<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, 1998
or
[ ] 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 0-29038
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 125
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 are the number of shares outstanding of the
Registrant's common stock and 5% Series A Convertible Preferred Stock at
February 10, 1999:
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS OUTSTANDING
-------------- -----------
<S> <C>
Common Stock, no par value 23,356,155
Preferred Stock, $1.00 par value 255
</TABLE>
<PAGE>
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets - December 31, 1998 and September 30, 1998............ 3
Consolidated Statements of Operations - For the Three Month Periods Ended
December 31, 1998 and 1997..................................................... 4
Consolidated Statements of Cash Flows - For the Three Month Periods
Ended December 31, 1998 and 1997............................................... 5
Notes to Interim Consolidated Condensed Financial Statements (Unaudited).......... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................ 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................................. 14
Item 2. Changes in Securities and Use of Proceeds......................................... 14
Item 6. Exhibits and Reports on Form 8-K.................................................. 15
SIGNATURES...................................................................................... 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 895,945 $ 253,107
Restricted cash 16,095 154,271
Trade accounts receivable, net of allowance of $396,465 and
$406,157, respectively 7,396,224 4,206,919
Inventory 3,987,109 3,224,671
Prepaid expenses and other 757,841 643,398
- ----------------------------------------------------------------------------------------------------------------
Total current assets 13,053,214 8,482,366
- ----------------------------------------------------------------------------------------------------------------
Property and equipment, net of accumulated depreciation of
$3,571,407 and $3,053,548, respectively 6,594,352 6,751,800
Other noncurrent assets 764,991 679,134
- ----------------------------------------------------------------------------------------------------------------
Total assets $ 20,412,557 $ 15,913,300
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,408,456 $ 4,648,129
Accrued liabilities 2,637,637 4,177,286
Revolving credit note 5,302,048 2,266,260
Current portion of obligations under capital lease 455,595 262,171
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 13,803,736 11,353,846
- ----------------------------------------------------------------------------------------------------------------
Long-term debt to stockholders, net of discount 1,568,875 -
Long-term portion of obligations under capital lease 1,433,127 754,751
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 16,805,738 12,108,597
- ----------------------------------------------------------------------------------------------------------------
Mandatorily redeemable convertible preferred stock:
5% Series A Convertible Preferred Stock, $1 par value, 400
shares authorized, 345 and 400 shares issued and outstanding,
respectively 2,593,077 2,390,475
- ----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, no par value, 50,000,000 shares authorized,
22,253,679 and 20,799,714 shares issued and outstanding,
respectively 30,318,553 29,114,774
Additional paid-in capital 1,687,312 1,687,312
Accumulated other comprehensive income 33,998 (2,625)
Accumulated deficit (31,026,121) (29,385,233)
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,013,742 1,414,228
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 20,412,557 $ 15,913,300
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
3
<PAGE>
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $12,919,530 $ 9,675,823
Cost of goods sold 10,940,081 7,522,657
- -----------------------------------------------------------------------------------------------------------------
Gross profit 1,979,449 2,153,166
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 534,274 810,565
Sales and marketing 693,605 671,672
General and administrative 1,182,319 1,018,363
Depreciation and amortization 235,148 1,067,205
Bad debt expense - 108,943
- -----------------------------------------------------------------------------------------------------------------
Total operating expenses 2,645,346 3,676,748
- -----------------------------------------------------------------------------------------------------------------
Operating loss (665,897) (1,523,582)
- -----------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 18,110 19,526
Interest expense (293,883) (155,132)
- -----------------------------------------------------------------------------------------------------------------
Net loss $ (941,670) $(1,659,188)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Reconciliation of net loss to net loss applicable to common stock:
Net loss $ (941,670) $(1,659,188)
Preferred stock dividends and amortization of the value
of the beneficial conversion feature on the preferred stock (699,218) -
- -----------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock $(1,640,888) $(1,659,188)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Basic and diluted loss per common share $ (0.08) $ (0.08)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Weighted average number of common shares 21,049,454 20,397,486
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
4
<PAGE>
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (941,670) $(1,659,188)
Adjustment to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 558,826 1,140,636
Changes in operating assets:
Restricted cash 138,176 1,471,985
Accounts receivable, net (3,189,305) (1,024,605)
Inventory (789,614) 711,931
Prepaid expenses and other (114,505) (34,989)
Accounts payable and accrued liabilities 176,592 (800,572)
- --------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (4,161,500) (194,802)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (333,234) (187,313)
Proceeds from sale of property and equipment - 21,637
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (333,234) (165,676)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt to stockholders 2,000,000 -
Payment of debt financing costs (21,350) -
Proceeds from issuance of common stock - 75,000
Draws on revolving credit note, net 3,035,788 150,803
Payments on capital lease obligations (127,239) (11,287)
Proceeds from exercise of stock options and warrants 213,750 128,250
Other 36,623 -
- --------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,137,572 342,766
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 642,838 (17,712)
Cash and cash equivalents, beginning of period 253,107 1,990,017
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 895,945 $ 1,972,305
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 205,755 $ 155,132
Interest received 18,110 19,526
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital lease additions 999,039 -
Issuance of stock warrants for debt financing costs 75,000 -
Issuance of stock warrants in connection with issuance of
debt to stockholders 461,538 -
Preferred stock dividends paid in common stock 5,795 -
Preferred stock dividends accrued 43,125 -
Amortization of beneficial conversion feature on preferred stock 650,298 -
Conversion of preferred stock to common stock 447,696 -
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
5
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements present the
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. All adjustments have been made to the accompanying interim
consolidated financial statements which are, in the opinion of the Company's
management, necessary for fair presentation of the Company's operating
results.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
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 notes required by generally accepted accounting principles for complete
financial statements. It is recommended that these interim consolidated
financial statements be read in conjunction with the Company's consolidated
financial statements and the notes thereto for the fiscal year ended
September 30, 1998 contained in the Company's Form 10-K as filed with the
Securities and Exchange Commission on December 29, 1998.
NOTE 2: INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
- --------------------------------------------------------------------------
<S> <C> <C>
Raw materials $3,564,113 $2,770,338
Work-in-process 252,787 280,445
Finished goods 170,209 173,888
- --------------------------------------------------------------------------
Total inventory $3,987,109 $3,224,671
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
Inventory is stated at the lower of cost or market value. Inventory
costs include direct materials, direct labor and certain indirect
manufacturing overhead expenses.
NOTE 3: LONG-TERM DEBT
In November 1998, the Company issued $2 million in debt with attached
stock warrants to certain stockholders of the Company. The debt is due in two
years and carries an interest rate of 10 percent per annum, due quarterly and
payable in either unregistered shares of common stock or cash, at the option
of the Company. One stock warrant was issued for each dollar of debt,
resulting in the issuance of 2 million stock warrants. Each warrant is
exercisable into one share of common stock beginning on December 1, 1998, at
an exercise price of $0.25 per share. The exercise price increases to $0.50
per share after August 1, 1999 and $1.00 per share after October 1, 2000. The
warrants expire on November 1, 2001. The stock warrants and underlying shares
of common stock carry no registration rights.
6
<PAGE>
The Company determined the fair value of the warrants to be
approximately $462 thousand and has reflected this value as a discount on the
debt. The debt discount is being amortized to interest expense over the life
of the related debt. Long-term debt to stockholders consists of the following
at December 31, 1998:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
<S> <C>
Notes payable to stockholders, interest of 10% per annum
Payable quarterly in cash or common stock,
Unsecured, due November 1, 2000 $ 2,000,000
Less - unamortized discount (431,125)
--------------------------------------------------------------------------
Long-term debt to stockholders, net of discount $ 1,568,875
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
In connection with the placement and issuance of this debt, the Company
incurred costs of $21 thousand and issued 100,000 stock warrants to the
Company's chairman of the board and 25,000 stock warrants to its external
counsel. Each warrant is exercisable for one share of common stock at $0.01
per share beginning on December 1, 1998, and the warrants expire on November
1, 2001. The stock warrants and underlying shares of common stock carry no
registration rights. The Company valued the warrants at $0.60 per share, or
$75 thousand. The total debt issuance costs of $96 thousand have been
reflected in other noncurrent assets in the accompanying unaudited
consolidated balance sheet and are being amortized over the life of the
related debt.
NOTE 4: PREFERRED STOCK
Pursuant to a Convertible Stock Purchase Agreement dated June 30,
1998 (the "Stock Purchase Agreement"), the Company issued 400 shares of its 5
percent Series A Convertible Preferred Stock, par value $1.00 per share
("Series A Stock"), for $4 million.
The Series A Stock is convertible into the Company's common stock at
the option of the holder beginning 90 days after the June 30, 1998 closing
date. During the next 150 days, the holder agreed to convert no more than 15
percent per month of the Series A Stock if certain quarterly revenue targets
were met by the Company through December 31, 1998. Such targets were met.
The Company also agreed to register the underlying common stock by October
15, 1998. The conversion price is the lesser of the fixed conversion price of
$2.31 per share or a variable conversion price based on 80 percent of the
average of the three lowest prices of the common stock in the 30 consecutive
days preceding each conversion. On the closing date, the variable conversion
price was lower than the fixed conversion price, resulting in an immediate
benefit to the preferred stockholders of approximately $1.4 million. The $1.4
million value of this beneficial conversion feature was reflected in
additional paid-in capital and is being charged to the accumulated deficit
through the earliest date of conversion. At December 31, 1998, $215 thousand
of the value of the beneficial conversion feature remains to be amortized.
The Series A Stock carries mandatory redemption rights that can be
exercised by the holder if certain triggering events occur. These redemption
rights could require the Company to redeem the Series A Stock for cash based
on a formula provided in the Stock Purchase Agreement. The Company cannot
estimate if or when the triggering events might occur nor the redemption
price. Therefore, the mandatory redemption feature has not been valued.
Should a triggering event occur, the Company will record a charge to the
accumulated deficit equal to the difference between the redemption price and
the carrying value of the Series A Stock.
Dividends are payable quarterly in registered shares of common
stock, but must be paid in cash upon the occurrence of certain events.
Attached to the Series A Stock were warrants to purchase 199,999 shares
of common stock at $3.00 per share. The warrants currently are exercisable
and have a term of four years. The Company valued the warrants at
approximately $284 thousand and reflected this amount in additional paid-in
capital.
During the three months ended December 31, 1998, the holder of the
preferred stock converted 55 shares of Series A Stock into 473,965 common
shares.
7
<PAGE>
At December 31, 1998, the carrying value of the Series A Stock
consists of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
<S> <C>
Balance, September 30, 1998 $ 2,390,475
Conversion of 55 shares of preferred stock
to 473,965 shares of common stock (447,696)
Amortization of beneficial conversion feature 650,298
-----------------------------------------------------------------
Balance, December 31, 1998 $ 2,593,077
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
NOTE 5: LOSS PER SHARE
Loss per share has been calculated in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Basic
loss per share is computed by dividing the net loss applicable to common
stock by the weighted average number of common shares outstanding during the
period. Diluted loss per share is computed by dividing net loss applicable to
common stock by the weighted average number of common and common equivalent
shares (if dilutive). Diluted loss per share is the same as basic loss per
share since the effect of common equivalent shares and assumed conversion of
the convertible preferred stock is antidilutive. Following is a
reconciliation of the basic and diluted loss per share computations:
<TABLE>
<CAPTION>
For the Three Months Ended
December 31,
1998 1997
---------------------------------------------------------------------------------
<S> <C> <C>
Net loss $ (941,670) $ (1,659,188)
Less
Preferred stock dividends (48,920) -
Amortization of the value of the
beneficial conversion feature
on the preferred stock (650,298) -
- -------------------------------------------------------------------------------------
Net loss applicable to common stock
(basic and diluted) $ (1,640,888) $ (1,659,188)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Weighted average common shares used
in computing basic and diluted
Loss applicable to common stock
per share 21,049,454 20,397,486
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Loss applicable to common stock per
Share (basic and diluted) $ (0.08) $ (0.08)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
NOTE 6: COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This standard establishes rules for the reporting of
comprehensive income and its components. Comprehensive income consists of net
income and foreign currency translation adjustments, as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
December 31,
1998 1997
----------------------------------------------------------------------------------
<S> <C> <C>
Net loss, as reported $ (941,670) $ (1,659,188)
Foreign currency translation adjustment 36,623 -
----------------------------------------------------------------------------------
Comprehensive loss $ (905,047) $ (1,659,188)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
The adoption of this standard had no net effect on the Company's net
loss or stockholders' equity for the three months ended December 31, 1998 and
1997. Prior year financial statements have been reclassified to conform to
the requirements of this standard.
NOTE 7: SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related
Information," which the Company adopted in the first quarter of fiscal 1999.
This standard establishes requirements for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Under this
standard, operating segments are to be determined consistent with the way
management organizes and evaluates financial information internally for
making operating decisions and assessing performance. The disclosure
provisions of this standard are not applicable for interim period in the year
of adoption. The adoption of this new standard is not expected to have a
material impact on the Company's financial position or results of operations.
NOTE 8: SUBSEQUENT EVENT
In January 1999, the holder of the Series A Stock converted 90
shares of the Series A Stock into 693,744 common shares.
In January 1999, 300,000 warrants relating to the long-term debt
issuance referred to in Note 3 were exercised for 300,000 Common Shares.
9
<PAGE>
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
OR 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the interim consolidated financial
condition and results of operations of the Company for the three-month
periods ended December 31, 1998 and 1997. It should be read in conjunction
with the Consolidated Financial Statements, the Notes thereto and other
financial information included elsewhere in this report, and in the Company's
Annual Report Form 10-K for the year ended September 30, 1998 as filed with
the Securities and Exchange Commission on December 29, 1998. For purposes of
the following discussion, references to year periods refer to the Company's
fiscal year ended September 30, 1998 and references to quarterly periods
refer to the Company's fiscal quarters ended December 31, 1998 and 1997.
On November 2, 1998 the Company issued $2 million in debt with
attached stock warrants to certain stockholders of the Company. The debt is
due in two years and carries an interest rate of 10 percent per annum, due
quarterly, and payable in either unregistered shares of common stock or cash,
at the option of the Company.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated operations data
of the Company expressed as a percentage of net sales (unaudited) for the
periods ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 84.7% 77.7%
-------------- -------------
Gross profit 15.3% 22.3%
-------------- -------------
Operating expenses:
Research and development 4.1% 8.4%
Sales and marketing 5.4% 6.9%
General and administrative 9.2% 10.5%
Depreciation and amortization 1.8% 11.0%
Bad debt expense 0.0% 1.1%
-------------- -------------
Total operating expenses 20.5% 38.0%
-------------- -------------
-------------- -------------
Operating loss (5.2)% (15.7)%
-------------- -------------
Other (expense), net (2.1)% (1.4)%
-------------- -------------
Net loss (7.3)% (17.1)%
-------------- -------------
-------------- -------------
</TABLE>
10
<PAGE>
NET SALES
Net sales consist of build-to-order ("BTO") services, turnkey and
off-the-shelf semiconductor memory modules, memory test solutions and
licensing of its proprietary Tanisys Touch technology, less returns and
discounts. Net sales increased 33.5% to $12.9 million in the first quarter of
fiscal 1999 from $9.7 million in the first quarter of fiscal 1998. The
increase in the first quarter of fiscal 1999 is due primarily to sales
increases in the Company's Comprehensive Logistics and Supply Services
("CLASS") from new customers and its off-the-shelf and turnkey memory products,
also primarily from new customers.
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 declined to $2.0 million in
the first quarter of fiscal 1999 from $2.2 million in first quarter of fiscal
1998. Expressed as a percent of sales, gross margin declined to 15.3% from
22.2% in the first quarters of fiscal 1999 and 1998, respectively. The
decrease in gross profits was due to the increased manufacturing costs
included in "cost of sales" and lower margins on turnkey and off-the-shelf
memory components in the first quarter of fiscal 1999 versus the first
quarter of fiscal 1998. Cost of sales reflects a 137% increase in component
placements in the first quarter of 1999 compared to the same period in fiscal
1998. Component placement costs are the main drivers of manufacturing expenses
and are expected to increase in absolute dollars in the future due to increasing
sales volumes. Per placement costs are expected to decline with increasing sales
volume as fixed manufacturing expenses are spread over greater unit volumes.
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 and employee compensation and
engineering design consulting fees. Research and development expenses
decreased to $534 thousand from $811 thousand in the first fiscal quarters of
1999 and 1998, respectively. The first quarter of fiscal 1998 reflected
unusually high expenditures relating to the DarkHorse Sigma-3 memory tester
and the development of a new family of memory modules. Expenses relating to
research and development are expected to increase slightly in absolute
dollars but decrease as a percentage of revenue.
SALES AND MARKETING
Sales and marketing expenses include all compensation of employees
and independent sales and marketing personnel, as well as the costs of
advertising, promotions, trade shows, travel, direct support and overhead.
Sales and marketing expenses increased $22 thousand to $694 thousand in the
first quarter of fiscal 1999 from $672 thousand in the first quarter of
fiscal 1998. The 3.2% increase in sales and marketing expenses versus the
33.5% increase in net sales for the same period reflects the change in
customer base between the periods. Sales and marketing expenses will increase
in future periods as expected increases in sales revenues materialize but are
expected to decrease slightly when expressed as a percent of revenues.
GENERAL AND ADMINISTRATIVE
General and administrative costs consist primarily of personnel costs
and support costs, including compensation, employee benefits, utilities,
insurance, professional fees and all costs associated with a reporting company.
General and administrative expenses increased to $1.2 million in the first
quarter of fiscal 1999 from $1.0 million in the first quarter of fiscal 1998.
The increase was primarily due to the addition of the Scotland facility.
General and administrative expenses are expected to remain relatively constant
during fiscal 1999 and decrease when expressed as a percent of sales.
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 May 1996 acquisitions of 1st Tech Corporation ("1st
Tech") and DarkHorse Systems, Inc. ("DarkHorse"). Depreciation and
amortization decreased to $235 thousand in first quarter fiscal 1999 from
$1.1 million in first quarter fiscal 1998. The decrease is due primarily to
the complete amortization in
11
<PAGE>
April 1998 of goodwill relating to the acquisitions of 1st Tech and DarkHorse.
Depreciation expenses are expected to decrease as a percentage of revenue and
increase in terms of absolute dollars with additional facility expansions and
equipment purchases used in manufacturing and research and development.
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, capital leases and notes payable. A major portion 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) increased to
$276 thousand in the first quarter of fiscal 1999 from $136 thousand in the
first quarter of fiscal 1998. The increase is due primarily to interest
expense relating to capital leases and long-term notes payable. The Company
expects to continue to require borrowings to fund growth in accounts
receivable and inventory in the future. The Company anticipates adding
manufacturing capacity financed with additional capital leases and long-term
notes, which will increase interest costs in future periods.
PROVISION FOR INCOME TAXES
For the years ended September 30, 1998 and 1997, the Company incurred
consolidated net operating losses for U.S. income tax purposes of approximately
$5.3 million and $6.0 million and for non-U.S. income tax purposes of
approximately $369 thousand and $-0-, respectively. The loss carryforwards
begin to expire in 2011. At September 30, 1998 and 1997, the Company had
temporary differences resulting in future tax deductions of approximately $756
thousand and $513 thousand, respectively, principally representing tax basis
in accrued liabilities and reserves. Deferred income tax assets from the loss
carryforwards and asset basis differences aggregate approximately $6.9 million
and $4.6 million at September 30, 1998 and 1997, respectively.
For financial reporting purposes, a valuation allowance of $6.9
million and $4.7 million at September 30, 1998 and 1997, respectively, has
been recorded to offset the deferred tax assets due to uncertainty as to
whether the benefits will be realized.
The availability of the net operating loss carryforwards and future tax
deductions to reduce taxable income is 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 believes that
the IRS Code Section 382 limitation did not exist at September 30, 1998 and
if triggered, the consequence is expected to have no material impact on the
Company's consolidated financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Tanisys has utilized the funds acquired in equity
financings of its common stock and preferred 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 and accounts receivable balances and pay its
general and administrative expenses.
During the first quarter of fiscal 1999, the Company generated $5.1
million in net cash from financing activities. The $5.1 million in fiscal
1999 consisted primarily of $2.0 million from issuance of debt to
stockholders and $3.0 million from net draws on the Company's credit line.
The Company used $4.2 million of cash in operating activities in the first
quarter of fiscal 1999, of which $3.2 million was used to increase accounts
receivable and $800 thousand was used to increase inventories. The increase
in accounts receivable and inventory resulted from a 41% increase in sales
during the same period. While management does not believe that the same
inventory growth will occur in similar high growth quarters, sales increases,
changes in customer mix, new customers, new products and product mix require
working capital. Management anticipates inventory levels to drop during the
second quarter and then grow as anticipated sales increase.
12
<PAGE>
The Company had $896 thousand in cash and a working capital deficit of
$751 thousand at December 31, 1998. The Company anticipates that working
capital will increase as manufacturing equipment is financed and reclassified
as a long-term liability. Currently, the obligations are classified under
"Accrued Liabilities" on the December 31, 1998 balance sheet. The anticipated
increase in working capital will be $1.8 million, less the current portion.
The Company also anticipates securing additional working capital from either
debt or equity financing.
Capital expenditures totaled approximately $333 thousand for the first
quarter of fiscal 1999. The Company is planning to lease or finance through debt
approximately $11.3 million of capital equipment during the remaining fiscal
year in anticipation of customer demand. The actual commitment and purchase of
the equipment will be dependent upon achieving certain sales levels.
The Company believes that its existing funds, anticipated cash flows
from operations and amounts available from future vendor credits, bank
borrowings, operating and capital lease financing, long-term 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 are produced by
a relatively small number of customers. In the first quarter of fiscal 1999,
the ten largest customers accounted for approximately 91.6% of net sales
compared to approximately 68% in same period in fiscal 1998. Three customers
represented 29.1%, 14.8% and 12.6%, respectively, in the first quarter of fiscal
1999. The customer representing 14.8% of sales in the first quarter of fiscal
1999 represented 29.5% of the Company's sales in the first quarter of fiscal
1998. 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 the first quarter of
fiscal 1999 will continue to utilize the Company's products or services.
One of the Company's largest customers has announced it will be
purchased by a competing company and the operations of the two companies
combined. While a relationship exists with the purchasing Company, Tanisys
does not presently have a contractual relationship with the purchasing
company. Management of the Company expects to benefit from the increased
sales volumes resulting from the combined companies.
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.
YEAR 2000 COMPLIANCE
The Year 2000 problem concerns the inability of certain computer systems to
appropriately recognize the year 2000 when the last two digits of the year are
entered in the date field. The Company has assessed its Year 2000 requirements
and believes that its major computer systems and programs are Year 2000
compliant and that the remaining systems are either already Year 2000 compliant
or will become Year 2000 compliant as the Company continues to replace obsolete
or non-functional systems as part of its normal asset replacement cycle.
Therefore, the Company believes that its costs to become Year 2000 compliant
have been immaterial and will continue to be immaterial in the future.
13
<PAGE>
The Company, however, could be adversely affected by the Year 2000
problem if computer systems of third parties such as banks, suppliers and
others with which the Company does business fail to address the Year 2000
problem successfully. While the Company continues to gather data on the Year
2000 compliance status of its customers and suppliers, there can be no
assurance that the Year 2000 problem, if experienced by such third parties,
will not have a material adverse effect upon the Company's business,
operating results and financial condition.
Many companies may need to modify or upgrade their information systems
to address the Year 2000 problem. The effects of this issue and of the
efforts by other companies to address it are unclear. The Company believes
that Year 2000 issues might affect the purchasing patterns of customers and
prospective customers. Many companies are expending significant resources to
correct their current software systems for Year 2000 compliance. These
expenditures might result in reduced funds available to purchase services and
products such as those offered by the Company.
The above Year 2000 disclosure constitutes a "Year 2000 Readiness
Disclosure" as defined in The Year 2000 Information and Readiness Disclosure
Act (the "Act"), which was signed into law on October 19, 1998. The Act
provides added protection from liability for certain public and private
statements concerning a company's Year 2000 readiness.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not believe that there is any material risk
exposure with respect to derivative or other financial instruments which
would require disclosure under this item.
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) In November 1998, the Company issued $2 million in debt with attached
stock warrants (the "Warrants") to certain stockholders of the Company
(the "Noteholders"). The promissory notes evidencing the debt have a
two-year term and bear interest at 10% per annum, with interest due
quarterly and payable in either unregistered shares of common stock or
cash, at the option of the Company. One stock warrant was issued for
each dollar of debt, resulting in the issuance of 2 million stock
warrants. Each warrant is exercisable into one share of common stock
beginning December 1, 1998, at an exercise price of $0.25 per share,
increasing to $0.50 per share after August 1, 1999 and to $1.00 per
share from October 1, 2000 through the expiration date of November 1,
2001. 850,000 shares of common stock were issued upon exercise of the
Warrants by the Noteholders as of December 31, 1998. The shares of
common stock issuable in payment of dividends and underlying the
warrants were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to the exemptions of such
registration provided under Regulation D ("Regulation D") of the rules
and regulations promulgated under the Securities Act by the Securities
and Exchange Commission and Section 4(2) of the Securities Act. The
Company relied upon certain representations and warranties of the
Noteholders, including, among other things, as to their status as
"accredited investors" (as that term is defined in Rule 501(a) of
Regulation D) and their ability to evaluate the merits and risks
involved and that the Common Stock was acquired solely for their own
account for investment and not with a view to distribution.
Pursuant to a Convertible Stock Purchase Agreement dated June 30, 1998
(the "Stock Purchase Agreement") among the Company, and KA Investments
LDC, the Company issued 400 shares of its Five Percent Series A
Convertible Preferred Stock, par value $1.00 per share and stated value
of
14
<PAGE>
$10,000 per share (the "Series A Stock"), for consideration of
$4 million. The Series A Stock is convertible into the Company's common
stock at the option of the holder beginning 90 days after the June 30,
1998 closing date. The conversion price is the lesser of the fixed
conversion price of $2.31 per share or a variable conversion price
based on 80 percent of the average of the three lowest prices of the
common stock in the 30 consecutive days preceding each conversion. On
the closing date, the variable conversion price was lower than the
fixed conversion price, resulting in an immediate benefit to the
preferred stockholder of approximately $1.4 million. The Series A Stock
carries mandatory redemption rights that can be exercised by the holder
if certain triggering events occur, which could require the Company to
redeem the Series A Stock for cash based on a formula provided in the
Stock Purchase Agreement. Dividends are payable quarterly in registered
shares of common stock but must be paid in cash upon the occurrence of
certain events. Attached to the Series A Stock were four-year warrants
to purchase 199,999 shares of common stock at $3.00 per share. During
the three months ended December 31, 1998, the holder of the preferred
stock converted 55 shares of Series A Stock into 473,965 shares of
common stock.
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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Incorporation of Tanisys Technology, Inc., as
amended (Exhibit 3.1 to Form S-3 Registration Statement filed
August 13, 1998)
3.2 Restated Bylaws of the Company (Exhibit 3.5 to Form 10
Registration Statement filed November 27, 1996)
10.1 Form of Promissory Note issued by Tanisys Technology, Inc.
in connection with $2 million debt closed November 2, 1998
(filed herewith)
10.2 Form of Warrant Agreement entered into between Tanisys
Technology, Inc. and subscribers to the $2 million debt
offering closed November 2, 1998, and form of attached
Stock Purchase Warrant issued thereunder (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) CURRENT REPORTS ON 8-K:
None.
</TABLE>
15
<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 15, 1999 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 15, 1999 By: /s/ DONALD R. TURNER
----------------------------
Donald R. Turner
CORPORATE CONTROLLER
(Duly authorized and Principal
Accounting Officer)
16
<PAGE>
EXHIBIT 10.1
P R O M I S S O R Y N O T E
$__________ November 2, 1998
FOR VALUE RECEIVED, in the manner, on the dates and in the amounts so
herein stipulated, the undersigned, TANISYS TECHNOLOGY, INC., a Wyoming
corporation ("Borrower"), PROMISES TO PAY TO THE ORDER OF __________________,
individually ("Lender"), at
_______________________________________________________, the sum of
______________________________________________________________ Dollars
($___________) in lawful money of the United States of America, which shall
be legal tender in payment of all debts and dues, public and private, at the
time of payment, and to pay interest on the unpaid principal amount from the
date hereof until maturity at a fixed rate ("Stated Rate") equal to Ten
Percent (10%) per annum, not to exceed the maximum non-usurious interest rate
permitted by applicable law from time to time in effect, as such law may be
interpreted, amended, revised, supplemented or enacted (the "Maximum Rate"),
provided that if at any time the Stated Rate exceeds the Maximum Rate, then
interest hereon shall accrue at the Maximum Rate. In the event the Maximum
Rate applicable to this Note should subsequently be changed, then interest
hereon shall accrue at a rate equal to the applicable Maximum Rate until the
aggregate amount of interest so accrued equals the aggregate amount of
interest which would have accrued at the Stated Rate without regard to any
usury limit, at which time interest hereon shall again accrue at the Stated
Rate. The principal amount of this Note and accrued interest are payable as
follows:
(a) Interest shall be due and payable quarterly, with the first
payment of interest due and payable ____________, 199_, and a
similar interest payment due and payable each ninety (90) days
thereafter until maturity of the Note (each an "Interest Payment
Date").
(b) Interest shall be payable, at the option of the Borrower, in cash
or shares of common stock, no par value ("Common Stock"), of the
Company. The Borrower shall provide Lender notice of its
intention to pay interest in cash or shares of Common Stock not
less than ten (10) business days prior to any interest payment
date. If interest is paid in shares of Common Stock, the number
of shares of Common Stock issuable on account of such interest
shall equal the cash amount of interest due on such Interest
Payment Date divided by the average of the closing bid price per
share of Common Stock for the five (5) trading days immediately
preceding the applicable Interest Payment Date.
(c) The principal amount of this Note, and any unpaid accrued
interest, shall be due and payable in full on November 1, 2000;
(d) In the event the Borrower closes an underwritten public offering,
principal and accrued interest shall be due and payable in full
as of such closing date.
<PAGE>
If Borrower shall default in the performance of the payment provisions
of this Note, Lender shall notify Borrower of the default in writing by
facsimile or by U.S. Certified Mail, Return Receipt Requested, and shall
demand cure of the default. Borrower shall thereupon have five (5) days from
receipt of notice from Lender in which to cure the default. In the event
Borrower shall not cure the default within the five (5)-day cure period,
Lender may, at its option, (i) accelerate and declare this Note immediately
due and payable, (ii) pursue any and all other rights, remedies and recourses
available to the holder hereof, at law or in equity, or (iii) pursue any
combination of the foregoing. Any failure to exercise this option shall not
constitute a waiver by Lender of the right to exercise the same at any other
time.
In the event of default in the making of any payment herein provided,
either of principal or interest, or in the event this Note is declared due,
interest shall accrue at the Maximum Rate.
Borrower hereby agrees to pay all expenses incurred, including
reasonable attorneys' fees, all of which shall become a part of the principal
hereof, if this Note is placed in the hands of an attorney for collection or
if collected by suit or through any probate, bankruptcy or any other legal
proceedings.
Interest charges will be calculated on amounts advanced hereunder on the
actual number of days these amounts are outstanding on the basis of a 360-day
year, except for calculations of the Maximum Rate, which will be on the basis
of a 365-day or 366-day year, as is applicable. It is the intention of the
parties hereto to comply with all applicable usury laws; accordingly, it is
agreed that notwithstanding any provisions to the contrary in this Note, or
in any of the documents securing payment hereof or otherwise relating hereto,
no such provision shall require the payment or permit the collection of
interest in excess of the Maximum Rate. If any excess of interest in such
respect is provided for, or shall be adjudicated to be so provided for, in
this Note or in any of the documents securing payment hereof or otherwise
relating hereto, then in such event (1) the provisions of this paragraph
shall govern and control; (2) neither Borrower, endorsers or guarantors, nor
their heirs, legal representatives, successors or assigns, nor any other
party liable for the payment hereof, shall be obligated to pay the amount of
such interest to the extent that it is in excess of the Maximum Rate; (3) any
such excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount hereof or refunded to Borrower; and
(4) the provisions of this Note and any documents securing payment of this
Note shall be automatically reformed so that the effective rate of interest
shall be reduced to the Maximum Rate. For the purpose of determining the
Maximum Rate, all interest payments with respect to this Note shall be
amortized, prorated and spread throughout the full term of the Note so that
the effective rate of interest on account of this Note is uniform throughout
the term hereof.
The provisions of this Note shall be governed by the laws of the State
of Texas.
Each surety, guarantor and endorser agrees that this Note and the liens
securing its payment may be renewed and the time of payment extended from
time to time, without notice and without releasing any of the foregoing.
2
<PAGE>
Borrower and any and all endorsers and guarantors of this Note severally
waive presentment for payment, notice of nonpayment, protest, demand, notice
of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Borrower may prepay this Note, in whole or in part, at any time prior to
maturity without penalty, and interest shall cease on any amount prepaid.
TANISYS TECHNOLOGY, INC.
By: /s/ Charles T. Comiso
-------------------------------------
Charles T. Comiso
Chief Executive Officer and President
3
<PAGE>
EXHIBIT 10.2
TANISYS TECHNOLOGY, INC.
WARRANT AGREEMENT
November 2, 1998
To the Subscribers whose names are set forth on EXHIBIT B hereto
Gentlemen:
Tanisys Technology, Inc., a Wyoming corporation (the "Company"), hereby
agrees to issue in connection with the private offering of its Promissory
Notes (the "Notes"), Class D Stock Purchase Warrants entitling the holders to
purchase an aggregate of 2,000,000 shares of common stock, no par value
("Common Stock"), each Warrant currently being equal to one share of Common
Stock of the Company, to be evidenced by an instrument in the form attached
hereto as EXHIBIT A (hereinafter referred to as the "Warrant," and the
Warrant and all instruments hereafter issued in replacement, substitution,
combination or subdivision thereof being hereinafter collectively referred to
as the "Warrants"). The number and character of shares of Underlying
Securities purchasable upon exercise of the Warrants are subject to
adjustment as provided in Section 6 below. The Warrants will be exercisable
by each Warrantholder as to all shares of Common Stock covered thereby at the
Purchase Price per share as defined below, at any time and from time to time
after December 1, 1998 and ending at 5:00 p.m., Austin time, on November 1,
2001.
1. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, shall have for all purposes hereof the following respective
meanings:
(a) The term "Act" refers to the Securities Act of 1933, as amended
from time to time.
(b) The term "Commission" refers to the Securities and Exchange
Commission.
(c) The term "Common Stock" refers to the Company's Common Stock, no
par value.
(d) The term "Other Securities" refers to any securities of the
Company or any other person (corporate or otherwise), any property
(including cash), and any right to
<PAGE>
receive any securities or property that the holders of the Warrants at
any time shall be entitled to receive, or shall have received, upon the
exercise of the Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 6 hereof or otherwise; provided, however, that Other
Securities does not include cash dividends payable upon Common Stock or
Other Securities, which cash dividend was payable to holders of record
prior to the date of exercise of a Warrant.
(e) The term "Purchase Price" means $0.25 per share prior to August
1, 1999, $0.50 from August 2, 1999 to October 1, 2000 and $1.00 thereafter,
subject to adjustment as set forth in Subsection 6(a).
(f) The term "Underlying Securities" refers to the shares of Common
Stock and Other Securities issuable under this Warrant Agreement and the
Warrants pursuant to the exercise of the Warrants; provided, however, that
"Underlying Securities" does not include Common Stock or Other Securities,
the right to the purchase of which has been waived pursuant to Subsection
6(b) hereof.
(g) The term "Warrantholder" refers to the initial recipients of the
Warrants and any transferee or transferees thereof permitted by Section
3(a) below.
2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) EXISTENCE. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation.
(B) CORPORATE AND OTHER ACTION. The Company has all requisite power
and authority (corporate and other), and has taken all necessary corporate
action, to authorize, execute, deliver and perform this Warrant Agreement;
to execute, issue, sell and deliver the Warrants and a certificate or
certificates evidencing the Warrants; to authorize and reserve for issuance
and, upon payment from time to time of the Purchase Price, to issue, sell
and deliver the shares of the Underlying Securities issuable upon exercise
of the Warrants; and to perform all of its obligations under this Warrant
Agreement and the Warrants. This Warrant Agreement has been duly executed
and delivered by the Company and is a legal, valid and binding agreement of
the Company enforceable in accordance with its terms. No authorization,
approval, consent or other order of any regulatory authority is required
for such authorization, issue or sale.
(c) NO VIOLATION. The execution and delivery of this Warrant
Agreement, the consummation of the transactions herein contemplated, and
the compliance with the terms and provisions of this Warrant Agreement and
of the Warrants will not conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration
<PAGE>
under, any statute, the Certificate of Incorporation, as amended, or the
Bylaws of the Company, or any indenture, mortgage, deed of trust, note,
bank loan, credit agreement, franchise, license, lease, permit or any
other agreement, understanding, instrument, judgment, decree, order,
statute, rule or regulation to which the Company is a party or by which
it is bound.
(d) VALIDITY. The Warrant, when delivered to you, will be duly
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms. The
shares of Underlying Securities of the Company, when delivered to you upon
payment of the Purchase Price, will be duly authorized and validly issued
and outstanding, fully paid and nonassessable, and free of preemptive
rights.
3. COMPLIANCE WITH THE ACT.
(a) PURCHASE FOR INVESTMENT; TRANSFERABILITY. You represent and
warrant to the Company that the Warrants and the shares of Underlying
Securities are being acquired for investment and not with a view to the
distribution or resale thereof. You agree that the Warrants and the
Underlying Securities may not be transferred, sold, assigned or
hypothecated, except pursuant to a registration statement that has become
effective under the Act, setting forth the terms of such offering, the
underwriting discount and commissions and any other pertinent data with
respect thereto, unless you have provided the Company with an opinion of
counsel reasonably acceptable to the Company that such registration is not
required.
(b) LEGEND. Each certificate representing Underlying Securities
shall be imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT.
NEITHER THE SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COUNSEL FOR
THIS CORPORATION, IS AVAILABLE.
(c) Unless the content otherwise requires, references in this Section
3 to "you" or "your" shall mean and include a Warrantholder or a holder of
Underlying Securities, as the case may be.
<PAGE>
4. EXERCISE OF WARRANTS.
Warrants may only be exercised in full by the Warrantholder by
surrender of the Warrant, with the form of subscription at the end thereof duly
executed by such Warrantholder, to the Company at its principal executive
offices, accompanied by certified or bank cashier's check payable to the order
of the Company in the full amount obtained by multiplying the number of shares
represented by the respective Warrant or Warrants by the Purchase Price per
share.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE.
Any exercise of the Warrants pursuant to Section 4 hereof shall be
deemed to have been effective immediately prior to the close of business on the
date on which the Warrants with the subscription form and the check for the
aggregate Purchase Price shall have been received by the Company; except that
the Company shall not be required to open its stock transfer books in order to
effect an exercise, and the effective time in such event shall be the date the
stock transfer books are reopened. At such time, the person or persons in whose
name or names any certificate or certificates for shares of Underlying
Securities shall be issuable upon such exercise shall be deemed to have become
the holder or holders of record of the shares of Underlying Securities so
purchased. As soon as practicable after the exercise of any Warrant, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of, and delivered to, the purchasing
Warrantholder, a certificate or certificates for the number of fully paid and
nonassessable shares of the Underlying Securities to which such Warrantholder
shall be entitled upon such exercise, plus in lieu of any fractional share to
which such Warrantholder would otherwise be entitled, cash in an amount
determined pursuant to Subsection 7(h) hereof. Such certificate shall contain
the legend required by Subsection 3(b) hereof.
6. ANTI-DILUTION PROVISIONS.
The Warrants are subject to the following terms and conditions during
the term thereof:
(a) STOCK DISTRIBUTIONS, SPLITS AND COMBINATIONS; ADJUSTMENTS. In
case of (i) the outstanding shares of Common Stock (or Other Securities)
shall be subdivided into a greater number of shares, (ii) a non-cash
dividend in Common Stock (or Other Securities) shall be paid in respect of
Common Stock (or Other Securities), or (iii) the outstanding shares of
Common Stock (or Other Securities) shall be combined in to a smaller number
of shares thereof, the number of shares of Underlying Securities subsequent
to such subdivision or combination or at the record date of such dividend
or distribution shall simultaneously with the effectiveness of such
subdivision or combination or immediately after the record date of such
dividend or distribution be equal to the number of shares of Common Stock
and Other Securities a holder would have owned and had a right to receive
as a result of such subdivision, combination, dividend or distribution if
such
<PAGE>
holder had actually held of record immediately prior to the
effectiveness of such subdivision or combination or immediately prior to
the record date of such dividend or distribution the number of shares of
Underlying Securities purchasable immediately prior to the effectiveness
of such subdivision or combination or the record date of such dividend
or distribution.
(b) REORGANIZATIONS AND RECAPITALIZATIONS. In case the Company shall
be reorganized or recapitalized by reclassifying its outstanding Common
Stock (or Other Securities) without par value to stock with par value,
then, as a condition of such reorganization or recapitalization, as the
case may be, immediately after the effective time of such reorganization or
recapitalization, each Warrantholder shall thereafter have the right to
purchase, upon the terms and conditions specified herein, the number of
shares of Underlying Securities that a holder would have owned and had the
right to receive as a result of such reorganization or recapitalization if
such holder had held of record the number of shares of Underlying
Securities immediately prior to such reorganization or recapitalization.
If any consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of its assets to another corporation,
shall be effected in such a way that holders of Common Stock and Other
Securities shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock and Other Securities, then, as a
condition of such consolidation, merger or sale, immediately after the
effective time of such consolidation, merger or sale, the Warrantholders
shall thereafter, subject to the last sentence of this Subsection, have the
right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant Agreement, the number of shares of
Underlying Securities that a holder would have owned and had a right to
receive as a result of such consolidation, merger or sale if such holder
had actually held of record immediately prior to such consolidation, merger
or sale the number of shares of Underlying Securities purchasable
immediately prior to such consolidation, merger or sale. If the Company is
merged into or consolidated with another corporation under circumstances
where the Company is not the surviving corporation or where the Company
will be a wholly owned subsidiary of another corporation (except where such
merger or consolidation is effected merely in order to recapitalize or
reincorporate the Company), or if the Company sells or otherwise disposes
of all or substantially all of its property or assets to another
corporation, all outstanding Warrants may be canceled by the Board of
Directors of the Company as of the effective date of any such merger,
consolidation or sale, provided that (i) written notice of such
cancellation is given to each holder of a Warrant not later than 30 days
prior to such effective date and (ii) each holder of a Warrant shall have
the right to exercise such Warrant in full during the said 30-day period
preceding the effective date of such merger, consolidation or sale.
(c) EFFECT OF DISSOLUTION OR LIQUIDATION. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights
under this Warrant Agreement and the Warrants shall terminate as of the
date upon which a certificate of dissolution or liquidation shall be filed
with the Secretary of State of Wyoming (or, if the Company theretofore
shall have been merged or consolidated with a corporation incorporated
under
<PAGE>
the laws of another state, the state of incorporation on the date
upon which action of equivalent effect shall have been taken); provided,
however, that (i) no dissolution or liquidation shall affect the rights
under Subsection (b) hereof of any Warrantholder and (ii) if the Company's
Board of Directors shall propose to dissolve or liquidate the Company, each
Warrantholder shall be given written notice of such proposal at the earlier
of (i) the time when the Company's shareholders are first given notice of
the proposal or (ii) the time when notice to the Company's shareholders is
first required.
(d) NOTICE OF CHANGE OF UNDERLYING SECURITIES. Whenever the number
of shares of Underlying Securities or the kind or amount of securities or
assets purchasable pursuant to the Warrants shall be adjusted pursuant to
any of the provisions of this Warrant Agreement, or the number of shares of
Underlying Securities or the kind or amount of securities or assets
receivable upon conversion of Underlying Securities shall be adjusted
pursuant to the terms thereof, the Company shall forthwith thereafter cause
to be sent to each Warrantholder a notice setting forth such adjustment and
also setting forth in detail the facts requiring such adjustments.
7. FURTHER COVENANTS OF THE COMPANY.
(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment of
its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant or of this Warrant
Agreement, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company:
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of
the Underlying Securities from time to time issuable upon the exercise
of the Warrants and shall use its best efforts to ensure that the par
value per share, if any, of the Underlying Securities is at all times
equal to or less than the then effective Purchase Price per share of
Underlying Securities; and
(ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock and Other
Securities upon the exercise of the Warrants from time to time
outstanding.
(b) TITLE TO STOCK. All shares of the Underlying Securities
delivered upon the exercise of the Warrants shall be validly issued, fully
paid and nonassessable; each holder of a Warrant shall receive good and
marketable title to the Underlying Securities, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and claims
whatsoever; and the Company shall have paid all taxes, if any, in respect
of the issuance
<PAGE>
thereof.
(c) LISTING ON SECURITIES EXCHANGES; REGISTRATION. If the Company at
any time shall list any Common Stock on any national securities exchange,
the Company will, at its expense, simultaneously list on such exchange,
upon official notice of issuance upon the exercise of the Warrants, and
maintain such listing of, all shares of Common Stock included in the
Underlying Securities from time to time issuable upon the exercise of the
Warrants or upon conversion of Underlying Securities, and the Company will
so list on any national securities exchange, will so register, and will
maintain such listing of, any Other Securities if and at the time that any
securities of such class shall be listed on such national securities
exchange by the Company. You shall have no right to require the Company to
register the Warrants or the shares of Common Stock underlying the
Warrants.
(d) REMEDIES. The Company stipulates that the remedies at law of the
Warrantholder or any holder of Underlying Securities in the event of any
default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant Agreement or the Warrants
are not and will not be adequate and that such terms may be specifically
enforced by a decree of the specific performance of any agreement contained
herein or in the Warrants or by an injunction against a violation of any of
the terms hereof or thereof or otherwise.
(e) EXCHANGE OF WARRANTS. Subject to Subsection 3(a) hereof, upon
surrender or exchange of any Warrant to the Company, the Company at its
expense will promptly issue and deliver to or upon the order of the holder
thereof a new Warrant of like tenor, in the name of such holder or as such
holder (upon payment by such Warrantholder of any applicable transfer
taxes) may direct, calling in the aggregate for the purchase of the number
of shares of the Underlying Securities called for on the face or faces of
the Warrant or Warrants so surrendered. The Warrants and all rights
thereunder are transferable in whole or in part upon the books of the
Company by the registered holder thereof subject to the provisions of
Subsection 3(a) hereof, in person or by duly authorized attorney, upon
surrender of the Warrant, duly endorsed, at the principal office of the
Company.
(f) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of any Warrant, and in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or in the case of such mutilation, upon surrender
and cancellation of such Warrant, the Company, at the expense of the
Warrantholder, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
(g) REPORTING BY THE COMPANY. The Company agrees that during the
term of the Warrants and as long as you hold Underlying Securities, it will
use its best efforts to keep current in the filing of all forms and other
materials, if any, which it may be required
<PAGE>
to file with the appropriate regulatory authority pursuant to the
Exchange Act and all other forms and reports required to be filed with
any regulatory authority having jurisdiction over the Company.
(h) FRACTIONAL SHARES. No fractional shares of Underlying Securities
are to be issued upon the exercise of any Warrant, but the Company shall
pay a cash adjustment in respect of any fraction of a share that would
otherwise be issuable in an amount equal to such fraction multiplied by the
closing market price per share of Underlying Securities on the day of
exercise, as determined by the closing bid and asked price regular way on
the principal national securities exchange on which the Underlying
Securities is listed or admitted to trading, or if not listed or admitted
to trading on any national securities exchange, the average of the highest
reported bid and lowest reported asked price over the preceding 30-day
period as furnished by the National Quotation Bureau Incorporated;
provided, however, that if the Underlying Securities are not traded in such
manner that the quotations referred to herein are available, the market
price shall be deemed to be the fair market value of such Underlying
Securities as reasonably determined by the Board of Directors.
8. OTHER WARRANTHOLDERS.
The Warrants are issued upon the following terms, to all of which each
holder or owner thereof by the taking thereof consents and agrees: (a) any
person who shall become a transferee, within the limitations on transfer imposed
by Subsection 3(a) hereof, shall take such Warrant subject to the provisions of
Subsection 3(a) hereof and the other provisions hereof and thereupon shall be
authorized to represent himself as absolute owner thereof and, subject to the
restrictions contained in this Warrant Agreement, shall be empowered to transfer
absolute title by endorsement and delivery thereof to a permitted bonafide
purchaser for value; (b) each prior taker or owner waives and renounces all of
his equities or rights in such Warrant in favor of each such permitted bonafide
purchaser, and each such permitted bonafide purchaser shall acquire absolute
title thereto and to all rights presented thereby; (c) until such time as the
respective Warrant is transferred on the books of the Company, the Company may
treat the registered holder thereof as the absolute owner thereof for all
purposes, notwithstanding any notice to the contrary; and (d) all references to
the words "you" and "your" in this Warrant Agreement shall be deemed to apply
with equal effect to any person to whom a Warrant has been transferred in
accordance with the terms hereof, and where appropriate, to any person holding
shares of the Underlying Securities.
9. MISCELLANEOUS.
All notices, certificates, and other communications from or at the request
of the Company to any Warrantholder shall be mailed by first class, registered,
or certified mail, postage prepaid, to the address set forth herein, to such
address as may have been furnished to the Company in writing by such
Warrantholder, or, if no notice of transfer has been received by the Company, to
the address of the last holder of such Warrant. This Warrant Agreement and any
of the terms hereof may be changed, waived, discharged, or terminated only
pursuant to Subsection 6(b)
<PAGE>
hereof or by an instrument in writing signed by the Company and the holders
of Warrants to purchase in excess of 50% of the Underlying Securities then
subject to purchase pursuant to the Warrants. This Warrant Agreement shall
be construed and enforced in accordance with and governed by the internal
laws of the State of Wyoming. The headings in this Warrant Agreement are for
purpose of reference only and shall not limit or otherwise affect any of the
terms hereof. This Warrant Agreement, together with the forms of instruments
annexed hereto as EXHIBIT A, constitutes the full and complete agreement of
the parties hereto with respect to the subject matter hereof.
THIS WARRANT AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES WITH RESPECT TO THE WARRANT AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed as of the 2nd day of November, 1998 by its proper corporate officers,
thereunto duly authorized.
TANISYS TECHNOLOGY, INC.
By:
Charles T. Comiso
Chief Executive Officer and President
CONFIRMED:
SIGNATURE
Printed Name:
Title (if applicable):
SIGNATURE
Printed Name:
Title (if applicable):
(Each co-owner or joint owner must sign.)
<PAGE>
EXHIBIT A
NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO
THIS WARRANT HAVE BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE
SECURITIES THAT MAY BE PURCHASED PURSUANT TO THIS WARRANT ARE BEING OFFERED
AND SOLD IN RELIANCE UPON CERTAIN EXEMPTIONS AFFORDED BY SUCH ACTS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACTS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
Warrant No. D-___
TANISYS TECHNOLOGY, INC.
CLASS D STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT _________________, or his/its registered
assigns, is entitled to purchase (i) at any time or from time to time after
December 1, 1998 until 5:00 p.m., Austin time, on August 1, 1999, _________
shares of common stock, no par value ("Common Stock"), of Tanisys Technology,
Inc., a Wyoming corporation (the "Company"), at a Purchase Price of $0.25 per
share, (ii) from August 2, 1999 until 5:00 p.m., Austin time, on October 1,
2000 at a Purchase Price of $0.50 per share or (iii) from October 2, 2000
until 5:00 p.m., Austin time, on November 1, 2001. The number of shares of
Common Stock exercisable under this Warrant is subject to adjustment pursuant
to Section 6 of the Warrant Agreement (defined below). This Warrant is
issued pursuant to a Warrant Agreement, dated as of November 2, 1998 (the
"Warrant Agreement"), between the Company and certain subscribers, and all
rights of the holder of this Warrant are subject to the terms and provisions
of the Warrant Agreement, copies of which are available for inspection at the
offices of the Company.
TRANSFER OF THIS WARRANT IS RESTRICTED AS PROVIDED IN THE WARRANT
AGREEMENT. Subject to the rules and regulations of the Securities and
Exchange Commission, the Securities Act of 1933, as amended, and the Warrant
Agreement, this Warrant and all rights hereunder are transferable at the
principal executive offices of the Company, by the holder hereof in person or
by his or its duly authorized attorney, upon surrender of this Warrant,
together with the Assignment hereof duly endorsed. Until transfer hereof on
the books of the Company, the Company may treat the registered holder as the
owner hereof for all purposes.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
and its corporate seal to be hereunto affixed in Austin, Texas by its proper
corporate officers thereunto duly authorized on this the 2nd day of November,
1998.
TANISYS TECHNOLOGY, INC.
<PAGE>
By: /s/ Charles T. Comiso
--------------------------------------
Charles T. Comiso
Chief Executive Officer and President
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Tanisys Technology, Inc.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________ shares of Common Stock of Tanisys
Technology, Inc. and herewith makes payment of $____________ therefor, and
requests that the certificate or certificates for such shares be issued in
the name of and delivered to the undersigned.
Dated:______________, _______
- -------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the within Warrant)
(Address)
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto ______________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of Tanisys Technology, Inc. to
which the within Warrant relates, and appoints _______________________
Attorney to transfer such right on the books of Tanisys Technology, Inc. with
full power of substitution in the premises.
The undersigned represents and warrants that the transfer of the within
Warrant is permitted by the terms of the Warrant Agreement pursuant to which
the within Warrant has been issued, and the Assignee hereof, by his
acceptance of this Assignment, represents and warrants that he is familiar
with the terms of said Warrant Agreement and agrees to be bound by the terms
thereof with the same force and effect as if a signatory thereto. Acceptance
of the Warrant by Assignee shall constitute acceptance of those terms and
conditions.
Dated:_________________, ______
Signed in the presence of: Assignor:
(Signature must conform in all respects to
name of holder as specified on the face of
the within Warrant)
Assignee:
Address of Assignee:
Tax ID No.:
<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, 1998 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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 912,040
<SECURITIES> 0
<RECEIVABLES> 7,396,224
<ALLOWANCES> 396,465
<INVENTORY> 3,987,109
<CURRENT-ASSETS> 13,053,214
<PP&E> 6,594,352
<DEPRECIATION> 3,571,406
<TOTAL-ASSETS> 20,412,557
<CURRENT-LIABILITIES> 13,803,736
<BONDS> 0
2,593,077
2,593,077
<COMMON> 30,318,553
<OTHER-SE> (29,304,811)
<TOTAL-LIABILITY-AND-EQUITY> 20,412,557
<SALES> 12,919,531
<TOTAL-REVENUES> 12,919,531
<CGS> 10,940,081
<TOTAL-COSTS> 10,940,081
<OTHER-EXPENSES> 2,645,347
<LOSS-PROVISION> 396,465
<INTEREST-EXPENSE> 293,883
<INCOME-PRETAX> (941,669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (941,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (941,669)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
