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Previous: INNOVO GROUP INC, DEF 14A, 1999-03-17 |
Next: WARBURG PINCUS INTERNATIONAL EQUITY FUND /PA/, 497, 1999-03-17 |
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 September
30, 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 February 26, 1999
TENET INFORMATION SERVICES, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet
as of September 30, 1998 1
Condensed consolidated statements of
operations for the three months ended
September 30, 1998 and 1997 3
Condensed consolidated statements of
cash flows for the three months ended
September 30, 1998 and 1997 4
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Litigation 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, 1998
------------------
Current Assets
Cash $ 69,492
Accounts receivable, net of allowance for
doubtful accounts of $7,500 52,328
Costs and estimated earnings in excess
of billings on uncompleted contracts 31,067
---------
Total current assets 152,887
---------
Furniture, Fixtures And Equipment 127,297
Less accumulated depreciation and
amortization (115,371)
---------
11,926
---------
Other Assets, net 1,425
---------
$ 166,238
=========
The accompanying notes are an integral part of these statements.
-1-
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
September 30, 1998
------------------
Current Liabilities
Note Payable $ 36,410
Accounts payable 87,531
Accrued liabilities 42,525
Amounts due to related parties 42,440
Deferred revenue 152,951
Billings in excess of costs and estimated
earnings on uncompleted contracts 19,750
-----------
Total current liabilities 381,607
-----------
Shareholders' Deficit
Common stock, $.001 par value;
100,000,000 shares authorized;
18,833,717 shares issued 18,834
Additional paid-in capital 4,834,421
Warrants outstanding 7,987
Accumulated deficit (5,076,611)
-----------
Total shareholders' deficit (215,369)
-----------
$ 166,238
===========
The accompanying notes are an integral part of these statements.
-2-
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
1998 1997
---------- ----------
Revenues $ 241,923 $ 168,178
Costs And Expenses
Cost of revenues 73,400 72,156
Selling, general and administrative 68,282 72,838
Software development 27,843 41,415
---------- ----------
169,525 186,409
---------- ----------
Inome (Loss) From Operations 72,398 (18,231)
---------- ----------
Other Income (Expense)
Interest expense (2,053) (1,012)
Interest income 138 122
---------- ----------
(1,915) (890)
---------- ----------
Net Income (Loss) $ 70,483 $ (19,121)
========== ==========
Basic Earnings/(Loss) Per Share $ 0.00 $ (0.00)
========== ==========
Diluted Earning/(Loss) per Share $ 0.00 $ 0.00
========== ==========
The accompanying notes are an integral part of these statements.
-3-
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
1998 1997
----------- ----------
Cash Flows from Operating Activities
Income (loss) $ 70,483 $ (19,121)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 1,279 2,714
(Increase) decrease in assets, net
of effect of acquisitions:
Accounts receivable, net 19,853 22,755
Costs and estimated earnings in
excess of billings on uncompleted
contracts (31,067) -
Increase (decrease) in liabilities,
net of effect of acquisitions:
Accounts payable (15,720) (21,249)
Accrued liabilities 1,218 (1,227)
Deferred Revenue (10,246) 23,500
Billings in excess of costs and
estimated earnings on uncompleted
contracts 19,750 -
----------- ----------
Net cash provided by operating
activities 55,550 7,372
----------- ----------
Cash Flows from Investing Activities
Cash acquired in acquisition - -
Additions to deferred software costs - -
Acquisition of furniture, fixtures and
equipment (7,995) -
----------- ----------
Net cash used in investing
activities (7,995) -
----------- ----------
The accompanying notes are an integral part of these statements.
-4-
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATEAD STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
1998 1997
---------- ----------
Cash Flows from Financing Activities
Payments on notes $ - $ (3,000)
Proceeds from issuance of
long term debt - 21,000
---------- ----------
Net cash provided by financing
activities - 18,000
---------- ----------
Net Increase (Decrease) in Cash 47,555 25,372
Cash, at beginning of period 21,937 27,338
---------- ----------
Cash, at end of period $ 69,492 $ 52,710
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period
for interest $ - $ 262
========== ==========
The accompanying notes are an integral part of these statements.
-5-
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Presentation of Interim Financial
Statements
The accompanying condensed 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 September 30, 1998
and the results of its operations and its
cash flows for the three months ended
September 30, 1998 and 1997 respectively.
The results of operations for the three
month period ended September 30, 1998 is
not necessarily indicative of the results
that may be expected for the remainder of
the fiscal year ending June 30, 1999.
(2) Basic and Diluted Earnings (Loss)
Per Common Share
The following data shows the amounts used
in computing earnings per share as of
September 30, 1998 and the effect on
income and the weighted average number of
shares of dilutive potential common stock:
Income available to common shareholders
used in basic earnings per share $ 70,483
-----------
Income available to common shareholders
after assumed conversions of dilutive securities $ 70,483
===========
Weighted average number of common shares used
in basic earnings per share 18,833,717
Effect of dilutive securities:
Stock options 50,000
Stock warrants 698,075
-----------
Weighted average number of common shares and
dilutive potential common shares used in
dilutive earnings per share $19,571,792
===========
Options on 924,286 shares of common stock and warrants on 3,266,507
of common stock were not included in computing diluted loss per share
because their effects were antidilutive.
(3) Revenue recognition on long term
software contracts
Revenues from long term software
installations are recognized on the
percentage of completion method, measured
by the percentage of costs incurred to
date to total estimated costs for each
contract.
Contract costs include all direct
material, labor and subcontract costs and
those indirect costs relating to contract
performance. General and administrative
costs are charged to expense as incurred.
Provisions for estimated losses on
uncompleted contracts are recognized in
the period in which such losses are
determined. Changes in job performance,
job conditions, and estimated
profitability, including those arising
from contract penalty provisions, and
final contract settlements may result in
revisions to revenues and costs and are
recognized in the period in which the
revisions are determined. An amount equal
to contract costs attributable to claims
is included in revenues when realization
is probable and the amount can be reliably
estimated.
The asset, "Costs and estimated earnings
in excess of billings on uncompleted
contracts," represents revenues recognized
in excess of amounts billed. The
liability, "Billings in excess of costs
and estimated earnings on uncompleted
contracts," represents billings in excess
of revenue recognized. Contract retentions
are included in accounts receivable.
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 for
the fiscal year ended June 30, 1998.
The Company 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
primary line.
As of September 30, 1998, the Company had
installed its EDNet product at 26
emergency department and urgent care
center sites. Two sites have been
upgraded to the EDNet32 Windows version.
In addition, the Company has received
deposits for upgrades to the Windows
version from three current clients. All
sites have annual maintenance contracts
for continued support and updates. It is
anticipated that most, if not all of these
sites, will renew this maintenance on an
annual basis.
As of September 30, 1998, the Company had
sold or leased its RCMS product to four
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.
Results of Operations
For the three months ended September 30,
1998 compared with the three months ended
September 30, 1997.
During the three month period ended
September 30, 1998, the Company had
revenues of $241,923 which represented a
44 percent increase from $168,178 for the
corresponding period of the prior fiscal
year. The sales consisted of emergency
$149,291 (62%), respiratory, $30,939
(13%), and consulting $ 61,693 (25%)
compared with $67,659 (40%), $77,390 (46%)
and $23,129 (14%), respectively, for the
corresponding period of the prior fiscal
year.
Cost of revenues increased 2% to $73,400
for the three month period ended September
30, 1998 from $72,156 for the
corresponding period of the prior year.
Selling, general, and administrative costs
decreased 6% to $68,282 for the three
month period ended September 30, 1998 from
$72,838 for the corresponding period of
the previous fiscal year. This decrease
in costs reflects the Company's decreased
marketing costs associated with the
marketing of the emergency system and
consulting services.
Software development costs decreased 33%
to $27,843 for the three month period
ended September 30, 1998 from $41,415 for
the comparable prior fiscal period. With
the primary development of the EDNet 32
Windows product completed, development
activities are now focused on
enhancements, which require fewer
resources. Development activities are now
focused on enhancements to the Windows
version.
The Company incurred an operating profit
of $72,398 for the three month period
ended September 30, 1998 compared with an
operating loss of $18,231 for the
corresponding period of the previous year.
This improvement was due to increased
emergency department sales of the now
completed Windows version, EDNet32.
Interest expense increased to $2,053 for
the three month period ended September 30,
1998 from $1,012 for the corresponding
period of the prior year.
The Company had net income of $70,483 or
$.00 per share for the three month period
ended September 30, 1998 compared with a
net loss of $19,121 or $.00 per share for
the corresponding period of the prior year.
Liquidity and Capital Resources
The Company's primary needs for capital
are to fund an increased sales effort and
stay current on its internal hardware
needs. For the three months ended
September 30, 1998, net cash provided by
operating activities was $55,550 as
compared to $7,372 for the three months
ended September 30, 1997, an increase of
$48,178. The Company has sufficient
capital for its current operations.
However, in order to significantly expand
sales, the Company will require additional
cash from borrowing or a private
placement. At September 30, 1998, the
Company had total assets of $166,238 and
shareholders' deficit of ($215,369)
compared to total assets of $100,753 and
shareholders' deficit of ($285,852) at
June 30, 1998, the Company's last fiscal
year end. The 65% increase in assets is
primarily the result of increased cash and
accounts receivable. The 25% improvement
in shareholders deficit is primarily the
result of operations. The Company did not
capitalize software development costs
during the three months ended September
30, 1998.
At September 30, 1998 the Company's
working capital deficit was ($228,720) as
compared to ($292,487) at June 30, 1998,
an improvement of 22%.
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 Vote of
Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K N/A
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: March 1, 1999 TENET INFORMATION
SERVICES, INC.
/s/ Jerald L. Nelson
----------------------------------
Chairman of the Board of Directors
Jerald L. Nelson
Chairman of the Board of Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1998, AND STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 69,492
<SECURITIES> 0
<RECEIVABLES> 59,738
<ALLOWANCES> (7,500)
<INVENTORY> 0
<CURRENT-ASSETS> 152,887
<PP&E> 127,297
<DEPRECIATION> (115,371)
<TOTAL-ASSETS> 166,238
<CURRENT-LIABILITIES> 381,607
<BONDS> 0
0
0
<COMMON> 18,834
<OTHER-SE> (234,203)
<TOTAL-LIABILITY-AND-EQUITY> 166,238
<SALES> 241,923
<TOTAL-REVENUES> 241,923
<CGS> 73,400
<TOTAL-COSTS> 73,400
<OTHER-EXPENSES> 96,125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,053
<INCOME-PRETAX> 70,483
<INCOME-TAX> 0
<INCOME-CONTINUING> 70,483
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,483
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
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