UNITED STATES |
[x] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2000 |
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. |
Wyoming (State or other jurisdiction of incorporation or organization) | 74-2675493 (I.R.S. Employer Identification Number) |
12201 Technology Blvd., Suite 125 Austin, Texas (Address of principal executive offices) | 78727 (Zip Code) |
(512) 335-4440 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 9, 2001: |
Title of Class | Number of Shares Outstanding | |||
---|---|---|---|---|
Common Stock, no par value | 24,156,784 |
TANISYS TECHNOLOGY, INC. AND SUBSIDIARIESINDEX |
PART I FINANCIAL INFORMATION | |||
Item 1. Interim Consolidated Financial Statements (Unaudited) | |||
Consolidated Balance Sheets – December 31, 2000 and September 30, 2000 | 3 | ||
Consolidated Statements of Operations – For the Three Months Ended | |||
December 31, 2000 and 1999 | 4 | ||
Consolidated Statements of Cash Flows – For the Three Months Ended | |||
December 31, 2000 and 1999 | 5 | ||
Notes to Interim Consolidated Financial Statements | 6 | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of | |||
Operations | 10 | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 13 | ||
PART II OTHER INFORMATION | |||
Item 1. Legal Proceedings | 13 | ||
Item 2. Changes in Securities and Use of Proceeds | ; | 13 | |
Item 3. Defaults upon Senior Securities | 13 | ||
Item 5. Other Information | 13 | ||
Item 6. Exhibits and Reports on Form 8-K | 13 | ||
SIGNATURES | 14 |
2 |
PART 1. FINANCIAL INFORMATIONItem 1. Financial StatementsTANISYS TECHNOLOGY, INC. and SUBSIDIARIES |
December 31, 2000 | September 30, 2000 | ||||
---|---|---|---|---|---|
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ 808,151 | $ 1,601,777 | |||
Restricted cash | 50,000 | — | |||
Trade accounts receivable, net of allowance of $132,793 and | |||||
$132,743, respectively | 2,319,446 | 1,713,417 | |||
Inventory | 725,415 | 694,529 | |||
Prepaid expenses and other | 114,528 | 137,654 | |||
Total current assets | 4,017,540 | 4,147,377 | |||
Property and equipment, net of accumulated depreciation of | |||||
$853,686 and $954,945, respectively | 439,025 | 394,468 | |||
Other noncurrent assets | 57,130 | 51,217 | |||
Total Assets | $ 4,513,695 | $ 4,593,062 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
Current liabilities: | |||||
Accounts payable | $ 321,480 | $ 340,925 | |||
Accrued liabilities | 295,011 | 598,498 | |||
Revolving credit note | 700,000 | 600,000 | |||
Current portion of obligations under capital lease | 7,367 | 10,516 | |||
Net current liabilities of discontinued operations | 853,180 | 1,003,981 | |||
Total current liabilities | 2,177,038 | 2,553,920 | |||
Long-term portion of obligations under capital lease | — | 126 | |||
Total liabilities | 2,177,038 | 2,554,046 | |||
Stockholders’ equity: | |||||
Common stock, no par value, 50,000,000 shares authorized, | |||||
24,097,358 and 24,097,358 shares issued and outstanding, | |||||
respectively | 37,579,849 | 37,579,849 | |||
Additional paid-in capital | 1,711,719 | 1,711,719 | |||
Accumulated deficit | (36,954,911 | ) | (37,252,552 | ) | |
Total stockholders’ equity | 2,336,657 | 2,039,016 | |||
Total liabilities and stockholders’ equity | $ 4,513,695 | $ 4,593,062 | |||
The accompanying notes are an integral part of these interim consolidated financial statements. 3 |
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES |
For the Three Months Ended December 31, | |||||
---|---|---|---|---|---|
2000 | 1999 | ||||
Net sales | $ 2,140,277 | $ 2,016,660 | |||
Cost of goods sold | 768,841 | 758,138 | |||
Gross profit | 1,371,436 | 1,258,522 | |||
Operating expenses: | |||||
Research and development | 556,519 | 318,625 | |||
Sales and marketing | 325,417 | 324,558 | |||
General and administrative | 155,697 | 165,068 | |||
Depreciation and amortization | 32,111 | 54,452 | |||
Total operating expenses | 1,069,744 | 862,703 | |||
Operating income | 301,692 | 395,819 | |||
Other income (expense): | |||||
Interest income | 12,381 | 2,899 | |||
Interest expense | (12,490 | ) | (90,561 | ) | |
Other | (3,942 | ) | (28,293 | ) | |
Net income | $ 297,641 | $ 279,864 | |||
Net income | $ 297,641 | $ 279,864 | |||
Preferred stock dividend | — | (27,212 | ) | ||
Net income applicable to common stockholders | $ 297,641 | $ 252,652 | |||
Basic income per common share: | |||||
Income from applicable to common stockholder | $ 0.01 | $ 0.02 | |||
Diluted income per common share: | |||||
Income applicable to common stockholders | $ 0.01 | $ 0.01 | |||
The accompanying notes are an integral part of these interim consolidated financial statements. 4 |
TANISYS TECHNOLOGY, INC. and SUBSIDIARIES |
For the Three Months Ended December 31, | |||||
---|---|---|---|---|---|
2000 | 1999 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ 297,641 | $ 279,864 | |||
Adjustments to reconcile net income to net cash provided by | |||||
(used in) operating activities: | |||||
Depreciation and amortization | 50,652 | 92,075 | |||
Loss on disposal of fixed assets | 750 | — | |||
Changes in operating assets: | |||||
Restricted cash | (50,000 | ) | 290,511 | ||
Accounts receivable, net | (606,029 | ) | 391,597 | ||
Inventory | (30,886 | ) | 227,548 | ||
Prepaid expenses and other | 23,126 | (46,341 | ) | ||
Other noncurrent assets | (8,678 | ) | 3,086 | ||
Accounts payable | (19,445 | ) | (466,460 | ) | |
Accrued liabilities | (303,487 | ) | (48,618 | ) | |
Net cash provided by (used in) operating activities of | |||||
continuing operations | (646,356 | ) | 723,262 | ||
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: | |||||
Draws (repayments) on revolving credit note, net | 100,000 | (1,232,504 | ) | ||
Payment of debt financing costs | — | 57,691 | |||
Proceeds from issuance of debt to stockholder | — | 200,000 | |||
(Payments) on capital lease obligations | (3,275 | ) | (5,544 | ) | |
Net cash provided by (used in) financing activities of | |||||
continuing operations | 96,725 | (980,357 | ) | ||
Net cash used in discontinued operations | (150,801 | ) | (363,078 | ) | |
Net decrease in cash and cash equivalents | (793,626 | ) | (620,173 | ) | |
Cash and cash equivalents at beginning of period | 1,601,777 | 684,949 | |||
Cash and cash equivalents at end of period | $ 808,151 | $ 64,776 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||
Cash paid for interest | $ 13,301 | $ 84,952 | |||
Interest received | 12,946 | 2,899 | |||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||
Preferred stock dividends paid in common stock | — | 27,212 | |||
Preferred stock dividends accrued | — | 25,829 | |||
Conversion of preferred stock to common stock | — | 122,099 | |||
The accompanying notes are an integral part of these interim consolidated financial statements. 5 |
NOTE 3: CASH AND CASH EQUIVALENTSThe 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. Restricted cash consists of a certificate of deposit pledged as collateral for a letter of credit to a specific vendor. NOTE 4: INVENTORYInventory consists of the following: |
December 31, 2000 | September 30, 2000 | ||||
---|---|---|---|---|---|
Raw materials | $491,379 | $453,573 | |||
Work-in-process | 66,335 | 93,941 | |||
Finished goods | 167,701 | 147,015 | |||
Total inventory | $725,415 | $694,529 | |||
Inventory is stated at the lower of cost or market value. Inventory costs include direct materials, direct labor and certain manufacturing overhead costs. NOTE 5: LONG-TERM DEBTAs of December 31, 2000, and September 30, 2000, the Company had no long-term debt. However, the Company had long-term debt to certain stockholders in the amount of $1,780,440 as of December 31, 1999, upon which interest was paid during the quarter ended December 31, 1999. During the second quarter of the fiscal year ended September 30, 2000, all of the debt to certain stockholders was converted to 4,000,000 shares of Common Stock. 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 6: PREFERRED STOCKPursuant 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 all of the Series A Stock into shares of Common Stock. NOTE 7: STOCKHOLDERS’ EQUITYAt the Company’s Annual Meeting of Stockholders on May 23, 2000, the Company’s stockholders approved a one-for-two reverse stock split of the Company’s Common Stock (the “Reverse Split”) effective May 25, 2000. The Reverse Split had no effect on the number of authorized shares of Common Stock, preferred stock or Series A Preferred Stock. Any stockholder otherwise entitled to any fractional share interest due to the Reverse Split received in lieu thereof, one additional share of Common Stock for the fractional share such stockholder would have been entitled to as a result of the Reverse Split. 7 |
The number of shares and per share amounts of the Company’s Common Stock set forth herein have been retroactively adjusted for all periods presented to reflect the Reverse Split. 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 8: EARNINGS PER SHAREBasic 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 December 31, 2000 and 1999, 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, | |||||
---|---|---|---|---|---|
2000 | 1999 | ||||
Net income | $ 297,641 | $ 279,864 | |||
Less- | |||||
Series A Stock dividends | — | (27,212 | ) | ||
Net income applicable to common | |||||
stockholders (basic and diluted) | $ 297,641 | $ 252,652 | |||
Weighted average number of common | |||||
shares used in basic earnings per share | 24,097,358 | 12,423,995 | |||
Effect of dilutive securities | |||||
Stock Options | 992,325 | 1,051,970 | |||
Warrants | 358,334 | 460,000 | |||
Series A Stock | — | 4,952,830 | |||
Weighted average number of common | |||||
shares and dilutive potential Common | |||||
Stock used in dilutive earning per share | 25,448,017 | 18,888,795 | |||
NOTE 9: SUBSEQUENT EVENT(S)None. NOTE 10: CONTINGENCIESThe Company is a defendant in a lawsuit filed by one of its customers related to the discontinued memory module manufacturing business for alleged breach of contract. The suit asks for actual damages, including all related expenses, in the amount of $77,838. The Company believes the suit is without merit and is vigorously defending its position. The Company believes it is unlikely that the final outcome of this claim would have a material adverse effect on the Company’s financial position or results from operations. A former leasing company has filed a lawsuit claiming a breach of a lease 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 leasing company. The Company is unable at this time to determine the outcome of this lawsuit. There can be no assurance that the resolution of this claim or any future proceeding would not have a material adverse effect on the Company’s results of operations for the fiscal period in which such resolution may occur. 8 |
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 that 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. 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 “Lessor”) 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, vacated the premises, and accordingly, the landlord is seeking reimbursement for its losses resulting from the Lessor vacating the property. The Company is the first guarantor and the Scottish Enterprise is the second guarantor of the lease. In addition to the guaranty of the rental payments, the Company may be liable for interest, legal fees and other expenses in connection with the default of Tanisys (Europe) Ltd. The Company is in the process of negotiating a discharge of its obligations with the landlord; however, there is no assurance that the Company will be successful in negotiating a favorable discharge of these obligations, in which case the resulting liability could have a material adverse effect on the business, financial condition and results of operations of the Company. 9 |
Results of OperationsThe following table sets forth certain consolidated operations data of the Company expressed as a percentage of net sales (unaudited) for the three months ended December 31, 2000 and 1999: |
For the Three Months Ended December 31, | |||||
---|---|---|---|---|---|
2000 | 1999 | ||||
Net sales | 100 | % | 100 | % | |
Cost of goods sold | 36 | % | 38 | % | |
Gross profit | 64 | % | 62 | % | |
Operating expenses: | |||||
Research and development | 26 | % | 16 | % | |
Sales and marketing | 15 | % | 16 | % | |
General and administrative | 7 | % | 8 | % | |
Depreciation and amortization | 2 | % | 3 | % | |
Total operating expenses | 50 | % | 43 | % | |
Operating income | 14 | % | 19 | % | |
Other income (expense): | |||||
Interest income | 1 | % | — | ||
Interest expense | (1 | %) | (4 | %) | |
Other | — | (1 | %) | ||
Net income | 14 | % | 14 | % | |
Net SalesNet sales consist of sales of production-level automated test equipment, less returns and discounts. Net sales increased 6% to $2,140,277 in the first quarter of fiscal 2001 from $2,016,660 in the same period last year. While sales of the Company’s Darkhorse SIGMA•3 memory module test systems remain strong, the quarter ended December 31, 2000, included the first customer shipment of the Model 400, designed for testing the new Double Data Rate (“DDR”) memory module technology. Cost of Sales and Gross ProfitCost 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 2000 quarter was up slightly in absolute dollars over the December 1999 quarter, but decreased from 38% of net sales in the December 1999 quarter to 36% in the December 2000 quarter. Gross profit for the quarter ended December 31, 2000 was $1,371,436, up approximately 9% over the gross profit of $1,258,522 from the same quarter of last year. Gross profit as a percent of sales increased to 64% in the quarter ended December 31, 2000 from 62% in the December 1999 quarter. The increase in gross profit percentage was primarily attributable to better raw material pricing. Research and DevelopmentResearch and development expenses, which consist of all costs associated with the engineering design and testing of new technologies and products, were $556,519 for the first quarter of fiscal year 2001 as compared to $318,625 for the same period last year, representing a 75% increase. The increase is a result of the development of test systems for both DDR and Flash memory technologies, as well as a new multi-site architecture that can be applied to all memory technologies. In an effort to continually improve engineering productivity, the Company invested in additional software and hardware tools during the first fiscal quarter of 2001. Research and development expenditures are expected to continue to increase as resources are allocated to develop new test systems and enhance current test systems to meet the market demands for the testing of new memory technologies. 11 |
Sales and MarketingSales 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 $325,417 for the first fiscal quarter of 2001 were approximately the same when compared to $324,558 for the same quarter last year. The Company continues to successfully sell test systems to the world’s largest semiconductor and memory module manufacturers. Sales and marketing expenses expressed as a percentage of revenues in the first quarter of fiscal 2001 and 2000 were 15% and 16%, respectively. Even though sales and marketing expenses were relatively the same between the first fiscal quarter of 2001 and first fiscal quarter of 2000, the Company expects its sales and marketing expenses to increase in terms of absolute dollars and decrease as a percentage of net sales in future periods as growth in revenue occurs. General and AdministrativeGeneral 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 first quarter of fiscal 2001 decreased 6%, or $9,371, to $155,697 from $165,068 for the same quarter of fiscal 2000. When expressed as a percentage of sales, general and administrative expenses decreased from 8% in the first quarter of fiscal 2000 to 7% in the same quarter of fiscal 2001, primarily due to more efficient management of these expenses. The absolute dollar expenses associated with the general and administrative area are expected to increase at a much slower pace than revenues in future periods with the anticipated continued growth in business activity. Depreciation and AmortizationDepreciation 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 $32,111 in the first quarter of fiscal 2001 from $54,452 in the same quarter of fiscal 2000. This decrease was due to the declining depreciable basis of the Company’s fixed assets. Other Income (Expense), NetOther income (expense), net consists primarily of interest income less interest expense. Interest expense for the quarter ended December 31, 2000, is mostly attributable to the Company’s working capital loan facility which is utilized for short-term inventory requirements and to fund accounts receivable. Interest expense for the quarter ended December 31, 1999, included interest paid on the Company’s working capital loan agreement and interest paid on debt the Company issued to certain stockholders of the Company in November 1998. The debt was converted to Common Stock in the second fiscal quarter of the year ended September 30, 2000. Interest income relates to the investment of available cash in short-term interest bearing accounts and cash equivalent securities. Other income (expense) decreased to $4,051 of expense in the first quarter of fiscal 2001 from $115,955 of expense in the first quarter of fiscal 2000. The decrease in other income (expense) is primarily due to the reduction of interest expense resulting from the reduction in debt from December 2000 to December 2001. Liquidity and Capital ResourcesSince inception, Tanisys has utilized the funds acquired in equity financings of its Common Stock and preferred stock, the exercise of stock warrants and stock options, capital leases, operating leases, vendor credits, certain bank borrowings, and funds generated from operations to support its operations, carry on research and development activities, acquire capital equipment, finance inventories and accounts receivable balances and pay its general and administrative expenses. During the first quarter of fiscal 2001, the Company utilized $646,356 of cash in its continuing operations associated primarily with the increase in accounts receivable of $606,029. The vast majority of the Company’s accounts receivable is with strong companies in the memory module business. The Company’s financing activities generated $96,725 due to an increase in its revolving credit line. The Company had $808,151 in cash and working capital of $1,840,502 at December 31, 2000, an increase in working capital of $247,045 from September 30, 2000, the Company’s previous fiscal year end. 12 |
Exhibit Number | Description |
3.1 | Amended and Restated Articles of Incorporation of Tanisys Technology, Inc. (filed herewith) |
(b) Current Reports on 8-K:None. 13 |
TANISYS TECHNOLOGY, INC. |
Date: February 14, 2001 | By: /s/ CHARLES T. COMISO —————————————— Charles T. Comiso Chief Executive Officer, President and Director |
Date: February 14, 2001 | By: /s/ TERRY W. REYNOLDS —————————————— Terry W. Reynolds Vice President and Chief Financial Officer (Duly authorized and Principal Accounting Officer) |
14 |