8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

July 29, 2004

Date of Report (Date of earliest event reported)

TARANTELLA, INC.

(Exact name of registrant as specified in its charter)

California	000-21484	94-2549086
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

425 Encinal Street

Santa Cruz, California 95060

(Address of principal executive offices)

(831) 427-7222

(Registrant’s telephone number, including area code)

Item 7. Financial Statements and Exhibits

The following exhibit is filed herewith:

Exhibit Number	Description
99.1	Text of press release issued by Tarantella, Inc., dated July 29, 2004, reporting the results of operations for Tarantella’s third fiscal quarter for the period ended June 30, 2004

Item 12. Results of Operations and Financial Condition

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

On July 29, 2004, Tarantella, Inc. issued a press release regarding its financial results for its third fiscal quarter for the period ended June 30, 2004. The full text of the earnings release concerning the foregoing results is furnished herewith as Exhibit 99.1.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TARANTELLA, INC.
Date: July 29, 2004	By:	/s/ John M. Greeley
		John M. Greeley Chief Financial Officer

EXHIBIT INDEX

Exhibit	Description
99.1	Text of press release issued by Tarantella, Inc., dated July 29, 2004, reporting the results of operations for Tarantella’s third fiscal quarter for the period ended June 30, 2004

EX-99.1

Exhibit 99.1

Tarantella, Inc. Announces Financial Results for Third Quarter Fiscal Year 2004

FOR IMMEDIATE RELEASE

CONTACTS:

John M. Greeley, CFO	Todd Friedman
Tarantella, Inc.	The Blue Shirt Group
831-427-7460	415-217-5869
jgreeley@tarantella.com	todd@blueshirtgroup.com

Tarantella, Inc. Announces Financial Results for Third Quarter Fiscal Year 2004

SANTA CRUZ, CA, July 29, 2004 – Tarantella, Inc. (OTC: TTLA.PK), a leading supplier of secure remote access software, today announced its financial results for the third quarter of fiscal 2004.

For the third fiscal quarter ended June 30, 2004, the Company announced revenue of $2.6 million, an operating loss of $4.4 million, and a net loss of $3.7 million or $0.13 per share. This compares to revenue of $3.1 million, an operating loss of $3.5 million, and a net loss of $3.7 million or $0.18 per share in the prior quarter ended March 31, 2004. The Company also reported cash and cash equivalents of $13.5 million as of June 30, 2004.

“Over the past several quarters, Tarantella has been executing on its plan to regain momentum through a series of strategic technology and distribution partnerships,” said John M. Greeley, Tarantella’s CFO. “As part of this strategy, in the third quarter, we re-launched the Secure Global Desktop family of products and established relationships with DevonIT, Edge Technologies and Morse plc. Because the expected benefits from these initiatives will not be realized for several quarters, we expect some variations in revenue performance as we build a sustainable company. The management team remains committed to driving this company to profitability.”

Today, the Company will conduct its previously scheduled conference call to discuss its 2004 fiscal third quarter results at 1:30 p.m. Pacific Daylight Time (4:30 p.m. EDT). This call is being webcast by CCBN and can be accessed at Tarantella’s web site at www.tarantella.com or in audio mode by dialing (617) 614-2706 with the passcode of 24994230. The call will be available for audio replay for seven days following the call by dialing (617) 801-6888 with the passcode of 46008958.

The webcast is also being distributed over CCBN’s Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN’s individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN’s Individual Investor Network. Institutional investors can access the call via CCBN’s password-protected event management site, StreetEvents (www.streetevents.com).

For Tarantella Investors:

This press release contains forward-looking statements. These forward-looking statements may be identified by use of terms such as “anticipates”, “believes”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “should” or “will”, or the negative of those terms or similar expressions. These forward-looking statements, including statements relating to the long term potential benefits of certain strategic changes in the Company and the impact that such changes may have on future revenue for the Company, and are subject to significant risks and uncertainties. Actual results may differ materially from those described in such statements as a result of these risks and uncertainties. Investors are cautioned that all

-Page 1 of 5-

Tarantella, Inc. Announces Financial Results for Third Quarter Fiscal Year 2004

forward-looking statements involve risks and uncertainty, including without limitation, the risk that the Company may not achieve profitability, and that the strategic changes will not generate the expected benefits, and other risks detailed from time to time in Tarantella’s SEC filings, including its filings on Forms 10-Q and 10-K. Tarantella disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Tarantella, Inc.

Tarantella, Inc. (OTC:TTLA.PK) is a leading provider of secure remote access software to nearly 12,000 customers’ sites worldwide. Tarantella enables organizations to access and manage information, data and applications across all platforms, networks and devices. Tarantella bridges the gap between vendors, ensuring that customers have complete access to business-critical information. Using Tarantella’s software, customers realize the benefits of secure corporate data, maximizing return on existing IT assets and improved productivity. The company markets its products through the Internet, key industry partnerships, and a worldwide network of consultants and resellers. Tarantella is headquartered in Santa Cruz, Calif. For more information, please visit the Tarantella web site at www.tarantella.com.

Tarantella, Secure Global Desktop and the Tarantella logo are trademarks or registered trademarks of Tarantella, Inc. in the United States and other countries. All other brand and product names are or may be trademarks of, and are used to identify the products or services of, their respective owners.

-Page 2 of 5-

Tarantella, Inc. Announces Financial Results for Third Quarter Fiscal Year 2004

TARANTELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2004			2003			2004			2003
	(Unaudited)						(Unaudited)
Net revenues:
Licenses	$	1,575		$	2,992		$	6,100		$	8,787
Services		1,055			760			3,135			2,140
Total net revenues		2,630			3,752			9,235			10,927
Cost of revenues:
Licenses		218			(14	)		588			124
Services		434			305			1,158			854
Total cost of revenues		652			291			1,746			978
Gross margin		1,978			3,461			7,489			9,949
Operating expenses:
Research and development		1,149			1,062			3,315			2,955
Selling, general and administrative		5,233			3,308			14,685			10,709
Restructuring		(26	)		101			(15	)		1,248
Total operating expenses		6,356			4,471			17,985			14,912
Operating loss		(4,378	)		(1,010	)		(10,496	)		(4,963	)
Other income (expense):
Interest income		34			5			47			52
Interest expense		(9	)		(1	)		(27	)		(2	)
Gain on sale of investments		718			—			718			—
Impairment of investments		—			(151	)		—			(151	)
Other income (expense), net		(18	)		33			(129	)		82
Total other income (expense)		725			(114	)		609			(19	)
Loss before income taxes		(3,653	)		(1,124	)		(9,887	)		(4,982	)
Income tax expense		44			122			239			280
Net loss		(3,697	)		(1,246	)		(10,126	)		(5,262	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(18	)		28			103			6
Unrealized gain (loss) on available for sale securities		(508	)		71			256			177
Reclassification adjustment for gains included in net income		(718	)		—			(718	)		—
Total other comprehensive income (loss)		(1,244	)		99			(359	)		183
Comprehensive loss	$	(4,941	)	$	(1,147	)	$	(10,485	)	$	(5,079	)
Net loss per share:
Basic and diluted	$	(0.13	)	$	(0.14	)	$	(0.50	)	$	(0.63	)
Shares used in net loss per share calculation:
Basic and diluted		27,392			8,764			20,077			8,403

-Page 3 of 5-

Tarantella, Inc. Announces Financial Results for Third Quarter Fiscal Year 2004

TARANTELLA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2004			September 30, 2003
(In thousands)	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	13,547		$	3,151
Available-for-sale equity securities		—			632
Trade receivables, net of allowances of $0.2 million at June 30, 2004 and $0.5 million at September 30, 2003		1,657			2,980
Other receivables		298			175
Prepaids and other current assets		507			720
Total current assets		16,009			7,658
Property and equipment, net		817			734
Acquired intangible assets, net		1,186			1,262
Goodwill		2,395			2,391
Other assets		263			343
Total assets	$	20,670		$	12,388
Liabilities and shareholders’ equity
Current liabilities:
Trade payables	$	972		$	1,341
Line of credit		—			319
Royalties payable		—			22
Royalties payable—former New Moon shareholders		1,713			1,725
Income taxes payable		373			549
Accrued restructuring charges		205			854
Accrued expenses and other current liabilities		3,134			3,317
Deferred revenues		2,323			1,757
Total current liabilities		8,720			9,884
Long-term deferred revenues		1,094			36
Total long-term liabilities		1,094			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 27,513 at June 30, 2004 and 11,959 shares at September 30, 2003		145,985			126,749
Deferred stock compensation		(363	)		—
Accumulated other comprehensive income		194			553
Accumulated deficit		(134,960	)		(124,834	)
Total shareholders’ equity		10,856			2,468
Total liabilities and shareholders’ equity	$	20,670		$	12,388

-Page 4 of 5-

Tarantella, Inc. Announces Financial Results for Third Quarter Fiscal Year 2004

TARANTELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended June 30,
	2004			2003
(In thousands)	(Unaudited)
Cash flows from operating activities:
Net loss	$	(10,126	)	$	(5,262	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization		927			595
Foreign currency exchange loss (gain)		63			(18	)
Gain on sale of marketable security		(718	)		—
Loss on disposal of property and equipment		2			82
Amortization of deferred stock compensation		343			—
Stock compensation expense		282			—
Changes in operating assets and liabilities, net of New Moon acquisition:
Trade receivables		1,324			(298	)
Other receivables		(123	)		(92	)
Prepaids and other current assets		260			60
Other assets		33			680
Trade payables		(390	)		(227	)
Royalties payable		(22	)		(181	)
Income taxes payable		(176	)		10
Accrued restructuring expenses		(649	)		(329	)
Accrued expenses and other current liabilities		(240	)		(1,154	)
Deferred revenues		1,624			638
Net cash used in operating activities		(7,586	)		(5,496	)
Cash flows from investing activities:
Net cash received from the New Moon acquisition		—			3,323
Purchases of property and equipment		(589	)		(152	)
Additional New Moon purchase acquisition costs		(4	)		—
Change in royalties payable—former New Moon shareholders		(12	)		(43	)
Proceeds from sale of marketable securities		889			—
Net cash provided by investing activities		284			3,128
Cash flows from financing activities:
Payments on capital lease obligations		(31	)		(220	)
Line of credit payments		(319	)		—
Net proceeds from issuance of common stock and warrants		18,049			139
Net cash provided by (used in) financing activities		17,699			(81	)
Effects of exchange rate changes on cash and cash equivalents		(1	)		(12	)
Increase (decrease) in cash and cash equivalents		10,396			(2,461	)
Cash and cash equivalents at beginning of period		3,151			7,055
Cash and cash equivalents at end of period	$	13,547		$	4,594

-Page 5 of 5-