<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-29038
TANISYS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
WYOMING 74-2675493
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12201 TECHNOLOGY BLVD., SUITE 130
AUSTIN, TEXAS 78727
(Address of principal executive offices) (Zip Code)
(512) 335-4440
(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. [X] Yes [ ] No
Indicated below is the number of shares outstanding of the Registrant's
only class of common stock at February 11, 1998:
NUMBER OF SHARES
TITLE OF CLASS OUTSTANDING
-------------- ----------------
Common Stock, no par value 20,529,714
<PAGE>
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Interim Consolidated Condensed Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets - December 31, 1997 and
September 30,1997.................................................. 3
Consolidated Condensed Statements of Loss - For the Three Month
Periods Ended December 31, 1997 and 1996........................... 4
Consolidated Condensed Statements of Cash Flows - For the Three
Month Periods Ended December 31, 1997 and 1996..................... 5
Notes to Interim Consolidated Condensed Financial Statements
(Unaudited)........................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................... 17
Item 5. Other Information................................................... 17
Item 6. Exhibits and Reports on Form 8-K.................................... 17
SIGNATURES...................................................................... 18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,972,305 $ 1,990,017
Restricted cash 67,463 1,539,448
Trade accounts receivable, net of allowance of $289,956 and
$180,157, respectively 4,543,974 3,519,369
Accounts receivable from related parties 12,371 12,371
Inventory, net of reserve of $256,715 and $317,023, respectively 3,777,119 4,489,050
Prepaid expenses and other current assets 410,753 364,042
- -----------------------------------------------------------------------------------------------------------
Total current assets 10,783,985 11,914,297
- -----------------------------------------------------------------------------------------------------------
Property and equipment, net of accumulated depreciation of
$1,954,030 and $1,730,832, respectively 2,463,394 2,539,324
Organization costs, net 384 512
Patents and trademarks, net 77,801 80,327
Goodwill, net of accumulated amortization of $5,975,832 and
$5,079,457, respectively 1,195,165 2,091,541
Other noncurrent assets 594,235 605,957
- -----------------------------------------------------------------------------------------------------------
Total Assets $ 15,114,964 $ 17,231,958
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,030,071 $ 3,917,786
Accounts payable to related parties 0 250
Accrued liabilities 797,582 710,189
Revolving credit note 4,323,319 4,172,516
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 8,150,972 8,800,741
- -----------------------------------------------------------------------------------------------------------
Obligations under capital lease 69,827 81,114
- -----------------------------------------------------------------------------------------------------------
Total liabilities 8,220,799 8,881,855
- -----------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, no par value, 50,000,000 shares
authorized, 20,459,714 and 20,334,714 shares issued and outstanding,
at December 31, 1997 and September 30, 1997, respectively 28,802,774 28,599,524
Accumulated deficit (21,908,609) (20,249,421)
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 6,894,165 8,350,103
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 15,114,964 $ 17,231,958
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
DECEMBER 31,
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 9,675,823 $15,263,661
Cost of goods sold 7,522,657 13,668,236
- --------------------------------------------------------------------------
Gross profit 2,153,166 1,595,425
- --------------------------------------------------------------------------
Operating expenses:
Research and development 810,565 518,708
Sales and marketing 671,672 697,986
General and administrative 1,018,363 859,474
Depreciation and amortization 1,067,205 1,020,590
Bad debt expense 108,943 46,841
- --------------------------------------------------------------------------
Total operating expenses 3,676,748 3,143,599
- --------------------------------------------------------------------------
Operating loss (1,523,582) (1,548,174)
- --------------------------------------------------------------------------
Other income (expense):
Interest income 19,526 11,709
Interest expense (155,132) (165,270)
- --------------------------------------------------------------------------
Net loss $(1,659,188) $(1,701,735)
- --------------------------------------------------------------------------
Loss per weighted average common share: (Note 7)
Basic $ (0.08) $ (0.11)
Diluted $ (0.08) $ (0.11)
- --------------------------------------------------------------------------
Weighted average number of common shares 20,397,486 16,163,626
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
DECEMBER 31,
1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,659,188) $(1,701,735)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,140,636 1,073,609
Decrease in restricted cash 1,471,985 0
Increase in accounts receivable (1,024,605) (1,331,633)
(Increase) decrease in inventory 711,931 (239,375)
Increase in prepaid expense (46,711) (155,898)
Decrease in other assets 11,722 0
Decrease in accounts payable and accrued liabilities (800,572) (569,761)
- -----------------------------------------------------------------------------------
Net cash used in operating activities (194,802) (2,924,793)
- -----------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (187,313) (488,709)
Proceeds from sale of property and equipment 21,637 0
Patent and trademark costs 0 (6,094)
- -----------------------------------------------------------------------------------
Net cash used in investing activities (165,676) (494,803)
- -----------------------------------------------------------------------------------
Cash flows from financing activities:
Draws on revolving credit note, net 150,803 1,370,851
Principal payments on capital lease obligations (11,287) (11,941)
Net proceeds from issuance of common stock 75,000 0
Net proceeds from exercise of stock options 128,250 10,440
Net proceeds from exercise of stock warrants 0 1,155,000
- -----------------------------------------------------------------------------------
Net cash provided by financing activities 342,766 2,524,350
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Decrease in cash and cash equivalents (17,712) (895,246)
Cash and cash equivalents, beginning of period 1,990,017 2,689,569
- -----------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 1,972,305 $ 1,794,323
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $ 155,132 $ 165,270
Interest received $ 19,526 $ 11,709
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying interim consolidated condensed financial statements present
the consolidated financial position, results of operations and cash flows of
Tanisys Technology, Inc. ("Tanisys") and its wholly owned subsidiaries
(collectively referred to as the "Company") as of the dates and for the
periods indicated. All material intercompany accounts and transactions have
been eliminated in consolidation.
The accompanying unaudited interim consolidated condensed financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
It is recommended that these interim consolidated condensed financial
statements be read in conjunction with the Company's consolidated financial
statements and the notes thereto for the fiscal year ended September 30, 1997
contained in the Company's Form 10-K as filed with the Securities and
Exchange Commission on December 29, 1997.
In the opinion of management, all adjustments, which are of a normal
recurring nature, considered necessary to present fairly the consolidated
condensed financial position as of December 31, 1997, the consolidated
condensed results of operations for the three-month periods ended December
31, 1997 and 1996 and the consolidated condensed cash flows for the
three-month periods ended December 31, 1997 and 1996 have been made.
RECLASSIFICATIONS
Certain reclassifications of amounts related to fiscal 1997 have been made to
conform with the fiscal 1998 presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be classified as cash equivalents. Cash
equivalents are carried at cost, which approximates market value. The
Company places its cash investments in high credit quality instruments.
Restricted cash represents deposits which are available only to pay down the
revolving credit note. (See Note 5)
INVENTORY
Inventory is stated at the lower of cost or market value. Inventory costs
include direct materials, direct labor and certain indirect manufacturing
overhead expenses.
REVENUE RECOGNITION
Revenue from sales is recognized when the related products are shipped,
typically freight on board ("FOB") shipping point or at the time the services
are rendered. The Company warrants products against defects and has a policy
concerning the return of products and accrues the cost of warranting these
products as they are shipped.
6
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," in
June 1996. This statement will require the Company to classify its financial
assets pledged as collateral separately in financial statements. This
statement is effective for fiscal years beginning after December 31, 1996,
and is to be applied prospectively. Earlier or retroactive application is
not permitted. The FASB issued SFAS No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement 125." SFAS No. 127 moves forward
some, but not all, of the provisions of SFAS No. 125 to December 31, 1997.
The Company believes that the adoption of this statement will not have a
material impact on the financial condition or results of operations of the
Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and displaying of comprehensive
income and its components in a full set of general purpose financial
statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997, with early application permitted. The Company believes
that the adoption of this statement will not have a material effect on the
financial condition or results of operations of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2: TRADE ACCOUNTS RECEIVABLE
The Company grants credit to domestic and international original equipment
manufacturers, distributors and end users. Effective November 1, 1997, the
Company purchased a business credit policy covering certain accounts
receivable. This insurance policy will provide protection against losses
from uncollectible accounts resulting from insolvency of specified customers
and has an annual deductible of $50 thousand with a maximum policy amount of
$5 million per year. At December 31, 1997, 32% of trade accounts receivable
were covered by this business credit policy.
Three customer balances exceeded 10% of the Company's total trade accounts
receivable at December 31, 1997. Accounts receivable from these customers
represented 17%, 14% and 12% of the $4.8 million balance of accounts
receivable at December 31, 1997. At September 30, 1997, two customers had
balances exceeding 10% of total trade accounts receivable, with one customer
at 22% and another at 13% of the $3.7 million balance. One customer
represented 29.5% of total revenue for the fiscal quarter ended December 31,
1997. For the fiscal quarter ended December 31, 1996, the Company's three
largest customers accounted for 18%, 17% and 15% of total revenue. The
Company's business, financial condition and results of operations will depend
in significant part upon its ability to obtain orders from new and existing
customers, as well as the financial condition and success of its customers,
the success of its customers' products and the general economy. Factors
affecting any of the Company's major customers and their respective customers
could have a material adverse effect on the Company's business, financial
condition and results of operations.
7
<PAGE>
NOTE 3: INVENTORY
Inventory consists of the following:
<TABLE>
December 31, September 30,
1997 1997
------------ -------------
<S> <C> <C>
Raw Materials $3,145,483 $3,976,488
Work-in-process 230,008 204,783
Finished goods 658,343 624,802
------------ -------------
4,033,834 4,806,073
Less inventory reserve (256,715) (317,023)
------------ -------------
Inventory, net $3,777,119 $4,489,050
------------ -------------
------------ -------------
</TABLE>
NOTE 4: PROPERTY AND EQUIPMENT
Property and equipment consists of the following balances and estimated
useful lives:
<TABLE>
At December 31, At September 30, Estimated
1997 1997 Useful Lives
--------------- ---------------- -------------
<S> <C> <C> <C>
Manufacturing equipment $ 1,514,259 $ 1,447,039 3-7 years
Office equipment 579,117 579,117 5 years
Engineering equipment 368,325 320,783 5 years
Computer equipment 532,623 514,892 3 years
Computer software 627,210 623,856 3 years
Furniture and fixtures 360,750 359,614 5 years
Vehicles 41,619 39,445 5 years
Leasehold improvements 393,521 385,410 Shorter of useful life or
remaining term of lease
- ------------------------------------------------------------------
Total property and equipment 4,417,424 4,270,156
Less accumulated amortization (1,954,030) (1,730,832)
- ------------------------------------------------------------------
Property and equipment, net $ 2,463,394 $ 2,539,324
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
The Company had approximately $326,455 and $268,414 of property and equipment
acquired under capital leases at December 31, 1997 and 1996, respectively. The
accumulated amortization related to these assets totaled $109,918 and $67,715
at December 31, 1997 and 1996, respectively. The related amortization
expense was $14,078 and $11,954 for the quarters ended December 31, 1997 and
1996, respectively.
The Company uses the straight-line method of depreciation. Depreciation and
amortization expense as reflected in the accompanying consolidated condensed
financial statements is as follows:
<TABLE>
For the three months ended December 31,
1997 1996
--------------------------------------
<S> <C> <C>
Cost of Goods Sold $ 73,431 $ 53,019
Operating Expenses 1,067,205 1,020,590
--------------------------------------
Total Depreciation and Amortization Expense $1,140,636 $1,073,609
--------------------------------------
--------------------------------------
</TABLE>
The Company reviews the carrying amount of its intangible assets and related
amortization periods on an annual basis for impairment by reviewing
undiscounted cash flow projections, excluding interest, as is required under
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." Impairment loss is recognized based
upon the difference between the carrying amount and the fair value of the
assets. Fair value is determined based upon the net present value of
estimated expected future cash flows using a discount rate commensurate with
risks involved. Based on its review, the Company believes no impairment has
occurred as of December 31, 1997.
8
<PAGE>
NOTE 5: REVOLVING CREDIT NOTE
The Company obtained a new $8,500,000 revolving credit note with a financial
institution effective July 24, 1997. The revolving credit note contains an
annual commitment fee of $85,000 and bears interest at the prime rate as
quoted in THE WALL STREET JOURNAL plus 2% (10.5% as of December 31, 1997).
The Company also issued the lender warrants exercisable for the purchase of
65,000 shares of common stock at a price of $5.38 per share, which was 5%
over the market closing price on the date the note agreement was executed.
These stock warrants expire on July 24, 2002. The revolving credit note has
a maturity date of July 24, 2000 and is secured by all of the Company's
assets. The maturity date will automatically be extended for successive
additional terms of three years each unless one party gives written notice to
the other, not less than sixty days prior to the maturity date, of its
election not to extend the maturity date. Borrowings are based upon 85% of
eligible accounts receivable and eligible inventory amounts as defined in the
borrowing agreement. The amount outstanding at December 31, 1997 was
$4,323,319. The amount available to draw at December 31, 1997 was $1,900.
The Company is required to maintain a lockbox account to be used for the
collection of trade accounts receivable. All collections must be applied to
reduce the outstanding balance of the revolving credit note. The balance of
this lockbox account is shown as restricted cash in the accompanying
consolidated condensed balance sheet.
NOTE 6: LEASE COMMITMENTS
The Company leases certain equipment and office space under noncancellable
leases with expiration dates ranging from 1998 through 2002.
Future minimum lease payments under all leases at December 31, 1997 were as
follows:
<TABLE>
Capital Leases Operating Leases
----------------------------------
<S> <C> <C>
1998 $ 93,004 $ 463,221
1999 57,275 604,696
2000 41,821 581,487
2001 0 324,212
2002 0 160,973
--------- -----------
Total minimum lease payments $ 192,100 $ 2,134,589
Amounts representing interest 33,574
---------
Present value of minimum capital
lease payments 158,526
Less: current portion (88,699)
---------
Long-term capital lease obligation $ 69,827
---------
---------
</TABLE>
Rent expense recorded under all operating leases was $171,233 and $93,498 for
the three months ending December 31, 1997 and 1996, respectively. The
Company had a letter of credit totaling $579,415 as collateral for an
operating lease for manufacturing equipment at December 31, 1997.
9
<PAGE>
NOTE 7: STOCKHOLDERS' EQUITY
COMMON STOCK
During the three months ended December 31, 1997, 50,000 shares of common
stock were purchased by the Chief Executive Officer of the Company, as
provided under his employment agreement, for total gross proceeds of $75,000.
STOCK OPTIONS
During the three months ended December 31, 1997, a director of the Company
exercised stock options for the purchase of 75,000 shares of the Company's
common stock for total gross proceeds of $128,250.
Additionally, seven-year stock options exercisable for a total of 2,032,800
shares of common stock at $2.00 per share were issued to employees, directors
and consultants of the Company, vesting one-fourth on each of the first four
anniversaries of the date of the grant.
WARRANTS
During the three months ended December 31, 1997, no warrants were issued or
exercised. At December 31, 1997, warrants for the purchase of 289,999 shares
of common stock were outstanding, of which 1,248 were exercisable.
LOSS PER SHARE
In the first quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings per Share," which establishes standards for computing and
presenting earnings per share ("EPS") for entities with publicly held common
stock or potential common stock. It requires dual presentation of basic and
diluted EPS on the face of the statement of operations for all entities with
complex capital structures. Basic loss per common share is calculated by
dividing net loss by the weighted average number of common shares outstanding
during the period. Diluted EPS does not differ from Basic EPS because the
common stock equivalents have not been included as their effect would be
antidilutive. The adoption of this statement did not change the calculation
of Primary EPS to Basic or Diluted EPS from prior years because of the
antidilutive effect of the common stock equivalents.
NOTE 8: RELATED PARTY TRANSACTIONS
In accordance with the terms of his employment agreement, the Chief Executive
Officer purchased 50,000 shares of common stock for a total purchase price of
$75,000 in December, 1997. (See Note 7)
NOTE 9: SUBSEQUENT EVENTS
In January 1998, the Chief Executive Officer of the Company purchased 50,000
shares of common stock for a total purchase price of $75,000 in accordance
with the terms of his employment agreement.
Alan H. Portnoy resigned from the Board of Directors effective January 15,
1998. The Board amended his existing stock option agreement to provide that
it shall remain in effect through January 15, 1999.
10
<PAGE>
Mark C. Holliday resigned from the Board of Directors effective January 15,
1998. Under the terms of his Separation Agreement, the Board amended his
existing stock option agreements to provide that they shall remain in effect
through the date of the 2000 Annual Meeting of Stockholders of the Company.
The Company has arranged for temporary manufacturing space in Europe and is
in the process of acquiring the surface mount machines and ancillary
equipment needed to assemble memory modules there. A grant has been applied
for from a European government agency charged with aiding companies to
provide jobs, and the Company has been notified that such a grant will be
offered. The grant will reimburse the Company for a portion of the cost of
all capital equipment and for a part of the training expenses for workers
hired there. Also, the Company will be provided the temporary and permanent
manufacturing space rent free for a period of time and will not be subject to
local property taxes until 2003. Tanisys has also entered into a contract
with LG Semicon America, Inc. to manufacture memory modules in this facility
for certain of their customers.
11
<PAGE>
ITEM 2.
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS AND INFORMATION RELATING TO TANISYS AND ITS SUBSIDIARIES THAT ARE
BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS MADE
BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN
USED IN THIS REPORT, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT,"
AND "INTEND" AND WORDS OR PHRASES OF SIMILAR IMPORT, AS THEY RELATE TO THE
COMPANY OR ITS MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT RISKS, UNCERTAINTIES AND
ASSUMPTIONS RELATED TO CERTAIN FACTORS INCLUDING, WITHOUT LIMITATIONS,
COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, CUSTOMER CONCENTRATIONS,
CUSTOMER RELATIONSHIPS AND FINANCIAL CONDITIONS, RELATIONSHIPS WITH VENDORS,
THE INTEREST RATE ENVIRONMENT, GOVERNMENTAL REGULATION AND SUPERVISION,
SEASONALITY, DISTRIBUTION NETWORKS, PRODUCT INTRODUCTIONS AND ACCEPTANCE,
TECHNOLOGICAL CHANGE, CHANGES IN INDUSTRY PRACTICES, ONE-TIME EVENTS AND
OTHER FACTORS DESCRIBED HEREIN. BASED UPON CHANGING CONDITIONS, SHOULD ANY
ONE OF MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD ANY
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR
INTENDED. THE COMPANY DOES NOT INTEND TO UPDATE THESE FORWARD-LOOKING
STATEMENTS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the consolidated condensed financial
condition and results of operations of the Company for the three-month
periods ended December 31, 1997 and 1996. It should be read in conjunction
with the Interim Consolidated Condensed Financial Statements, the Notes
thereto and other financial information included elsewhere in this report.
For purposes of the following discussion, references to year periods refer to
the Company's fiscal year ended September 30, 1997 and references to
quarterly periods refer to the Company's fiscal quarters ended December 31,
1997 and 1996.
Tanisys was organized under the laws of the Province of British
Columbia, Canada, on January 27, 1984, as Montebello Resources Ltd., and
pursued oil and gas exploration in British Columbia and Manitoba, Canada. In
October 1992, Tanisys changed its name to First American Capital Group Inc.
Unsuccessful in the exploration business, Tanisys became dormant pursuant to
the rules and regulations of the Vancouver Stock Exchange ("VSE"). During
the first two quarters of 1993, Tanisys was reorganized in accordance with
the rules of the VSE. As part of this reorganization, Tanisys acquired
Timespan Communications Corp. ("Timespan") as a wholly owned subsidiary of
Tanisys and dissolved it as of October 23, 1996. Tanisys changed its name to
Rosetta Technologies Inc. in May 1993 and to Tanisys Technology, Inc. in July
1994. Until May 21, 1996, Tanisys focused on research and development of
highly specialized applications of capacitive touch sensing technology.
Effective May 21, 1996, Tanisys acquired, through mergers with its
wholly owned subsidiaries, all of the outstanding common stock of 1st Tech
Corporation ("1st Tech") and DarkHorse Systems, Inc. ("DarkHorse") and began
operations in Austin, Texas as a consolidated group of companies providing
custom design, engineering and manufacturing services, test solutions and
standard and custom module products to leading original equipment
manufacturers ("OEMs") in the computer, networking and telecommunications
industries. In consideration for the acquisitions of 1st Tech and DarkHorse,
Tanisys Company issued 2,950,000 and 1,200,000 shares, respectively, of
common stock. Prior but subject to the consummation of the acquisitions of
1st Tech and DarkHorse, 1st Tech issued 1,150,000 shares of its common stock
for $2.00 per share in an equity financing, raising a total of $2.3 million,
the proceeds of which were used to reduce short-term debt and provide working
capital for 1st Tech.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain consolidated condensed income
data of the Company expressed as a percentage of net sales (unaudited) for
the three-month periods ended December 31, 1997 and 1996:
<TABLE>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1997 1996
------ ------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 77.7% 89.5%
------ ------
Gross profit 22.3% 10.5%
------ ------
Operating expenses:
Research and development 8.4% 3.4%
Sales and marketing 6.9% 4.6%
General and administrative 10.5% 5.6%
Depreciation and amortization 11.0% 6.7%
Bad debt expense 1.1% 0.3%
------ ------
Total operating expenses 38.0% 20.6%
------ ------
Operating loss (15.7)% (10.1)%
Other income (expense), net (1.4)% (1.0)%
------ ------
Net loss (17.1)% (11.1)%
------ ------
------ ------
</TABLE>
NET SALES
Net sales consist of custom manufacturing services, custom memory
modules, standard memory modules, design engineering fees, memory module test
solutions and advanced technology services, less returns and discounts. Net
sales decreased to $9.7 million in the first quarter of fiscal 1998 from
$15.3 million in the first quarter of fiscal 1997. The decrease in fiscal
1998 is primarily due to changes in product mix. The Company is emphasizing
its quick-turn manufacturing program, Comprehensive Logistics and Supply
Solutions ("C.L.A.S.S."), which is designed to support the build-to-order
("BTO") and configuration-to-order ("CTO") emphasis currently in place or
contemplated by all the major personal computer manufacturers. The
semiconductor memory chips used in this program, primarily Dynamic Random
Access Memory ("DRAM"), are supplied by the customer, which reduces net sales
and cost of sales by removing the highest cost component in a memory module.
An additional factor in the decrease of net sales in the first quarter of
fiscal 1998 is the continuing decline in the price of DRAM.
COST OF SALES AND GROSS PROFIT
Cost of sales includes the costs of all components and materials purchased
for the manufacture of products and the direct labor and overhead costs
associated with manufacturing. Gross profit increased to $2.2 million in
first quarter fiscal 1998 from $1.6 million in the first quarter of fiscal
1997. Gross profit margin increased to 22.3% in first quarter 1998 from
10.5% in first quarter fiscal 1997. The increase in gross profit as well as
the increase in gross profit margin were due primarily to the transition to
the C.L.A.S.S. program and the continuing decline in the cost of raw
materials, as described in Net Sales above.
RESEARCH AND DEVELOPMENT
Research and development expenses consist of the costs associated with
the design and testing of new technologies and products. These relate
primarily to the costs of materials, personnel, management and employee
compensation and engineering design consulting fees. Research and
development expenses increased to $811 thousand in first quarter fiscal 1998
from $519 thousand in first quarter fiscal 1997, representing an increase of
56.3% from period to period. The substantial increase was due primarily to
the development of new tester products and expenses related to the design of
standard and custom modules. Expenses relating to research and development
are expected to remain approximately the same in terms of absolute dollars
and to decrease as a percentage of revenue as revenues increase in future
periods.
13
<PAGE>
SALES AND MARKETING
Sales and marketing expenses include all compensation of employees and
independent sales personnel, as well as the costs of advertising, promotions,
trade shows, travel, direct support and overhead. Sales and marketing
expenses decreased to $672 thousand in first quarter fiscal 1998 from $698
thousand in first quarter fiscal 1997, an 3.8% decrease. In the first
quarter of fiscal years 1998 and 1997, sales and marketing expenses expressed
as a percentage of revenues were 6.9% and 4.6%, respectively. Sales and
marketing expenses are expected to decrease slightly when expressed as a
percentage of revenue and to continue to increase significantly in terms of
absolute dollars in future periods as revenues increase.
GENERAL AND ADMINISTRATIVE
General and administrative costs consist primarily of personnel costs,
including compensation and employee benefits, and support costs including
utilities, insurance, professional fees and all costs associated with a
reporting company. General and administrative expenses increased to $1.0
million in first quarter fiscal 1998 from $859 thousand in first quarter
fiscal 1997, an 18.5% increase. In the first quarter of fiscal years 1998 and
1997, general and administrative expenses expressed as a percentage of
revenues were 10.5% and 5.6%, respectively. The increase in actual funds
expended in fiscal 1998 is primarily due to the expansion of the Company's
facilities and operation hours and the addition of staff and contract labor.
Expenses associated with the general and administrative area are expected to
decrease significantly in absolute dollars and as a percentage of revenue in
future periods due to expense containment programs currently in effect.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization includes the depreciation for all fixed
assets exclusive of those used in the manufacturing process and included as
part of "Cost of Sales" and the amortization of intangibles, including
goodwill incurred in the acquisitions of 1st Tech and DarkHorse.
Depreciation and amortization increased to $1.1 million in first quarter
fiscal 1998 from $1.0 million in first quarter fiscal 1997. The increase is
due primarily to the purchases of additional network equipment and accounting
software. Depreciation expenses are expected to decrease as a percentage of
revenue and increase slightly in terms of absolute dollars with additional
facility expansions and equipment purchases used in research and development.
Amortization expenses are expected to decrease significantly in the third
quarter of fiscal 1998 due to the complete amortization of goodwill relating
to the acquisition of 1st Tech and DarkHorse.
OTHER INCOME (EXPENSE), NET
Other income (expense), net consists primarily of interest income less
interest expense. Interest expense is attributable to borrowings from a
revolving credit note. Substantially all of the interest expense relates to
credit line draws made for short-term inventory requirements and to fund
accounts receivable. Interest income relates to investment of available cash
in short-term interest bearing accounts and cash equivalent securities.
Other income (expense) decreased to $136 thousand of expense in the first
quarter of fiscal 1998 from $154 thousand during the same period of fiscal
1997, a net decrease of 11.7%. The Company had no debt and earned interest on
its available cash until its May 21, 1996 acquisitions of 1st Tech and
DarkHorse. Thereafter, the Company incurred net interest expense due to the
increased balances of inventories and accounts receivable. The Company
expects to continue to require borrowings to fund growth in inventories and
accounts receivable in the future and therefore expects to continue to
reflect net interest expense. Interest expense is expected to increase
slightly in terms of absolute dollars due to debt related to short-term
borrowings for accounts receivable and inventory purchases to support the
increase in revenues.
PROVISION FOR INCOME TAXES
During fiscal 1997, the Company incurred consolidated net operating
losses for U.S. income tax purposes of approximately $6.0 million. The loss
carryforwards expire in 2012 and 2011, respectively. During 1997, the
Company had temporary differences resulting in future tax deductions of $513
thousand,
14
<PAGE>
principally representing tax basis in accrued liabilities and intangible
assets. Deferred income tax assets from the loss carryforwards and asset
basis differences aggregated $4.6 million and $2.2 million at September 30,
1997.
For financial reporting purposes, valuation allowances of $4.6 million
and $2.2 million have been recorded to offset the deferred tax assets due to
the uncertainty as to whether the benefits will be realized.
The availability of the net operating loss carryforward and future tax
deductions to reduce taxable income are subject to various limitations under
the Internal Revenue Code of 1986, as amended (the "Code"), in the event of
an ownership change as defined in Section 382 of the Code. The Company may
lose the benefit of such net operating loss carryforwards due to Internal
Revenue Service ("IRS") Code Section 382 limitations. This section states
that after reorganization or other change in corporate ownership, the use of
certain carryforwards may be limited or prohibited. The Company does not
believe that an IRS Code Section 382 limitation exists as of September 30,
1997.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Tanisys has utilized the funds acquired in equity
financings of its common stock, the exercise of stock warrants and stock
options, capital leases, operating leases, vendor credits, certain bank
borrowings and funds generated from operations to support its operations,
carry on research and development activities, acquire capital equipment,
finance inventories, accounts receivable balances and pay its general and
administrative expenses. During the first quarter of fiscal 1998, the
Company generated $343 thousand in net cash from financing activities versus
$2.5 million in the first quarter of fiscal 1997. The $343 thousand in
fiscal 1998 consisted primarily of $203 thousand from the purchase of common
stock and exercise of options to purchase common stock and $151 thousand of
net draws on the Company's revolving credit note. There have been no further
offerings or issuances of unregistered securities in the current quarter
other than in connection with the issuance of common stock upon the exercise
of warrants and stock options. At December 31, 1997, the Company had $2.0
million of cash and restricted cash and $2.6 million of working capital.
On June 27, 1997, the Company received approval of an $8.5 million,
three-year revolving credit note from a new financial institution. The
transaction was completed on July 24, 1997. Borrowings under the revolving
credit note are based on eligible accounts receivable, inventory and
equipment and subject to the terms and conditions of the credit agreement.
The revolving credit note is collateralized by all of the Company's assets.
The interest rate on this line is prime plus 2%.
Capital expenditures totaled approximately $166 thousand and $489
thousand in the first quarter of fiscal years 1998 and 1997, respectively.
These expenditures were primarily for the purchase of manufacturing
equipment, test equipment and the expansion of manufacturing facilities. The
Company plans to spend approximately $5.6 million in the remainder of fiscal
1998 in capital expenditures for additional manufacturing capacity through
working capital, operating leases and capital leases. At February 12, 1998,
$2.0 million of the estimated $5.6 million had been allocated to capital
expenditures.
The Company has entered into certain capital lease arrangements. The
outstanding principal on these obligations at December 31, 1997 was $159
thousand.
15
<PAGE>
The Company believes that its existing funds, anticipated cash flow from
operations and amounts available from future vendor credits, bank borrowings,
the exercise of outstanding warrants and stock options and equity financings
will be sufficient to meet its working capital and capital expenditure needs
for the next 12 months. There is no assurance that the Company will be able
to locate an alternate source or sources for the required increase in its
outstanding debt or that it will be successful in its attempts to raise a
sufficient amount of funds in a subsequent equity offering or offerings. In
such event, the Company's inability to raise needed funds could have a
material adverse effect on the Company.
SIGNIFICANT CUSTOMER CONCENTRATION
A significant percentage of the Company's net sales is produced by a
relatively small number of customers. In the first quarter of fiscal 1998
and 1997, the ten largest customers accounted for approximately 68% and 73%
of net sales, respectively. One customer produced 29.5% of sales in the
first quarter of fiscal 1998. In the first quarter of fiscal 1997, three
customers each produced more than 10% of net sales, 18%, 17%, and 15%. While
the Company expects to continue to be dependent on a relatively small number
of customers for a significant percentage of its net sales, there can be no
assurance that any of the top ten customers in fiscal 1998 will continue to
utilize the Company products or services. The actual customers producing the
sales are different between the two periods, and the Company expects this
type of variation of volume of purchases from a particular customer to
continue throughout this fiscal year.
The Company in general has no firm long-term volume commitments from its
customers and generally enters into individual purchase orders with its
customers. Customer purchase orders are subject to change, cancellation or
delay with little or no consequence to the customer. The Company has
experienced such changes and cancellations and expects to continue to do so
in the future. The replacement of canceled, delayed or reduced purchase
orders with new business cannot be assured. The Company's business,
financial condition and results of operations will depend significantly on
its ability to obtain purchase orders from existing and new customers, upon
the financial condition and success of its customers, the success of
customer's products and the general economy. Factors affecting the
industries of the Company's major customers could have a material adverse
effect on the Company's business, financial condition and results of
operations.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
At the date hereof, there are no pending, or to the best knowledge of
the Company, threatened matters involving litigation involving the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
The exhibits listed below are filed as part of or incorporated by
reference in this report. Where such filing is made by incorporation by
reference to a previously filed document, such document is identified in
parentheses.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Articles of Continuance dated June 30, 1993 (Exhibit 3.1 to Form 10
Registration Statement filed November 27, 1996)
3.2 Articles of Amendment to Articles of Continuance dated July 11, 1994
(Exhibit 3.2 to Form 10 Registration Statement filed November 27,
1996)
3.3 Articles of Amendment dated April 28, 1995 (Exhibit 3.3 to Form 10
Registration Statement filed November 27, 1996)
3.4 Articles of Amendment dated April 15, 1996 (Exhibit 3.4 to Form 10
Registration Statement filed November 27, 1996)
3.5 Restated Bylaws of the Company (Exhibit 3.5 to Form 10 Registration
Statement filed November 27, 1996)
4.1 Form of Common Stock Certificate (Exhibit 4.6 to Form 10 Registration
Statement filed November 27, 1996)
4.2 Form of Class S Warrant Certificate (filed herewith)
11.1 Statement regarding Computation of Per Share Earnings (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) CURRENT REPORTS ON 8-K:
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TANISYS TECHNOLOGY, INC.
Date: February 12, 1998 By: /s/ JOE O. DAVIS
--------------------------------------------
Joe O. Davis
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND CORPORATE SECRETARY
(Duly authorized and Principal Financial Officer)
Date: February 12, 1998 By: /s/ DONALD R. TURNER
--------------------------------------------
Donald R. Turner
CORPORATE CONTROLLER
(Duly authorized and Principal Accounting Officer)
18
<PAGE>
EXHIBIT 4.2
WARRANT CERTIFICATE
THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THESE WARRANTS AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
THESE WARRANTS AND SUCH SHARES MAY NOT BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT CERTIFICATE, AND NO TRANSFER OF THESE WARRANTS OR SUCH
SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS HAVE BEEN
FULLY COMPLIED WITH.
WARRANT CERTIFICATE
To Purchase Shares of Common Stock of
TANISYS TECHNOLOGY, INC.
No. S-___ ________ Warrants
THIS CERTIFIES THAT, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, __________________________
__________________ (the "Holder") is the registered owner of the number of
Warrants specified above, each of which Warrants initially entitles the
Holder hereof, subject to the conditions and limitations hereinafter set
forth, to purchase from TANISYS TECHNOLOGY, INC. (the "Company"), a
corporation domesticated and existing under the laws of the State of Wyoming,
one share of the Company's Common Stock, no par value (the "Common Stock"),
at a purchase price equal to $________ per share (the "Exercise Price"). The
Warrants shall not be terminable by the Company prior to the expiration date
(as herein defined). The shares of Common Stock issuable upon exercise of
the Warrants are sometimes referred to herein as the "Warrant Shares."
The Warrants shall be void and all rights represented hereby shall cease on
_________________ (the "Expiration Date").
The Warrants are subject to the following provisions, terms and conditions:
1. EXERCISE; ISSUE OF CERTIFICATES; PAYMENT FOR SHARES. The rights
represented by this Warrant Certificate may be exercised by the Holder hereof,
in whole or in part (but not as to fractional shares of Common Stock), provided
that this Warrant, may be exercised only as follows:
____________________________________________________________________
___________________________________________, by the surrender of this Warrant
Certificate (with the Exercise Form annexed hereto as Schedule 1 properly
completed and executed) to the Company at its principal office specified in
Section 7, or its then current address, and upon payment in full to the Company
of the Exercise Price for the Warrant Shares being purchased by cash or
cashier's check or bank draft. The shares so purchased shall be and will be
<PAGE>
deemed to be issued to the Holder hereof as the record owner of such shares
as of the close of business on the date on which this Warrant Certificate
shall have been surrendered and payment made for such shares as aforesaid.
Certificates for the shares so purchased shall be delivered to the Holder
hereof within a reasonable time, not exceeding ten (10) days, after this
Warrant Certificate shall have been so exercised, and unless the Warrants
have expired, a new Warrant Certificate representing the number of shares, if
any, with respect to which this Warrant Certificate shall not then have been
exercised shall also be delivered to the Holder hereof within such time.
Such certificate or certificates shall be deemed to have been issued, and any
Person so designated to be named therein shall be deemed for all purposes to
have become a Holder of record of such Warrant Shares, as of the close of
business on the date of the surrender of this Warrant Certificate and payment
in full of the Exercise Price as aforesaid.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES; LISTING. The Company
covenants and agrees that: (a) all Warrant Shares will, upon issuance, be
original-issue shares (and not treasury stock), fully paid and nonassessable and
free from all taxes, claims, liens, charges and other encumbrances with respect
to the issue thereof; (b) without limiting the generality of the foregoing, the
Company will from time to time take all such action as may be required to assure
that the par value per share of Common Stock shall at all times be less than or
equal to the Exercise Price; (c) during the period within which the rights
represented by this Warrant Certificate may be exercised, the Company will at
all times have authorized and reserved for the purpose of issue or transfer upon
exercise of the Warrants, a sufficient number of original-issue shares of its
Common Stock to provide for the exercise of all the Warrants; and (d) upon the
exercise of the Warrants represented by this Warrant Certificate, the Company
will, at its expense, promptly notify each securities exchange, if any, on which
any Common Stock is at the time listed of such issuance, and maintain a listing
of all shares of Common Stock from time to time issuable upon the exercise of
the Warrants to the extent such shares can be listed.
3. RESTRICTIONS ON TRANSFER.
3.1 RESTRICTIVE LEGENDS. Each certificate for any Warrant Shares issued
upon the exercise of any Warrant, and each stock certificate issued upon the
transfer of any such Warrant Shares, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS, AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS."
Each Warrant Certificate issued in substitution for any Warrant Certificate
pursuant to Section 5 shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES
2
<PAGE>
LAWS. THESE WARRANTS AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT OR LAWS. THESE WARRANTS AND SUCH SHARES MAY NOT BE TRANSFERRED
EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT CERTIFICATE, AND NO
TRANSFER OF THESE WARRANTS OR SUCH SHARES SHALL BE VALID OR EFFECTIVE
UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN FULLY COMPLIED WITH."
3.2 TERMINATION OF RESTRICTIONS. The restrictions imposed by this Section
upon the transferability of Warrant Shares shall cease and terminate as to any
particular Warrant Shares, (a) when such securities shall have been effectively
registered under the Securities Act and applicable state securities laws and
disposed of in accordance with the registration statement covering such
securities, or (b) when in the reasonable opinion of counsel for the Company or
for the Holder thereof such restrictions are no longer required in order to
comply with the Securities Act and applicable state securities laws. Whenever
such restrictions shall terminate as to any Warrant Shares, the Holder thereof
shall be entitled to receive from the Company, without expense, new certificates
of like tenor not bearing the restrictive legends set forth in Section 3.1.
4. ACQUISITION OF WARRANTS. Holder represents that it is acquiring the
Warrants represented by this Warrant Certificate and, upon any exercise of such
Warrants, will acquire Common Stock hereunder for its own account for the
purpose of investment, and not with a view to the public distribution thereof
within the meaning of the Securities Act, subject to any requirement of law that
the disposition thereof shall at all times be within the control of the Holder.
5. REPLACEMENT OF WARRANT CERTIFICATES. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity bond reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such mutilated Warrant Certificate, the Company,
at its expense, will execute and deliver, in lieu thereof, a new Warrant
Certificate of like tenor. Such Warrant Certificate shall not be valid until
duly executed by the Holder hereof.
6. CERTIFICATE RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANTS. The
rights and obligations of the Company shall survive until the exercise of all of
the Warrants or the Expiration Date, whichever is earlier.
7. NOTICES. All notices, requests and other communications required or
permitted to be given or delivered to the Holder of the Warrants shall be in
writing, and shall be delivered, or shall be sent by certified or registered
mail, postage prepaid and addressed, to the Holder at the address shown on such
Holder's Warrant Certificate, or at such other address as shall have been
furnished to the Company by notice from such Holder. All notices, requests and
other communications required or permitted to be given or delivered to the
Company shall be in writing, and shall be delivered, or shall be sent by
certified or registered mail, postage prepaid and addressed to the office of the
Company, (return receipt requested) at 12201 Technology Boulevard, Suite 130,
Austin, Texas 78727-6101; Attention: Joe O. Davis, or at such other
3
<PAGE>
address as shall have been furnished to the Holder of the Warrants by notice
from the Company. Any such notice, request or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a
writing delivered or sent by certified or registered mail as provided above.
All notices shall be deemed to have been given either at the time of the
delivery thereof to (or the receipt by, in the case of a facsimile) any
officer or employee of the Person (defined as an individual, corporation,
partnership, trust, unincorporated organization, or a governmental or any
agency or political subdivision thereof) entitled to receive such notice at
the address of such Person for purposes of this Section, or if mailed, at the
completion of the third full day following the time of such mailing thereof
to such address, as the case may be.
8. AMENDMENTS. Neither this Warrant Certificate nor any term or
provision may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
9. GOVERNING LAW. This Warrant Certificate is governed by and shall be
construed in accordance with the substantive laws of the State of Wyoming
without regard to conflict of law principles.
10. CAPTIONS. The captions used in this Warrant Certificate are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Warrant Certificate.
11. REGISTRATION OF REGISTERED OWNER. The Company shall treat the
registered owner as the person exclusively entitled to receive notices and other
to exercise rights under this Warrant Certificate.
12. NO TRANSFER. This Warrant Certificate and the purchase rights
represented hereby may not be sold, assigned, pledged or otherwise transferred
without the consent of the Company, which consent will not be unreasonably
withheld.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed as a deed by its duly authorized officer and this Warrant Certificate
to be dated ______________.
TANISYS TECHNOLOGY, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
The undersigned Holder hereby executes this Warrant Certificate as a deed and
assumes the obligations of the Holder described herein.
------------------------------------------
Name:
-------------------------------------
4
<PAGE>
SCHEDULE 1
EXERCISE FORM
[To be executed only upon exercise of Warrant]
TO: TANISYS TECHNOLOGY, INC.
The undersigned irrevocably exercises _____________ of the Warrants for the
purchase of one share (subject to adjustment) of Common Stock, no par value per
share, of Tanisys Technology, Inc. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_______ (such payment being
in cash or by cashier's check or bank draft payable to the order of "Tanisys
Technology, Inc."), all at the exercise price and on the terms and conditions
specified in the within Warrant Certificate, surrenders the within Warrant
Certificate and all right, title and interest therein (except as to any
unexercised Warrants) to Tanisys Technology, Inc. and directs that the shares of
Common Stock deliverable upon the exercise of such Warrants be registered or
placed in the name and at the address specified below and delivered thereto.
Date:
----------------------------- -----------------------------------
(Signature of Owner)
-----------------------------------
-----------------------------------
(Address)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
5
<PAGE>
EXHIBIT 11.1
TANISYS TECHNOLOGY, INC.
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
Common Common Weighted
Share Shares Days Average Number
Date Description Activity Outstanding Outstanding of Shares
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9/30/97 Balance 20,334,714 21 4,641,620
10/21/97 Exercise of stock options 75,000 20,409,714 62 13,754,372
12/22/97 Issuance of common shares 50,000 20,459,714 9 2,001,494
12/31/97 Balance 20,459,714
Weighted Average Shares 20,397,486
Net Loss $(1,659,188)
Loss per Weighted Average Share:
Basic $ (0.08)
Diluted $ (0.08)
</TABLE>
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR TANISYS TECHNOLOGY,
INC. AND SUBSIDIARIES AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE
NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,972,305
<SECURITIES> 0
<RECEIVABLES> 4,543,974
<ALLOWANCES> 289,956
<INVENTORY> 3,777,119
<CURRENT-ASSETS> 10,783,985
<PP&E> 2,463,394
<DEPRECIATION> 1,954,030
<TOTAL-ASSETS> 15,114,964
<CURRENT-LIABILITIES> 8,150,972
<BONDS> 0
0
0
<COMMON> 28,802,774
<OTHER-SE> (21,908,609)
<TOTAL-LIABILITY-AND-EQUITY> 15,114,964
<SALES> 9,675,823
<TOTAL-REVENUES> 9,675,823
<CGS> 7,522,657
<TOTAL-COSTS> 7,522,657
<OTHER-EXPENSES> 3,676,748
<LOSS-PROVISION> 108,943
<INTEREST-EXPENSE> 155,132
<INCOME-PRETAX> (1,659,188)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,659,188)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,659,188)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
