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, 2002
[ ] 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.
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(Exact name of small business issuer as specified in its charter)
UTAH 87-0405405
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
No.)
53 West 9000 South
Sandy, Utah 84070
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(Address of principal executive office)
(801) 568-0899
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(Issuer's telephone number)
No Change
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(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 19,336,205 shares of common stock outstanding at November 4,
2002
Tenet Information Services, Inc.
TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet as of September 30, 2002 1
Condensed consolidated statements of operations for the three
months ended September 30, 2002 and 2001 3
Condensed consolidated statements of cash flows for the three
months ended September 30, 2002 and 2001 4
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Controls and Procedures 9
PART II OTHER INFORMATION
Item 1. Litigation 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
CERTIFICATION 11
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, 2002
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CURRENT ASSETS:
Cash $ 25,252
Accounts receivable, net of allowance for
doubtful accounts of $7,500 104,503
Prepaid expenses 2,400
Work performed in excess of billings 49,450
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Total current assets 181,605
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FURNITURE, FIXTURES AND EQUIPMENT 131,824
Less accumulated depreciation and
amortization (115,315)
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16,509
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OTHER ASSETS, NET 3,675
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TOTAL ASSETS $ 201,789
==========
See the accompanying notes to the condensed consolidated financial statements.
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TENET INFORMATION SERVICES, INC. AND SUSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
September 30, 2002
------------------
CURRENT LIABILITIES:
Accounts payable $ 103,438
Accrued expenses 75,978
Accrued interest 7,931
Amounts due to related parties 47,133
Deferred revenue 160,435
Billings in excess of costs 54,072
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Total current liabilities 448,987
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SHAREHOLDERS' DEFICIT:
Common stock, $.001 par value;
100,000,000 shares authorized;
19,336,205 shares issued 19,336
Additional paid-in capital 4,853,896
Accumulated deficit (5,120,430)
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Total shareholders' deficit (247,198)
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TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT $ 201,789
==========
See the accompanying notes to the condensed consolidated financial statements.
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TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
September 30,
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2002 2001
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REVENUES
SW licenses & support $ 112,274 $ 119,995
Consulting services 33,182 36,268
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TOTAL REVENUES $ 145,456 $ 156,263
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COSTS AND EXPENSES:
Cost of revenues 94,544 74,908
Selling, general and administrative 53,303 45,002
Software development 25,131 24,146
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172,978 144,056
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INCOME (LOSS) FROM OPERATIONS (27,522) 12,207
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OTHER INCOME EXPENSE:
Interest expense (3,857) (6,310)
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Total Other Expense (3,857) (6,310)
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NET INCOME (LOSS) $ (31,379) $ 5,897
========== ==========
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE $ (0.00) $ 0.00
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES USED IN PER SHARE
CALCULATION 19,935,205 19,065,092
========== ==========
See the accompanying notes to the condensed consolidated financial statements.
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TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
September 30,
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (31,379) $ 5,897
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation 2,428 2,301
Changes in assets and liabilities:
Accounts receivable, net (9,073) (159,591)
Prepaid expenses 1,900 -
Work performed in excess
of billing (28,819) (9,930)
Accounts payable (14,539) (6,055)
Accrued expenses 3,726 2,161
Deferred revenue 6,836 63,687
Billings in excess of cost 15,587 98,801
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Net cash used in
operating activities (53,333) (2,729)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of furniture, fixtures and
equipment - (2,347)
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Net cash used by investing
activities - (2,347)
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See the accompanying notes to the condensed consolidated financial statements.
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TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATEAD STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Three Months Ended
September 30,
2002 2001
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NET INCREASE (DECREASE) IN CASH (53,333) (5,076)
CASH, at beginning of period 78,585 37,022
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CASH, at end of period $ 25,252 $ 31,946
========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the period
for interest $ 2,950 $ 5,781
======== ==========
See the accompanying notes to condensed consolidated financial statements.
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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 accounting principles generally accepted in the United States of America
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 filed on September 30, 2002.
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, 2002 and the
results of its operations and its cash flows for the three months ended
September 30, 2002 and 2001, respectively. The results of operations for the
three-month period ended September 30, 2002 are not necessarily indicative of
the results that may be expected for the remainder of the fiscal year ending
June 30, 2003.
(2) Basic and Diluted Earnings per Common Share
Basic earnings per common share are computed by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share reflects the potential dilution
which could occur if all contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock. A
total of 605,000 potentially issuable common shares were excluded from the
calculation of diluted loss per common share at September 30, 2002 and 2001
because the effects would be antidilutive.
(3) Revenue Recognition
The Company recognizes revenue in accordance with the provisions of Statement of
Position No. 91-1 Software Revenue Recognition as follows:
Revenues related to the EDNet System consist of sales of software licenses,
installation of information systems and related software customization and
enhancements. In addition, revenues are generated from annual software support
and maintenance. Installation revenues are recognized on the percentage of
completion method measured by completion and acceptance of contracted
milestones. The asset "work performed in excess of billings" represent costs
incurred and revenues earned in excess of billings on uncompleted contracts. The
liability "billings in excess of work performed" represents billings in excess
of costs incurred and revenue recognized.
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Revenues from annual software and maintenance are recognized ratably over the
term of each contract. Amounts billed in advance of revenue recognition for
software and maintenance are recorded as deferred revenue.
Revenues from consulting services are recognized when the services have been
provided.
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, 2002.
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 group, which conducts efficiency studies in various hospital
situations, as well as customizes software solutions to specific hospital
requirements.
As of September 30, 2002, the Company had installed its EDNet product to 24
emergency department and urgent care sites. All sites have annual maintenance
contracts for continued support and updates. As of September 30, 2002 the
Company was in the process of installing EDNet32 upgrades at 5 DOS client sites.
The Consulting division provides consulting support to major hospitals
throughout the country. These services consist primarily of cost benefit
evaluations, patient classification for nursing, and productivity management for
all other departments. Consulting services are charged on a negotiated fee
basis. As of September 30, 2002 the Company was providing consulting services
to two hospitals.
Results of Operations
For the three months ended September 30, 2002 compared with the three months
ended September 30, 2001.
During the three month period ended September 30, 2002, the Company had revenues
of $145,456, which represented a 7% decrease from $156,263 for the corresponding
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period of the prior fiscal year. The sales consisted of EDNet license and
support $112,274 (77%), and consulting $33,182 (23%), compared with $119,995
(77%), and $36,268 (23%), respectively, for the corresponding period of the
prior fiscal year.
Cost of revenues increased 26% to $94,544 for the three month period ended
September 30, 2002 from $74,908 for the corresponding period of the prior year.
This increase was directly related to putting more company resources into
customer support activities.
Selling, general, and administrative expense increased 18% to $53,303 for the
three-month period ended September 30, 2002 from $45,002 for the corresponding
period of the previous fiscal year. This increase is primarily due to more
management resources being devoted to the sales process for the EDNet product
line.
Software development costs increased 4% to $25,131 for the three-month period
ended September 30, 2002 from $24,146 for the corresponding period of the prior
fiscal year. Development activities are now focused on enhancements to the
EDNet software.
The Company had an operating loss of $27,522 for the three-month period ended
September 30, 2002 compared with a profit of $12,207 for the corresponding
period of the previous year. The lower operating profit reflects the Company's
lower revenues as well as higher costs incurred in expanding the sales effort
and strengthening the customer support function.
Interest expense decreased to $3,857 for the three-month period ended September
30, 2002 from $6,310 for the corresponding period of the prior year. This
decline resulted from a reduction in debt levels from the prior year.
The Company had a net loss of $31,379 or $(0.00) per share for the three month
period ended September 30, 2002 compared with a net income of $5,897 or $0.00
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 to stay current on its continuing product development. For the three months
ended September 30, 2002, net cash used in operating activities was $53,333 as
compared to net cash used in operations of $2,729 for corresponding period of
the prior year. 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, 2002,
the company had total assets of $201,789 and shareholders deficit of $247,198
-8-
compared to total assets of $221,558 and shareholders deficit of $215,819 at
June 30, 2002, the Company's last fiscal year end. The 9% decrease in assets is
primarily the result of a decrease in cash and the increase in work performed in
excess of billings. The change in shareholders' deficit is primarily the result
of the operating loss for the quarter. The Company did not capitalize any
software development costs during the three months ended September 30, 2002.
At September 30, 2002 the Company had a working capital deficit of $267,382 as
compared to a working capital deficit of $298,341 at September 30, 2001, an
improvement of 10%.
Inflation has not had a significant impact on the Company's operations.
ITEM 3: CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The Company
maintains controls and procedures designed to ensure that information required
to be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. Based upon their evaluation of those controls and
procedures performed within 90 days of the filing date of this report, the chief
executive officer and the principal financial officer of the Company concluded
that the Company's disclosure controls and procedures were adequate.
(b) Changes in internal controls. The Company made no significant changes in
its internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.
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
-9-
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: November 11, 2002 TENET INFORMATION
SERVICES, INC.
/s/Jerald L. Nelson
Chairman of the Board of Directors
Jerald L. Nelson
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Attachment A
Form of Certification for Form 10-QSB
CERTIFICATIONS*
I, Frank C. Overfelt, certify that:
1. I have reviewed this quarterly report on Form 10-QSB Tenet
Information Services, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact necessary to make the statements
made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
base on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 11, 2002
/s/__Frank C. Overfelt_________________
Frank C. Overfelt
Director, President
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I, Jerald L. Nelson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB Tenet
Information Services, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact necessary to make the statements
made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
base on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 11, 2002
/s/ Jerald L. Nelson_______________________
Jerald L. Nelson
Corporate Treasurer,
Chairman of the Board
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