UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ x ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File No.
0-18113
TENET INFORMATION SERVICES, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
UTAH 87-0405405
---- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4885 South 900 East #107
Salt Lake City, Utah 84117
---------------------------
(Address of principal executive office)
(801) 268-3480
--------------
(Issuer's telephone number)
No Change
---------
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the Issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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.
(1) Yes_X__ No
(2) Yes X No___
The Company had 18,833,717 shares of common stock
outstanding at November 15, 1998
<PAGE>
Tenet Information Services, Inc.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet as of March 31, 1998 1
Condensed consolidated statements of operations for the
three months and nine months ended March 31, 1998 and 1997 3
Condensed consolidated statements of cash flows for the
nine months ended March 31, 1998 and 1997 5
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Litigation 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
March 31, 1998
--------------
CURRENT ASSETS:
Cash $ 19,268
Accounts receivable, net of allowance for
doubtful accounts of $7,500 85,782
----------
Total current assets 105,050
----------
FURNITURE, FIXTURES AND EQUIPMENT 119,302
Less accumulated depreciation and
amortization (111,377)
----------
7,925
----------
OTHER ASSETS, net 1,425
----------
$ 114,400
==========
The accompanying notes are an integral part of this balance sheet.
-1-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 1998
--------------
CURRENT LIABILITIES:
Note Payable $ 38,422
Accounts payable 152,720
Accrued salaries and benefits 56,074
Amounts due to related parties 41,305
Deferred revenue 161,759
----------
Total current liabilities 450,280
----------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value;
100,000,000 shares authorized;
18,665,222 shares outstanding 18,829
Additional paid-in capital 4,829,383
Warrants outstanding 7,987
Accumulated deficit (5,192,079)
----------
Total shareholders' equity (335,880)
----------
$ 114,400
==========
The accompanying notes are an integral part of this balance sheet.
-2-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
March 31,
-----------------------
1998 1997
---------- ----------
REVENUES $ 153,89 $ 152,864
---------- ----------
COSTS AND EXPENSES:
Cost of revenues 68,908 111,835
Selling, general and administrative 65,429 92,925
Software development 56,247 41,395
---------- ----------
190,584 246,155
---------- ----------
LOSS FROM OPERATIONS (36,692) (93,291)
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (17,641) (1,376)
Interest income 154 1
---------- ----------
Other expense, net (17,487) (1,375)
---------- ----------
Extraordinary Item - Net of 0 Tax Effect
Gain on extinguishment of debt 9,933 -
NET LOSS $ (44,246) $ (94,666)
========== ==========
NET LOSS PER COMMON SHARE $ (.00) $ (.01)
========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,729,253 13,018,505
========== ==========
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
March 31,
-----------------------
1998 1997
---------- ----------
REVENUES $ 493,025 $ 546,942
---------- ----------
COSTS AND EXPENSES:
Cost of revenues 207,804 409,417
Selling, general and administrative 197,571 342,453
Software development 163,916 185,491
---------- ----------
569,291 937,361
---------- ----------
LOSS FROM OPERATIONS (76,266) (390,419)
---------- ----------
OTHER INCOME (EXPENSE):
Write-off of excess purchase price - -
Interest expense (19,649) (3,678)
Interest income 441 1,039
---------- ----------
Other expense, net (19,208) (2,639)
---------- ----------
Net Loss Before Extraordinary Item (95,474) (393,058)
---------- ----------
Extraordinary Item - Net of 0 Tax Expense
Gain on extinguishment of debt 9,933 -
NET LOSS $ (85,541) $ (393,058)
========== ==========
NET LOSS PER COMMON SHARE $ (.00) $ (.03)
========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,251,962 12,471,391
========== ==========
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
March 31,
-----------------------
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (85,545) $ (393,058)
Adjustments to reconcile net
loss to net cash (used in) provided
by operating activities:
Depreciation and amortization 8,144 142,530
Stock issued for services & expenses 32,528 -
Gain on extinguishment of debt (9,933) -
(Increase) decrease in assets, net
of effect of acquisitions:
Accounts receivable, net (35,788) (2,083)
Inventories - 3,220
Contracts receivable - 20,829
Increase (decrease) in liabilities,
net of effect of acquisitions:
Accounts payable 24,907 (46,829)
Accrued expenses and interest 12,580 -
Accrued salaries and benefits 546 (49,398)
Amounts due to related parties - 9,106
Deferred revenue 30,347 93,590
---------- ----------
Net cash (used in) provided by
operating activities (22,210) (222,093)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in acquisition - -
Additions to deferred software costs
Acquisition of furniture, fixtures and
equipment - -
---------- ----------
Net cash used in investing activities - -
========== ==========
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATEAD STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Nine Months Ended
March 31,
-----------------------
1998 1997
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long
Term debt $ 29,306 $ -
Conversion of warrants, net - 81,504
Principal payments on long-term debt (27,445) (40,668)
Sale of common stock,
net of offering costs 12,278 -
---------- ----------
Net cash provided by financing
activities 14,140 40,836
---------- ----------
NET INCREASE (DECREASE) IN CASH (8,070) (181,257)
CASH, at beginning of period 27,338 209,589
---------- ----------
CASH, at end of period $ 19,268 $ 28,332
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 488 $ 8,208
========== ==========
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Presentation of Interim Financial Statements
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's most recent
Annual Report on Form 10-K.
In the opinion of management, these financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's consolidated financial position at March 31,
1998 and the results of its operations and its cash flows for three and nine
months ended March 31, 1998 and 1997 respectively. The results of
operations for the three and nine-month periods ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the remainder
of the fiscal year ending June 30, 1998.
(2) Net Loss Per Common Share
Net loss per common share for the three and six months ended March 31, 1998
and 1997 are based on the weighted average number of common shares
outstanding during the periods. Warrants and options outstanding have not
been included in the computations since any assumption of conversion would
have an antidilutive effect thereby decreasing the net loss per common share.
(3) Conversion of Warrants
On August 30, 1996, the board of directors authorized a reduction of the
exercise price of the Company's Class B warrants to $.05 from $.07 per
share, contingent upon conversion by September 30, 1996. A total of
1,621,424 warrants were exercised, leaving 178,575 Class B warrants
outstanding. Proceeds to the Company totaled $81,071, of which $10,643 was
paid through the conversion of existing debt owing to the warrant holder.
On February 20, 1998 the board of directors authorized a reduction of the
exercise price on all outstanding warrants and options to $0.03 per share
contingent upon exercise by March 20, 1998. A total of 1,164,286 options
and 2,578,342 warrants were exercised. As a result, the Company received
cash of $17,321 and extinguished debt of $94,961 held by the option and
warrant holders. In addition, the company converted $62,174 of debt into
2,074,496 shares of common stock.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General
- ----------
This discussion should be read in conjunction with management's discussion
and analysis of financial condition and results of operations included in
the Company's Annual Report on Form 10-K(sb) for the fiscal year ended June
30, 1997.
The Company's is engaged in developing and servicing data processing
information products used in hospitals. The Company's two main products are
an emergency department computer system known as EDNet and a respiratory
care computer system known as RCMS. The Company also has a consulting group
which conducts efficiency studies in various hospital situations, as well as
customizes software solutions to specific hospital requirements.
As a result of the Company's decision to focus its limited time and monetary
resources towards the development of an Emergency Department Windows
product, the EDNet System has become the Company's basic line.
Two members of the Board, Dr. Richard Gwinn and Dr. Robert Smith resigned as
directors of the Company effective November 1, 1996 and December 12, 1996
respectively. Dr. Gwinn resigned as an employee November 1, 1996. However,
both have continued to render services on an hourly basis for continued
support of existing customers, as well as review and critique of the EDNet
32 product.
Effective March 21, 1997, the Vice president of Marketing resigned on a
mutually accepted basis. This resignation and the disagreement with
management over marketing methods has significantly reduced the number of
potential sales leads for the Company.
These cost reductions (resignations above) resulted in lower SG&A expenses
and a decrease in consulting revenues of the Company as the efforts of those
involved with consulting have been more focused on EDNet 32. Also, pending
consulting contracts have not materialized. The Company is concerned about
the reduced level of consulting revenues and is considering marketing
alternatives.
As of March 31, 1998, the Company had sold or leased its RCMS product to
four hospitals and its RCMS/X product to two hospitals at various locations
throughout the United States. Generally, the Company's customers purchase
the computer hardware from the Company, lease the Company's software and
enter into a service contract for the lease period. The Company at this
time is not actively marketing the RCMS/X product, and there is at present
no development program ongoing.
As of March 31, 1997, the Company had installed its EDNet product in 26
emergency department sites. Two sites have upgraded to EDNet 32 Windows
version. All sites have annual maintenance contracts for continued support
and updates. It is anticipated that a vast majority, if not all of these
sites, will renew this maintenance on an annual basis. As of March 31,
1998, the Company was in the process of installing EDNet at one additional
site.
Results of Operations
- --------------------------
For the three months ended March 31, 1998 compared with the three months
ended March 31, 1997.
During the three-month period ended March 31, 1998, the Company had revenues
of $153,892 which represented a 1 percent increase from $152,864 for the
corresponding period of the prior fiscal year. The 1998 sales consisted of
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
3-month 3-month
ended % of ended % of Change in % Change
3/31/98 sales 3/31/97 sales sales of sales
-------- ----- -------- ------ --------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Emergency $ 80,753 52% $ 49,978 33% $ 30,775 62%
Respiratory $ 69,362 45% $ 78,552 51% ($ 9,190) (12%)
Consulting $ 3,777 02% $ 24,333 16% ($ 20,556) (84%)
--------- ---- -------- ---- --------- -----
$ 153,892 100% $152,863 100% ($186,176) 01%
========= ==== ======== ===== ========== ====
</TABLE>
This modest sales increase was due to increased emergency department
revenues which offset declines in respiratory and consulting revenues.
Cost of revenues decreased 38% to $68,908 for the three-month period ended
March 31, 1998 from $111,835 for the corresponding period of the prior
fiscal year. This is consistent with the decline in consulting and
respiratory revenues.
Selling, general, and administrative costs decreased 30% to $65,429 for the
three-month period ended March 31, 1998 from $92,925 for the corresponding
period of the previous fiscal year. This coincides with a reduction of
personnel in the marketing of the Respiratory arena, the combination of the
Chief Operating Officer position with the head of consulting, and reduced
commissions and travel.
Software development costs increased 36% to $56,247 for the three-month
period ended March 31, 1998 from $41,395 for the corresponding period of the
prior fiscal year. This is primarily the result of the continuing
development of the emergency department Windows product, and of the fact
that the Company has elected not to capitalize any of the development costs
for EDNet32.
The Company incurred an loss of $44,246 for the three-month period ended
March 31, 1998 compared with an operating loss of $94,666 for the
corresponding period of the previous year. This is a direct result of lack
of sales and orders for the Company's products.
The Company's loss per share decreased to $(.00) as compared with $(.0l) for
the corresponding period of the previous year.
Interest expense increased to $17,641 for the three-month period ended March
31, 1998 from $1,376 for the corresponding period of the prior year as a
result of converting the related debt to equity.
For the nine months ended March 31, 1998 compared with the nine months ended
March 31, 1997.
During the nine month period ended March 31, 1998 the Company had revenues
of $493,025 which represents a decrease of 10% from the corresponding period
of the prior fiscal year. This decrease in sales was due to the Company's
decision to market the EDNet32 system in lieu of continuing aggressive
marketing of the DOS product, lack of follow-on Respiratory sales and fewer
RCMS customers. Also, the effect of the consulting group working on the
ENDet32 project, as well as delays in anticipated contracts, resulted in
lower consulting revenues.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
9-month 9-month
ended % of ended % of Change in
3/31/97 sales 3/31/96 sales sales % Change
------- ------ ------- ------ --------- --------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Emergency $ 229,007 46% $233,106 46% $( 4,099) (02%)
Respiratory $ 221,773 45% $234,320 40% $(12,543) (05%)
Consulting $ 42,245 09% $ 79,516 14% $(37,274) (47%)
--------- ----- -------- ---- --------- -----
$ 493,025 100% $546,942 100% $(53,917) (10%)
</TABLE>
Cost of revenues decreased 49% to $207,804 for the nine-month period ended
March 31, 1998 from $409,417 for the corresponding period of the prior
fiscal year. The primary reason for the decrease was the Company decision
to write-off its capitalized software over the final 9 months of fiscal
1997. This amounted to an increased charge of $112,300.
Selling, general, and administrative costs decreased 42% to $197,571 for the
nine-month period ended March 31, 1998 from $342,453 for the corresponding
period of the previous fiscal year. This coincides with a reduction of
personnel in the marketing of the Respiratory arena, the combination of the
Chief Operating Officer position with the head of consulting, and reduced
commissions and travel
Software development costs decreased 12% to $163,916 for the nine-month
period ended March 31, 1998 from $185,491 for the corresponding period of
the prior fiscal year. This is primarily the result of the Company's
winding down of the development of the emergency department Windows product,
and of the fact that the Company has elected not to capitalize any of the
development costs for EDNet 32.
The Company incurred an loss of $85,541 for the nine-month period ended
March 31, 1998 compared with an operating loss of $393,058 for the
corresponding period of the previous year. This is a result of the
Company's the write-off of capitalized software and the decision not to
capitalize the development work on the EDNet 32 system.
Interest expense increased to $19,649 for the nine-month period ended March
31, 1998 from $3,678 for the corresponding period of the prior year as a
result of the lack of sufficient working capital to make payments in a
timely manner to suppliers, consultants and employees.
Liquidity and Capital Resources
- -------------------------------
The Company has suffered recurring losses from operations since fiscal year
1989, and as of March 31, 1998 had an accumulated deficit of $5,192,079.
The operating losses are due in part to significant decreases in revenues in
fiscal years 1995, 1994 and 1993 as the Company redeveloped and updated its
respiratory product and also as a result of the Company's expensing $546,884
of excess purchase price related to the recent NMC and HCG acquisitions.
Management believes that those arrangements were fair, and represent a
valuable addition to the Company.
During the fiscal year ended June 30, 1996, the Company signed a letter of
intent to raise an additional minimum of $201,000 in equity funding and is
proceeding with a private placement of its common stock with a minimum of
$201,000 and a maximum of $600,000 to be raised on a best efforts basis.
This offering consists of a minimum of 670,000 units and a maximum of
2,000,000 units priced at $.30 per unit. Each unit consists of (i) one
share of common stock and (ii) a warrant to purchase an additional share at
$.25 per share if exercised within one year of the placement closing and
$.42 afterward until the termination date three years after the placement
closing. This offering closed on June 28, 1996 raising for the Company a
net amount of $185,852.
The Company also accelerated conversion of its Class B warrants by offering
a discount to $.05 from $.07 if exercised prior to September 30, 1996. A
total of 1,621,424 warrants were exercised, creating $70,429 in cash and
$10,643 in debt reduction.
At June 30, 1996, the Company had $40,000 in bridge financing. This was
repaid from the Private Placement Offering.
The Company's cash position decreased by $8,070 during the nine month period
ended March 31, 1998 to $19,268 as compared to $27,338 as of June 30, 1997.
The Company had a working capital deficit of $345,230 as of March 31, 1998
as compared with a deficit of $469,775 as of June 30, 1997. Operating
activities used $22,210 for the nine month period ended March 31, 1998 as
compared with using $222,093 for the corresponding period of the previous
year. The principal sources of cash have been (i) proceeds from conversion
of warrants of $12,278 from March 20, 1998, (ii) proceeds from conversion of
warrants of $81,504 from September 1996, and (iii) the $185,852 net raised
in the above mentioned private placement. The Company has not capitalize
software development costs during the nine month period ended March 31,
1998. There were debt payments of $27,445 during the nine month period
ended March 31, 1998 as compared with $40,668 for the corresponding period
of the previous year.
While a portion of the Company's current liabilities (approximately 11% or
$51,238), is owed to present officers and/or directors. There can be no
assurances that these officers and/or directors will not seek payment in the
near term.
Inflation has not had a significant impact on the Company's operations.
PART II OTHER INFORMATION
Item 1. Litigation N/A
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of
Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 14, 1999 TENET INFORMATION
SERVICES, INC.
/s/ Jerald L. Nelson,
----------------------------------------
Jerald L. Nelson,
Chairman of the Board of Directors
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of March 31, 1998, and statements of operations for the nine months
ended March 31, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 19,268
<SECURITIES> 0
<RECEIVABLES> 93,282
<ALLOWANCES> (7,500)
<INVENTORY> 0
<CURRENT-ASSETS> 105,050
<PP&E> 119,302
<DEPRECIATION> (111,377)
<TOTAL-ASSETS> 114,400
<CURRENT-LIABILITIES> 450,280
<BONDS> 0
0
0
<COMMON> 18,829
<OTHER-SE> 4,837,370
<TOTAL-LIABILITY-AND-EQUITY> 114,400
<SALES> 153,892
<TOTAL-REVENUES> 153,892
<CGS> 68,908
<TOTAL-COSTS> 68,908
<OTHER-EXPENSES> 121,676
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,641
<INCOME-PRETAX> (44,246)
<INCOME-TAX> 0
<INCOME-CONTINUING> (44,246)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,246)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
