UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number
1-9812
TENERA, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3213541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Maritime Plaza, Suite 750, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 273-2705
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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.
Yes X No
--------- ----------.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
-------- -----------.
The number of shares outstanding on June 30, 2003, was 9,984,259.
TABLE OF CONTENTS
PAGE
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) ............................................. 1
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ..... 11
Item 3. Quantitative and Qualitative Disclosures of Market Risk.................................... 16
Item 4. Controls and Procedures.................................................................... 16
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings ......................................................................... *
Item 2. Changes in Securities ..................................................................... *
Item 3. Defaults Upon Senior Securities ........................................................... *
Item 4. Submission of Matters to a Vote of Security Holders ....................................... *
Item 5. Other Information ......................................................................... *
Item 6. Exhibits and Reports on Form 8-K .......................................................... 17
_______________________________
* None.
i
1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
TENERA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ -----------------------------
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------
General and Administrative Expenses ...... $ 374 $ 252 $ 525 $ 377
------------ ------------- ------------ -------------
Loss from Continuing Operations........... (374) (252) (525) (377)
Discontinued Operations:
Loss from Discontinued Operations ...... (436) (1,221) (1,402) (2,221)
Gain on Sale of Gotrain Assets ......... 4,879 -- 4,879 --
Income Tax Expense (Benefit) ........... 1 (174) 7 (159)
------------ ------------- ------------ -------------
Earnings (Loss) from Discontinued
Operations ............................... 4,442 (1,047) 3,470 (2,062)
------------ ------------- ------------ -------------
Net Earnings (Loss) ...................... $ 4,068 $ (1,299) $ 2,945 $ (2,439)
============ ============= ============ =============
Net Earnings (Loss) per Share -- Basic and
Diluted:
Net Loss from Continuing Operations .... $ (0.04) $ (0.03) $ (0.05) $ (0.04)
Net Earnings (Loss) from Discontinued
Operations.............................. 0.45 (0.10) 0.35 (0.20)
------------ ------------- ------------ -------------
Net Earnings (Loss) .................... $ 0.41 $ (0.13) $ 0.30 $ (0.24)
============ ============= ============ =============
Weighted Average
Number of Shares Outstanding -- Basic and
Diluted................................... 9,984 9,984 9,984 9,984
============ ============= ============ =============
- ------------------------------------------------------------------------------------------------------------------
See accompanying notes.
1
TENERA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
- ----------------------------------------------------------------------------------------------------------------
June 30, December 31,
2003 2002
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents ............................................... $ 2,121 $ 1,277
Restricted cash ......................................................... 500 --
Trade receivables, less allowance of $539 at June 30, 2003 and Dec 31,
2002
Billed ................................................................ 151 620
Unbilled .............................................................. 72 635
Other current assets .................................................... 148 185
------------- ------------
Total Current Assets ................................................ 2,992 2,717
Property and Equipment, Net ............................................... 20 243
Other Assets .............................................................. 37 576
------------- ------------
Total Assets ..................................................... $ 3,049 $ 3,536
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable ........................................................ $ 231 $ 1,068
Accrued compensation and related expenses ............................... 793 1,397
Deferred revenue ........................................................ -- 391
Subordinated debt and accrued interest .................................. -- 1,605
------------- ------------
Total Current Liabilities ........................................... 1,024 4,461
Stockholders' Equity (Deficit)
Common Stock, $0.01 par value, 25,000,000 authorized, 10,417,345 issued,
and 9,984,259 outstanding at June 30, 2003 and Dec 31, 2002.............. 104 104
Paid in capital, in excess of par ....................................... 5,698 5,693
Accumulated deficit...................................................... (3,284) (6,229)
Treasury stock-- 433,086 shares at June 30, 2003 and Dec 31, 2002 ....... (493) (493)
------------- ------------
Total Stockholders' Equity (Deficit) .............................. 2,025 (925)
------------- ------------
Total Liabilities and Stockholders' Equity (Deficit) ............. $ 3,049 $ 3,536
============= ============
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes.
2
TENERA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
(In thousands)
- -------------------------------------------------------------------------------------------------------------
Common Stock Paid-In Accumulated Treasury
Capital in Deficit Stock Total
------------------------ Excess
of Par
Shares Amount
- -------------------------------------------------------------------------------------------------------------
December 31, 2002 ...... 9,984 $ 104 $ 5,693 $ (6,229) $ (493) $ (925)
Fair Value of Stock
Compensation to Consultant -- -- 4 -- -- 4
Net Loss ............... -- -- -- (1,123) -- (1,123)
------------------------ ------------ ----------------- ----------- -------------
March 31, 2003 ......... 9,984 $ 104 $ 5,697 $ (7,352) $ (493) $ (2,044)
Fair Value of Stock
Compensation to Consultant -- -- 3 -- -- 3
Return of Investor Capital
in Subsidiary .......... -- -- (2) -- -- (2)
Net Earnings ........... -- -- -- 4,068 -- 4,068
------------------------ ------------ ----------------- ----------- -------------
------------------------ ------------ ----------------- ----------- -------------
June 30, 2003 .......... 9,984 $ 104 $ 5,698 $ (3,284) $ (493) $ 2,025
======================== ============ ================= =========== =============
- -------------------------------------------------------------------------------------------------------------
See accompanying notes.
3
TENERA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------
(In thousands) Six Months Ended June 30,
------------------------------
2003 2002
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) ..................................................... $ 2,945 $ (2,439)
Adjustments to reconcile net earnings (losses) to cash used by operating
activities:
Depreciation and amortization.......................................... 238 449
Net (gain) loss on sale of assets ..................................... (4,881) 2
Stock compensation to consultant ...................................... 7 15
Changes in assets and liabilities:
Trade receivables, net of allowance ................................. 852 576
Income tax receivable ............................................... -- 884
Other current assets ................................................ 10 (157)
Other assets ........................................................ 27 (104)
Accounts payable .................................................... (707) (143)
Accrued compensation and related expenses ........................... (604) (3)
Deferred revenue .................................................... 62 26
Accrued interest expense ............................................ (105) 45
------------- ------------
Net Cash Used By Operating Activities ............................. (2,156) (849)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment ................................... -- (19)
Proceeds from sale of assets ............................................ 4,502 1
------------- ------------
Net Cash Provided (Used) in Investing Activities .................. 4,502 (18)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale (repayment) of subordinated debt .................................. (1,500) 1,500
Return of investor capital in subsidiary ................................ (2) --
------------- ------------
Net Cash (Used) Provided by Financing Activities ................. (1,502) 1,500
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................................. 844 633
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................... 1,277 1,286
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 2,121 $ 1,919
============= ============
NON-CASH FINANCING AND INVESTING ACTIVITIES
Sale of assets in exchange for note receivable........................... $ 41 $ --
============= ============
Restricted cash from sale of GoTrain assets ............................. $ 500 $ --
============= ============
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes.
4
TENERA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003 and 2002
(Unaudited)
Note 1. Organization
TENERA, Inc. (including its subsidiaries, "TENERA", or the "Company") had
historically provided a broad range of professional and technical services, and
web-based e-Learning solutions. As previously announced, the Company completed
the sales of each of the subsidiary business operations by June 30, 2003. This
was accomplished through the disposition of all operating assets by two of the
Company's subsidiaries and the sale of the third subsidiary.
The Company had historically been principally organized into two operating
segments: Professional and Technical Services and e-Learning. The Company's
professional and technical services were designed to solve complex management,
engineering, environmental, health and safety challenges associated with the
management of federal government properties. TENERA's web-based e-Learning
products and services, provided through the Company's GoTrain Corp. subsidiary
(`GoTrain'), were designed to provide a suite of on-line, interactive,
compliance and regulatory-driven training applications for use by clients'
employees.
The Company previously announced that the Board of Directors is proposing
a plan of dissolution for ratification and approval by its shareholders at a
Special Meeting of shareholders scheduled to be held in September 2003. The plan
was approved by the Board of Directors, subject to shareholder approval, on July
15, 2003. Accordingly, a proxy statement will be prepared and distributed by the
Company to its shareholders recommending approval of the plan in advance of the
Special Meeting.
In reaching this decision, the Board considered that the Company has been
unable to return to profitable quarterly results since the quarter ended
September 30, 2000. The Company recorded net losses of $4.8 million and $2.0
million in 2002 and 2001, respectively. The Company's businesses have been
adversely affected by the general economic downturn in the United States over
the past couple of years. The economic slowdown, combined with the "melt-down"
of the fortunes of the power-generating and power-trading industry, has resulted
in less demand for new and existing power plant capacity, which had a direct
effect on the Company's environmental consulting business. The economic slowdown
has also put budgetary pressure on the federal government, with the result that
certain programs of the Department of Energy in which the Company participates
have been constrained. Additionally, the pressure of corporate cost-cutting by
many U.S. corporations has resulted in reduced training opportunities for the
Company's e-Learning activities; many clients and potential clients had not
expanded their training activities to the levels originally expected because of
reduced manpower and/or lower funding for training. Starting in 2001, responding
to these economic conditions, the Company took steps to reduce its cash
requirements through staff reductions, which further constrained the Company's
ability to develop its businesses.
Revenues have continued to decline over each succeeding quarter until the
revenue in the quarter ended December 31, 2002 totaled less than 40% of the
revenues in the third quarter of 2000. The declines in revenue were spread
across the Company's Professional and Technical Services segment; however it was
most characteristic of the substantial decline in services requested by the
Company's largest multi-year Professional and Technical Services contract with
the Department of Energy's Rocky Flats Site (the "Site"). The decline in scope
was consistent with budgetary pressure on the DOE as well as shifting needs at
the Site as the remediation work was continuing along towards scheduled
completion in 2006. Even with the greatly diminished roles for the Company at
the Site, the contract itself was scheduled to complete its initial period of
performance on September 30, 2003 and would be subject to a determination by the
client as to the first of three possible annual extensions of the period of
performance. As reported previously, management anticipated that in light of the
current business environment, the Company would experience further reduction in
revenues expected to be recognized in its Professional and Technical Services
Segment during the remainder of 2003.
5
The decrease in consolidated revenues during this period was only slightly
offset by the increase in e-Learning Segment activity; however the increased
revenues in that Segment came at a significant cost in cash resources. Cash
reserves were being depleted to fund ongoing operating losses, since e-Learning
revenue was insufficient to cover expenses, such as costs of e-Learning course
and platform development, sales and marketing and administration. Initial
funding of the e-Learning Segment came from the cash generated by the Company's
Professional and Technical Services Segment. As previously reported, management
believed that the cash expected to generated from the Professional and Technical
Services Segment would be insufficient to provide funding necessary for further
development of its e-Learning Segment. Also as previously reported, the
Company's efforts seeking new lines of credit have been unsuccessful to date.
Due to declining revenues, net losses, and declining cash balances, the
Company's auditor's opinion expressed substantial doubt regarding the Company's
ability to continue as a going concern at the end of the 2001 and 2002 calendar
years. There has been uncertainty on how long the current downturn will last and
when a sustained recovery may occur. Any further decline in the clients' markets
or in general economic conditions would likely result in a further reduction in
demand for the Company's products and services. Additionally, there has been a
concern that the Company may have difficulty in collecting outstanding trade
receivables from cash constrained clients, causing its own cash flow to be
adversely affected. Also, in such an environment, pricing pressures could
continue, negatively impacting gross margins.
The Company has made considerable efforts to identify and evaluate
strategic alternatives, including strategic partnerships. In June 2001, the
Company's e-Learning subsidiary, GoTrain Corp. entered into a five-year
strategic partnership agreement with SmartForce (now merged with SkillSoft) to
co-develop and distribute ES&H and regulatory content via the SmartForce
internet platform. Under the agreement, GoTrain retained ownership of its
proprietary content and shared in the revenue of any GoTrain content sold by
SmartForce. As part of the agreement, GoTrain was required to make an initial
and quarterly payment SmartForce for platform license and maintenance, and
integration of existing GoTrain content. Minimum net payments due by GoTrain
over the remaining period of the agreement totaled $1.2 million at December 31,
2002. In June 2002, SmartForce announced that it had entered into an agreement
to merge with SkillSoft, another e-Learning company, which was completed in
September 2002. The surviving entity, know as SkillSoft, assumed GoTrain's
agreement with SmartForce. In late 2002, due to the lack of achieving expected
revenue growth over the first 18 months, GoTrain notified SkillSoft of a desire
to restructure the agreement.
Separately, GoTrain was able to raise $1.5 million in subordinated debt in
early 2002; however, the cash infusion proved insufficient in light of
slower-than-expected revenue growth. In the third quarter of 2002, the Company
sought unsuccessfully additional external equity or working capital funding for
the e-Learning enterprise. As previously reported, although management believed
that the e-Learning segment has significant future potential, it was unable to
identify funding sources beyond what it had previously raised in capital for
that segment.
To address the diminishing cash resource generation within the
Professional and Technical Services Segment, management also contacted numerous
potential debt and equity financial investors, including existing investors.
However, such discussions failed to generate necessary funding for the Company
or its subsidiaries. After completing their respective due diligence processes,
all potential and existing investors declined to enter into meaningful
negotiations.
As previously announced, the Board of Directors then concluded, in light
of the extensive and unsuccessful efforts to locate a strategic or an investment
partner for the Company, that it would be in the best interest of the
shareholders to pursue the possibility of a merger, sale of assets or closure of
the operating subsidiaries, collectively or individually.
Management then contacted a number of companies that it thought might have
an interest in merging or purchasing assets from the subsidiaries. The list of
prospects represented the collective knowledge of companies that were either
currently active in the e-Learning or Professional and Technical Services
markets or which the Company believed could have an interest in that market.
Management attempted to schedule meetings with each of the prospective parties
and subsequently solicited indications of interest from such parties.
6
The Company did not receive any expressions of merger interest from the
parties for the e-Learning business, but an offer was received from its
strategic partner, SkillSoft, for the e-Learning assets. The initial agreement
to purchase the assets from GoTrain was struck at a level which was expected to
generate sufficient working capital for the Company to possibly redeploy its
resources within other operating environments. However, after further
contemplation of the general economic conditions, recent purchase prices paid
for similar assets within the e-Learning market, and due diligence efforts by
the buyer, the price offered was reduced prior to finalization of the agreement.
Although the offered proceeds were considered by the Company to be a reasonable
price for the assets sold, they did not provide surplus working capital.
Similarly, the Company did not receive any expressions of merger interest
from the independent parties approached for the Professional and Technical
Services Segment's two subsidiaries: TENERA Energy, LLC ("Energy") and TENERA
Rocky Flats., LLC ("Rocky Flats"). Thereafter, late in the first quarter of
2003, the Company reached agreement to transfer the ownership and operations of
management of Energy to the former employees of the subsidiary. Late in the
second quarter of 2003, a Rocky Flats joint venture partner, The S.M. Stoller
Corporation, advised the Company that it was interested in assuming the
obligations of certain Professional and Technical Services Rocky Flats site
contracts and joint venture interests.
As a result of these three separate sets of negotiations, sales of each of
the subsidiary business operations were completed by June 30, 2003. On July 15,
2003, the Board determined, based upon the expected net cash proceeds from the
completed sales and management's belief that the Company would not be able to
reduce expenses and personnel further, that the Company would not able to fund
the reestablishment of an operating entity in order to profitably sell and
market a product or service. The Board also reviewed projected estimates of
expenses associated with an orderly liquidation of TENERA, as well as the cash
on hand as of June 30, 2003. Since the Company did not have any offers to
purchase the remaining non-operating assets, such as trade and note receivables,
furniture, and office equipment, at this time or to terminate favorably its
long-term obligations, the Company was unable to effectively estimate the value
of the net assets upon liquidation. The Board also considered other bankruptcy
alternatives (such as provided for by the U.S. Bankruptcy Code) but believed
that such alternatives would likely result in higher transaction costs and
longer delays, further minimizing any possible distributions to shareholders.
For these reasons, on July 15, 2003 the Board of Directors concluded that
the dissolution and liquidation would have the highest probability of returning
the greatest value to the shareholders.
Also previously announced, the Company was notified on June 13, 2003 that
it may not meet certain of the American Stock Exchange's ("AMEX") continued
listing standards. On June 25, 2003, the Company submitted a response
acknowledging the notification and stating that it would conduct a review of the
alternatives available to the Company. The Company also announced on July 1,
2003 in a press release that there could be no assurance however that the
Company would be able to present a plan that will meet the continued AMEX
listing standards, or if it did not, would be able to provide an alterative
market for its outstanding shares. Subsequent to July 15, 2003, the Company
notified the AMEX of the Board of Directors resolution to wind up and dissolve
the Company and its recommendation for approval from the Company's shareholders.
On July 16, 2003, the AMEX contacted the Company to announce that in light of
the information received from the Company, it had halted trading of the common
stock on the Exchange pending a move to delist the Company.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation. The accompanying consolidated interim financial
statements are prepared on the Company's historical basis of accounting and
include the accounts of the Company and its subsidiaries and are unaudited. The
disposition of all operating assets by two of the Company's subsidiaries and the
sale of the third subsidiary prompted presentation of their results on the
consolidated statement of operations as discontinued operations. However, no
adjustments have been made to reflect a liquidation basis of accounting because
the Company's board of directors approved the plan of liquidation subsequent to
June 30, 2003. Assuming approval by the shareholders at the Special Meeting, in
future reporting periods, the Company will report on a liquidation basis, which
will result in the assets and liabilities of the Company being adjusted to their
estimated net realizable values.
7
All intercompany accounts and transactions have been eliminated. In the
opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position at June 30,
2003, and the results of operations and cash flows for the three month and six
month periods ended June 30, 2003 and 2002, respectively, have been made. For
further information, refer to the financial statements and notes thereto
contained in TENERA, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 2002, filed with the Securities and Exchange Commission ("SEC").
The results of operations for the three month and six month periods ended June
30, 2003 and 2002, respectively, are not necessarily indicative of results that
may be expected for any other interim period or for the full year ending
December 31, 2003.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ materially from
these estimates.
Cash and Cash Equivalents. At June 30, 2003 and December 31, 2002, the
Company's cash and cash equivalents included deposited cash and money market
accounts at a banking institution. Historically and from time to time, the
Company has invested in commercial paper issued by companies with strong credit
ratings. There were no such investments at June 30, 2003 and December 31, 2002.
The Company includes in cash and cash equivalents, all short-term, highly liquid
investments, which mature within three months of acquisition.
Restricted Cash. At June 30, 2003, the Company had $500,000 of cash held
in escrow pursuant to the asset purchase agreement with SkillSoft Corporation
(see Notes 1 and 5 to Consolidated Financial Statements). Under the agreement,
$100,000 was to be released upon the acceptance of twenty-five training courses
developed by the Company subsequent to the transaction close on June 4, 2003.
The courses were completed and accepted by the purchaser in mid-July 2003 and
the $100,000 has been released from the escrow account. Additionally, $125,000
is to be released upon the satisfaction of certain working capital requirements.
The Company believes the requirements have been met and is awaiting SkillSoft's
concurrence, which is expected in the third quarter of 2003. The remaining
$275,000 in escrow secures certain indemnification obligations of the Company,
which remain until June 4, 2004.
Concentrations of Credit Risk and Credit Risk Evaluations. Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and accounts receivable.
Cash and cash equivalents consist principally of money market accounts. Cash and
cash equivalents are held with a domestic financial institution with high credit
standing. The Company has not experienced any significant losses on its cash and
cash equivalents. Until the discontinuation of operations, the Company conducted
business with companies in various industries primarily in the United States.
The Company performed ongoing credit evaluations of its customers and generally
did not require collateral. Allowances are maintained for potential credit
issues, and such losses to date have been within management's expectations.
Included in accounts receivable are certain trade receivables related to U.S.
government contracts and included in the net balance of accounts receivable are
allowances of $539,000 for doubtful accounts, which includes approximately
$400,000 for disputed amounts arising from government audits related to the
government contract receivables. At June 30, 2003, two clients accounted for 46%
and 32%, respectively, of the Company's trade receivables. At December 31, 2002,
three clients accounted for 19%, 17%, and 13%, respectively, of the Company's
trade receivables. During the first six months of 2003 and 2002, one client
accounted for 64% and 66%, respectively, of the Company's total revenue. All the
above concentrations relate to Professional and Technical Services Segment
clients.
Property and Equipment. Property and equipment are stated at cost
($2,017,000 and $3,368,000 at June 30, 2003 and December 31, 2002,
respectively), net of accumulated depreciation ($1,997,000 and $3,125,000 at
June 30, 2003 and December 31, 2002, respectively). Depreciation is calculated
using the straight-line method over the estimated useful lives, which range from
three to five years.
Other Assets. Included in this asset category prior to the sale of the
e-Learning segment are the costs of internal-use e-Learning operating system
software, both acquired and developed by the Company, and certain costs related
to the development of the Company's e-Learning training courses used in its
8
internet-based application service provider business. These costs have been
capitalized in accordance with Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use".
Income Taxes. The Company uses the liability method to account for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities. Deferred tax assets and liabilities are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. Income tax expense recorded in the first half of 2003 reflects minimum
taxes due for certain states. No provision for taxes has been made for the gain
associated with the sale of e-Learning assets (see Note 5 to Consolidated
Financial Statements) as this gain is offset by carryforward losses of the
Company.
Accounting for Stock-Based Compensation. Under the provisions of the
TENERA 1992 Option Plan, 1,500,000 shares of TENERA common stock are reserved
for issuance upon the exercise of options granted to key employees and
consultants. TENERA's 1993 Outside Directors Compensation and Option Plan
reserves 500,000 shares for issuance upon exercise of options granted to
non-employee directors. The employee stock options generally vest over a three
year period and expire six years from date of grant. The outside director
options vest over a one year period and expire ten years from date of grant. As
of June 30, 2003, options for 1,329,500 TENERA shares were outstanding and
options for 1,227,000 shares were exercisable.
Per Share Computation. Basic earnings per share is computed by dividing
net earnings by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
by adding other common stock equivalents, including stock options and
convertible debentures, in the weighted average number of common shares
outstanding for a period, if dilutive. The determination of fully diluted
earnings per share excludes the impact of 1,329,500 additional shares of TENERA
common stock, issuable upon the exercise of outstanding stock options, because
they are antidilutive.
Proforma Disclosures of the Effect of Stock-Based Compensation. Pro forma
interim information regarding net earnings (loss) and earnings (loss) per share
is required by SFAS 148 and has been determined as if the Company had accounted
for its stock options under the fair value method of FAS 123. The fair value for
the options has been estimated at the date of grant using a Black-Scholes option
pricing model.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, options valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Since the Company's stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting periods of the options. The
Company has elected to base its initial estimate of compensation expense on the
total number of options granted. Subsequent revisions to reflect actual
forfeitures are made in the period the forfeitures occur through a catch-up
adjustment.
There was no significant difference between reported and pro forma net
earnings (loss)and no difference in reported and pro forma net earnings (loss)
per share for the three and six month periods ended June 30, 2003 and 2002.
Comprehensive Income. The Company does not have any components of
comprehensive income. Therefore, comprehensive income is equal to net earnings
reported for all periods presented.
Recent Accounting Pronouncements. In December 2002, the FASB issued
Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure, or SFAS 148. This statement amends
FASB Statement No. 123 (FAS 123), Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. This
statement also amends the disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
9
method used on reported results. The provisions of this statement relating to
alternative transition methods and annual disclosure requirements are effective
for fiscal years ending after December 15, 2002. The provisions of this
statement relating to interim financial information are effective for the
quarter ending March 31, 2003. The transitional provisions did not have an
impact on the Company's financial statements as it did not elect to change from
the intrinsic value method to the fair value method.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities, or FIN 46.
FIN 46 clarifies existing accounting principles related to the preparation of
consolidated financial statements when the equity investors in an entity do not
have the characteristics of a controlling financial interest or when the equity
at risk is not sufficient for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 requires a
company to evaluate all existing arrangements to identify situations where a
company has a "variable interest" (commonly evidenced by a guarantee arrangement
or other commitment to provide financial support) in a "variable interest
entity" (commonly a thinly capitalized entity) and further determine when such
variable interests require a company to consolidate the variable interest
entities' financial statements with its own. The Company is required to perform
this assessment by September 30, 2003 and consolidate any variable interest
entities for which it will absorb a majority of the entities' expected losses or
receive a majority of the expected residual gains. The Company has not yet
performed this assessment; however the Company is not aware of any variable
interest entities that it may be required to consolidate.
Note 3. Commitments and Contingencies
Leases. The Company occupies facilities under noncancelable operating
leases expiring at various dates through 2005. The leases call for proportionate
increases due to property taxes and certain other expenses. Rent expense
amounted to $299,000 for the six months ended June 30, 2003 ($361,000 in the
first six months of 2002). On July 31, 2003, the Company vacated its San
Francisco headquarters and advised the property manager of its intent to enter
into negotiations regarding its remaining lease commitments. There can be no
assurance that the Company will successfully obtain a settlement on terms and
conditions that are acceptable. The Company entered into a sublease at a nominal
rate for a temporary single office to administer the Board-recommended
dissolution process.
As of June 30, 2003, minimum rental commitments under operating leases,
principally for real property, are as follows (in thousands):
(Year Ending December 31)
- ----------------------------------------------------------------------------------------------------------------
2003 ......................................................................................... $ 204
2004 ......................................................................................... 393
2005 ......................................................................................... 382
------------
Total Minimum Payments Required .............................................................. $ 979
============
- ----------------------------------------------------------------------------------------------------------------
Note 4. Subordinated Debt
In March 2002, the Company's GoTrain subsidiary sold subordinated
convertible debentures to private investors for a total principal amount of
$1,500,000 ("Series 1 Debenture" - $1,000,000; "Series 2 Debenture" - $500,000).
Each debenture bore simple interest at the rate of 8% per annum, with cumulative
interest payable only if the debenture was not converted into convertible
preferred stock of GoTrain, pursuant to the debenture terms. The maturity date
of each debenture was July 31, 2003.
In March 2003, the Company issued subordinated debt of $85,000 to an
officer of the Company to provide additional working capital. The debt bore
simple interest at the rate of 8% per annum, had no maturity date, and was
secured by the trade receivable assets of GoTrain.
10
In June 2003, all outstanding subordinated debt and accrued interest was
repaid.
Note 5. Gain on Sale of GoTrain Assets
As previously announced, in June 2003, GoTrain Corp. sold all of the
assets of its e-Learning business of its to SkillSoft Corporation for
approximately $5,000,000 in cash, plus assumption of certain liabilities related
to the business. The assets were comprised of trade receivables, prepaid rent
and deposits, furniture and office equipment, capitalized software development
costs , software, and certain intangible assets . The liabilities assumed were
accounts payable, accrued expenses, and deferred revenue. Of the total cash
amount, $500,000 reflects the amount held in escrow as security for post closing
adjustments and indemnification obligations (see Note 2 to Consolidated
Financial Statements). The book value of the assets sold was $704,000 and the
book value of the liabilities assumed was $583,000, resulting in a net gain on
sale of $4,879,000.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Forward-Looking Statements
With the exception of historical facts, the statements contained in this
discussion are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor
provisions created by that statute. Certain statements contained in the
following Management's Discussion and Analysis of Results of Operations and
Financial Condition, including, without limitation, statements containing the
words "believes", "anticipates", "estimates", "expects", "future", "intends",
and words of similar import, constitute forward-looking statements that involve
risks and uncertainties. Such risks, uncertainties and changes in condition,
significance, value and effect could cause the Company's actual results to
differ materially from those anticipated events. Such risks and uncertainties
include uncertainty of access to capital; the reliance on major customers and
concentration of revenue from the government sector; the uncertainty of future
profitability; uncertainty regarding competition; reliance on key personnel;
uncertainty regarding industry trends and customer demand; and government
contract audits. Additional risks are detailed in the Company's filings with the
SEC, including its Form 10-K for the year ended December 31, 2002.
Critical Accounting Policies
The Company considers certain accounting policies related to allowance for
doubtful accounts and cost capitalization and impairment to be critical policies
due to the estimation processes involved in each.
Allowance for Doubtful Accounts. The Company is required to estimate the
collectibility of its trade receivables. A considerable amount of judgment is
required in assessing the ultimate realization of these receivables, including
the credit-worthiness of each client. If the financial condition of the
Company's clients were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.
Cost Capitalization and Impairment. Until June 2003 the Company had
significant assets related to the capitalization of costs of internal-use
e-Learning operating system software and costs related to the development of
e-Learning training courses. The determination of related estimated useful lives
and whether or not these assets are impaired involves significant judgments.
Results of Continuing and Discontinued Operations
Losses from continuing operations for the three and six-month periods
ended June 30, 2003 were $374,000 and $525,000, respectively, compared to loss
of $252,000 and $377,000, respectively, for the same periods in 2002. The losses
from continuing operations are comprised entirely of general and administrative
expenses. Losses in 2003 were higher than 2002 due to the reduction in the
allocation of general and administrative expenses to the operating segments as
these operations were discontinued during the first half of 2003. General and
administrative expenses are expected to continue at a lower amount per quarter
until the Company dissolves.
11
Losses from discontinued operations for the three and six-month periods
ended June 30, 2003 were $436,000 and $1,402,000, respectively, compared to
losses of $1,221,000 and $2,221,000, respectively, for the same periods in 2002.
Losses in 2003 were lower than 2002 primarily due to a lower allocation of work
to lower-tier subcontractor teams at the Rocky Flats site and the sale of TENERA
Energy, LLC in March 2003 (see Note 1 to Consolidated Financial Statements).
Both revenue and direct costs decreased accordingly.
Contract Backlog
There is no contracted backlog at June 30,2003. All operating activities
have been sold or curtailed as of this date (see Note 1 to Consolidated
Financial Statements).
Liquidity and Capital Resources
Cash and cash equivalents increased by $844,000 during the first six
months of 2003. The increase was due to proceeds from the sale of assets
($4,502,000 - see Note 5 to Consolidated Financial Statements), partially offset
by the repayment of subordinated debt ($1,500,000 - see Note 4 to Consolidated
Financial Statements) and cash used by operations ($2,156,000).
Restricted cash increased by $500,000 in the first half of 2003 related to
the sale of e-Learning assets (see Notes 1, 2, and 5 to Consolidated Financial
Statements).
Trade receivables, net of sales allowance, decreased by $852,000 from
December 31, 2002, primarily due to the sale of business activities (see Notes 1
and 5 to Consolidated Financial Statements).
Accounts payable decreased by $707,000 and accrued compensation and
related expenses decreased by $604,000 since the end of 2002. The changes relate
to the sale of all business activities during the period (see Note 1 to
Consolidated Financial Statements), whereby the liabilities were either
transferred to the new owners, or paid by the Company. It is anticipated that
the accounts payable and accrued compensation and related expenses will continue
to decrease as contracts with vendors are closed out and remaining employees
depart. As of August 1, 2003, there is only one remaining full-time employee of
the Company, while approximately six former-employees are available on an
as-needed part-time employment basis.
Accrued interest expense decreased by $105,000 from December 31, 2002
related to the repayment of the subordinated debt (see Note 4 to Consolidated
Financial Statements).
No cash dividend was declared in the first six months of 2003.
The impact of inflation on project revenue and costs of the Company was
minimal.
At June 30, 2003, the Company had operating lease commitments through 2005
totaling $979,000, principally for real property (see Note 3 to Consolidated
Financial Statements). The table below schedules these contractual obligations:
- ----------------------------------------------------------------------------------------------------------------
Contractual Obligations Payments Due By Period
---------------------------------------------------------
(In thousands) Total Less 1 - 3 4 - 5 After 5
Than 1 Years Years Years
Year
- ----------------------------------------------------------------------------------------------------------------
Operating Lease Obligations ..................... $ 979 $ 401 $ 578 $ -- $ --
- ----------------------------------------------------------------------------------------------------------------
The Company's businesses have been adversely affected by the general
economic downturn in the United States over the past couple of years. The
economic slowdown, combined with the "melt-down" of the fortunes of the
power-generating and power-trading industry, has resulted in less demand for new
and existing power plant capacity, which had a direct effect on the Company's
environmental consulting business. The economic slowdown has also put budgetary
pressure on the federal government, with the result that certain programs of the
Department of Energy in which the Company participates have been constrained.
Additionally, the pressure of corporate cost-cutting by many U.S. corporations
has resulted in reduced training opportunities for the Company's e-Learning
activities; many clients and potential clients had not expanded their training
12
activities to the levels originally expected because of reduced manpower and/or
lower funding for training. Starting in 2001, responding to these economic
conditions, the Company took steps to reduce its cash requirements through staff
reductions, which further constrained the Company's ability to develop its
businesses.
Revenues have continued to decline over each succeeding quarter until the
revenue in the quarter ended December 31, 2002 totaled less than 40% of the
revenues in the third quarter of 2000. The declines in revenue were spread
across the Company's Professional and Technical Services segment; however it was
most characteristic of the substantial decline in services requested by the
Company's largest multi-year Professional and Technical Services contract with
the Department of Energy's Rocky Flats Site (the "Site"). The decline in scope
was consistent with budgetary pressure on the DOE as well as shifting needs at
the Site as the remediation work was continuing along towards scheduled
completion in 2006. Even with the greatly diminished roles for the Company at
the Site, the contract itself was scheduled to complete its initial period of
performance on September 30, 2003 and would be subject to a determination by the
client as to the first of three possible annual extensions of the period of
performance. As reported previously, management anticipated that in light of the
current business environment, the Company would experience further reduction in
revenues expected to be recognized in its Professional and Technical Services
Segment during the remainder of 2003.
The decrease in consolidated revenues during this period was only slightly
offset by the increase in e-Learning Segment activity; however the increased
revenues in that Segment came at a significant cost in cash resources. Cash
reserves were being depleted to fund ongoing operating losses, since e-Learning
revenue was insufficient to cover expenses, such as costs of e-Learning course
and platform development, sales and marketing and administration. Initial
funding of the e-Learning Segment came from the cash generated by the Company's
Professional and Technical Services Segment. As previously reported, management
believed that the cash expected to generated from the Professional and Technical
Services Segment would be insufficient to provide funding necessary for further
development of its e-Learning Segment. Also as previously reported, the
Company's efforts seeking new lines of credit have been unsuccessful to date.
Due to declining revenues, net losses, and declining cash balances, the
Company's auditor's opinion expressed substantial doubt regarding the Company's
ability to continue as a going concern at the end of the 2001 and 2002 calendar
years. There has been uncertainty on how long the current downturn will last and
when a sustained recovery may occur. Any further decline in the clients' markets
or in general economic conditions would likely result in a further reduction in
demand for the Company's products and services. Additionally, there has been a
concern that the Company may have difficulty in collecting outstanding trade
receivables from cash constrained clients, causing its own cash flow to be
adversely affected. Also, in such an environment, pricing pressures could
continue, negatively impacting gross margins.
The Company has made considerable efforts to identify and evaluate
strategic alternatives, including strategic partnerships. In June 2001, the
Company's e-Learning subsidiary, GoTrain Corp. entered into a five-year
strategic partnership agreement with SmartForce (now merged with SkillSoft) to
co-develop and distribute ES&H and regulatory content via the SmartForce
internet platform. Under the agreement, GoTrain retained ownership of its
proprietary content and shared in the revenue of any GoTrain content sold by
SmartForce. As part of the agreement, GoTrain was required to make an initial
and quarterly payment SmartForce for platform license and maintenance, and
integration of existing GoTrain content. Minimum net payments due by GoTrain
over the remaining period of the agreement totaled $1.2 million at December 31,
2002. In June 2002, SmartForce announced that it had entered into an agreement
to merge with SkillSoft, another e-Learning company, which was completed in
September 2002. The surviving entity, know as SkillSoft, assumed GoTrain's
agreement with SmartForce. In late 2002, due to the lack of achieving expected
revenue growth over the first 18 months, GoTrain notified SkillSoft of a desire
to restructure the agreement.
Separately, GoTrain was able to raise $1.5 million in subordinated debt in
early 2002; however, the cash infusion proved insufficient in light of
slower-than-expected revenue growth. In the third quarter of 2002, the Company
sought unsuccessfully additional external equity or working capital funding for
the e-Learning enterprise. As previously reported, although management believed
that the e-Learning segment has significant future potential, it was unable to
identify funding sources beyond what it had previously raised in capital for
that segment.
13
To address the diminishing cash resource generation within the
Professional and Technical Services Segment, management also contacted numerous
potential debt and equity financial investors, including existing investors.
However, such discussions failed to generate necessary funding for the Company
or its subsidiaries. After completing their respective due diligence processes,
all potential and existing investors declined to enter into meaningful
negotiations.
As previously announced, the Board of Directors then concluded, in light
of the extensive and unsuccessful efforts to locate a strategic or an investment
partner for the Company, that it would be in the best interest of the
shareholders to pursue the possibility of a merger, sale of assets or closure of
the operating subsidiaries, collectively or individually.
Management then contacted a number of companies that it thought might have
an interest in merging or purchasing assets from the subsidiaries. The list of
prospects represented the collective knowledge of companies that were either
currently active in the e-Learning or Professional and Technical Services
markets or which the Company believed could have an interest in that market.
Management attempted to schedule meetings with each of the prospective parties
and subsequently solicited indications of interest from such parties.
The Company did not receive any expressions of merger interest from the
parties for the e-Learning business, but an offer was received from its
strategic partner, SkillSoft, for the e-Learning assets. The initial agreement
to purchase the assets from GoTrain was struck at a level which was expected to
generate sufficient working capital for the Company to possibly redeploy its
resources within other operating environments. However, after further
contemplation of the general economic conditions, recent purchase prices paid
for similar assets within the e-Learning market, and due diligence efforts by
the buyer, the price offered was reduced prior to finalization of the agreement.
Although the offered proceeds were considered by the Company to be a reasonable
price for the assets sold, they did not provide surplus working capital.
Similarly, the Company did not receive any expressions of merger interest
from the independent parties approached for the Professional and Technical
Services Segment's two subsidiaries: TENERA Energy, LLC ("Energy") and TENERA
Rocky Flats., LLC ("Rocky Flats"). Thereafter, late in the first quarter of
2003, the Company reached agreement to transfer the ownership and operations of
management of Energy to the former employees of the subsidiary. Late in the
second quarter of 2003, a Rocky Flats joint venture partner, The S.M. Stoller
Corporation, advised the Company that it was interested in assuming the
obligations of certain Professional and Technical Services Rocky Flats site
contracts and joint venture interests.
As a result of these three separate sets of negotiations, sales of each of
the subsidiary business operations were completed by June 30, 2003. On July 15,
2003, the Board determined, based upon the expected net cash proceeds from the
completed sales and management's belief that the Company would not be able to
reduce expenses and personnel further, that the Company would not able to fund
the reestablishment of an operating entity in order to profitably sell and
market a product or service. The Board also reviewed projected estimates of
expenses associated with an orderly liquidation of TENERA, as well as the cash
on hand as of June 30, 2003. Since the Company did not have any offers to
purchase the remaining non-operating assets, such as trade and note receivables,
furniture, and office equipment, at this time or to terminate favorably its
long-term obligations, the Company was unable to effectively estimate the value
of the net assets upon liquidation. The Board also considered other bankruptcy
alternatives (such as provided for by the U.S. Bankruptcy Code) but believed
that such alternatives would likely result in higher transaction costs and
longer delays, further minimizing any possible distributions to shareholders.
For these reasons, on July 15, 2003 the Board of Directors concluded that
the dissolution and liquidation would have the highest probability of returning
the greatest value to the shareholders. However, liquidation and dissolution may
not create value to the shareholders or result in any remaining capital for
distribution to the shareholders. The Company cannot assure the precise nature
and amount of any distribution to the shareholders pursuant to the plan of
dissolution. Uncertainties as to the precise net value of the non-cash assets
and the ultimate amount of liabilities make it difficult to predict with
certainty the aggregate net value, if any, ultimately distributable to the
shareholders. The actual nature and amount of all distributions will depend in
part upon the ability to convert the remaining non-cash assets into cash. The
14
Company cannot be certain of the final amount of the liabilities. The following
factors will affect the amount of cash, if any, that will be available for
distribution to shareholders:
The proceeds from escrowed assets may be less than anticipated if GoTrain does
not enjoy favorable outcomes in the completion of the outstanding obligations
from the sale of the e-Learning assets.
GoTrain is obligated under the asset purchase agreement for the e-Learning
assets (the "SkillSoft Agreement") to i) complete the development of 25
e-Learning courses, ii) deliver Working Capital (as defined by the SkillSoft
Agreement) with value of $5,000, and to iii) indemnify the warranties and
representations of the SkillSoft Agreement for a period of one year. Funds
totaling $500,000 were set aside in escrow to meet these commitments and will be
released to the parties in accordance with the terms of the SkillSoft Agreement.
The costs of the course development were borne by TENERA's subsidiary, GoTrain
Corp., from the net proceeds of the sale of assets and were completed on an
outsourced fixed-price basis with former employees. On or about July 22, 2003,
the Company satisfied the course development obligation and received
notification of the release of $100,000 from the escrow account. The Company has
provided SkillSoft with its Working Capital calculations and believes that the
requirements for the transfer of Working Capital have been met and is awaiting
SkillSoft's concurrence, which is expected in the third quarter of 2003. There
can be no assurance that the Working Capital obligation or the indemnity period
will close without drawing down on escrowed funds. The actual nature and amount
of all distributions will depend in part upon our ability to release the
remaining escrowed funds to TENERA. If the Company does not enjoy favorable
outcomes in the completion of the outstanding escrowed obligations, it may not
generate meaningful cash, if any to return to the shareholders.
The Company may not be able to collect all of the retained receivables.
The Company has retained receivables of approximately $240,000 related to
the Energy subsidiary's business that have remained unpaid in excess of six
months. Although the Company maintains that the amounts outstanding are due and
payable under the terms of the client agreements and has delivered a written
demand for payment, there can be no assurance that the client will honor the
agreement. If necessary, the Company may pursue legal recourse to affect
collection; however such a course of action would also utilize cash resources to
pay for litigation support costs while not providing a guaranteed successful
outcome. Any litigation could delay or even prevent the Company from completing
the plan of dissolution. If the Company does not enjoy favorable outcomes in the
collection of the outstanding receivables, it may not generate meaningful cash,
if any to return to the shareholders.
The Company may not be able to settle all of the obligations to creditors.
The Company has current and future obligations to creditors. These
include, without limitation, long-term contractual obligations associated with
business agreements with customers and other third parties. As part of the wind
down process, the Company will attempt to settle the obligations with the
creditors. If the Company cannot reach an agreement with a creditor concerning
an obligation, including its landlord, that creditor may choose to bring a
lawsuit against the Company. Any litigation could delay or even prevent the
Company from completing the plan of dissolution. Moreover, amounts required to
settle the obligations to creditors will reduce the amount of remaining capital
available for distribution to shareholders.
The Company will continue to incur claims, liabilities and expenses which will
reduce the amount available for distribution to shareholders.
Claims, liabilities and expenses from operations (such as operating
costs, salaries, directors' and officers' insurance, payroll and local taxes,
legal, accounting and consulting fees and miscellaneous office expenses) will
continue to be incurred as the Company winds down. These expenses will reduce
the amount of assets available for ultimate distribution to shareholders. If
available cash and amounts received on the sale of non-cash assets are not
adequate to provide for the obligations, liabilities, expenses and claims, the
Company may not be able to distribute meaningful cash, or any cash at all, to
the shareholders.
15
The Company may not have fully reserved for or identified all obligations owing
to third parties, including obligations to government agencies.
Although the Company has continuously maintained an adequate system of
reporting to identify and reserve for obligations owing to third parties, there
can be no assurance that all obligations, including those to government agencies
are known at this time. If additional third party obligations are identified,
the Company may not be able to distribute meaningful cash, or any cash at all,
to the shareholders.
Distribution of assets, if any, to the shareholders could be delayed.
The Company is currently unable to predict the precise timing of any
distribution pursuant to the wind down. The timing of any distribution will
depend on and could be delayed by, among other things, the timing of sales of
the non-cash assets, conversion of outstanding receivables, claim settlements
with creditors and the successful closure of the escrowed funds described above.
Additionally, a creditor could seek an injunction against the making of
distributions to the shareholders on the ground that the amounts to be
distributed were needed to provide for the payment of the liabilities and
expenses. Any action of this type could delay or substantially diminish the
amount available for distribution to the shareholders.
The Company has been notified of delisting from the American Stock Exchange
("AMEX").
The Company was notified on June 13, 2003 that it did not meet certain of
the Exchange's continued listing standards. On June 25, 2003, the Company
submitted a response acknowledging the notification and stating that it would
conduct a review of the alternatives available to the Company. The Company also
announced on July 1, 2003 in a press release that there could be no assurance
however that the Company would be able to present a plan that will meet the
continued AMEX listing standards, or if it did not, would be able to provide an
alterative market for its outstanding shares. Subsequent to July 15, 2003, the
Company notified the AMEX of the Board of Directors resolution to wind up and
dissolve the Company and its recommendation for approval from the Company's
shareholders. On July 16, 2003, the AMEX contacted the Company to announce that
in light of the information received from the Company, it had halted trading of
the common stock on the Exchange pending a move to delist the Company.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Company has minimal exposure to market and interest risk as the
Company invests its excess cash in short-term instruments which mature within 90
days from the date of purchase. The Company does not have any derivative
instruments.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our chief executive officer and chief financial officer, after evaluating
our "disclosure controls and procedures" (as defined in Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-14(c) and 15-d-14(c)) as of a date (the
"Evaluation Date") within 90 days before the filing date of this quarterly
report on Form 10-Q have concluded that as of the Evaluation Date, our
disclosure controls and procedures are effective to ensure that information we
are required to disclose in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.
(b) Changes in internal controls.
Subsequent to the Evaluation Date, there were no significant changes in
our internal controls or in other factors that could significantly affect our
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
16
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.0 Statement regarding computation of per share earnings: See Notes
to Consolidated Financial Statements
99.1(1) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002
(Jeffrey R. Hazarian - Chief Executive Officer and Chief
Financial Officer)
(b) Reports on Form 8-K
A Form 8K, dated June 4, 2003, was filed with the SEC on June 19,
2003, reporting on the sale of all assets of GoTrain Corp to
SkillSoft Corporation.
A Form 8K, dated July 15, 2003, was filed with the SEC on July
23, 2003, reporting on the proposal of a plan of dissolution for
ratification and approval by shareholders.
A Form 8K, dated June 30, 2003, was filed with the SEC on July
25, 2003, reporting on the transfer of the Company's remaining
contracted work scopes for the Department of Energy sites to The
S.M. Stoller Corporation.
___________________________
(1) Filed herewith
17
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: August 11, 2003
TENERA, INC.
By /s/ JEFFREY R. HAZARIAN
---------------------------------------------------
Jeffrey R. Hazarian
Chief Executive Officer and Chief Financial Officer
18
CERTIFICATION
I, Jeffrey R. Hazarian, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TENERA,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state 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 officer 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 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 officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors:
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 officer and I have indicated
in this quarterly report whether 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.
Dated: August 11, 2003 /s/ JEFFREY R. HAZARIAN
---------------------------------------------------
Jeffrey R. Hazarian
Chief Executive Officer and Chief Financial Officer
19
EXHIBIT INDEX
Ex. 99.1 Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of
2002 (Jeffrey R. Hazarian - Chief Financial Officer and
Executive Vice
President)