<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                 --------------

                                    FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the quarterly period ended December 31, 1998

                                                    or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from ______________  to ________________

                         Commission File Number 0-29038

                            TANISYS TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)

                  WYOMING                                      74-2675493
       (State or other jurisdiction of                      (I.R.S. Employer
        incorporation or organization)                   Identification Number)

      12201 TECHNOLOGY BLVD., SUITE 125
                AUSTIN, TEXAS                                    78727
  (Address of principal executive offices)                    (Zip Code)

                                 (512) 335-4440
              (Registrant's Telephone Number, Including Area Code)

         Indicate by check mark whether the Registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter 
period that the Registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

         Indicated below are the number of shares outstanding of the 
Registrant's common stock and 5% Series A Convertible Preferred Stock at 
February 10, 1999:
<TABLE>
<CAPTION>
                                                        NUMBER OF SHARES
            TITLE OF CLASS                                 OUTSTANDING
            --------------                                 -----------
   <S>                                                  <C>
   Common Stock, no par value                               23,356,155
   Preferred Stock, $1.00 par value                                255
</TABLE>

<PAGE>

                    TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES

                                      INDEX
<TABLE>
<S>        <C>
PART I     FINANCIAL INFORMATION
Item 1.       Interim Consolidated Financial Statements (Unaudited)
              Consolidated Balance Sheets - December 31, 1998 and September 30, 1998............  3
              Consolidated Statements of Operations - For the Three Month Periods Ended
                 December 31, 1998 and 1997.....................................................  4
              Consolidated Statements of Cash Flows - For the Three Month Periods
                 Ended December 31, 1998 and 1997...............................................  5
              Notes to Interim Consolidated Condensed Financial Statements (Unaudited)..........  6
Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
                 Operations..................................................................... 10
Item 3.       Quantitative and Qualitative Disclosures About Market Risk........................ 14

PART II    OTHER INFORMATION
Item 1.       Legal Proceedings................................................................. 14
Item 2.       Changes in Securities and Use of Proceeds......................................... 14
Item 6.       Exhibits and Reports on Form 8-K.................................................. 15
SIGNATURES...................................................................................... 16
</TABLE>



                                       2

<PAGE>
                          PART I. FINANCIAL INFORMATION      
                                                             
ITEM 1. FINANCIAL STATEMENTS       

                    TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS       
                                   (UNAUDITED)               
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,          SEPTEMBER 30,
                                                                      1998                  1998
----------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                   <C>
ASSETS
Current assets:
   Cash and cash equivalents                                      $    895,945          $    253,107
   Restricted cash                                                      16,095               154,271
   Trade accounts receivable, net of allowance of $396,465 and
      $406,157, respectively                                         7,396,224             4,206,919
   Inventory                                                         3,987,109             3,224,671
   Prepaid expenses and other                                          757,841               643,398
----------------------------------------------------------------------------------------------------------------
      Total current assets                                          13,053,214             8,482,366
----------------------------------------------------------------------------------------------------------------
Property and equipment, net of accumulated depreciation of
   $3,571,407 and $3,053,548, respectively                           6,594,352             6,751,800
Other noncurrent assets                                                764,991               679,134
----------------------------------------------------------------------------------------------------------------
      Total assets                                                $ 20,412,557          $ 15,913,300
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                               $  5,408,456          $  4,648,129
   Accrued liabilities                                               2,637,637             4,177,286
   Revolving credit note                                             5,302,048             2,266,260
   Current portion of obligations under capital lease                  455,595               262,171
----------------------------------------------------------------------------------------------------------------
      Total current liabilities                                     13,803,736            11,353,846
----------------------------------------------------------------------------------------------------------------
Long-term debt to stockholders, net of discount                      1,568,875                     -
Long-term portion of obligations under capital lease                 1,433,127               754,751
----------------------------------------------------------------------------------------------------------------
      Total liabilities                                             16,805,738            12,108,597
----------------------------------------------------------------------------------------------------------------
Mandatorily redeemable convertible preferred stock:
   5% Series A Convertible Preferred Stock, $1 par value, 400 
      shares authorized, 345 and 400 shares issued and outstanding,
      respectively                                                   2,593,077             2,390,475
----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
   Common stock, no par value, 50,000,000 shares authorized,
      22,253,679 and 20,799,714 shares issued and outstanding,
      respectively                                                  30,318,553            29,114,774
   Additional paid-in capital                                        1,687,312             1,687,312
   Accumulated other comprehensive income                               33,998                (2,625)
   Accumulated deficit                                             (31,026,121)          (29,385,233)
----------------------------------------------------------------------------------------------------------------
      Total stockholders' equity                                     1,013,742             1,414,228
----------------------------------------------------------------------------------------------------------------
      Total liabilities and stockholders' equity                  $ 20,412,557          $ 15,913,300
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS

                                       3


<PAGE>

                    TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS  
                                   (UNAUDITED)               
<TABLE>
<CAPTION>
                                                                            FOR THE THREE MONTHS
                                                                             ENDED DECEMBER 31,
                                                                        1998                     1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                      <C>
Net sales                                                            $12,919,530              $ 9,675,823
Cost of goods sold                                                    10,940,081                7,522,657
-----------------------------------------------------------------------------------------------------------------
Gross profit                                                           1,979,449                2,153,166
-----------------------------------------------------------------------------------------------------------------
Operating expenses:
   Research and development                                              534,274                  810,565
   Sales and marketing                                                   693,605                  671,672
   General and administrative                                          1,182,319                1,018,363
   Depreciation and amortization                                         235,148                1,067,205
   Bad debt expense                                                            -                  108,943
-----------------------------------------------------------------------------------------------------------------
      Total operating expenses                                         2,645,346                3,676,748
-----------------------------------------------------------------------------------------------------------------
Operating loss                                                          (665,897)              (1,523,582)
-----------------------------------------------------------------------------------------------------------------
Other income (expense):
   Interest income                                                        18,110                   19,526
   Interest expense                                                     (293,883)                (155,132)
-----------------------------------------------------------------------------------------------------------------
Net loss                                                             $  (941,670)             $(1,659,188)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Reconciliation of net loss to net loss applicable to common stock:
   Net loss                                                          $  (941,670)             $(1,659,188)
   Preferred stock dividends and amortization of the value
      of the beneficial conversion feature on the preferred stock       (699,218)                       -
-----------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock                                  $(1,640,888)             $(1,659,188)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Basic and diluted loss per common share                              $     (0.08)             $     (0.08)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Weighted average number of common shares                              21,049,454               20,397,486
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS

                                       4

<PAGE>

                    TANISYS TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS  
                                   (UNAUDITED)               
<TABLE>
<CAPTION>
                                                                            FOR THE THREE MONTHS
                                                                             ENDED DECEMBER 31,
                                                                        1998                     1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                              $  (941,670)          $(1,659,188)
Adjustment to reconcile net loss to net cash used in operating
   activities:
      Depreciation and amortization                                       558,826             1,140,636
Changes in operating assets:
   Restricted cash                                                        138,176             1,471,985
   Accounts receivable, net                                            (3,189,305)           (1,024,605)
   Inventory                                                             (789,614)              711,931
   Prepaid expenses and other                                            (114,505)              (34,989)
   Accounts payable and accrued liabilities                               176,592              (800,572)
--------------------------------------------------------------------------------------------------------------
      Net cash used in operating activities                            (4,161,500)             (194,802)
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets                                                (333,234)             (187,313)
Proceeds from sale of property and equipment                                    -                21,637
--------------------------------------------------------------------------------------------------------------
      Net cash used in investing activities                              (333,234)             (165,676)
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt to stockholders                          2,000,000                     -
Payment of debt financing costs                                           (21,350)                    -
Proceeds from issuance of common stock                                          -                75,000
Draws on revolving credit note, net                                     3,035,788               150,803
Payments on capital lease obligations                                    (127,239)              (11,287)
Proceeds from exercise of stock options and warrants                      213,750               128,250
Other                                                                      36,623                     -
--------------------------------------------------------------------------------------------------------------
      Net cash provided by financing activities                         5,137,572               342,766
--------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                          642,838               (17,712)
Cash and cash equivalents, beginning of period                            253,107             1,990,017
--------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                              $   895,945           $ 1,972,305
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid for interest                                             $   205,755           $   155,132
   Interest received                                                       18,110                19,526
NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Capital lease additions                                                999,039                     -
   Issuance of stock warrants for debt financing costs                     75,000                     -
   Issuance of stock warrants in connection with issuance of
      debt to stockholders                                                461,538                     -
   Preferred stock dividends paid in common stock                           5,795                     -
   Preferred stock dividends accrued                                       43,125                     -
   Amortization of beneficial conversion feature on preferred stock       650,298                     -
   Conversion of preferred stock to common stock                          447,696                     -
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS

                                       5

<PAGE>

                             TANISYS TECHNOLOGY, INC.
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (UNAUDITED)

NOTE 1:  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The accompanying consolidated financial statements present the 
financial position, results of operations and cash flows of Tanisys 
Technology, Inc. ("Tanisys") and its wholly owned subsidiaries (collectively 
referred to as the "Company") as of the dates and for the periods indicated.  
All material intercompany accounts and transactions have been eliminated in 
consolidation.  All adjustments have been made to the accompanying interim 
consolidated financial statements which are, in the opinion of the Company's 
management, necessary for fair presentation of the Company's operating 
results.

         The accompanying unaudited consolidated financial statements have 
been prepared in accordance with generally accepted accounting principles for 
financial information and with the instructions to Form 10-Q and Article 10 
of Regulation S-X. Accordingly, they do not include all of the information 
and notes required by generally accepted accounting principles for complete 
financial statements.  It is recommended that these interim consolidated 
financial statements be read in conjunction with the Company's consolidated 
financial statements and the notes thereto for the fiscal year ended 
September 30, 1998 contained in the Company's Form 10-K as filed with the 
Securities and Exchange Commission on December 29, 1998.

NOTE 2:  INVENTORY

         Inventory consists of the following:

<TABLE>
<CAPTION>
                                          DECEMBER 31,    SEPTEMBER 30,
                                             1998             1998     
--------------------------------------------------------------------------
<S>                                      <C>              <C>
Raw materials                            $3,564,113       $2,770,338
Work-in-process                             252,787          280,445
Finished goods                              170,209          173,888
--------------------------------------------------------------------------
Total inventory                          $3,987,109       $3,224,671
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>

         Inventory is stated at the lower of cost or market value. Inventory 
costs include direct materials, direct labor and certain indirect 
manufacturing overhead expenses.

NOTE 3:  LONG-TERM DEBT

     In November 1998, the Company issued $2 million in debt with attached 
stock warrants to certain stockholders of the Company. The debt is due in two 
years and carries an interest rate of 10 percent per annum, due quarterly and 
payable in either unregistered shares of common stock or cash, at the option 
of the Company. One stock warrant was issued for each dollar of debt, 
resulting in the issuance of 2 million stock warrants. Each warrant is 
exercisable into one share of common stock beginning on December 1, 1998, at 
an exercise price of $0.25 per share. The exercise price increases to $0.50 
per share after August 1, 1999 and $1.00 per share after October 1, 2000. The 
warrants expire on November 1, 2001. The stock warrants and underlying shares 
of common stock carry no registration rights.


                                       6

<PAGE>

     The Company determined the fair value of the warrants to be 
approximately $462 thousand and has reflected this value as a discount on the 
debt. The debt discount is being amortized to interest expense over the life 
of the related debt. Long-term debt to stockholders consists of the following 
at December 31, 1998:
<TABLE>
<CAPTION>
       -------------------------------------------------------------------------
       <S>                                                       <C>
       Notes payable to stockholders, interest of 10% per annum
                 Payable quarterly in cash or common stock,
                 Unsecured, due November 1, 2000                  $    2,000,000
                 Less - unamortized discount                            (431,125)
       --------------------------------------------------------------------------
       Long-term debt to stockholders, net of discount            $    1,568,875
       --------------------------------------------------------------------------
       --------------------------------------------------------------------------
</TABLE>
     In connection with the placement and issuance of this debt, the Company 
incurred costs of $21 thousand and issued 100,000 stock warrants to the 
Company's chairman of the board and 25,000 stock warrants to its external 
counsel. Each warrant is exercisable for one share of common stock at $0.01 
per share beginning on December 1, 1998, and the warrants expire on November 
1, 2001. The stock warrants and underlying shares of common stock carry no 
registration rights. The Company valued the warrants at $0.60 per share, or 
$75 thousand. The total debt issuance costs of $96 thousand have been 
reflected in other noncurrent assets in the accompanying unaudited 
consolidated balance sheet and are being amortized over the life of the 
related debt.

NOTE 4:  PREFERRED STOCK

         Pursuant to a Convertible Stock Purchase Agreement dated June 30, 
1998 (the "Stock Purchase Agreement"), the Company issued 400 shares of its 5 
percent Series A Convertible Preferred Stock, par value $1.00 per share 
("Series A Stock"), for $4 million.

         The Series A Stock is convertible into the Company's common stock at 
the option of the holder beginning 90 days after the June 30, 1998 closing 
date. During the next 150 days, the holder agreed to convert no more than 15 
percent per month of the Series A Stock if certain quarterly revenue targets 
were met by the Company through December 31, 1998. Such targets were met.  
The Company also agreed to register the underlying common stock by October 
15, 1998. The conversion price is the lesser of the fixed conversion price of 
$2.31 per share or a variable conversion price based on 80 percent of the 
average of the three lowest prices of the common stock in the 30 consecutive 
days preceding each conversion. On the closing date, the variable conversion 
price was lower than the fixed conversion price, resulting in an immediate 
benefit to the preferred stockholders of approximately $1.4 million. The $1.4 
million value of this beneficial conversion feature was reflected in 
additional paid-in capital and is being charged to the accumulated deficit 
through the earliest date of conversion. At December 31, 1998, $215 thousand 
of the value of the beneficial conversion feature remains to be amortized.

     The Series A Stock carries mandatory redemption rights that can be 
exercised by the holder if certain triggering events occur. These redemption 
rights could require the Company to redeem the Series A Stock for cash based 
on a formula provided in the Stock Purchase Agreement. The Company cannot 
estimate if or when the triggering events might occur nor the redemption 
price. Therefore, the mandatory redemption feature has not been valued. 
Should a triggering event occur, the Company will record a charge to the 
accumulated deficit equal to the difference between the redemption price and 
the carrying value of the Series A Stock.

         Dividends are payable quarterly in registered shares of common 
stock, but must be paid in cash upon the occurrence of certain events.

     Attached to the Series A Stock were warrants to purchase 199,999 shares 
of common stock at $3.00 per share. The warrants currently are exercisable 
and have a term of four years. The Company valued the warrants at 
approximately $284 thousand and reflected this amount in additional paid-in 
capital.

         During the three months ended December 31, 1998, the holder of the 
preferred stock converted 55 shares of Series A Stock into 473,965 common 
shares.

                                        7
<PAGE>

         At December 31, 1998, the carrying value of the Series A Stock 
consists of the following:
<TABLE>
<CAPTION>
            -----------------------------------------------------------------
            <S>                                               <C>
            Balance, September 30, 1998                       $     2,390,475
            Conversion of 55 shares of preferred stock
                        to 473,965 shares of common stock            (447,696)
            Amortization of beneficial conversion feature             650,298
            -----------------------------------------------------------------
                               Balance, December 31, 1998     $     2,593,077
            -----------------------------------------------------------------
            -----------------------------------------------------------------
</TABLE>
NOTE 5:  LOSS PER SHARE

     Loss per share has been calculated in accordance with Statement of 
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Basic 
loss per share is computed by dividing the net loss applicable to common 
stock by the weighted average number of common shares outstanding during the 
period. Diluted loss per share is computed by dividing net loss applicable to 
common stock by the weighted average number of common and common equivalent 
shares (if dilutive). Diluted loss per share is the same as basic loss per 
share since the effect of common equivalent shares and assumed conversion of 
the convertible preferred stock is antidilutive. Following is a 
reconciliation of the basic and diluted loss per share computations:
<TABLE>
<CAPTION>
                                                        For the Three Months Ended
                                                               December 31,
                                                        1998                 1997
    ---------------------------------------------------------------------------------
    <S>                                             <C>                <C>
    Net loss                                        $    (941,670)     $   (1,659,188) 
    Less
            Preferred stock dividends                     (48,920)                  -
            Amortization of the value of the
               beneficial conversion feature
               on the preferred stock                    (650,298)                  -
-------------------------------------------------------------------------------------
         Net loss applicable to common stock
               (basic and diluted)                  $  (1,640,888)     $   (1,659,188)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
         Weighted average common shares used
              in computing basic and diluted
              Loss applicable to common stock
              per share                                21,049,454          20,397,486
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
         Loss applicable to common stock per
              Share (basic and diluted)             $       (0.08)     $        (0.08)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
NOTE 6:  COMPREHENSIVE INCOME

     Effective October 1, 1998, the Company adopted SFAS No. 130, "Reporting 
Comprehensive Income." This standard establishes rules for the reporting of 
comprehensive income and its components. Comprehensive income consists of net 
income and foreign currency translation adjustments, as follows:
<TABLE>
<CAPTION>
                                                               For the Three Months Ended
                                                                      December 31,
                                                              1998                   1997
           ----------------------------------------------------------------------------------
           <S>                                          <C>                   <C>
           Net loss, as reported                        $       (941,670)     $    (1,659,188)
           Foreign currency translation adjustment                36,623                    -
           ----------------------------------------------------------------------------------
           Comprehensive loss                           $       (905,047)     $    (1,659,188)
           ----------------------------------------------------------------------------------
           ----------------------------------------------------------------------------------
</TABLE>
                                         8
<PAGE>

     The adoption of this standard had no net effect on the Company's net 
loss or stockholders' equity for the three months ended December 31, 1998 and 
1997. Prior year financial statements have been reclassified to conform to 
the requirements of this standard.

NOTE 7:  SEGMENT REPORTING

         In June 1997, the Financial Accounting Standards Board issued SFAS 
No. 131, "Disclosure about Segments of an Enterprise and Related 
Information," which the Company adopted in the first quarter of fiscal 1999. 
This standard establishes requirements for reporting information about 
operating segments in annual financial statements and requires selected 
information about operating segments in interim financial reports issued to 
stockholders. It also establishes standards for related disclosures about 
products and services, geographic areas and major customers. Under this 
standard, operating segments are to be determined consistent with the way 
management organizes and evaluates financial information internally for 
making operating decisions and assessing performance. The disclosure 
provisions of this standard are not applicable for interim period in the year 
of adoption. The adoption of this new standard is not expected to have a 
material impact on the Company's financial position or results of operations.

NOTE 8:  SUBSEQUENT EVENT

         In January 1999, the holder of the Series A Stock converted 90 
shares of the Series A Stock into 693,744 common shares.

         In January 1999, 300,000 warrants relating to the long-term debt 
issuance referred to in Note 3 were exercised for 300,000 Common Shares.


                                        9

<PAGE>

         THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS CERTAIN FORWARD-LOOKING 
STATEMENTS AND INFORMATION RELATING TO TANISYS AND ITS SUBSIDIARIES THAT ARE 
BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS MADE 
BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED 
IN THIS REPORT, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT," AND 
"INTEND" AND WORDS OR PHRASES OF SIMILAR IMPORT, AS THEY RELATE TO THE 
COMPANY OR ITS MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING 
STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT RISKS, UNCERTAINTIES AND 
ASSUMPTIONS RELATED TO CERTAIN FACTORS INCLUDING, WITHOUT LIMITATIONS, 
COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, CUSTOMER CONCENTRATIONS, 
CUSTOMER RELATIONSHIPS AND FINANCIAL CONDITIONS, RELATIONSHIPS WITH VENDORS, 
THE INTEREST RATE ENVIRONMENT, GOVERNMENTAL REGULATION AND SUPERVISION, 
SEASONALITY, DISTRIBUTION NETWORKS, PRODUCT INTRODUCTIONS AND ACCEPTANCE, 
TECHNOLOGICAL CHANGE, CHANGES IN INDUSTRY PRACTICES, ONE-TIME EVENTS AND 
OTHER FACTORS DESCRIBED HEREIN. BASED UPON CHANGING CONDITIONS, SHOULD ANY ONE 
OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING 
ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE 
DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR INTENDED. 
THE COMPANY DOES NOT INTEND TO UPDATE THESE FORWARD-LOOKING STATEMENTS.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

OVERVIEW

     The following is a discussion of the interim consolidated financial 
condition and results of operations of the Company for the three-month 
periods ended December 31, 1998 and 1997. It should be read in conjunction 
with the Consolidated Financial Statements, the Notes thereto and other 
financial information included elsewhere in this report, and in the Company's 
Annual Report Form 10-K for the year ended September 30, 1998 as filed with 
the Securities and Exchange Commission on December 29, 1998. For purposes of 
the following discussion, references to year periods refer to the Company's 
fiscal year ended September 30, 1998 and references to quarterly periods 
refer to the Company's fiscal quarters ended December 31, 1998 and 1997.

         On November 2, 1998 the Company issued $2 million in debt with 
attached stock warrants to certain stockholders of the Company. The debt is 
due in two years and carries an interest rate of 10 percent per annum, due 
quarterly, and payable in either unregistered shares of common stock or cash, 
at the option of the Company.

RESULTS OF OPERATIONS

         The following table sets forth certain consolidated operations data 
of the Company expressed as a percentage of net sales (unaudited) for the 
periods ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED
                                               DECEMBER 31,
                                           1998              1997
                                      --------------    -------------
<S>                                   <C>               <C>
         Net sales                        100.0%           100.0%
         Cost of goods sold                84.7%            77.7%
                                      --------------    -------------
         Gross profit                      15.3%            22.3%
                                      --------------    -------------
         Operating expenses:
            Research and development        4.1%             8.4%
            Sales and marketing             5.4%             6.9%
            General and administrative      9.2%            10.5%
            Depreciation and amortization   1.8%            11.0%
            Bad debt expense                0.0%             1.1%
                                      --------------    -------------
         Total operating expenses          20.5%            38.0%
                                      --------------    -------------
                                      --------------    -------------
         Operating loss                    (5.2)%          (15.7)%
                                      --------------    -------------
         Other (expense), net              (2.1)%           (1.4)%
                                      --------------    -------------
         Net loss                          (7.3)%          (17.1)%
                                      --------------    -------------
                                      --------------    -------------
</TABLE>
                                       10
<PAGE>

NET SALES

     Net sales consist of build-to-order ("BTO") services, turnkey and 
off-the-shelf semiconductor memory modules, memory test solutions and 
licensing of its proprietary Tanisys Touch technology, less returns and 
discounts. Net sales increased 33.5% to $12.9 million in the first quarter of 
fiscal 1999 from $9.7 million in the first quarter of fiscal 1998. The 
increase in the first quarter of fiscal 1999 is due primarily to sales 
increases in the Company's Comprehensive Logistics and Supply Services 
("CLASS") from new customers and its off-the-shelf and turnkey memory products, 
also primarily from new customers.

COST OF SALES AND GROSS PROFIT

         Cost of sales includes the costs of all components and materials 
purchased for the manufacture of products and the direct labor and overhead 
costs associated with manufacturing. Gross profit declined to $2.0 million in 
the first quarter of fiscal 1999 from $2.2 million in first quarter of fiscal 
1998. Expressed as a percent of sales, gross margin declined to 15.3% from 
22.2% in the first quarters of fiscal 1999 and 1998, respectively. The 
decrease in gross profits was due to the increased manufacturing costs 
included in "cost of sales" and lower margins on turnkey and off-the-shelf 
memory components in the first quarter of fiscal 1999 versus the first 
quarter of fiscal 1998. Cost of sales reflects a 137% increase in component 
placements in the first quarter of 1999 compared to the same period in fiscal 
1998. Component placement costs are the main drivers of manufacturing expenses 
and are expected to increase in absolute dollars in the future due to increasing
sales volumes. Per placement costs are expected to decline with increasing sales
volume as fixed manufacturing expenses are spread over greater unit volumes.

RESEARCH AND DEVELOPMENT

     Research and development expenses consist of the costs associated with 
the design and testing of new technologies and products. These relate 
primarily to the costs of materials, personnel and employee compensation and 
engineering design consulting fees. Research and development expenses 
decreased to $534 thousand from $811 thousand in the first fiscal quarters of 
1999 and 1998, respectively. The first quarter of fiscal 1998 reflected 
unusually high expenditures relating to the DarkHorse Sigma-3 memory tester 
and the development of a new family of memory modules. Expenses relating to 
research and development are expected to increase slightly in absolute 
dollars but decrease as a percentage of revenue.

SALES AND MARKETING

         Sales and marketing expenses include all compensation of employees 
and independent sales and marketing personnel, as well as the costs of 
advertising, promotions, trade shows, travel, direct support and overhead. 
Sales and marketing expenses increased $22 thousand to $694 thousand in the 
first quarter of fiscal 1999 from $672 thousand in the first quarter of 
fiscal 1998. The 3.2% increase in sales and marketing expenses versus the 
33.5% increase in net sales for the same period reflects the change in 
customer base between the periods. Sales and marketing expenses will increase 
in future periods as expected increases in sales revenues materialize but are 
expected to decrease slightly when expressed as a percent of revenues.

GENERAL AND ADMINISTRATIVE

         General and administrative costs consist primarily of personnel costs 
and support costs, including compensation, employee benefits, utilities, 
insurance, professional fees and all costs associated with a reporting company.
General and administrative expenses increased to $1.2 million in the first 
quarter of fiscal 1999 from $1.0 million in the first quarter of fiscal 1998. 
The increase was primarily due to the addition of the Scotland facility. 
General and administrative expenses are expected to remain relatively constant 
during fiscal 1999 and decrease when expressed as a percent of sales.

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization includes the depreciation for all fixed 
assets exclusive of those used in the manufacturing process and included as 
part of "cost of sales" and the amortization of intangibles, including 
goodwill incurred in the May 1996 acquisitions of 1st Tech Corporation ("1st 
Tech") and DarkHorse Systems, Inc. ("DarkHorse"). Depreciation and 
amortization decreased to $235 thousand in first quarter fiscal 1999 from 
$1.1 million in first quarter fiscal 1998. The decrease is due primarily to 
the complete amortization in
                                    11
<PAGE>

April 1998 of goodwill relating to the acquisitions of 1st Tech and DarkHorse. 
Depreciation expenses are expected to decrease as a percentage of revenue and 
increase in terms of absolute dollars with additional facility expansions and 
equipment purchases used in manufacturing and research and development.

OTHER INCOME (EXPENSE), NET

         Other income (expense), net, consists primarily of interest income 
less interest expense. Interest expense is attributable to borrowings from a 
revolving credit note, capital leases and notes payable. A major portion of 
the interest expense relates to credit line draws made for short-term 
inventory requirements and to fund accounts receivable. Interest income 
relates to investment of available cash in short-term interest bearing 
accounts and cash equivalent securities. Other income (expense) increased to 
$276 thousand in the first quarter of fiscal 1999 from $136 thousand in the 
first quarter of fiscal 1998. The increase is due primarily to interest 
expense relating to capital leases and long-term notes payable. The Company 
expects to continue to require borrowings to fund growth in accounts 
receivable and inventory in the future. The Company anticipates adding 
manufacturing capacity financed with additional capital leases and long-term 
notes, which will increase interest costs in future periods.

PROVISION FOR INCOME TAXES

     For the years ended September 30, 1998 and 1997, the Company incurred 
consolidated net operating losses for U.S. income tax purposes of approximately
$5.3 million and $6.0 million and for non-U.S. income tax purposes of 
approximately $369 thousand and $-0-, respectively. The loss carryforwards 
begin to expire in 2011. At September 30, 1998 and 1997, the Company had 
temporary differences resulting in future tax deductions of approximately $756 
thousand and $513 thousand, respectively, principally representing tax basis 
in accrued liabilities and reserves. Deferred income tax assets from the loss 
carryforwards and asset basis differences aggregate approximately $6.9 million 
and $4.6 million at September 30, 1998 and 1997, respectively.

         For financial reporting purposes, a valuation allowance of $6.9 
million and $4.7 million at September 30, 1998 and 1997, respectively, has 
been recorded to offset the deferred tax assets due to uncertainty as to 
whether the benefits will be realized.

     The availability of the net operating loss carryforwards and future tax 
deductions to reduce taxable income is subject to various limitations under 
the Internal Revenue Code of 1986, as amended (the "Code"), in the event of 
an ownership change as defined in Section 382 of the Code. The Company may 
lose the benefit of such net operating loss carryforwards due to Internal 
Revenue Service ("IRS") Code Section 382 limitations. This section states 
that after reorganization or other change in corporate ownership, the use of 
certain carryforwards may be limited or prohibited. The Company believes that 
the IRS Code Section 382 limitation did not exist at September 30, 1998 and 
if triggered, the consequence is expected to have no material impact on the 
Company's consolidated financial position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception, Tanisys has utilized the funds acquired in equity 
financings of its common stock and preferred stock, the exercise of stock 
warrants and stock options, capital leases, operating leases, vendor credits, 
certain bank borrowings and funds generated from operations to support its 
operations, carry on research and development activities, acquire capital 
equipment, finance inventories and accounts receivable balances and pay its 
general and administrative expenses.

     During the first quarter of fiscal 1999, the Company generated $5.1 
million in net cash from financing activities. The $5.1 million in fiscal 
1999 consisted primarily of $2.0 million from issuance of debt to 
stockholders and $3.0 million from net draws on the Company's credit line. 
The Company used $4.2 million of cash in operating activities in the first 
quarter of fiscal 1999, of which $3.2 million was used to increase accounts 
receivable and $800 thousand was used to increase inventories. The increase 
in accounts receivable and inventory resulted from a 41% increase in sales 
during the same period. While management does not believe that the same 
inventory growth will occur in similar high growth quarters, sales increases, 
changes in customer mix, new customers, new products and product mix require 
working capital. Management anticipates inventory levels to drop during the 
second quarter and then grow as anticipated sales increase.

                                        12
<PAGE>

     The Company had $896 thousand in cash and a working capital deficit of 
$751 thousand at December 31, 1998. The Company anticipates that working 
capital will increase as manufacturing equipment is financed and reclassified 
as a long-term liability. Currently, the obligations are classified under 
"Accrued Liabilities" on the December 31, 1998 balance sheet. The anticipated 
increase in working capital will be $1.8 million, less the current portion. 
The Company also anticipates securing additional working capital from either 
debt or equity financing.

         Capital expenditures totaled approximately $333 thousand for the first 
quarter of fiscal 1999. The Company is planning to lease or finance through debt
approximately $11.3 million of capital equipment during the remaining fiscal 
year in anticipation of customer demand. The actual commitment and purchase of 
the equipment will be dependent upon achieving certain sales levels.

         The Company believes that its existing funds, anticipated cash flows 
from operations and amounts available from future vendor credits, bank 
borrowings, operating and capital lease financing, long-term borrowings, the 
exercise of outstanding warrants and stock options and equity financings will 
be sufficient to meet its working capital and capital expenditure needs for 
the next 12 months.

         There is no assurance that the Company will be able to locate an 
alternate source or sources for the required increase in its outstanding debt 
or that it will be successful in its attempts to raise a sufficient amount of 
funds in a subsequent equity offering or offerings. In such event, the 
Company's inability to raise needed funds could have a material adverse 
effect on the Company.

SIGNIFICANT CUSTOMER CONCENTRATION

         A significant percentage of the Company's net sales are produced by 
a relatively small number of customers. In the first quarter of fiscal 1999, 
the ten largest customers accounted for approximately 91.6% of net sales 
compared to approximately 68% in same period in fiscal 1998. Three customers 
represented 29.1%, 14.8% and 12.6%, respectively, in the first quarter of fiscal
1999. The customer representing 14.8% of sales in the first quarter of fiscal 
1999 represented 29.5% of the Company's sales in the first quarter of fiscal 
1998. While the Company expects to continue to be dependent on a relatively 
small number of customers for a significant percentage of its net sales, there 
can be no assurance that any of the top ten customers in the first quarter of 
fiscal 1999 will continue to utilize the Company's products or services.

         One of the Company's largest customers has announced it will be 
purchased by a competing company and the operations of the two companies 
combined. While a relationship exists with the purchasing Company, Tanisys 
does not presently have a contractual relationship with the purchasing 
company. Management of the Company expects to benefit from the increased 
sales volumes resulting from the combined companies.

         The Company in general has no firm long-term volume commitments from 
its customers and generally enters into individual purchase orders with its 
customers. Customer purchase orders are subject to change, cancellation or 
delay with little or no consequence to the customer. The Company has 
experienced such changes and cancellations and expects to continue to do so 
in the future. The replacement of canceled, delayed or reduced purchase 
orders with new business cannot be assured. The Company's business, financial 
condition and results of operations will depend significantly on its ability 
to obtain purchase orders from existing and new customers, upon the financial 
condition and success of its customers, the success of customer's products 
and the general economy. Factors affecting the industries of the Company's 
major customers could have a material adverse effect on the Company's 
business, financial condition and results of operations.

YEAR 2000 COMPLIANCE

     The Year 2000 problem concerns the inability of certain computer systems to
appropriately recognize the year 2000 when the last two digits of the year are 
entered in the date field. The Company has assessed its Year 2000 requirements 
and believes that its major computer systems and programs are Year 2000 
compliant and that the remaining systems are either already Year 2000 compliant
or will become Year 2000 compliant as the Company continues to replace obsolete
or non-functional systems as part of its normal asset replacement cycle. 
Therefore, the Company believes that its costs to become Year 2000 compliant 
have been immaterial and will continue to be immaterial in the future.

                                          13


<PAGE>

     The Company, however, could be adversely affected by the Year 2000 
problem if computer systems of third parties such as banks, suppliers and 
others with which the Company does business fail to address the Year 2000 
problem successfully. While the Company continues to gather data on the Year 
2000 compliance status of its customers and suppliers, there can be no 
assurance that the Year 2000 problem, if experienced by such third parties, 
will not have a material adverse effect upon the Company's business, 
operating results and financial condition.

     Many companies may need to modify or upgrade their information systems 
to address the Year 2000 problem. The effects of this issue and of the 
efforts by other companies to address it are unclear. The Company believes 
that Year 2000 issues might affect the purchasing patterns of customers and 
prospective customers. Many companies are expending significant resources to 
correct their current software systems for Year 2000 compliance. These 
expenditures might result in reduced funds available to purchase services and 
products such as those offered by the Company.

         The above Year 2000 disclosure constitutes a "Year 2000 Readiness 
Disclosure" as defined in The Year 2000 Information and Readiness Disclosure 
Act (the "Act"), which was signed into law on October 19, 1998. The Act 
provides added protection from liability for certain public and private 
statements concerning a company's Year 2000 readiness.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company does not believe that there is any material risk 
exposure with respect to derivative or other financial instruments which 
would require disclosure under this item.
                                       
                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         At the date hereof, there are no pending, or to the best knowledge 
of the Company, threatened matters involving litigation involving the Company.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

(a)      Not applicable.

(b)      Not applicable.

(c)      In November 1998, the Company issued $2 million in debt with attached
         stock warrants (the "Warrants") to certain stockholders of the Company
         (the "Noteholders"). The promissory notes evidencing the debt have a
         two-year term and bear interest at 10% per annum, with interest due
         quarterly and payable in either unregistered shares of common stock or
         cash, at the option of the Company. One stock warrant was issued for
         each dollar of debt, resulting in the issuance of 2 million stock
         warrants. Each warrant is exercisable into one share of common stock
         beginning December 1, 1998, at an exercise price of $0.25 per share,
         increasing to $0.50 per share after August 1, 1999 and to $1.00 per
         share from October 1, 2000 through the expiration date of November 1,
         2001. 850,000 shares of common stock were issued upon exercise of the
         Warrants by the Noteholders as of December 31, 1998. The shares of
         common stock issuable in payment of dividends and underlying the
         warrants were not registered under the Securities Act of 1933, as
         amended (the "Securities Act"), pursuant to the exemptions of such
         registration provided under Regulation D ("Regulation D") of the rules
         and regulations promulgated under the Securities Act by the Securities
         and Exchange Commission and Section 4(2) of the Securities Act. The
         Company relied upon certain representations and warranties of the
         Noteholders, including, among other things, as to their status as
         "accredited investors" (as that term is defined in Rule 501(a) of
         Regulation D) and their ability to evaluate the merits and risks
         involved and that the Common Stock was acquired solely for their own
         account for investment and not with a view to distribution.

         Pursuant to a Convertible Stock Purchase Agreement dated June 30, 1998
         (the "Stock Purchase Agreement") among the Company, and KA Investments
         LDC, the Company issued 400 shares of its Five Percent Series A
         Convertible Preferred Stock, par value $1.00 per share and stated value
         of 
                                       


                                       14
<PAGE>

         $10,000 per share (the "Series A Stock"), for consideration of 
         $4 million. The Series A Stock is convertible into the Company's common
         stock at the option of the holder beginning 90 days after the June 30,
         1998 closing date. The conversion price is the lesser of the fixed
         conversion price of $2.31 per share or a variable conversion price
         based on 80 percent of the average of the three lowest prices of the
         common stock in the 30 consecutive days preceding each conversion. On
         the closing date, the variable conversion price was lower than the
         fixed conversion price, resulting in an immediate benefit to the
         preferred stockholder of approximately $1.4 million. The Series A Stock
         carries mandatory redemption rights that can be exercised by the holder
         if certain triggering events occur, which could require the Company to
         redeem the Series A Stock for cash based on a formula provided in the
         Stock Purchase Agreement. Dividends are payable quarterly in registered
         shares of common stock but must be paid in cash upon the occurrence of
         certain events. Attached to the Series A Stock were four-year warrants
         to purchase 199,999 shares of common stock at $3.00 per share. During
         the three months ended December 31, 1998, the holder of the preferred
         stock converted 55 shares of Series A Stock into 473,965 shares of
         common stock.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS:

         The exhibits listed below are filed as part of or incorporated by
reference in this report. Where such filing is made by incorporation by
reference to a previously filed document, such document is identified in
parentheses.

<TABLE>
<CAPTION>
    EXHIBIT
     NUMBER                             DESCRIPTION
    -------                             -----------
<S>            <C>
      3.1      Articles of Incorporation of Tanisys Technology, Inc., as 
               amended (Exhibit 3.1 to Form S-3 Registration Statement filed 
               August 13, 1998)

      3.2      Restated Bylaws of the Company (Exhibit 3.5 to Form 10 
               Registration Statement filed November 27, 1996)

     10.1      Form of Promissory Note issued by Tanisys Technology, Inc. 
               in connection with $2 million debt closed November 2, 1998 
               (filed herewith)

     10.2      Form of Warrant Agreement entered into between Tanisys 
               Technology, Inc. and subscribers to the $2 million debt 
               offering closed November 2, 1998, and form of attached 
               Stock Purchase Warrant issued thereunder (filed herewith)

     27.1      Financial Data Schedule (filed herewith)

(b) CURRENT REPORTS ON 8-K:

    None.
</TABLE>


                                      15

<PAGE>
                                       
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, 
as amended, the Registrant has duly caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized.

                                       TANISYS TECHNOLOGY, INC.

Date: February 15, 1999                By: /s/ JOE O. DAVIS           
                                          ----------------------------
                                           Joe O. Davis
                                           SENIOR VICE PRESIDENT,
                                           CHIEF FINANCIAL OFFICER AND 
                                           CORPORATE SECRETARY
                                           (Duly authorized and Principal 
                                           Financial Officer)

Date: February 15, 1999                By: /s/ DONALD R. TURNER              
                                          ----------------------------
                                           Donald R. Turner
                                           CORPORATE CONTROLLER
                                           (Duly authorized and Principal 
                                           Accounting Officer)



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