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, 2004
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[] 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.
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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.)
3380 North El Paso, Street, Ste. G
Colorado Springs, Colorado 80907
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(Address of principal executive office)
(719) 630-3800
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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
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(2) Yes X No
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As of September 30, 2004, the Company had 6,779,074 shares of common stock
issued and outstanding.
Transitional Small Business Disclosure Format (Check one) Yes No X
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Tenet Information Services, Inc.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet as of September 30, 2004........ F-1
Condensed consolidated statements of operations for the three
months ended September 30, 2004 and 2003............................. F-2
Condensed consolidated statements of cash flows for the three
months ended September 30, 2004 and 2003............................. F-3
Notes to condensed consolidated financial statements................. F-4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 6
Item 3. Controls Procedures................................................ 6
PART II OTHER INFORMATION
Item 1. Litigation......................................................... 6
Item 2. Changes in Securities.............................................. 6
Item 3. Defaults Upon Senior Securities.................................... 6
Item 4. Submission of Matters to a Vote of Security Holders................ 6
Item 5. Other Information.................................................. 7
Item 6. Exhibits and Reports on Form 8-K................................... 7
SIGNATURES................................................................. 8
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Condensed Consolidated Balance Sheet
(Unaudited)
September 30, 2004
Assets
Current assets:
Cash .......................................................... $ 28,411
Accounts and notes receivable ................................ 42,414
Inventory, at lower of cost or market (Note 3) ................ 49,272
Prepaid expenses .............................................. 1,717
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Total current assets ........................... 121,814
Property and Equipment ........................................ 139,422
Accumulated depreciation ...................................... (80,355)
Intangible assets ............................................. 64,412
Accumulated amortization ...................................... (14,139)
Other assets .................................................. 4,877
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Total assets ................................... $ 236,031
=========
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable .............................................. $ 137,382
Other current liabilities ..................................... 231,747
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Total current liabilities ...................... 369,129
---------
Shareholders' deficit:
Common stock .................................................. 6,779
Additional paid-in capital .................................... --
Retained loss ................................................. (139,877)
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Total shareholders' deficit .................... (133,098)
---------
$ 236,031
=========
See accompanying notes to condensed consolidated financial statements
F-1
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
--------------------------
2004 2003
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Sales and revenue ........................ $ 77,250 $ 48,920
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Costs of revenue ..................... 38,417 24,341
Selling, general and administrative .. 135,413 50,165
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Total operating expenses 173,830 74,506
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Operating loss ......... (96,580) (25,586)
Other income (expense):
Other income ......................... 24,333 --
Interest expense ..................... (1,285) (1,276)
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Loss before income taxes .. (73,532) (26,862)
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Income tax provision (Note 2) ............ -- --
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Net loss .................. $ (73,532) $ (26,862)
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Basic and diluted income (loss) per share $ (0.01) $ (0.01)
=========== ===========
Number of weighted average common shares
outstanding .......................... 6,779,079 3,435,148
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See accompanying notes to condensed consolidated financial statements
F-2
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
-----------------------
2004 2003
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Net cash provided by (used in)
operating activities ........ $(120,389) $ (11,068)
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Cash flows from investing activities:
Purchase of equipment and other assets ...... (21,677) --
Net cash provided by (used in)
investing activities ........ (21,677) --
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Cash flows from financing activities:
Payment for long-term debt .................. (10,142) --
Sale of common stock ........................ -- 8,396
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Net cash provided by
financing activities ........ (10,142) 8,396
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Net change in cash ............ (152,208) (2,672)
Cash, beginning of period ................... 180,619 6,192
--------- ---------
Cash, end of period ......................... $ 28,411 $ 3,520
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes ............................ $ -- $ --
========= =========
Interest ................................ $ -- $ --
========= =========
See accompanying notes to condensed consolidated financial statements
F-3
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1: Basis of presentation
The condensed financial statements presented herein have been prepared by our
Company in accordance with the accounting policies in its Form 10-KSB with
financial statements dated June 30, 2004, and should be read in conjunction with
the notes thereto.
In our opinion, all adjustments (consisting only of normal recurring
adjustments) which are necessary to provide a fair presentation of operating
results for the interim period presented have been made. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Financial data presented herein are unaudited.
Note 2: Income taxes
We record income taxes in accordance with SFAS No. 109, "Accounting for Income
Taxes". We have incurred net operating losses during all periods presented
resulting in a deferred tax asset, which was fully allowed for; therefore, the
net benefit and expense resulted in $-0- income taxes.
Note 3: Inventory
Inventory consists of raw and finished inventory, which have been accounted for
at lower of cost or market. We have made no provision for inventory
obsolescence, as our management have deemed this unnecessary.
Raw materials .......................................... $16,872
Finished goods ......................................... 32,400
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$49,272
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F-4
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. They include statements regarding the
timing and expected benefits of the acquisition of LGA by Tenet. These
statements are based on management's current expectations and estimates; actual
results may differ materially due to certain risks and uncertainties. For
example, the ability of LGA to achieve expected results may be affected by
external factors such as competitive price pressures, conditions in the economy
and industry growth, and internal factors, such as future financing of the
acquired operations and the ability to control expenses.
Results of Operations
1Q 04 1Q 03
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Revenue 77,250 48,920
Cost of Revenue 38,417 24,341
SGA 135,413 50,165
Net Loss (73,532) (26,862)
Sept. 30 Quarter 2004 Compared with Sept.30 Quarter 2003
During the first Quarter of Fiscal 2005, the Company had revenues of $77,250,
which represented an increase of $28,330 or 34% over the comparable quarter's
revenue of $48,920. This increase is primarily attributable to increased sales
of the Silent Hitch Pin during the Quarter.
Cost of revenue increased $14,076 or 39% from $24,341 in 2003 to $38,417 in
2004.
Gross margin on product sales decreased to 37% for the current quarter from 50%
during last years first Quarter. The decrease in gross margin is reflective of a
shift in the mix of LGA's revenue. During the current Quarter, direct to
consumer sales, when compared to total sales, declined relative to dealer and
OEM sales.
SG&A expenses increased to $135,413 for the current Quarter, compared to $50,165
for last years comparable Quarter. The increase in SG&A expenses for the current
Quarter includes the cost of the Tenet Information Services combination. Of the
$85,248 increase in SG&A expenses, approximately $60,000 of this amount is
attributable to accounting and legal expenses stemming from the Tenet
transaction. The balance of SG&A's increase involved expenses the Company
incurred for patent work, graphic design and website development.
Net loss for the current quarter was ($73,532) or ($0.01) per share as compared
to ($26,862) or ($0.01) per share for the Quarter ending Sept. 30, 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position decreased from $180,619 at June 30, 2004 to $28,411
at September 30, 2004. During the first Quarter of fiscal 2005, the Company used
$120,389 of cash to fund its operating activities and $21,677 for the purchase
of tooling and patent related expenses.
During the quarter the Company finalized tooling for the GearDeck 17 System .
Also during the Quarter, the Company finalized two patents applications for new
technology stemming from a successful product development effort begun in 2003.
Please review the GearDeck System at our website, www.letsgoaero.com.
LGA Capital Requirements
The Company reported a working capital deficit of $247,315 as of September 30,
2004, as compared with a deficit of $168,011 as of June 30, 2004.
The Company will need to raise additional operating capital from either
financing activities or from product licensing revenue at least through the end
of the 2005 fiscal year. With the completion of the Tenet transaction, the
Company's legal and accounting expenses are expected to decline when compared to
Fiscal 2005's first quarter. The Company is currently increasing its product
inventory and higher inventory levels will also increase the use of cash until
the inventory is sold. Currently, LGA intends to add approximately $150,000 of
inventory to its books over the next 120 days. In addition, the Company will
incur higher operating expenses into the future for, among other reasons, an
increased focus on selling, for product warehousing costs and for the addition
of personnel.
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The Company is working on several product licensing opportunities, that, if
completed, have the potential to generate significant operating capital for our
business. However, no assurance can be given as to whether these discussions
will result in a completed transaction, nor can the Company give any assurances
as to the timing or financial magnitude of these transactions.
The Company does have a financing commitment from an existing shareholder for
the purchase of up to $250,000 in new common stock. The Company will begin
utilizing this financial commitment during the current Quarter. Do to the timing
of anticipated inventory additions, the Company will need to raise capital, in
addition to this existing financial commitment, from either financing or
licensing sources in early calendar 2005.
The Company is experiencing an growing level of product interest from consumers,
dealers and OEM's. The increased interest is primarily for our GearSpace,
GearDeck and SHP product lines, along with GearCrate and GearWagon LG (Little
Giant). GearCrate and GearWagon LG are the Company's two most recent patent
pending additions to its product line and intellectual property. It will take
time and capital to convert this interest into product sales and/or licensing
revenue. Therefore, even though the Company anticipates higher sales revenue
going forward, it is not able to forecast when its sales volume will be
sufficient to support the Company's operating expenses. Therefore, for the next
two quarters, in addition to the existing $250,000 capital commitment, LGA will
pursue raising additional operating capital from either finance or licensing
related sources. There can be no assurance given as to whether we will be
successful at generating the additional operating capital we will need from
either of these sources.
While a portion of the current liabilities, approximately $81,739, 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.
Inflation has not had a significant impact on the Company's operations.
Item 3. Controls and Procedures.
Tenet does not have formal disclosure controls and procedures (as defined in
Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of September 30,
2004. Tenet's Chief Executive Officer and Treasurer have determined, however,
that Tenet's and LGA's informal controls and procedures were adequate and
effective to:
a. ensure that material information relating to Tenet and LGA was made known to
them by others within those entities, particularly during the period in which
this report was being prepared; and
b. provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
Tenet's management plans to review its controls and procedures with the aim
towards implementing more formal controls and procedures required by paragraph
(b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act during the first half
of fiscal year 2005.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Unregistered Sales of Securities and Use of Proceeds.
Pursuant to the terms of the Acquisition Agreement - Stock for Stock entered
into between Tenet and Let's Go Aero, Inc. ("LGA") dated July 14, 2004, and
effective as of June 30, 2004, and described in detail in Tenet's Form 8-K filed
July 21, 2004 Form 8-KA filed September 21, 2004 and Form 10-KSB filed October
13, 2004, all of the former shareholders and note holders of LGA are to tender
their LGA shares and notes to Tenet for exchange, and Tenet is to issue new
shares of its common stock to the former shareholders and note holders of LGA. A
total of 5,762,214 shares of Tenet Common Stock is to be issued to 14 LGA
shareholders and note holders. The value of the shares to be issued as of the
date of the Acquisition Agreement was deemed to be approximately $4,033,550
(based on the number of shares issued in exchange for the outstanding principal
and interest due on the notes to be exchanged). As of September 30, 2004, ***
shares and $*** of converted promissory notes of LGA had been tendered and ***
shares of Tenet Common Stock had been issued in exchange for those LGA shares
and promissory notes under the terms of the Acquisition Agreement. The Tenet
shares have been and will be issued pursuant to exemption from registration
under Sections 3(b)and/or 4(2) of the Securities Act of 1933 and/or Regulation D
promulgated thereunder.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submissions of Matters to a Vote of Security Holders.
None.
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Item 5. Other Information.
None.
Item 6. Exhibits.
(i) Exhibits
Exhibit
No. Description
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31 Certification required under Section 302 of Sarbanes- Oxley Act of 2002
32 Certification required under Section 906 of Sarbanes- Oxley Act of 2002
(ii) Reports on Form 8-K
None
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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 13, 2004 TENET INFORMATION
SERVICES, INC.
/s/ Marty Williams
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Chairman of the Board of Directors
Marty Williams
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