loss per share: |
||||||||||||||||
| Basic and diluted |
$ | (0.12 | ) | $ | (0.18 | ) | $ | (0.17 | ) | $ | (0.39 | ) | ||||
| Shares used in net loss per share calculation: |
||||||||||||||||
| Basic and diluted |
27,778 | 20,232 | 27,414 | 16,440 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2005 |
September 30, 2004 (1) |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,746 | $ | 9,621 | ||||
| Trade receivables, net of allowances of $73 at March 31, 2005 and $106 at September 30, 2004 |
2,058 | 2,069 | ||||||
| Other receivables |
371 | 247 | ||||||
| Prepaids and other current assets |
523 | 622 | ||||||
| Total current assets |
6,698 | 12,559 | ||||||
| Property and equipment, net |
791 | 947 | ||||||
| Acquired intangible assets, net |
497 | 674 | ||||||
| Goodwill |
2,395 | 2,395 | ||||||
| Other assets |
62 | 19 | ||||||
| Total assets |
$ | 10,443 | $ | 16,594 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Trade payables |
$ | 1,289 | $ | 832 | ||||
| Royalties payable - former New Moon shareholders |
1,713 | 1,713 | ||||||
| Income taxes payable |
209 | 210 | ||||||
| Accrued restructuring charges |
208 | 1,121 | ||||||
| Accrued expenses and other current liabilities |
2,229 | 3,740 | ||||||
| Deferred revenues |
2,543 | 2,572 | ||||||
| Total current liabilities |
8,191 | 10,188 | ||||||
| Long-term deferred revenues |
706 | 794 | ||||||
| Long-term liabilities, other |
83 | 16 | ||||||
| Total long-term liabilities |
789 | 810 | ||||||
| Total liabilities |
8,980 | 10,998 | ||||||
| Commitments and contingencies (note 10) |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, authorized 20,000 shares; no shares issued and outstanding in 2005 |
— | — | ||||||
| Common stock, no par value, authorized 100,000 shares; issued and outstanding 27,995 at March 31, 2005 and 27,553 shares at September 30, 2004 |
146,526 | 146,088 | ||||||
| Deferred stock compensation |
(88 | ) | (187 | ) | ||||
| Accumulated other comprehensive income |
238 | 184 | ||||||
| Accumulated deficit |
(145,213 | ) | (140,489 | ) | ||||
| Total shareholders’ equity |
1,463 | 5,596 | ||||||
| Total liabilities and shareholders’ equity |
$ | 10,443 | $ | 16,594 | ||||
| (1) | Amounts as of September 30, 2004 have been derived from audited financial statements as of that date. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Six Months Ended March 31, |
||||||||
| 2005 |
2004 |
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| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (4,724 | ) | $ | (6,429 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
395 | 525 | ||||||
| Gain from foreign currency translation |
40 | 78 | ||||||