UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------______________
FORM 10-Q
(Mark
(Mark One)
[x][x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
June 30,December 31, 2001or
[ ] 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(Exact name of registrant as specified in its charter)
Wyoming 74-2675493
(State(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(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'sRegistrant’s common stock atAugust 14, 2001:
February 11, 2002:
Number of Shares
Title of Class
Outstanding
Common Stock, no par value
24,147,534
1
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1.
Interim Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets
- June 30,– December 31, 2001 and September 30,2000..........................................2001…………… 3Consolidated Statements of Operations - For the Three Months
and Nine MonthsEndedJune 30,December 31, 2001 and
2000.........2000. .……………………………………….…………..…. 4Consolidated Statements of Cash Flows - For the Three Months
and Nine MonthsEndedJune 30,December 31, 2001 and
2000.........2000 ..….….………………………………….…………….. 5Notes to Interim Consolidated Financial
Statements..............Statements …………………………………….. 6Item 2.
Management'sManagement’s Discussion and Analysis of Financial Condition and Results ofOperations.........................Operations….…………………………………………………………………………. 11
Item 3.
Quantitative and Qualitative Disclosures About Market
Risk...... 15Risk…………………….……… 14
PART II OTHER INFORMATION
Item 1. Legal
Proceedings............................................... 15Proceedings…………………………………………………………………………. 14Item 2.
Changes in Securities and Use of
Proceeds....................... 16Proceeds……………………………………………….. 14Item 6.
Exhibits and Reports on Form
8-K............................... 16 SIGNATURES.................................................................. 17 28-K……………………………………………………….. 14 SIGNATURES……………………………………………………………………………………..……. 15
#
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31,
September 30,
2001
2001
ASSETS |
Current assets: |
Cash and cash equivalents | $ 505,244 | $ 1,369,988 | |
Trade accounts receivable, net of allowance for doubtful accounts of |
$ | 947,535 | 600,768 |
Inventory | 918,594 | 1,042,180 |
Prepaid expenses and other | 71,932 | 140,044 |
Total current assets | 2,443,305 | 3,152,980 |
Property and equipment, net of accumulated depreciation of |
$1,054,929 and | 352,061 | 363,382 |
Other non-current assets | 46,626 | 49,420 |
Total assets | $ | $ |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: |
Accounts payable | $ 363,106 | $ 502,278 | |
Accrued liabilities | 475,646 | 265,598 | |
Revolving credit note | - | 88,456 | |
Current portion of obligations under capital lease | 14,086 | 13,791 | |
| Net current liabilities of discontinued operations | 175,143 | 320,909 |
Total current liabilities | 1,027,981 | 1,191,032 |
Net noncurrent liabilities of discontinued operations | 41,375 | 57,251 |
Long-term portion of obligations under capital lease | 15,798 | 19,494 |
Note payable Series A Preferred stockholders, net | 669,337 | 345,801 |
Total liabilities | 1,754,491 | 1,613,578 |
Stockholders' equity: | ||
Series A convertible preferred stock: |
15% Series A convertible preferred stock, $1 par value 10,000,000 | |||
shares authorized, 3,834,171 and 2,650,429 shares issued and | |||
outstanding, respectively | 2,593,326 | 2,473,429 | |
Common stock, no par value, 50,000,000 shares authorized, |
24,147,534 and 24,097,358 shares issued and outstanding, | ||||
respectively | 37,604,709 | 37,604,709 |
Additional paid-in capital | 3,991,884 | 4,006,042 | |
Accumulated deficit | (43,102,418) | (42,131,976) |
Total stockholders' equity | 1,087,501 | 1,952,204 | ||
Total liabilities and stockholders' equity | $ 2,841,992 | $ 3,565,782 |
The accompanying notes are an integral part of these interim consolidated financial statements.
3
#
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months | |||||
Ended |
2001 | 2000 |
Net sales | $ | $ |
Cost of goods sold | 482,430 | 768,841 |
Gross profit | 469,354 | 1,371,436 |
Operating expenses: |
Research and development | 530,154 | 556,519 | |
Sales and marketing | 323,128 | 325,417 | |
General and administrative | 112,663 | 155,697 | |
Depreciation and amortization | 30,211 | 32,111 |
Total operating expenses | 996,156 | 1,069,744 |
Operating income (loss) Other income (expense): | (526,802) | 301,692 |
Interest income | 3,639 | 12,381 | |
Interest expense | (17,031) | (12,490) | |
Interest expense – Series A debt discount | (323,536) | - | |
Other | (6,816) | (3,942) |
Net income (loss) | $ (870,546) | $ 297,641 |
Income (loss) from continuing operations | $ (870,546) | $ 297,641 |
Preferred stock dividend | (99,897) | - |
Net income (loss) applicable to common stockholders | $ (970,443) | $ 297,641 |
Basic income (loss) per common share: | ||
Income (loss) from applicable to common stockholders | $ (0.04) | $ 0.01 |
Diluted income (loss) per common share: | ||
Income (loss) applicable to common stockholders | $ (0.04) | $ 0.01 |
The accompanying notes are an integral part of these interim consolidated financial statements.
4
#
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months | |||||
Ended |
2001 | 2000 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net income (loss) | $ | $ |
Adjustments to reconcile net income (loss) to net cash provided |
by (used in) operating activities: |
Depreciation and amortization | 50,705 | 50,652 | ||
Loss on sale of fixed assets | - | 750 | ||
Amortization of debt discount interest expense | 323,536 | - | ||
Changes in operating assets: |
(Increase) decrease in restricted cash | - | (50,000) | |
(Increase) decrease in accounts receivable, net | (346,767) | (606,029) |
(Increase) decrease in inventory | 86,995 | (30,886) |
(Increase) decrease in prepaid expenses and other | 68,112 | 23,126 | |
(Increase) decrease in other noncurrent assets | - | (8,678) | |
Increase (decrease) in accounts payable | (139,172) | (19,445) | |
Increase (decrease) in accrued liabilities | 210,048 | (303,487) |
Net cash continuing operations | (617,089) | (646,356) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of fixed assets | - | (93,194) |
Net cash used in investing activities of continuing operations | - | (93,194) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Offering costs from Series A preferred stock issue | (14,158) | - |
Proceeds on stockholder debt | 20,000 | - |
Borrowings on revolving credit note | - | 700,000 |
Repayments on revolving credit note | (88,456) | (600,000) |
(Payments) on capital lease obligations | (3,400) | (3,275) |
Net cash provided by (used in) financing activities of continuing operations | (86,014) | 96,725 |
Net cash used in continuing operations | (703,103) | (642,825) |
Net cash used in discontinued operations | (161,641) | (150,801) |
(Decrease) in cash and cash equivalents | (864,744) | (793,626) |
Cash and cash equivalents at beginning of period | 1,369,988 | 1,601,777 |
Cash and cash equivalents at end of period | $ 505,244 | $ 808,151 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
Cash paid for interest | $ | $ |
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
Preferred stock dividends paid in | 99,897 | - | |
Transfer of inventory to | 36,590 | - |
The accompanying notes are an integral part of these interim consolidated financial statements.
5
Tanisys Technology, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
#
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"(“Tanisys”) and its wholly owned subsidiaries, 1st Tech Corporation ("(“1st Tech"Tech”), DarkHorse Systems, Inc. ("DarkHorse"(“DarkHorse”), and Rosetta Marketing and Sales Inc., and also include the
accounts of Tanisys (Europe) Ltd., located in Scotland, for the nine months
ended June 30, 2000 (collectively, the "Company"“Company”). The stock of Tanisys (Europe)
Ltd. was sold on December 9, 1999 (see Note 2 below). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted accounting
principles.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 accounting principlesin 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 accounting principlesin the United States of America for complete financial statements. It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the Company's
consolidatedCompany’sconsolidated financial statements and the notes thereto for the fiscal year ended September 30, 20002001 contained in the Company'sCompany’s Form 10-K10-K/A filed with the Securities and Exchange Commission on December 15, 2000.
26, 2001.
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.
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. Numerous factors could affect the Company’s operating results, including, but not limited to, general economic conditions, competition, and changing technologies. A change in any of these factors could have an adverse effect on the Company’s consolidated financial position or results of operations. The Company experienced an operating loss of $870,546 for the quarter ended December 31, 2001, even though it had net operating income of $297,641 for the quarter ended December 31, 2000. The Company had to raise additional capital in order to continue its operations in fiscal 2001 resulting in the issuance of Series A Preferred Stock and related debt (See Notes 6 and 7). The current economic slowdown continues in the worldwide semiconductor industry resulting in concern over the sustainability of the Company’s revenues and its ability to attract additional capital if needed.
In view of these matters, realization of a major portion of the assets in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which in turn may be dependent upon the success of its future operations. Management believes that the Company’s reputation in the marketplace and its well respected product line will help generate revenues during the remainder of the economic downturn. These revenues will result in a certain level of cash flow which, when coupled with the Company’s current cash position, will provide the opportunity for the Company to continue as a going concern.
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, and prior periods have been restated to reflect the sale.
The loss on the sale, as well as the costs associated with the disposition of the memory module manufacturing business, has been recorded in the financial statements as of September 30, 1999. As of June 30,December 31, 2001, remaining future costs associated with the disposition of the discontinued operations are $599,135.
6
NOTE 3: CASH AND CASH EQUIVALENTS
The Company invests its excess cash in money market funds, U.S. Treasury obligations, and short-term debt instruments of U.S. corporations with strong credit ratings. The Company has established guidelines with respect to the diversification and maturities that maintain safety and liquidity. The Company considers all highly liquid investments with an original maturity of three months or less and money market funds to be cash equivalents. Cash equivalents are carried at cost, which approximates market value.
NOTE 4: INVENTORY
Inventory consists of the following:
June 30, September 30,
2001 2000
=============================================================
Raw materials $ 992,722 $ 453,573
Work-in-process 38,012 93,941
Finished goods 256,398 147,015
-------------------------------------------------------------
Total inventory $1,287,132 $ 694,529
=============================================================
December 31, | September 30, | |||
2001 | 2001 | |||
Raw materials | $ 669,134 | $ 721,298 | ||
Work-in-process | 40,031 | 35,887 | ||
Finished goods | 209,429 | 284,995 | ||
Total inventory | $ 918,594 | $ 1,042,180 |
Inventory is statedvalued at the lower ofstandard cost or market value. Inventory is
accounted forwhich approximates actual cost computed on a firstfirst-in, first-out basis, not in first out basis.excess of market value. Inventory costs include direct materials and certain indirect manufacturing overhead costs.
expenses.
The Company’s policy concerning inventory impairment charges is to establish a new, reduced cost basis for the affected inventory that remains until the inventory is sold or disposed. Only additional impairment charges could affect the cost basis. If subsequent to the date of impairment it is determined that the impairment charges are recoverable, the Company does not increase the carrying costs of the affected inventory and corresponding income.
NOTE 5: REVOLVING CREDIT NOTE
The
On May 30, 2001, the Company entered into ana new Accounts Receivable Financing Agreement ("Debt
Agreement") with Silicon Valley Bank on May 30, 2001 to fund accounts receivable
and provide working capital up to a maximum of $2,000,000 secured by the assets
of the Company. The Company has violated certain requirements of its Debt Agreement with Silicon Valley Bank relating to failurereplace the former Revolving Line of Credit Agreement dated September 19, 2000. As of December 31, 2001, the Company owed nothing under this agreement. The loan facility provides for the financing of up to $2,500,000 of the face amount of the Company’s accounts receivable of which the Bank will loan 80% on domestic accounts and 70% on eligible foreign accounts as determined solely by the Bank. The applicable interest rate is prime plus 1.5%, decreasing to prime plus 1.0% if the Company is able to meet 90% of its planned revenue. The Company does not believe it will meet the required planned revenue amounts before the maturity date of the loan facility. The Accounts Receivable Financing Agreement also provides for a collateral handling fee equal to 0.50% per month of the average daily financed balance. The Accounts Receivable Financing Agreement has a maturity date of May 29, 2002 and contains certain quarterly financial covenants the Company must meet. The Company failed to meet the specified net
income levelJune 30, 2001, September 30, 2001 and December 31, 2001 financial covenants. In addition, the Company does not believe it will be able to meet the financial covenants for the quarter ended June 30, 2001. TheMarch 31, 2002 due to the current economic situation. However, the Company and Silicon Valleybelieves that the Bank will continue to provide financing of the Company’s accounts receivable, but the terms of the financing may be less favorable.
NOTE 6: LONG-TERM DEBT
On August 13, 2001, the Company entered into a Loan Modification and Forbearance Agreement dated August 3,
2001 in which Silicon Valley Bank agreed to forbear from exercising its rights
and remedies under the Debt Agreement until the Company closed its Series A Preferred Stock equity financing. UponPurchase Agreement in conjunction with a private placement financing with an investment group led by New Century Equity Holdings Corp. (“New Century”). The financing consisted of the closingissuance of 2,642,200 shares of the Company’s Series A Preferred Stock, including 7,200 shares issued on September 28, 2001 for costs related to the offering, and fundinga note payable to the investors in the amount of $2,642,200. The note has no interest, cannot be prepaid, and matures on July 13, 2003. Repayment of the note can only be made with payments calculated by multiplying the excess of the quarterly EBITDA over specified financial targets less quarterly capital expenditures over $300,000 by 50%. These calculated payments are to be paid until the debt has been repaid in full. Ho wever, if the debt has not been repaid in full on or before July 15, 2003, New Century may at its sole option require the Company to issue to the investors additional shares of Series A Preferred Stock equal to 50% of the then outstanding Common Stock, Preferred Stock, and any Common Stock equivalents on an as-if-converted and fully diluted basis. The Company does not believe it will be able to achieve the specified financial targets for the six-month period ending June 30, 2002.
The Company, at August 13, 2001 valued the note payable to the Series A Preferred stockholders at $177,000, consisting of the face value of $2,642,200 and a discount on the debt of $2,465,200 to be amortized over the term of the note. For the quarter ended December 31, 2001, the Company charged $323,536 of the discount on the debt to interest expense leaving a December 31, 2001 note balance, net of discount, of $669,337, and is due during the year ended September 30, 2003.
NOTE 7: PREFERRED STOCK
The Company has issued 2,635,000 shares of Series A Preferred Stock (“Series A Preferred”) for $1.00 per share pursuant to a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) dated August 13, 2001. The issuance of the Series A Preferred Stock equityresulted from a private placement financing Silicon Valley Bank waived its rightswith an investment group led by New Century Equity Holdings Corp. (“New Century”) (Nasdaq: NCEH), a Delaware corporation. New Century participated in the financing through the purchase of 1,060,000 of the above shares of the Company’s Series A Preferred Stock which represented approximately 40% of the original issuance of the Series A Preferred. The proceeds of $2,635,000, less offering costs of approximately $171,000, will be utilized to continue product development and remedies undermarketing efforts and to provide working cap ital for the Debt Agreement. (See Note 11).
NOTE 6: LONG-TERM DEBT
As of June 30,Company’s operations.
On September 28, 2001, and September 30, 2000, the Company had no long-term
debt. Duringissued 7,200 shares of Series A Preferred in lieu of cash for costs related to the quarter ended March 31, 2000, alloffering.
Each share of the debt to certain
stockholders was converted to 4,000,000Series A Preferred is immediately convertible into 33.334 shares of Common Stock. There was,
however, interest paid on this debt during the quarter ended March 31, 2000.
Along with the notes payable to these stockholders, all related discounts and
debt issuance costs have been charged to Common Stock on the Consolidated
Balance Sheet for the fiscal year ended September 30, 2000.
NOTE 7: PREFERRED STOCK
Pursuant to a Convertible Stock Purchase Agreement dated June 30, 1998, the
Company issued 400 shares of its 5% Series A Convertible Preferred Stock, par
value $1 per share ("Series A Stock"), for $4,000,000. As of March 31, 2000, the
Company had converted allThe holders of the Series A Stock intoPreferred will be entitled to a cumulative annual dividend of 15%, payable quarterly, which, at the option of New Century may be paid in cash or in additional shares of Common Stock.Series A new issuancePreferred.
A dividend of 139,691 shares of Series A Preferred valued at $99,897 was paid to the holders of the Series A Preferred for the quarter ended December 31, 2001.
The holders of the Series A Preferred will have a liquidation preference in the event of any liquidation, sale, merger or similar event, and have registration rights and other customary rights. The Company has also issued a note payable to the Series A Preferred stockholders in the amount of $2,642,200 with repayments only to be made to the extent the Company’s cash flow meets certain levels. In conjunction with the debt, the Company has granted a security interest in all of its assets to secure its obligation to make these payments subject to the security interest of the Company’s bank loan facility. In addition, the Company has also agreed to issue additional shares of Series A Preferred equal to 50% of the then fully diluted Common Stock occurred onto the holders if the Company fails to repay the note, plus the mandatory dividends, by July 15, 2003. The Company has a lso agreed to issue, at up to six different times, additional shares of Series A Preferred to the investors equal to 25% of the then fully diluted Common Stock if the Company fails to meet any of certain financial targets, beginning with the quarters ended September 30, 2001 and December 31, 2001, and then for the four six-month periods ending June 30, 2002, December 31, 2002, June 30, 2003, and December 31, 2003. On October 30, 2001, the Company issued 999,051 shares of Series A Preferred due to its failure to meet the financial targets for the quarter ended September 30, 2001 as set forth in the Series A Preferred Stock Purchase Agreement. New Century received 400,794 of theses shares of Series A Preferred. On January 30, 2002, the Company issued 1,340,510 shares of Series A Preferred due to its failure to meet the December 31, 2001 financial targets, including 537,780 shares of Series A Preferred issued to New Century. The Company does not expect to meet the specified financial targets f or the six months ending June 30, 2002.
The Company obtained an appraisal of the Series A Preferred and the notes payable at August 13, 2001, and allocated the proceeds of the financing to both instruments based on the valuation. The proceeds of $2,642,200 were allocated to the Series A Preferred and the note payable in which 2,575,000 shares were issued for $2,575,000 (See Note 11).
7
NOTE 8: STOCKHOLDERS'STOCKHOLDERS’ EQUITY
On December 6, 2000, the Company filed a Registration Statement on Form S-8 with the Securities and Exchange Commission requesting that 7,000,000 shares of Common Stock be registered and set aside for the Company'sCompany’s stock option plans.
NOTE 9: EARNINGS PER SHARE
Basic income or loss per common share is computed based on the weighted average number of common shares outstanding during each period. For the quarters ended June 30,December 31, 2001 and 2000, diluted income per common share is computed based on the weighted average number of common shares outstanding after giving effect to the potential issuance of Common Stock on the exercise of options and warrants. All Common Stock amounts and per share information have been restated
to reflect the Reverse Split for all periods presented. The following table provides a reconciliation between net income and net income applicable to common stockholders, and between basic and diluted shares outstanding:
For the Three Months Ended | ||||
December 31, |
2001 | 2000 |
Net income | $ | $ |
Less- |
Series A Stock dividends | (99,897) | - |
Net income |
stockholders (basic and diluted) | $ | $ |
Weighted average number of common |
shares used in basic earnings per share | 24,147,534 | 24,097,358 | |
Effect of dilutive securities Stock Options Warrants | - - | 992,325 358,334 |
Weighted average number of common shares and dilutive potential Common Stock used in dilutive earning per share | 24,147,534 | 25,448,017 |
NOTE 10: RELATED PARTY TRANSACTIONS
Accrued liabilities
None.
NOTE 11: SUBSEQUENT EVENTS
On February 4, 2002, Mr. Parris H. Holmes, Jr. resigned as the Company’s Chairman of June 30, 2001 included $90,000the Board of Directors, and Mr. C. Lee Cooke was appointed as the Company’s new Chairman of the Board of Directors by New Century Equity Holdings Corp. under the authority granted in deferred
compensation to the Company's President and Chief Executive Officer, Charles T.
Comiso. On July 27, 2001, the $90,000 of deferred compensation, plus an
additional $5,000 of deferred compensation for the month of July 2001, was
converted to a note payable to Mr. Comiso along with $6,800 of additional
compensation and $30,000 of funds borrowed from Mr. Comiso for working capital.
The note payable to Mr. Comiso totaled $131,800 and carried an interest rate of
ten percent (10%) per annum. In conjunction with the closing of the Series A Preferred Stock financing (See "Note 11: Subsequent Events" below) on August 14,
2001, Mr. Comiso converted $90,000 of the note payable into 90,000 shares of
Series A Preferred Stock. The remaining balance of the note payable was repaid
onPurchase Agreement dated August 13, 2001. On August 13, 2001,Mr. Holmes is the Company closed a private financing in the amount of
$2,575,000. New Century Equity Holdings Corp. (Nasdaq: NCEH) participated in the
financing through the purchase of one million sharesChairman of the Company's Series A
Preferred Stock. The Chairman and Chief Executive OfficerBoard of New Century Equity Holdings Corp. is also(see Note 7: Preferred Stock). Mr. Holmes will remain as an advisor to the Company's Chairman of theCompany’s Board of Directors.
As partDirectors for a minimum of the August 13, 2001 private financing transaction, a certain number
of the Company's employees purchasedthree years and has received 293,772 shares of the Company'sCompany’s Series A Preferred Stock.
8
NOTE 11: SUBSEQUENT EVENTS
The Company has settled a lawsuit filed by one of its customers related to
the discontinued memory module manufacturing businessas compensation for alleged breach of
contract. The suit asked for actual damages of $77,838 and was settled for an
undisclosed amount. The settlement amount is included in net current liabilities
of discontinued operations as of June 30, 2001.
The Company has reached an agreement with a former equipment financing
company to settle a lawsuit claiming a breach of an agreement for certain
manufacturing equipment previously utilized in the Company's discontinued memory
module manufacturing business. The manufacturing equipment has been sold at the
direction of the equipment financing company. The settlement amount is included
in net current liabilities of discontinued operations as of June 30, 2001.
The Company has settled a dispute arising from the guaranty of a lease
associated with the Company's discontinued memory module manufacturing business.
The settlement was made with the landlord and the Scottish Enterprise and
releases the Company from any guaranty of past or future rental payments and
other related expenses in connection with the default of Tanisys (Europe) Ltd.
The dispute arose when, in December 1999, the Company sold assets and
liabilities related to its memory module manufacturing business and exited the
memory module manufacturing business. Included in the sale was all of the
capital stock of Tanisys (Europe) Ltd., which was then a wholly owned subsidiary
of the Company. Tanisys (Europe) Ltd. (the "Lessee") had executed a 15-year
lease in April 1998 covering industrial premises situated in High Blantyre,
Scotland. In connection with the execution of the lease, the Company
co-guaranteed the lease payments along with the Scottish Enterprise. The initial
annual rental payment was approximately $200,000, plus increases based on
reviews in 2003 and 2008. In March or April 2000, Tanisys (Europe) Ltd., which
is now owned by the purchaser of the Company's discontinued memory module
manufacturing business, abandoned the premises, and accordingly, the landlord
sought reimbursement for its losses resulting from the Lessee vacating the
property. The Company was the first guarantor and the Scottish Enterprise was
the second guarantor of the lease. The liability for this settlement is recorded
in the net current liabilities of discontinued operations as of June 30, 2001.
The slowdown in the worldwide semiconductor industry has had a severely
negative impact on the Company's revenues and cash flows resulting in the need
for an infusion of cash into the Company. Therefore, on August 13, 2001, the
Company closed a private placement financing in the amount of $2,575,000. New
Century Equity Holdings Corp. (Nasdaq: NCEH) ("New Century") participated in the
financing through the purchase of one million shares of the Company's Series A
Preferred Stock. The proceeds will be utilized to continue its product
development and marketing efforts and to provide working capital for the
Company's operations.
In connection with the private placement financing, the Company issued
2,575,000 shares of its Series A Preferred Stock for $1.00 per share. Each share
of Series A Preferred Stock is initially convertible into 33.334 shares of the
Company's common stock. The holders of the Series A Preferred Stock will be
entitled to a cumulative annual dividend of 15%, which, at the option of the
holders of the Series A Preferred Stock, may be paid in cash or in additional
shares of Series A Preferred Stock. The holders of the Series A Preferred Stock
will have a liquidation preference in the event of any liquidation sale, merger
or other similar event, and have registration rights and other customary rights.
The Company has also agreed to make payments to the Series A Preferred Stock, to
the extent its cash flow meets certain levels, until the holders have received
the amount of their investments in the Series A Preferred Stock and has granted
a security interest in all of its assets to secure its obligation to make these
payments. The Company has also agreed to issue additional shares of Series A
Preferred Stock equal to 50% of the then fully diluted common stock to the
investors if the Company fails to return the amount of their investment, plus
the mandatory dividends, by July 15, 2003. In addition, the Company has agreed
that if it does not meet any of certain financial targets in any of six
performance periods that the Series A Preferred stockholders will be issued
additional Series A Preferred Stock equal to 25% of the fully diluted
as-if-converted shares of the Company at the end of each such determination
period beginning with the quarter ending September 30, 2001. If the slowdown in
the worldwide semiconductor industry continues for an extended period of time,
the Company
9
may not meet one or more of the specified financial targets, thus triggering the
issuance of additional shares of Series A Preferred Stock.
The Series A Preferred shares will vote together with the Company's common
stock on an as-if- converted basis and not as a separate class. Each share of
Series A Preferred will have a number of votes equal to the number of common
stock shares then issuable upon conversion of such shares of the Series A
Preferred Stock.
The Company has agreed to call a special meeting of its shareholders to
vote on a proposal to authorize additional common stock so as to permit the
conversion of the Series A Preferred Stock. The holders of the Series A
Preferred Stock will be entitled to vote with the holders of the common stock at
the special meeting, and will control sufficient votes to approve the proposal.
Immediately after the special meeting, the shares of Series A Preferred Stock
initially issued would be convertible into approximately 78% of the then
outstanding common stock. If Tanisys is required to issue all of the shares of
Series A Preferred Stock that it could potentially be required to issue in
connection with the Series A financing, those shares would be convertible into
approximately 97% of the then outstanding as-if-converted common stock.
In connection with the financing transaction described above, two members
of the Board of Directors of the Company resigned, and New Century appointed two
directors to the Board. Subject to certain requirements, New Century will have
the right to appoint a third member to the Company's five member Board of
Directors.
Also in connection with the financing transaction described above, the
Company's Board of Directors approved, subject to shareholder approval, a new
stock option plan, pursuant to which the Board may grant stock options covering
up to 15% of the fully diluted common stock, including the Series A Preferred
Stock as-if-converted into common stock.
services.
NOTE 12: CONTINGENCIES
The Company is a defendant in a lawsuit filed by the purchaser of the
Company's discontinued memory module manufacturing business for alleged breach
of representations, warranties and covenants. The suit asks for $50,000 plus
attorneys' fees and court costs. The Company believes the suit is without merit
and is vigorously defending its position. The Company believes it is unlikely
that the final outcome would have a material adverse effect on the Company's
financial position or results from operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
10
None.
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'sCompany’s management as well as assumptions made by and information currently available to the Company'sCompany’s management. When used in this report, the words "anticipate," "believe," "estimate," "expect,"“anticipate,” “believe,” “estimate,” “expect,” and "intend"“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'sManagement’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 months ended June 30,December 31, 2001 and 2000. It should be read in conjunction with the unaudited interim Consolidated Financial Statements, the Notes thereto and other financial information included elsewhere in this report, and in the Company'sCompany’s Annual Report on Form 10-K10-K/A for the year ended September 30, 20002001 filed with the Securities and Exchange Commission on December 15, 2000.26, 2001. For purposes of the following discussion, references to year periods refer to the Company'sCompany’s fiscal year ended September 30, 20002001 and references to quarterly periods refer to the Company'sCompany’s fiscal quarters ended June 30,December 31, 2001 and 2000.
On December 9, 1999, the Company sold its memory module manufacturing
business, including all of the common stock of Tanisys (Europe) Ltd. The results
of the memory module manufacturing business have been classified as discontinued
operations, and prior periods have been restated to reflect the sale. The loss
on the sale, as well as the costs associated with the disposition of the memory
module manufacturing business, has been recorded in the consolidated financial
statements as of September 30, 1999. As of June 30, 2001, the remaining future
costs associated with the disposition of the discontinued operations was
$599,135.
Since consummating the sale transaction, the Company has refocused all of
its efforts on the development, manufacture and sale of production-level
automated test equipment.
11
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 three months and nine months ended June 30,December 31, 2001 and 2000:
For the Three |
2001 | 2000 | |||||||
Net sales | 100% | 100% |
Cost of goods sold | 51% | 36% | |||||
Gross profit | 49% | 64% | |||||
Operating expenses: |
Research and development | 55% | 26% |
Sales and marketing | 34% | 15% |
General and administrative | 12% | 7% |
Depreciation and amortization | 3% | 2% |
Total operating expenses | 104% | 50% |
Operating income (loss) Other income (expense): | (55%) | 14% | ||||
Interest income | - | 1% | |||||
Interest expense | (2%) | (1%) |
Interest | (34%) | - | ||
Other | (1%) | - |
Net income (loss) Preferred stock dividends | (92%) (10%) | 14% - | ||
Net income (loss) | (102%) | 14% |
Net Sales
Net sales consist of sales of production-level automated test equipment along with related hardware and software, less returns and discounts. Continuing to be impacted by the worldwide semiconductor industry slowdown, net sales decreased 58%56% to $1,012,583$951,784 in the thirdfirst quarter of fiscal 20012002 from $2,430,272$2,140,277 in the same period last year. The Company'sCompany’s customers depend upon the current and anticipated market demand for semiconductors and products that utilize semiconductors. The slowdown in the worldwide semiconductor industry has resulted in significantly reduced levels of capital expenditures for semiconductor equipment such as the Company'sCompany’s automated test equipment. This slowdown has had a severely negative impact upon the sales of the Company during the quarter ended June 30,December 31, 2001. We do not believe that orders for the Company'sCompany’ s test systems were lost to competition but instead have been delayed. The Company continues to enhance and broaden its product line to support all memory technologies in order to deliver high quality, cost effective and high-speed test systems to its customers when a recovering economy occurs.
Cost of Sales and Gross Profit
Cost of sales includes the costs of all components and materials purchased for the manufacture of products, direct labor and related overhead costs. Cost of sales for the JuneDecember 2001 quarter was $673,248,$482,430, down in absolute dollars from the $834,203$768,841 of the previous year, but higher in terms of percent of sales at 67%51% versus 34%36% for the same quarter last year. The decrease in cost of sales in terms of dollars was due to lower sales volume in the JuneDecember 2001 quarter, while the increase in percentage of sales was due to the mix of products sold as well as lower sales volume, resulting in reduced absorption of fixed manufacturing costs.
Gross profit for the JuneDecember 2001 quarter was $339,335,$469,354 as compared to $1,596,069$1,371,436 from the same quarter last year. Gross profit as a percent of sales was 33%49% and 66%64% for the quarters ended JuneDecember 30, 2001 and 2000, respectively. The decrease in gross profit in terms of both dollars and percent of sales was due to the mix of products sold and lower sales volume in the JuneDecember 2001 quarter, resulting in reduced absorption of fixed manufacturing costs.
12
Research and Development
Research and development expenses, which consist of all costs associated with the engineering design and testing of new technologies and products, were $579,239$530,154 for the thirdfirst quarter of fiscal year 20012002 as compared to $621,632$556,519 for the same quarter last year. Costs reflect the ongoing development of test systems for both Double Data Rate ("DDR"(“DDR”) and Flash memory technologies, as well as a new distributed networking architecture that can be applied to all memory technologies.
The Company will continue to invest in research and development to developdesign new test systems and enhance current test systems to meet the market demands for the testing of new memory technologies.
Sales and Marketing
Sales and marketing expenses include compensation of sales and marketing related employees and independent sales representatives, plus costs for travel, advertising, trade shows and related overhead. Expenses of $280,860$323,128 for the thirdfirst fiscal quarter of 20012002 were down by 26%slightly when compared to $380,343$325,417 for the same quarter last year. Most of the reduction reflects sales commissions on
lower revenues. The Company continues to market its tests systems to the world'sworld’s largest semiconductor and memory module manufacturers.
General and Administrative
General and administrative expenses consist primarily of personnel costs, including employee compensation and benefits, and support costs including utilities, insurance, professional fees and all costs associated with a reporting company. General and administrative expenses for the thirdfirst quarter of fiscal 20012002 decreased 14%28% to $159,823$112,663 from $185,655$155,697 for the same quarter of fiscal 2000.2001. The decrease was primarily due to reductions in professional fees
and public company expenses.personnel costs. The Company has taken additional actions to decrease general and administrative costs.
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“Cost of Goods Sold,"” and the amortization of intangibles, including patents related to memory module test systems technology. Depreciation and amortization increaseddecreased to $32,844$30,211 in the thirdfirst quarter of fiscal 20012002 from $26,273$32,111 in the same quarter of fiscal 2000. The increasedecrease reflects investment in
new software and hardware tools designed to maximize the efficiency of
engineering research and development as well as additional amortization
resulting from the issuance of new patents.
assets that have been fully depreciated.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income less interest expense. Substantially all of the interest expense relates to the
Company's working capital loan facility which is utilized for short term
inventory requirements and to fund accounts receivable. Interest income relates
to the investment of available cash in short-term interest bearing accounts and
cash equivalent securities. Other income (expense) decreased to $31,425$343,744 in net other expense for the JuneDecember 2001 quarter from $12,960$4,051 in net other incomeexpense from the same period last year. Interest expense for the JuneDecember 2001 quarter increased over the same period last year due to increased borrowing from the Company's working capital
facility. In addition, non-recurring miscellaneous income enhanced results foramortization of debt discount on the third quarter of last year.
note payable to the Series A Preferred stockholders.
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, 13
During the thirdfirst quarter of fiscal 2001,2002, the Company utilized $91,687$617,089 in cash flow from its operating activities of continuing operations primarily due to a net loss from operations partially offset by a reductionand an increase in accounts receivable. The Company also reduced its revolving credit line by $316,096.$88,456. Cash and cash equivalents decreased by $529,321$864,744 during the quarter ended JuneDecember 2001 resulting in $79,962$505,244 in unrestricted cash and working capital of $230,105$1,415,324 at June 30,December 31, 2001, a decrease in working capital of $681,064$546,624 from September 30, 2001, the priorCompany’s most recent fiscal quarter ended March 31, 2001.
year end.
The Company entered into an Accounts Receivable Financing Agreement ("(“Debt Agreement"Agreement”) with Silicon Valley Bank (the “Bank”) on May 30, 2001 to fund accounts receivable and provide working capital. The Company has violated certain requirements of its Debt Agreement with Silicon Valley Bank relating to failure to meet the specified net income levellevels for the quarterquarters ended June 30, September 30, and December 31, 2001. The Company and
Silicon Valleybelieves that the Bank entered into a Loan Modification and Forbearance Agreement
dated August 3, 2001 in which Silicon Valley Bank agreedwill continue to forbear from
exercising its rights and remedies under the Debt Agreement until the Company
closed its Series A Preferred Stock financing. Upon the closing and fundingprovide financing of the Series A Preferred StockCompany’s accounts receivable, but the terms of the financing Silicon Valley Bank waived its rights
and remedies under the Debt Agreement.
may be less favorable.
Significant Customer Concentration
A significant percentage of the Company'sCompany’s net sales is produced by a relatively small number of customers. In the thirdfirst quarter of fiscal 2001,2002, the ten largest customers accounted for approximately 98%99% of net sales compared to approximately 98% in the same period last year. The top three customers represented 33%29%, 22%, and 18%19% of sales, respectively, in the quarter ended June
30,December 31, 2001. The customer that represented 22% of sales in the JuneDecember 2001 quarter accounted for approximately 58% of sales in the same period last year. FourFive customers were included in both top ten customer lists for the thirdfirst fiscal quarters of 20012002 and 2000;2001; they accounted for approximately 50%35% of sales in thirdfirst quarter of fiscal 20012002 and approximately 87%62% of sales in the thirdfirst quarter of fiscal 2000.
2001.
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 cancelled, delayed or reduced purchase orders with new business cannot be assured. The Company'sCompany’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 customers' products and the general economy. Factors affecting the industries of the Company'sCompany’s major customers could have a material adverse effect on the Company'sCompany’s business, financial condition and results of operations.
Certain Events Occurring Subsequent to June 30,December 31, 2001
The slowdown in
On February 4, 2002, Mr. Parris H. Holmes, Jr. resigned as the worldwide semiconductor industry has had a severely
negative impact onCompany’s Chairman of the Company's revenuesBoard of Directors, and cash flows resulting inMr. C. Lee Cooke was appointed as the need
for an infusionCompany’s new Chairman of cash into the Company. Therefore, on August 13, 2001, the
Company closed a private placement financing in the amountBoard of $2,575,000.Directors by New Century Equity Holdings Corp. (Nasdaq: NCEH) ("New Century") participated inunder the financing through the purchase of one million shares of the Company's Series A
Preferred Stock. The proceeds will be utilized to continue its product
development and marketing efforts and to provide working capital for the
Company's operations.
In connection with the private placement financing, the Company issued
2,575,000 shares of its Series A Preferred Stock for $1.00 per share. Each share
of Series A Preferred Stock is initially convertible into 33.334 shares of the
Company's common stock. The holders of the Series A Preferred Stock will be
entitled to a cumulative annual dividend of 15%, which, at the option of the
holders of the Series A
14
Preferred Stock, may be paid in cash or in additional shares of Series A
Preferred Stock. The holders of the Series A Preferred Stock will have a
liquidation preference in the event of any liquidation sale, merger or other
similar event, and have registration rights and other customary rights. The
Company has also agreed to make payments to the Series A Preferred Stock, to the
extent its cash flow meets certain levels, until the holders have received the
amount of their investmentsauthority granted in the Series A Preferred Stock Purchase Agreement dated August 13, 2001. Mr. Holmes will remain as an advisor to the Company’s Board of Directors for a minimum of three years and has granted a
security interest in allreceived 293,772 shares of its assets to secure its obligation to make these
payments. The Company has also agreed to issue additional shares ofthe Company’s Series A Preferred Stock equal to 50% of the then fully diluted common stock to the
investors if the Company fails to return the amount of their investment, plus
the mandatory dividends, by July 15, 2003. In addition, the Company has agreed
that if it does not meet any of certain financial targets in any of six
performance periods that the Series A Preferred stockholders will be issued
additional Series A Preferred Stock equal to 25% of the fully diluted
as-if-converted shares of the Company at the end of each such determination
period beginning with the quarter ending September 30, 2001. If the slowdown in
the worldwide semiconductor industry continuesas compensation for an extended period of time,
the Company may not meet one or more of the specified financial targets, thus
triggering the issuance of additional shares of Series A Preferred Stock.
The Series A Preferred shares will vote together with the Company's common
stock on an as-if-converted basis and not as a separate class. Each share of
Series A Preferred will have a number of votes equal to the number of common
stock shares then issuable upon conversion of such shares of the Series A
Preferred Stock.
The Company has agreed to call a special meeting of its shareholders to
vote on a proposal to authorize additional common stock so as to permit the
conversion of the Series A Preferred Stock. The holders of the Series A
Preferred Stock will be entitled to vote with the holders of the common stock at
the special meeting, and will control sufficient votes to approve the proposal.
Immediately after the special meeting, the shares of Series A Preferred Stock
initially issued would be convertible into approximately 78% of the then
outstanding common stock. If Tanisys is required to issue all of the shares of
Series A Preferred Stock that it could potentially be required to issue in
connection with the Series A financing, those shares would be convertible into
approximately 97% of the then outstanding as-if-converted common stock.
In connection with the financing transaction described above, two members
of the Board of Directors of the Company resigned, and New Century appointed two
directors to the Board. Subject to certain requirements, New Century will have
the right to appoint a third member to the Company's five member Board of
Directors.
Also in connection with the financing transaction described above, the
Company's Board of Directors approved, subject to shareholder approval, a new
stock option plan, pursuant to which the Board may grant stock options covering
up to 15% of the fully diluted common stock, including the Series A Preferred
Stock as-if-converted into common stock.
services.
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
Information on the Company'sCompany’s legal proceedings is contained in this Form 10-Q for the quarterly period ended June 30,December 31, 2001 in "Part“Part 1 Financial Information"Information” under the caption "Notes“Notes to Consolidated Financial Statements"Statements” under "Note“Note 12: Contingencies,"” and is incorporated herein by reference.
15
Item 2. Changes in Securities and Use of Proceeds
(a)
Not applicable.
(b)
Not applicable.
(c)
On August 13, 2001, the Company issued 2,575,000 shares of its Series A Preferred Stock in a private financing for consideration of $2,575,000. The shares of Series A Preferred Stock issued in the private financing are restricted securities. The transaction was exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended. Information on the Series A Preferred Stock transaction is contained in this Form 10-Q for the quarterly period ended June 30,December 31, 2001 in "Part“Part 1 Financial Information"Information” under the caption "“ Notes to Consolidated Financial Statements"Statements” under "Note 11: Subsequent Events,"“Note 7: Preferred Stock” and is incorporated herein by reference.
In accordance with the Series A Stock Purchase Agreement executed on August 13, 2001 in conjunction with the private placement discussed above, the Company has issued additional shares of Series A Preferred Stock for no proceeds. On October 30, 2001, the Company issued 999,051 shares of Series A Preferred due to its failure to meet the financial targets for the quarter ended September 30, 2001 as set forth in the Series A Preferred Stock Purchase Agreement. On January 30, 2002, the Company issued 1,340,510 shares of Series A Preferred due to its failure to meet the December 31, 2001 financial targets. An additional 293,772 shares of Series A Preferred stock were issued for services on February 11, 2002.
(d)
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a)
Exhibits
The exhibits listed below are filed as part of this report.
Exhibit
Number
Description
------ -----------
10.40 Silicon Valley Bank Accounts Receivable Financing Agreement
dated May 30, 2001 (filed herewith)
10.41 Loan Modification and Forbearance Agreement dated August 3,
2001 (filed herewith)
10.42 Promissory Note to Charles T. Comiso dated July 27, 2001
(filed herewith)
(b) Current Reports on Form 8-K:
Form 8-K dated and filed July 31, 2001 reporting the Company's results
of operations for the quarter ended June 30, 2001.
Form 8-K dated August 13, 2001 and filed August 14, 2001 reporting the
Company's issuance of Series A Preferred Stock in a private financing
transaction.
16
None.
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: August 14, 2001 February 13, 2002
By: /s/ CHARLES T. COMISO
--------------------------------
Charles T. Comiso
RICHARD M. BROOK
Richard M. Brook
Chief Executive Officer
President and Director
Date: August 14, 2001 February 13, 2002
By: /s/TERRY W. REYNOLDS
--------------------------------
Terry W. Reynolds
Vice President of Finance and Chief Financial Officer
(Duly authorized and Principal Accounting Officer)
17