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, 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. 0-18113
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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 December 31, 2004, the Company had 8,029,074 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 at December 31, 2004 ............... F-1
Condensed Consolidated Statements of Operations, for the six months ended
December 31, 2004 and 2003 and for the three months ended
December 31, 2004 and 2003 ......................................... F-2
Condensed Consolidated Statement of Changes in Shareholders' Deficit for
the period from July 1, 2004 through December 31, 2004 .......... F-3
Condensed Consolidated Statements of Cash Flows, for the six months ended
December 31, 2004 and 2003 ...................................... F-4
Notes to condensed consolidated financial statements .................... F-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 6
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.................................................. 9
Item 6. Exhibits and Reports on Form 8-K................................... 9
SIGNATURES................................................................. 10
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Index to Financial Statements
(Unaudited)
Page
----
Condensed Consolidated Balance Sheet at December 31, 2004 ............... F-1
Condensed Consolidated Statements of Operations, for the six months ended
December 31, 2004 and 2003 and for the three months ended
December 31, 2004 and 2003 ......................................... F-2
Condensed Consolidated Statement of Changes in Shareholders' Deficit for
the period from July 1, 2004 through December 31, 2004 .......... F-3
Condensed Consolidated Statements of Cash Flows, for the six months ended
December 31, 2004 and 2003 ...................................... F-4
Notes to condensed consolidated financial statements .................... F-5
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Condensed Consolidated Balance Sheet
(Unaudited) December 31, 2004
Assets
Current assets:
Cash ........................................................... $ 142,605
Accounts and notes receivable ................................. 24,254
Inventory, at lower of cost or market (Note 4) ................. 94,343
Prepaid expenses ............................................... 1,144
---------
Total current assets ....................... 262,346
Property and Equipment ......................................... 140,815
Accumulated depreciation ....................................... (86,302)
Intangible assets .............................................. 71,737
Accumulated amortization ....................................... (14,959)
Other assets ................................................... 4,877
---------
Total assets .................................... $ 378,514
=========
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable ............................................... $ 126,688
Other current liabilities ...................................... 217,354
---------
Total current liabilities ....................... 344,042
---------
Shareholders' deficit:
Common stock (Note 2) .......................................... 256,779
Additional paid-in capital ..................................... --
Retained loss .................................................. (222,307)
---------
Total shareholders' deficit ..................... 34,472
---------
$ 378,514
=========
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)
Six Months Ended Three Months Ended
December 31, December 31,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Sales and revenue ....................... $ 123,235 $ 94,860 $ 45,985 $ 45,940
----------- ----------- ----------- -----------
Costs of revenue ..................... 55,714 44,961 17,297 20,620
Selling, general and administrative .. 229,466 145,911 94,053 95,746
Research and development ............. 11,099 -- 11,099 --
----------- ----------- ----------- -----------
Total operating expenses .. 296,279 190,872 122,449 116,366
----------- ----------- ----------- -----------
Operating loss ............ (173,044) (96,012) (76,464) (70,426)
Other income (expense):
Other income (expense) ............... 16,359 (63,361) (7,974) (63,361)
Interest expense ..................... (2,809) (72,793) (1,524) (71,517)
----------- ----------- ----------- -----------
Loss before income taxes .... (159,494) (232,166) (85,962) (205,304)
----------- ----------- ----------- -----------
Income tax provision (Note 3) ........... -- -- -- --
----------- ----------- ----------- -----------
Net loss .................... $ (159,494) $ (232,166) $ (85,962) $ (205,304)
=========== =========== =========== ===========
Basic and diluted income (loss) per share $ (0.02) $ (0.07) $ (0.01) $ (0.06)
=========== =========== =========== ===========
Number of weighted average common shares
outstanding .......................... 6,862,412 3,476,399 7,070,746 3,572,576
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements
F-2
TENET INFORMATION SERVICES, INC.
(Formerly let's Go Aero, Inc.)
Condensed Statement of Changes in Shareholders' Deficit
(Unaudited)
Additional
Common Stock Paid-in Retained
---------------------
Shares Par Value Capital Deficit Total
--------- --------- ------------ --------- ---------
Balance at
July 1, 2004 ............... 6,779,074 $ 6,779 $ -- $ (62,813) $ (56,034)
Sale of shares for cash (Note 2) 1,250,000 250,000 -- -- 250,000
Net loss ....................... -- -- -- (159,494) (159,494)
--------- --------- ------------ --------- ---------
Balance at
December 31, 2004 .......... 8,029,074 $ 256,779 $ -- $(222,307) $ 34,472
========= ========= ============ ========= =========
See accompanying notes to condensed consolidated financial statements
F-3
TENET INFORMATION SERVICES, INC.
(Formerly Let's Go Aero, Inc.)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
----------------------
2004 2003
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Net cash provided by (used in)
operating activities ........................ $(247,477) $ (90,298)
--------- ---------
Cash flows from investing activities:
Purchase of equipment and other assets ...... (30,395) (310)
--------- ---------
Net cash provided by (used in)
investing activities ........................ (30,395) (310)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt ................ -- 17,811
Payment for long-term debt .................. (10,142) --
Sale of common stock ........................ 250,000 73,500
--------- ---------
Net cash provided by (used in)
financing activities ........................ 239,858 91,311
--------- ---------
Net change in cash ............ (38,014) 703
Cash, beginning of period ................... 180,619 6,192
--------- ---------
Cash, end of period ......................... $ 142,605 $ 6,895
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes .............................. $ -- $ --
========= =========
Interest .................................. $ -- $ --
========= =========
See accompanying notes to condensed consolidated financial statements
F-4
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.
The financial results during the six months ended December 31, 2003 and three
months ended December 31, 2003 presents the result of operations of Let's Go
Aero, Inc. and does not include the financial results of Tenet Information
Services, Inc.
Note 2: Related party
On December 1, 2004, we issued 1,250,000 shares of restricted common stock to a
company owned by one of our directors, in exchange for $250,000 cash. We are
entitled to a call option, giving our Company the right to repurchase all of the
shares issued at an exercise price of $0.40 per share any time before November
30, 2006.
Note 3: 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 4: 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 .......................... $25,991
Finished goods ......................... 68,352
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$94,343
=======
F-5
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
Six Months Ended
December 31,
---------------------
04 03
-------- --------
Revenue 123,235 94,860
Cost of Revenue (55,714) (44,961)
SGA (229,466) (145,911)
R & D (11,099) --
Other Income(expense) 16,359 (63,361)
Interest Expense (2,809) (72,793)
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Net Loss (159,494) (232,166)
Six Months Ended December 31, 2004, Compared with Six Months Ended December 31,
2003
During the first six months of Fiscal 2005, the Company's revenue grew 30% to
$123,235, compared to $94,860 in revenue for the similar period of Fiscal 2004.
During the current period the Company's sales resulted primarily from inquiries
generated by our web site. The Company intends to increase its selling effort
during the second half of fiscal 2005, as the GearDeck product line is
introduced.
Cost of revenue for the six months ended December 31, 2004, increased $10,753 or
24% from $44,961 during the 2003 period, to $55,714 for the 2004 period.
Gross margin on product sales increased to 55% for the current period from 53%
during last years comparable period.
6
SG&A expenses increased to $229,466 for the six months ended December 31, 2004,
compared to $145,911 for the comparable period of 2003. The increase in SG&A
expenses for the current six month period is primarily attributable to costs
associated with the Tenet Information Services combination.
Net loss for the six months ended December 31, 2004, was ($159,494) or ($0.02)
per share as compared to ($232,166) or ($0.07) per share for the six months
ending December 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position increased from $6,895 at December 31, 2003 to
$142,279 at December 31, 2004. During the first half of fiscal 2005, the Company
used $247,477 of cash to fund its operating activities and $30,395 for the
purchase of tooling and patent related expenses.
LGA Capital Requirements
During the second Quarter of fiscal 2005, LGA sold 1,250,000 shares of common
stock to an existing LGA shareholder, for $250,000, or $0.20 per share. In
conjunction with this sale, LGA negotiated a call option for these shares that
grants LGA the right for two years following the completion of this transaction,
to re-purchase any or all of these shares at $0.40 per share.
The Company will need to raise additional operating capital from either
financing activities or from product licensing revenue to fund the Company's
growth through the end of the 2005 fiscal year. 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 $100,000 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, product fullfillment and the
personnel necessary to support this growth.
The Company is working on several product licensing opportunities, that if
completed, have the potential to generate significant growth 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.
Due to the timing of anticipated inventory additions and higher operating
expenses, the Company will need to raise capital, in addition to the recent
private placement, from either financing or licensing sources during fiscal
2005.
The Company is experiencing a growing level of product interest from consumers,
dealers and OEM's. 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 LGA will pursue raising additional growth
capital from either finance or licensing related sources. There can be no
assurance given as to whether LGA will be successful at generating the
additional growth capital it will need from either of these sources.
While a portion of the current liabilities, approximately $88,278, 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.
CONTROLS AND PROCEEDURES
Based on the evaluation of the Company's controls and procedures required by
Rule 13a-15 or Rule 15d-15 under the Exchange Act, the Company's Chief Executive
Officer and Treasurer believe that the Company's controls and other procedures
that are designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the United States
securities laws is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms were adequate as of the
end of the period covered by this Form 10-QSB. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the securities laws is accumulated and
communicated to the issuer's management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
7
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Unregistered Sales of Securities and Use of Proceeds.
During the second Quarter of fiscal 2005, LGA sold 1,250,000 shares of common
stock to an existing LGA shareholder, for $250,000, or $0.20 per share. In
conjunction with this sale, LGA retains a call option for these shares that
grants LGA the right for two years following the completion of this transaction,
to re-purchase any or all of these shares at $0.40 per share. The transaction
was completed on November 30, 2004. The Tenet shares were issued pursuant to
exemption from registration under Sections 3(b)and/or 4(2) and or 4(6) 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.
8
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
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: February 17, 2004 TENET INFORMATION
SERVICES, INC.
/s/ Marty Williams
----------------------------------
Chairman of the Board of Directors
Marty Williams
10