8-K

UNITED STATES

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

Date of Report (date of earliest event reported)

May 12, 2005

TARANTELLA, INC.

(Exact name of registrant as specified in its charter)

California	000-21484	94-2549086
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

425 Encinal Street

Santa Cruz, California 95060

(Address of principal executive offices, including zip code)

(831) 427-7222

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On May 12, 2005, Tarantella, Inc. issued a press release regarding its financial results for its second fiscal quarter for the period ended March 31, 2005. The full text of the press release concerning the foregoing results is furnished herewith as Exhibit 99.1.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities 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.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

Exhibit Number	Document
99.1	Text of press release issued by Tarantella, Inc., dated May 12, 2005, reporting the results of operations for Tarantella’s second fiscal quarter for the period ended March 31, 2005.

SIGNATURE

Pursuant to the requirements of the Securities and 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: May 13, 2005	By:	/s/ John M. Greeley
	Name:	John M. Greeley
	Title:	Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Document
99.1	Text of press release issued by Tarantella, Inc., dated May 12, 2005, reporting the results of operations for Tarantella’s second fiscal quarter for the period ended March 31, 2005.

EX-99.1

Exhibit 99.1

Tarantella, Inc. Announces Financial Results for Second Quarter Fiscal Year 2005

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 Second Quarter 2005

SANTA CRUZ, CA, May 12, 2005 – Tarantella, Inc. (OTC: TTLA.OB), a leading supplier of secure application access software, today announced its financial results for the second quarter of fiscal year 2005.

For the second fiscal quarter ended March 31, 2005, the Company announced revenues of $2.7 million, an operating loss of $3.4 million, and a net loss of $3.5 million or $0.12 per share. This compares to revenues of $4.0 million, an operating loss of $1.3 million, and a net loss of $1.3 million or $0.05 per share in the prior quarter ended December 31, 2004. The Company also reported, as of March 31, 2005, cash and cash equivalents of $3.7 million.

Due to the company’s pending acquisition by Sun Microsystems, it will not be holding its previously scheduled conference call following the release of the results.

About Tarantella, Inc.

Tarantella, Inc. (OTC: TTLA.OB) is a leading provider of secure application access software. Tarantella’s Secure Global Desktop family of products enables organizations to access and manage information, data and applications across virtually all platforms, networks and devices. Secure Global Desktop allows Enterprise customers to web-enable any enterprise application without costly re-writes, bridging the gap between vendors and 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 partners, and a worldwide distribution network. 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.

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Tarantella, Inc. Announces Financial Results for Second Quarter Fiscal Year 2005

TARANTELLA, INC.

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

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Tarantella, Inc. Announces Financial Results for Second Quarter Fiscal Year 2005

TARANTELLA, INC.

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
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.

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Tarantella, Inc. Announces Financial Results for Second Quarter Fiscal Year 2005

TARANTELLA, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Six Months Ended March 31,
	2005			2004
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
Loss on disposal of property and equipment		18			2
Stock compensation expense		262			364
Changes in operating assets and liabilities:
Trade receivables		11			(204	)
Other receivables		(124	)		(6	)
Prepaids and other current assets		99			129
Other assets		(43	)		(60	)
Trade payables		457			(524	)
Royalties payable		—			(21	)
Income taxes payable		(1	)		(15	)
Accrued restructuring charges		(913	)		(438	)
Accrued expenses and other current liabilities		(1,511	)		835
Deferred revenues		(117	)		1,926
Other long-term liabilities		67			—
Net cash used in operating activities		(6,084	)		(3,838	)
Cash flows from investing activities:
Purchases of property and equipment		(7	)		(176	)
Purchases of software and technical licenses		(59	)		—
Additional New Moon acquisition costs		—			(4	)
Change in royalties payable - former New Moon shareholders		—			(12	)
Net cash used in investing activities		(66	)		(192	)
Cash flows from financing activities:
Payments on capital lease obligations		—			(31	)
Line of credit payments		—			(319	)
Net proceeds from issuance of common stock and warrants		275			17,810
Net cash provided by financing activities		275			17,460
Effects of exchange rate changes on cash and cash equivalents		—			(6	)
Increase (decrease) in cash and cash equivalents		(5,875	)		13,424
Cash and cash equivalents at beginning of period		9,621			3,151
Cash and cash equivalents at end of period	$	3,746		$	16,575

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