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 DecemberMarch 31, 20012002

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 11,May 10, 2002:

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 – DecemberMarch 31, 20012002 and September 30, 2001…….………….    3

        Consolidated Statements of Operations - For the Three Months and Six Months Ended

December

March 31, 20012002 and 2000. .…2001………..…………………………………….…………..….    4

Consolidated Statements of Cash Flows - For the Three Months and Six Months Ended

        December

March 31, 20012002 and 2000 2001………..….….………………………………….……………..    5

        Notes to Interim Consolidated Financial Statements ……………………………………..    6

Item 2.           Management’s Discussion and Analysis of Financial Condition and Results of                      

Operations….………………………………………………………………………….     11

Item 3.

        Quantitative and Qualitative Disclosures About Market Risk…………………….………    1415

PART II    OTHER INFORMATION

Item 1.           Legal Proceedings………………………………………………………………………….   1415

Item 2.4.

        Changes in Securities and UseSubmission of Proceeds……………Matters to a Vote of Security Holders……………………………………..   14  

Item 6.

       Exhibits and  Reports on Form 8-K………………………………………………………..    1415

SIGNATURES……………………………………………………………………………………..…….    1517

#

PART 1.  FINANCIAL INFORMATION

Item 1. Financial Statements

TANISYS TECHNOLOGY, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of these interim consolidated financial statements.

#

TANISYS TECHNOLOGY, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these interim consolidated financial statements.

#

TANISYS TECHNOLOGY, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these interim consolidated financial statements.

#

TANISYS TECHNOLOGY, INC.

NOTES TO INTERIM 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.  It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the Company’sconsolidated financial statements and the notes thereto for the fiscal year ended September 30, 2001 contained in the Company’s Form 10-K/A filed with the Securities and Exchange Commission on December 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 operatinga loss of $870,546$992,183 for the quarter ended DecemberMarch 31, 2001, even though it had2002, compared to a net operating incomeloss of $297,641$949,679 for the quarter ended DecemberMarch 31, 2000.2001. 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 relatedre lated 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.  No assurances can be made that additional capital may be obtained.

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.  ManagementWhile it still remains uncertain as to the timing and strength of the recovery of the worldwide semiconductor industry, 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 backlog and 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 DecemberMarch 31, 2001,2002, remaining future costs associated with the disposition of the discontinued operations are $216,519,$306,716, including actual and estimated remaining balances of terminated equipment and real estate leases, legal and professional fees, related vendor liabilities, and other miscellaneous accrued expenses.

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:

Inventory is valued at standard cost which approximates actual cost computed on a first-in, first-out basis, not in excess of market value.  Inventory costs include direct materials and certain indirect manufacturing overhead 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

On May 30, 2001,March 22, 2002, the Company entered into a new Accounts Receivable FinancingPurchase Agreement with Silicon Valley Bank to replace the former Revolving Line of CreditAccounts Receivable Financing Agreement dated September 19, 2000.May 30, 2001.  As of DecemberMarch 31, 2001,2002, 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.balance outstanding during the month.  The Accounts Receivable FinancingPurchase Agreement also provides for an admistrative fee equal to 0.50% of the face amount of each receivable when initially purchased. The Accounts Receivable Purchase 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 June 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 March 31, 2002 due to the current economic situation.  However, the Company believes that the Bank will continue to provide financing of the Company’s accounts receivable, but the terms of the financing may be less favorable.  2003.

NOTE 6:  LONG-TERM DEBT

On August 13, 2001, the Company entered into a Series A Preferred Stock Purchase 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 issuance 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 a 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 DecemberMarch 31, 2001,2002, the Company charged $323,536$316,502 of the discount on the debt to interest expense leaving a DecemberMarch 31, 20012002 note balance, net of discount, of $669,337,$962,181, and is due during the year ended September 30, 2003.

In March 2002, the Company repurchased 117,509 shares of its Series A Preferred for $150,000 in accordance with a repurchase agreement with a certain investor.  In conjunction with the repurchase of the Series A Preferred, the related debt, net of debt discount, of $23,658 was cancelled.

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 resulted from a private placement financing with 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 marketing efforts and to provide working cap ital for the Company’s operations.

On September 28, 2001, the Company issued 7,200 shares of Series A Preferred in lieu of cash for costs related to the offering.

Each share of Series A Preferred is immediately convertible into 33.334 shares of Common Stock.  The holders of the Series A Preferred 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 Series A Preferred.  

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, 2001.2001, including 56,038 shares issued to New Century at a value of $40,077.

In February 2002, the Company issued 293,772 shares of its Series A Preferred for services at a value of $150,000.

In March 2002, the Company repurchased 117,509 shares of its Series A Preferred for $150,000 in accordance with a repurchase agreement with a certain investor.  The purchase amount is to be paid monthly through June 2003.

A dividend of 197,932 shares of Series A Preferred valued at $101,054 was paid to the holders of the Series A Preferred for the quarter ended March 31, 2002, including 76,783 shares issued to New Century at a value of $39,205.

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 to 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 the amount of $2,465,200 and $177,000, respectively.

NOTE 8:  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’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 DecemberMarch 31, 20012002 and 2000,2001, 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. The following table provides a reconciliation between net incomeloss and net incomeloss applicable to common stockholders, and between basic and diluted shares outstanding:

NOTE 10:  RELATED PARTY TRANSACTIONS

None.

NOTE 11:  SUBSEQUENT EVENTS

On February 4,April 5, 2002, Mr. Parris H. Holmes, Jr. resignedPaul Hunter assumed the role of Vice President of Engineering.  Mr. Hunter joined the Company in 1997 and previously served as Director of Engineering.  Prior to coming to the Company’s ChairmanCompany, Mr. Hunter had over 20 years experience in the electronics and computer industry.

In May 2002, the Company entered into an agreement with its landlord to extend the term of its current facilities lease for an additional twenty-four months with a new expiration date of April 30, 2005.  As a result of the Boardrenewal and extension, the Company was able to receive more favorable terms for the remaining term of Directors, and Mr. C. Lee Cooke was appointed asits current lease obligation.  In addition, the Company’s new ChairmanCompany has subleased approximately 16% of the Board of Directors by New Century Equity Holdings Corp. under the authority granted in the Series A Preferred Stock Purchase Agreement dated August 13, 2001. Mr. Holmes is the Chairman of the Board of New Century Equity Holdings Corp. (see Note 7: Preferred Stock).  Mr. Holmes will remain asits office space to an advisor to the Company’s Board of Directorsunrelated party for a minimumperiod of three years and has received 293,772 shares of the Company’s Series A Preferred as compensation for those services.one year commencing May 1, 2002.

NOTE 12:  CONTINGENCIES

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’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 months ended DecemberMarch 31, 20012002 and 2000.2001.  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’s Annual Report on Form 10-K/A for the year ended September 30, 2001 filed with the Securities and Exchange Commission on December 26, 2001.  For purposes of the following discussion, references to year periods refer to the Company’s fiscal year ended September 30, 2001 and references to quarterly periods refer to the Company’s fiscal quarters ended DecemberMarch 31, 2002 and 2001.

Revenue has declined throughout much of fiscal 2001 and 2000.has continued to remain low in the first two quarters of fiscal 2002 during what the Company believes to be a severe cyclical downturn in the worldwide semiconductor industry.  Although it is uncertain as to if and when the next economic growth cycle will occur, the Company expects to be ready to meet the demands of its customers with products, capacity and people in place.  It is difficult to predict product demand in 2002.  However, ending the March 2002 quarter with the largest backlog of orders in the past 13 quarters, the Company is cautiously optimistic about the remainder of fiscal 2002.

The Company’s discussion and analysis of its financial condition and results of operations are based upon its unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  Management evaluates its estimates on an on-going basis, including those related to bad debts, inventories, warranty obligations, contingencies and litigation.  The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates under different assu mptions or conditions.

#

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 ended DecemberMarch 31, 20012002 and 2000:2001:

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 56%55% to $951,784$479,478 in the firstsecond quarter of fiscal 2002 from $2,140,277$1,068,038 in the same period last year. The Company’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’s automated test equipment.  This slowdown has had a severely negative impact upon the sales of the Company during the quarter ended DecemberMarch 31, 2001.2002.  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.

Backlog

While the Company’s net sales were down for the quarter ended March 2002, the Company had its largest backlog of orders at the end of the quarter that it has had in the past 13 quarters.

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 December 2001March 2002 quarter was $482,430,$261,658, down in absolute dollars from the $768,841$596,769 of the previous year, but higherapproximately the same in terms of percent of sales at 51%55% versus 36%56% for the same quarter last year.  The decrease in cost of sales in terms of dollars was due to lower sales volume in the December 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.March 2002 quarter.

Gross profit for the December 2001March 2002 quarter was $469,354$217,820 as compared to $1,371,436$471,269 from the same quarter last year.  Gross profit as a percent of sales was 49%45% and 64%44% for the quarters ended December 30,March 31, 2002 and 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 December  2001 quarter, resulting in reduced absorption of fixed manufacturing costs.March 2002 quarter.

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 $530,154$480,712 for the firstsecond quarter of fiscal year 2002 as compared to $556,519$718,245 for the same quarter last year.  Costs reflect the ongoing development of test systems for both Double Data Rate (“DDR”) and Flash memory technologies, as well as a new distributed networking architecture that can be applied to all memory technologies.  The reduction in research and development expenses is a result of the timing in the development cycle of new products and a reduction in staffing.

The Company will continue to invest in research and development to design 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 $323,128$239,138 for the firstsecond fiscal quarter of 2002 were down slightly when compared to $325,417from $426,602 for the same quarter last year.year due to a decrease in travel related expenses and one-time personnel recruiting fees incurred in the quarter ended March 2001.  The Company continues to market its tests systems to the world’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 firstsecond quarter of fiscal 2002 decreased 28%31% to $112,663$141,180 from $155,697$203,544 for the same quarter of fiscal 2001.  The decrease was primarily due to reductions in personnel costs.costs and professional fees.  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 of Goods Sold,” and the amortization of intangibles, including patents related to memory module test systems technology.  Depreciation and amortization decreased to $30,211$31,862 in the firstsecond quarter of fiscal 2002 from $32,111$36,802 in the same quarter of fiscal 2000.2001.   The decrease reflects assets that have been fully depreciated.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income less interest expense. Other income (expense) decreased to $343,744$317,111 in net other expense for the December 2001March 2002 quarter from $4,051$35,755 in net other expense from the same period last year.  Interest expense for the December 2001March 2002 quarter increaseddecreased over the same period last year due to less debt during the March 2002 quarter compared to the March 2001 quarter, while interest expense resulting from the amortization of debt discount on the note payable to the Series A Preferred stockholders.stockholders was $316,502 for the March 2002 quarter and did not exist in the March 2001 quarter.

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 firstsecond quarter of fiscal 2002, the Company utilized $617,089$263,201 in cash flow from all of its operatingcontinuing activities of continuing operations primarily due to a net loss from operations and an increase in accounts receivable.   The Company also reduced its revolving credit line by $88,456.inventory.  Cash and cash equivalents decreased by $864,744$323,003 during the quarter ended December 2001March 2002 resulting in $505,244$182,241 in unrestricted cash and working capital of $1,415,324$619,083 at DecemberMarch 31, 2001,2002, a decrease in working capital of $546,624$1,342,865 from September 30, 2001, the Company’s most recent fiscal year end.

The Company entered into an Accounts Receivable Financing Agreement (“Debt 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 DebtPurchase Agreement with Silicon Valley Bank relatingon March 22, 2002 to failure to meet the specified net income levels for the quarters ended June 30, September 30, and December 31, 2001. The Company believes that the Bank will continue to provide financing of the Company’sfund accounts receivable butup to an aggregate face value of $2,500,000.  The Accounts Receivable Purchase Agreement has a maturity date of March 31, 2003.  As of March 31, 2002, the terms of the financing may be less favorable.Company owed nothing to Silicon Valley Bank under this Agreement.

Significant Customer Concentration

A significant percentage of the Company’s net sales is produced by a relatively small number of customers.  In the firstsecond quarter of fiscal 2002, the ten largest customers accounted for approximately 99%100% of net sales compared to approximately 98% in the same period last year.  The top three customers represented 29%60%, 22%16%, and 19%15% of sales, respectively, in the quarter ended DecemberMarch 31, 2001.2002.  The customer that represented 22%15% of sales in the December 2001March  2002 quarter accounted for approximately 58%14% of sales in the same period last year.  FiveFour customers were included in both top ten customer lists for the firstsecond fiscal quarters of 2002 and 2001; they accounted for approximately 35%18% of sales in firstthe second quarter of fiscal 2002 and approximately 62%11% of sales in the firstsecond quarter of fiscal 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, from time to time, 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’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’s major customers couldco uld have a material adverse effect on the Company’s business, financial condition and results of operations.  operation

Certain Events Occurring Subsequent to DecemberMarch 31, 20012002

On February 4,April 5, 2002, Mr. Parris H. Holmes, Jr. resignedPaul Hunter assumed the role of Vice President of Engineering.  Mr. Hunter joined the Company in 1997 and previously served as Director of Engineering.  Prior to coming to the Company’s ChairmanCompany, Mr. Hunter had over 20 years experience in the electronics and computer industry.

In May 2002, the Company entered into an agreement with its landlord to extend the term of its current facilities lease for an additional twenty-four months with a new expiration date of April 30, 2005.  As a result of the Boardrenewal and extension, the Company was able to receive more favorable terms for the remaining term of Directors, and Mr. C. Lee Cooke was appointed asits current lease obligation.  In addition, the Company’s new ChairmanCompany has subleased approximately 16% of the Board of Directors by New Century Equity Holdings Corp. under the authority granted in the Series A Preferred Stock Purchase Agreement dated August 13, 2001.  Mr. Holmes will remain asits office space to an advisor to the Company’s Board of Directorsunrelated party for a minimumperiod of three years and has received 293,772 shares of the Company’s Series A Preferred as compensation for those services.one year commencing May 1, 2002.

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’s legal proceedings is contained in this Form 10-Q for the quarterly period ended DecemberMarch 31, 20012002 in “Part 1 Financial Information” under the caption “Notes to Consolidated Financial Statements” under “Note 12: Contingencies,” and is incorporated herein by reference.

Item 2.  Changes in Securities and Use of Proceeds

(a)

Not applicable.

(b)

Not applicable.

(c)

On August 13, 2001, the Company issued 2,575,0002,635,000 shares of its Series A Preferred Stock in a private financing for consideration of $2,575,000.$2,635,000.  On September 28, 2001, the Company issued an additional 7,200 shares of Series A Preferred Stock for services rendered.  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 DecemberMarch 31, 20012002 in “Part 1 Financial Information” under the caption “ Notes to Consolidated Financial Statements” under “Note 7: Preferred Stock” and is incorporated hereinher ein 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.

In March 2002, the Company repurchased 117,509 shares of its Series A Preferred Stock for $150,000 in accordance with a repurchase agreement with a certain investor.

(d)

Not applicable.

Item 4.  Submission of Matters to a Vote of Securitiy Holders.

At the Annual Meeting of Stockholders held on February 26, 2002, the following matters were adopted by the margins indicated below, and additional information can be obtained from the Company’s Proxy Statement filed on January 11, 2002.

1.     To elect as director C. Lee Cooke to serve until the 2005 Annual Meeting of Stockholders.

For:

86,388,083

Against:

                -

Abstentions:

     409,806

2.     To elect as director Theodore W. Van Duyn to serve until the 2005 Annual Meeting of

        Stockholders.

For:

86,391,033

Against:

  -

Abstentions:

     406,856

3.     To elect as director David P. Tusa to serve until the 2004 Annual Meeting of Stockholders.

For:

86,382,693

Against:

  -

Abstentions:

     415,196

4.     To elect as director Richard M. Brook to serve until the 2004 Annual Meeting of     Stockholders.

For:

86,386,258

Against:

  -

Abstentions:

     411,631

5.     To elect as director Justin L. Ferrero to serve until the 2003 Annual Meeting of Stockholders.

For:

86,383,433

Against:

  -

Abstentions:

     414,456

6.     To ratify the appointment of Brown, Graham and Company, P.C. as independent public      accountants of the Company for the fiscal year ending September 30, 2002.

For:

86,462,985

Against:                    210,238

Abstentions:

     124,666

7.     To increase the number of shares of the Company’s common stock authorized for issuance to

                       1,000,000,000 shares.

For:

84,989,907

Against:

  1,741,456

Abstentions:

       66,525

8.     To increase the number of shares of the Company’s preferred stock authorized for issuance to

        50,000,000 shares.

For:

70,963,117

Against:

  1,341,990

Abstentions:

       72,968

9.     To approve an amendment to the 1993 Stock Option Plan to increase the number of shares           available for grant from 5,000,000 to 45,000,000.

For:

70,565,687

Against:

  1,735,898

Abstentions:

      76,490

10.    To approve an amendment to the 1997 Non-Employee Director Stock Option Plan to

         increase the number of shares available for grant from 2,000,000 to 12,000,000.

For:

70,489,862

Against:

  1,779,658

Abstentions:

     108,555

11.    To amend the terms of the Series A Preferred Stock to modify the voting rights of the

         holders of the Series A Preferred Stock.

For:

71,074,192

Against:

  1,204,340

Abstentions:

       99,543

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

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:  February 13,May  15, 2002

By: /s/RICHARD M. BROOKC. LEE COOKE

Richard M. BrookC. Lee Cooke

Chairman of the Board of Directors

Chief Executive Officer

President and DirectorPresident

Date:  February 13,May 15, 2002

By: /s/TERRY W. REYNOLDS

Terry W. Reynolds

Vice President of Finance and Chief Financial Officer

 (Duly authorized and Principal Accounting Officer)

#