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, 1997
[ ] 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
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(Address of principal executive office)
(801) 268-3480
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(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_ __ No X
(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
September 30, 1997 1
Condensed consolidated statements of operations for
the three months ended September 30, 1997 and 1996 3
Condensed consolidated statements of cash flows
for the three months ended September 30, 1997 and 1996 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 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Seurity Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30,
1997
-----------
Current Assets
Cash $ 52,710
Accounts receivable, net of allowance for
doubtful accounts of $7,500 27,239
-----------
Total Current Assets 79,949
-----------
Furniture, Fixtures and Equipment 119,302
Less: Accumulated depreciation and amortization (105,947)
-----------
13,355
-----------
Other Assets, net 1,425
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$ 94,729
===========
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' (DEFICIT) EQUITY
September 30,
-------------
Current Liabilities
Note payable $ 46,840
Current portion of related party long-term debt 10,889
Accounts payable 106,564
Accrued salaries and benefits 79,906
Amounts due to related parties 159,810
Deferred revenue 154,912
Accrued interest 7,210
-----------
Total Current Liabilities 566,131
-----------
Shareholders' Equity
Common stock, $.001 par value;
100,000,000 shares authorized;
13,018,505 shares issued 13,019
Additional paid-in capital 4,611,517
Warrants outstanding 29,721
Accumulated deficit (5,125,659)
-----------
Total Shareholders' Equity (471,402)
-----------
$ 94,729
===========
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
September 30,
-----------------------
1997 1996
---------- ----------
Revenues $ 168,178 $ 246,522
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Costs and Expenses
Cost of revenues 72,156 146,464
Selling, general and administrative 72,838 144,542
Software development 41,415 94,380
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186,409 385,386
---------- ----------
Loss from Operations (18,231) (138,864)
Other Income (Expense)
Interest expense (1,012) (1,176)
Interest income 122 695
---------- ----------
Other Expense, net (890) (481)
Net Loss $ (19,121) $ (139,345)
========== ==========
Net Loss Per Common Share $ (0.00) $ (0.01)
========== ==========
Weighted Average Common
Shares Outstanding 13,018,505 11,445,800
========== ==========
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
September 30,
-----------------------
1997 1996
---------- ----------
Cash Flows from Operating Activities
Net loss $ (19,121) $ (139,345)
Adjustments to reconcile net
loss to net cash (used in) provided
by operating activities:
Accrued interest 750 -
Depreciation and amortization 2,714 22,910
(Increase) decrease in assets, net
of effect of acquisitions:
Accounts receivable, net 22,755 29,118
Inventories - (342)
Contracts receivable - 6,747
Increase (decrease) in liabilities, net of
effect of acquisitions:
Accounts payable (21,249) (38,465)
Accrued salaries and benefits (1,977) (30,449)
Amounts due related parties - 8,004
Deferred Revenue 23,500 10,433
---------- ----------
Net Cash (Used in) Provided by
Operating Activities 7,372 (131,389)
---------- ----------
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.
-4-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Three Months Ended
September 30,
-----------------------
1997 1996
---------- ----------
Cash Flows from Financing Activities
Conversion of warrants, net $ - $ 81,054
Payments on notes (3,000) (41,589)
Proceeds from issuance of
long term debt 21,000 -
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Net Cash Provided by Financing Activities 18,000 39,465
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Net Increase (Decrease) in Cash 25,372 (91,924)
Cash, at beginning of period 27,338 209,589
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Cash, at end of period $ 52,710 $ 117,665
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 262 $ 1,176
========== ==========
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
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, 1997 and the results of its operations and its cash flows
for the three months ended September 30, 1997 and 1996 respectively. The
results of operations for the three month period ended September 30, 1996
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 months ended September 30, 1997 is
based on the weighted average number of common shares outstanding during
the period. 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.
-6-
<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 for the fiscal year ended June
30, 1997.
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.
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, 1996, 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.
The net result of the resignations above is to decrease in administrative
costs as well as to decrease the consulting revenues of the Company
as the efforts of those involved with consulting have been more focused on
EDNet 32. The Company is concerned about the reduced level of consulting
revenues and is considering marketing alternatives.
As of September 30, 1997, the Company had sold or leased its RCMS product
to five 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.
As of September 30, 1997, the Company had installed its EDNet product at 26
emergency department sites. These 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 September 30, 1997, the Company was in the process of installing
EDNet at one additional site.
-7-
<PAGE>
Results of Operations
---------------------
For the three months ended September 30, 1997 compared with the three
months ended September 30, 1996.
During the three month period ended September 30, 1997, the Company had
revenues of $168,178 which represented a 32 percent decrease from $246,522
for the corresponding period of the prior fiscal year. The sales consisted
of emergency $67,659 (40%), respiratory, $77,390 (46%), and consulting $
23,129 (14%) compared with $134,328 (54%), $72,452 (30%) and $39,742 (16%),
respectively, for the corresponding period of the prior fiscal year.
Cost of revenues decreased 51% to $72,156 for the three month period ended
September 30, 1997 from $146,464 for the corresponding period of the prior
year. This is a result of the decreased cost of revenues for consulting
and the respiratory product.
Selling, general, and administrative costs decreased 50% to $72,838 for the
three month period ended September 30, 1997 from $144,542 for the
corresponding period of the previous fiscal year. This decrease in costs
primarily reflects the Company's decreased marketing costs associated with
the marketing of the emergency system and consulting services.
Software development costs decreased 56% to $41,415 for the three month
period ended September 30, 1997 from $94,380 for the corresponding period
of the prior fiscal year. This is the result of the use of outside
contractors for the development of the emergency room product.
The Company incurred an operating loss of $19,121 for the three month
period ended September 30, 1997 compared with an operating loss of $139,345
for the corresponding period of the previous year.
Interest expense decreased to $1,012 for the three month period ended
September 30, 1997 from $1,176 for the corresponding period of the prior
year as a result of a debt conversion.
The Company incurred a net loss of $19,121 ($.00) per share for the three
month period ended September 30, 1997 compared with a net loss of $139,345
($.01) per share for the corresponding period of the prior year.
-8-
<PAGE>
Liquidity and Capital Resources
-------------------------------
The Company has suffered recurring losses from operations since fiscal year
1989, and as of September 30, 1997 had an accumulated deficit of
$5,125,659. 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.
Effective September 5, 1995, the Company acquired certain assets of HCG.
The assets acquired include certain accounts receivable, equipment,
software products and other intangible assets. In exchange for the assets
acquired, the Company agreed to issue 50,000 shares of common stock and
assume $30,000 of debt.
On September 29, 1995, the Company and NMC approved the terms of an
Agreement and Plan of Reorganization (the "Agreement") pursuant to which
NMC was merged with and into Tenet Merger Subsidiary, Inc., a wholly owned
subsidiary of the Company incorporated for the purpose of effecting the
merger. NMC develops and markets an integrated information
management/patient tracking system designed specifically for use in
emergency departments.
The Company's cash position increased by $25,372 during the three month
period ended September 30, 1997 to $52,710 as compared to $27,338 as of
June 30, 1997. However, the Company had a working capital deficit of
$486,182 as of September 30, 1997 as compared with a deficit of $469,775 as
of June 30, 1997. Operating activities provided $7,372 for the three month
period ended September 30, 1997 as compared with using $131,389 for the
corresponding period of the previous year. The principal sources of cash
have been (i) proceeds from a loan of $21,000 and (ii) proceeds from the
conversion of warrants of $81,054. The Company did not capitalize software
development costs during the three-month period ended September 30, 1997.
There were debt payments of $3,000 during the three-month period ended
September 30, 1997 as compared with payments of $41,589 for the
corresponding period of the previous year.
While a significant portion of the current liabilities, $159,810 is owed to
present officers and/or directors, there can be no assurances that these
officers/directors will not seek payment in the near term.
Management believes that cash flows from existing contract arrangements
will be sufficient to allow the Company to operate through the next twelve
month period. However, in order to significantly expand its sales, the
Company will require additional cash infusions through additional private
placements or borrowing arrangements.
Inflation has not had a significant impact on the Company's operations.
-9-
<PAGE>
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
<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 September 30, 1997, and statements of operations for the three
months ended September 30, 1997, 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-30-1997
<CASH> 52,710
<SECURITIES> 0
<RECEIVABLES> 34,739
<ALLOWANCES> 7,500
<INVENTORY> 0
<CURRENT-ASSETS> 78,949
<PP&E> 119,302
<DEPRECIATION> (105,947)
<TOTAL-ASSETS> 94,729
<CURRENT-LIABILITIES> 566,131
<BONDS> 0
0
0
<COMMON> 13,019
<OTHER-SE> 1,641,238
<TOTAL-LIABILITY-AND-EQUITY> 94,729
<SALES> 168,178
<TOTAL-REVENUES> 168,178
<CGS> 72,156
<TOTAL-COSTS> 72,156
<OTHER-EXPENSES> 114,253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,012
<INCOME-PRETAX> (19,121)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,121)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,121)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
