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 DECEMBER 31, 1999
[ ] 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 19,065,862 shares of common stock
outstanding at December 31, 1999
<PAGE>
Tenet Information Services, Inc.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet as of
December 31, 1999. . . . . . . . . . . . . . . . . . . 1
Condensed consolidated statements of operations for
the three months and six months ended December 31,
1999 and 1998. . . . . . . . . . . . . . . . . . . . . 3
Condensed consolidated statements of cash flows for
the six months ended December 31, 1999 and 1998. . . . 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
December 31, 1999
-----------------
CURRENT ASSETS:
Cash $ 8,236
Accounts receivable, net of allowance for
doubtful accounts of $7,500 197,224
-----------
TOTAL CURRENT ASSETS 205,460
-----------
FURNITURE, FIXTURES AND EQUIPMENT 149,137
Less accumulated depreciation and amortization (126,647)
-----------
22,490
-----------
OTHER ASSETS, net 1,425
-----------
$ 229,375
===========
The accompanying notes are an integral part of
this balance sheet.
-1-
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 1999
-----------------
CURRENT LIABILITIES:
Current maturities of notes payable $ 12,887
Accounts payable 125,641
Accrued expenses 76,955
Accrued interest 2,115
Deferred revenue 92,107
Billings in excess of costs and estimated
Earnings on uncompleted contracts 67,572
-----------
Total current liabilities 377,277
-----------
Long Term Liabilities
Notes Payable 25,000
Notes Payable to related party 26,436
-----------
Total Long Term Liabilities 51,436
-----------
Total Liabilities 428,713
-----------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value;
100,000,000 shares authorized;
19,065,892 shares outstanding 19,066
Additional paid-in capital 4,843,476
Warrants outstanding 7,987
Accumulated deficit (5,069,867)
-----------
Total shareholders' equity (199,338)
-----------
$ 229,375
===========
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 Six Months Ended
December 31,
1999 1998
----------- -----------
REVENUES $ 249,121 $ 224,727
COSTS AND EXPENSES:
Cost of revenues 96,120 77,211
Selling, general and administrative 83,382 80,048
Software development 59,928 55,463
----------- -----------
239,430 212,722
----------- -----------
GAIN (LOSS) FROM OPERATIONS 9,691 12,005
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,787) (2,107)
Interest income 44 563
----------- -----------
Other expense, net (1,743) (1,544)
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM 7,948 10,461
EXTRAORDINARY ITEM NET OF TAX EFFECT OF $0
Gain on forgiveness of debt - 16,903
NET INCOME $ 7,948 $ 27,364
----------- -----------
NET LOSS PER COMMON SHARE $ .00 $ .00
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 19,065,862 19,571,792
=========== ===========
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 Six Months Ended
December 31,
1999 1998
----------- -----------
REVENUES $ 451,412 $ 466,650
----------- -----------
COSTS AND EXPENSES:
Cost of revenues 174,171 150,611
Selling, general and administrative 154,285 148,330
Software development 110,887 83,306
----------- -----------
439,343 382,247
----------- -----------
GAIN (LOSS) FROM OPERATIONS 12,069 84,403
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (3,661) (4,160)
Interest income 114 701
----------- -----------
Other expense, net (3,547) (3,459)
----------- -----------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM 8,522 80,944
EXTRAORDINARY ITEM NET OF TAX EFFECT OF $0
Gain on Forgiveness of debt - 16,903
NET INCOME (LOSS) $ 8,522 $ 97,847
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ .00 $ .00
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 19,065,862 19,571,792
=========== ===========
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 Three Months Ended
December 31,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 8,522 $ 97,847
Adjustments to reconcile net
loss to net cash (used in) provided
by operating activities:
Depreciation and amortization 4,466 2,432
Gain on forgiveness of debt - (16,903)
(Increase) decrease in assets, net
of effect of acquisitions:
Accounts receivable, net (58,034) (47,826)
Increase in accrued interest 1,058 4,161
(Decrease) in accounts payable 28,211 (35,201)
(Decrease) in accrued salaries
and benefits 13,182 (439)
Billings in excess of costs and
estimated earnings on uncompleted
contracts 889 59,105
Current maturities of notes payable (5,993) -
(Decrease) in deferred revenues (11,556) (50,124)
----------- -----------
Net cash provided by (used in)
operating activities (19,255) 13,052
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of furniture, fixtures and
equipment (4,548) (7,995)
----------- -----------
Net cash used in investing
activities (4,548) (7,995)
----------- -----------
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 Three Months Ended
December 31,
1999 1998
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long
Term Debt $ - $ -
Principal payments on long-term debt - (3,250)
---------- -----------
Net cash provided by (Used in)
financing activities - (3,250)
----------- -----------
NET INCREASE (DECREASE) IN CASH (23,803) (1,807)
CASH, at beginning of period 32,039 21,937
----------- -----------
CASH, at end of period $ 8,236 $ 23,744
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,265 $ -
=========== ===========
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
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 December 31, 1999 and the
results of its operations and its cash flows for
the three and six months ended December 31, 1999
and 1998 respectively. The results of operations
for the three-month and six-month periods ended
December 31, 1999 are not necessarily indicative
of the results that may be expected for the
remainder of the fiscal year ending June 30, 2000.
(2) Basic and Diluted Earnings (Loss) per Common
Share
The following data shows the amounts used in
computing earnings per share for the three and
six months ended December 31, 1999 and the effect
on income and the weighted average number of
shares of dilutive potential common stock:
For the Three For the Six
Months Ended Months Ended
December 31, December 31,
1999 1999
----------- -----------
Income available to common shareholders
used in basic earnings per share $ 7,948 $ 8,522
---------- ----------
Income available to common shareholders after
assumed conversions of dilutive securities $ 7,948 $ 8,522
========== ==========
Weighted average number of common shares
used in basic earnings per share 19,065,862 19,065,862
Effect of dilutive securities:
Stock Options 50,000 50,000
Stock Warrants 688,075 688,075
----------- ----------
Weighted average number of common shares
and dilutive potential common shares
used in dilutive earnings per share 19,803,937 19,803,937
=========== ==========
(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,
1999.
The Company is engaged in developing and servicing data processing
information products used in hospitals. The Company's main product is an
emergency department computer system known as EDNet. In addition, the
Company also has a consulting practice which specializes in methods and
systems improvements, productivity measurement, cost identification and
organizational analysis for all inpatient and outpatient hospital
departments, as well as customized software solutions for specific hospital
departmental requirements.
As of December 31, 1999, the Company has installed its EDNet product in 24
clients, 13 of which have been upgraded to the EDNet32 Windows version. In
addition, the Company is in the process of upgrading 6 additional current
clients and has received a purchase order from a new client. Three current
clients are also adding additional site licenses at satellite facilities,
bringing the total number of sites using the EDNet product to 29. 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.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THE THREE MONTHS
ENDED DECEMBER 31, 1998.
During the three-month period ended December 31, 1999, the Company had
revenues of $249,121 which represented a 11 percent increase from $224,727
for the corresponding period of the prior fiscal year. The 1999 sales
consisted of
3-month % of 3-month % of Change % Change
ended sales ended sales in sales of sales
12/31/99 12/31/98
Emergency $161,063 65% $148,698 66% $ 12,365 8%
Respiratory $ 11,522 5% $ 30,940 14% $(19,418) (63%)
Consulting $ 76,536 31% $ 45,089 20% $ 31,447 70%
-------- ---- -------- ---- -------- ----
$249,121 100% $224,727 100% $ 24,394 15%
======== ==== ======== ==== ======== ====
This sales increase resulted primarily from the Company's success in
upgrading existing clients to the EDNet32 windows product. Increased
emergency and consulting revenues more than offset a continuing decline in
respiratory revenues.
Cost of revenues increased 24% to $96,120 for the three-month period ended
December 31, 1999 from $77,211 for the corresponding period of the prior
fiscal year. This is a result of the shift in revenues toward consulting
sales, software installations which tend to be more resource intensive than
maintenance revenue.
Selling, general, and administrative expenses increased 4% to $83,382 for
the three-month period ended December 31, 1999 from $80,048 for the
corresponding period of the previous fiscal year. This reflects the
increased sales effort to market the newly updated EDNet32 windows
emergency department software. The Company continues to tightly control
administrative costs.
Software development costs increased 8% to $59,928 for the three-month
period ended December 31, 1999 from $55,463 for the corresponding period of
the prior fiscal year. Development activities are now focused on
enhancements to the EDNet32 product.
The Company had operating net income of $9,691 for the three-month period
ended December 31, 1999 compared with an operating net income of $12,005
for the corresponding period of the previous year. Increased revenues were
offset by increased sales and development expenses which resulted in lower
operating profit.
Interest expense declined to $1,787 for the three-month period ended
December 31, 1999 compared to $2,107 during the prior fiscal year.
The Company's net per common share of $7,985 or $0.00 per share for the
three month period ended December 31, 1999 compared with net income of
$10,461 or $0.00 for the corresponding period of the previous fiscal year.
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THE SIX MONTHS
ENDED DECEMBER 31, 1998.
During the six month period ended December 31, 1999, the Company had
revenues of $451,412, which represented a 3% decline from $466,650 for the
corresponding period of the prior fiscal year. The 1999 sales consisted of:
6-month 6-month
ended % of ended % of Change
12/31/99 sales 12/31/98 sales in sales % Change
---------- ----- -------- ----- -------- --------
Emergency $ 332,873 74% $ 297,989 64% $ 34,884 12%
Respiratory $ 27,053 6% $ 61,879 13% ($ 34,286) (56%)
Consulting $ 91,486 20% $ 106,782 23% ($ 15,836) (15%)
--------- ---- --------- ---- --------- -----
$ 451,412 100% $ 466,650 100% ($ 15,238) (3%)
========= ==== ========= ==== ========= =====
This decrease in sales was due to the continuing decline in respiratory
maintenance revenue which was not offset by the increase in Emergency
Department revenue. Consulting revenue also declined due to the timing of
completion of existing projects.
Cost of revenues increased 26% to $189,171 for the six-month period ended
December 31, 1999 from $150,611 for the corresponding period of the prior
fiscal year. This increase is due to the shift of sales into upgrades for
emergency departments and increased consulting revenues, which tend to be
more labor intensive.
Selling, general, and administrative expenses increased 4% to $154,285 for
the six-month period ended December 31, 1999 from $148,330 for the
corresponding period of the previous fiscal year. This reflects increased
sales activity relating to marketing the EDNet32 Windows product.
Software development expenses increased 15% to $ 95,887 for the six-month
period ended December 31, 1999 from $83,306 for the corresponding period of
the prior fiscal year. Development efforts are now focused on product
enhancements to meet customer requirements..
The Company had operating income of $12,069 for the six-month period ended
December 31, 1999 compared with an operating gain of $84,403 for the
corresponding period of the previous year. Lower overall sales totals an
higher expense levels contributed to the decline in operating earnings.
Interest expense decreased to $3,661 for the six-month period ended
December 31, 1999 from $4,160 for the corresponding period of the prior year.
The Company's net income per share increased to $0.00 as compared with
$0.00 for the corresponding period of the previous year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for capital are to fund an increased sales
effort and to keep the software products current in the marketplace. For
the six months ended December 31, 1999 net cash used in operating
activities was $19,255 as compared to those same activities providing
$13,052 in the six months ended December 31, 1998, an decrease of $32,307.
The Company has sufficient capital for its current operations. However, in
order to significantly expand sales, the Company will require additional
cash from an external source. At December 31, 1999 the Company had total
assets of $229,375 and shareholders equity of ($199,338) compared to total
assets of $195,062 and shareholders equity of ($207,860) at June 30, 1999,
the Company's last fiscal year end. The 18% increase in assets is primarily
the result of higher accounts receivable. The 4% improvement in
shareholders equity is primarily the result of operations. The Company did
not capitalize any software development costs during the six months ended
December 31, 1999 nor did it capitalize any such costs during the prior year.
The Company's cash position decreased by $23,803 during the six month
period ended December 31, 1999 to $8,236 down from $32,039 as of June 30,
1999. The Company's working capital was ($171,817) at December 31, 1999 as
compared to ($180,257) at June 30, 1999, an improvement of 5%.
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: February 11, 2000 TENET INFORMATION
SERVICES, INC.
/s/ Jerald L. Nelson
---------------------
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 December 31, 1999, and statements of operations for the six months
ended December 31, 1999, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,236
<SECURITIES> 0
<RECEIVABLES> 197,224
<ALLOWANCES> 7,500
<INVENTORY> 0
<CURRENT-ASSETS> 205,460
<PP&E> 149,137
<DEPRECIATION> 126,647
<TOTAL-ASSETS> 229,375
<CURRENT-LIABILITIES> 377,277
<BONDS> 51,436
0
0
<COMMON> 19,066
<OTHER-SE> (218,404)
<TOTAL-LIABILITY-AND-EQUITY> 229,375
<SALES> 451,412
<TOTAL-REVENUES> 451,412
<CGS> 174,171
<TOTAL-COSTS> 174,171
<OTHER-EXPENSES> 265,172
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,547
<INCOME-PRETAX> 8,522
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,522
<EPS-BASIC> 0
<EPS-DILUTED> 0.00
</TABLE>
