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, 2002
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 is the number of shares outstanding of the Registrant’s common stock at
February 14, 2003:
Number of Shares
Title of Class
Outstanding
Common Stock, no par value
24,147,534
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1.
Interim Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets – December 31, 2002 and September 30, 2002…………… 3
Consolidated Statements of Operations - For the Three Months Ended
December 31, 2002 and 2001. .……………………………………….…………..…. 4
Consolidated Statements of Cash Flows - For the Three Months Ended
December 31, 2002 and 2001 ..….….………………………………….…………….. 5
Notes to Interim Consolidated Financial Statements …………………………………….. 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations….…………………………………………………………………………. 12
Item 3.
Quantitative and Qualitative Disclosures About Market Risk…………………….……… 16
Item 4.
Controls and Procedures………………………………………………………………….. 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings…………………………………………………………………………. 16
Item 2.
Changes in Securities and Use of Proceeds……………………………………………….. 16
Item 6.
Exhibits and Reports on Form 8-K……………………………………………………….. 17
Signatures ...………………………………………………………………………………………..……. 18
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002………………………………………………………………. 19
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002………………………………………………………………. 20
Exhibits
…………………………………………………………………………………………………. 21
#
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, | September 30, | |||||
2002 | 2002 |
ASSETS |
Current assets: |
Cash and cash equivalents | $ 10,258 | $ 146,698 | |
Trade accounts receivable, net of allowance for doubtful accounts of |
$96,848 and $94,604, respectively | 464,582 | 454,174 |
Inventory | 436,916 | 416,528 |
Prepaid expenses and other | 42,107 | 89,751 |
Total current assets | 953,863 | 1,107,151 |
Property and equipment, net of accumulated depreciation of |
$1,142,213 and $1,109,669, respectively | 157,807 | 191,825 |
Other non-current assets | 35,723 | 38,524 |
Total assets | $ 1,147,393 | $ 1,337,500 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
Current liabilities: |
Accounts payable | $ 672,127 | $ 611,684 | |
Accrued liabilities | 326,559 | 471,056 | |
Revolving credit note | 266,638 | 151,627 | |
Note payable to stockholder | 44,116 | 43,138 | |
Note payable Series A Preferred stockholders, net | 1,930,542 | 1,607,006 | |
Current portion of obligations under capital lease | 15,799 | 15,520 | |
| Net current liabilities of discontinued operations | 268,920 | 275,914 |
Total current liabilities | 3,524,701 | 3,175,945 |
Long-term portion of obligations under capital lease | - | 3,973 |
Total liabilities | 3,524,701 | 3,179,918 |
Stockholders' equity (deficit): | ||
Series A convertible preferred stock: |
Preferred stock; $1 par value; 50,000,000 shares authorized: |
15% Series A cumulative convertible preferred stock; $1 par value; 8,019,137 and 7,724,292 shares issued and outstanding, respectively | 2,986,758 | 2,880,959 |
Common stock; no par value; 1,000,000,000 share authorized; |
24,147,534 shares issued and outstanding | 37,604,709 | 37,604,709 |
Additional paid-in capital | 3,919,072 | 3,981,505 | |
Accumulated deficit | (46,887,847) | (46,309,591) |
Total stockholders' deficit | (2,377,308) | (1,842,418) | ||
Total liabilities and stockholders' deficit | $ 1,147,393 | $ 1,337,500 |
The accompanying notes are an integral part of these interim consolidated financial statements.
#
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months | |||||
Ended December 31, |
2002 | 2001 |
Net sales | $ 714,548 | $ 951,784 |
Cost of goods sold | 344,887 | 482,430 |
Gross profit | 369,661 | 469,354 |
Operating expenses: |
Research and development | 235,702 | 530,154 | |
Sales and marketing | 193,537 | 323,128 | |
General and administrative | 86,434 | 112,663 | |
Depreciation and amortization | 22,028 | 30,211 |
Total operating expenses | 537,701 | 996,156 |
Operating loss Other income (expense): | (168,040) | (526,802) |
Interest income | 3 | 3,639 | |
Interest expense | (16,206) | (17,031) | |
Interest expense – Series A debt discount | (323,536) | (323,536) | |
Other | 32,822 | (6,816) |
Net loss | $ (474,957) | $ ( 870,546) |
Loss from continuing operations | $ (474,957) | $ (870,546) |
Preferred stock dividend | (103,300) | (99,897) |
Net loss applicable to common stockholders | $ (578,257) | $ (970,443) |
Basic loss per common share | $ (0.02) | $ (0.04) |
Diluted loss per common share | $ (0.02) | $ (0.04) |
Weighted average shares outstanding: | ||
Basic | 24,147,534 | 24,147,534 |
Diluted | 24,147,534 | 24,147,534 |
The accompanying notes are an integral part of these interim consolidated financial statements.
#
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months | |||||
Ended December 31, |
2002 | 2001 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net loss | $ (474,957) | $ (870,546) |
Adjustments to reconcile net loss to net cash |
used in operating activities: |
Depreciation and amortization | 36,410 | 50,705 | ||
Gain on sale of fixed assets | (90) | - | ||
Amortization of debt discount interest expense | 323,536 | 323,536 | ||
Preferred stock issued for services decrease in value | (62,431) | - |
Changes in operating assets: |
(Increase) decrease in accounts receivable, net | (10,409) | (346,767) |
(Increase) decrease in inventory | (20,389) | 86,995 |
(Increase) decrease in prepaid expenses and other | 47,643 | 68,112 | |
Increase (decrease) in accounts payable | 60,443 | (139,172) | |
Increase (decrease) in accrued liabilities | (144,497) | 210,048 |
Net cash used in operating activities of continuing operations | (244,741) | (617,089) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Proceeds from the sale of equipment | 500 | - |
Net cash provided by investing activities of continuing operations | 500 | - |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from the issuance of preferred stock | 2,500 | - |
Offering costs from Series A preferred stock issue | - | (14,158) |
Proceeds on stockholder debt | 978 | 20,000 |
Borrowings on revolving credit note | 384,965 | - |
Repayments on revolving credit note | (269,953) | (88,456) |
Payments on capital lease obligations | (3,695) | (3,400) |
Net cash provided by (used in) financing activities of continuing operations | 114,795 | (86,014) |
Net cash used in continuing operations | (129,446) | (703,103) |
Net cash used in discontinued operations | (6,994) | (161,641) |
Decrease in cash and cash equivalents | (136,440) | (864,744) |
Cash and cash equivalents at beginning of period | 146,698 | 1,369,988 |
Cash and cash equivalents at end of period | $ 10,258 | $ 505,244 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
Cash paid for interest | $ 16,868 | $ 18,735 |
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
Preferred stock dividends paid in Series A preferred stock | 103,300 | 99,897 | |
Transfer of inventory to fixed assets | - | 36,590 |
The accompanying notes are an integral part of these interim consolidated financial statements.
#
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 unaudited interim consolidated financial statements include the accounts of Tanisys Technology, Inc. (“Tanisys”) and its wholly owned subsidiaries, 1st Tech Corporation (“1st Tech”), DarkHorse Systems, Inc. (“DarkHorse”), and Rosetta Marketing and Sales Inc. (collectively, the “Company”). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All significant intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, the accompanying interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for all periods. It is recommended that these unaudited 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, 2002 contained in the Company’s Form 10-K filed with the Securities and Exchange Commission on January 13, 2003.
The Company designs, manufactures and markets production-level automated test equipment for a wide variety of semiconductor memory technologies.
On December 9, 1999, the Company sold its memory module manufacturing business, including all of the common stock of Tanisys (Europe) Ltd. The assets, liabilities and the loss from the sale of the memory module manufacturing business have been included in the accompanying interim consolidated financial statements as discontinued operations.
Realization of Assets
The Company incurred an operating loss for the quarter ended December 31, 2002, and generated operating losses for its fiscal years 2002 and 2001, as well as having a history of losses prior to fiscal 2000. At December 31, 2002, the Company had a working capital deficit of $2,570,838 and negative equity of $2,377,308. The Company is also in default with the payment terms of many of its suppliers. In addition, the Company has no access to additional working capital, all of its assets are pledged, and it has received a “going concern” opinion from its independent auditors for both fiscal years ended September 30, 2002 and 2001. Therefore, there can be no assurances that the Company can continue its operations in the future.
NOTE 2.
DISCONTINUED OPERATIONS
On December 9, 1999, the Company sold certain assets of its memory module manufacturing business, including all the stock of Tanisys (Europe) Ltd., a wholly owned subsidiary of the Company located in Scotland. The sale also included the assumption of certain liabilities by the buyer. The results of the memory module manufacturing business have been classified as discontinued operations in all fiscal periods presented.