SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: October 28, 1996
TENET INFORMATION SERVICES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Utah 0-18113 87-0405405
__________________ ________________ _____________________
(State or other (Commission File No.) (IRS Eployer ID No.)
jurisdiction of
incorporation)
4885 South 900 East Suite #107
Salt Lake City, Utah 84117
--------------------------------
(address of principal executive offices, including zip code)
801-268-3490
------------
(Registrant's telephone number including area code)
<PAGE>
TABLE OF CONTENTS
Item 2. Acquisition or Disposition of Assets 1
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Financial Statements and Pro Forma
Financial Information 1
b. Exhibits 1
SIGNATURES 2
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Effective September 29, 1995, Tenet Information Services, Inc., (the
"Company") and National Microcomputer Corporation, ("NMC") approved the
terms of an Agreement and Plan of Reorganization pursuant to which NMC was
merged with and into Tenet Merger Subsidiary, Inc., a wholly owned
subsidiary of the Company incorporated for the purpose of effecting the
merger. NMC develops and markets an integrated information
management/patient tracking system designed specifically for use in
hospital emergency departments.
Three million shares of the Company's common stock were exchanged for all
outstanding shares of NMC. The three million shares were valued at
$420,000. In connection with the merger, the Company also entered into
three-year employment agreements with NMC's major shareholders and a key
employee. In addition , the Company entered into consulting agreements
with two additional shareholders of NMC. The terms of the merger and the
related employment and consulting agreements were determined through arms'
length negotiations conducted by the principals of the Company and
representatives of NMC. There was no relationship between the owners of
NMC and the Company or any of its affiliates, any director or officer of
the Company or any associate of any such director or officer.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired: Page
------
- Report of Independent Public Accountants F-1
- Balance Sheet at June 30, 1995 F-2
- Statements of Operations for the years ended
June 30, 1995 and 1994 F-3
- Statements of Shareholders' Equity (Deficit)
for the years ended June 30, 1995 and 1994 F-4
- Statements of Cash Flows for the years ended
June 30, 1995 and 1994 F-5
- Notes to Financial Statements F-6
(b) Pro Forma financial information:
The following unaudited proforma acquisition information for fiscal 1996
and 1995 presents the results of operations as if the NMC acquisition had
occurred at the beginning of fiscal 1995, after giving effect to the write-
off of the excess purchase price totaling $509,884. The write-off of
excess purchase price is a nonrecurring charge which resulted directly from
the transactions and therefore has been excluded from the following pro
forma information. The proforma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have
occurred had the acquisitions been made at the beginning of fiscal 1995 as
described above or of the results which may occur in the future.
Unaudited Pro Forma Results of
Operations
Years ended June 30
-------------------
1996 1995
------ ------
Revenues $1,140,792 $695,519
Loss from operations (634,363) (354,976)
Net Loss (1,197,972) (372,963)
Net loss per common share (.11) (.05)
(c) Exhibits:
The following document is incorporated by reference to the Company's report
on Form 10-K dated October 14, 1995 for the year ended June 30, 1995.
2.2 Agreement and Plan of Reorganization
<PAGE>
NATIONAL MICROCOMPUTER CORPORATION
FINANCIAL STATEMENTS
AS OF JUNE 30, 1995 AND
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To National Microcomputer Corporation:
We have audited the accompanying balance sheet of National MicroComputer
Corporation (a California corporation) as of June 30, 1995, and the related
statements of operations, shareholders' equity (deficit) and cash flows for
each of the two years in the period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 1, the Company has experienced recurring losses from
operations and as of June 30, 1995 has a working capital deficit of $81,301
and a shareholders' deficit of $35,715. Subsequent to June 30, 1995, the
Company was merged into Tenet Information Services, Inc. ("Tenet"). Tenet
also has experienced recurring losses from operations and its ability to
fund the combined operations is dependent upon obtaining additional debt or
equity capital. Tenet has been successful in recently raising $252,000 of
equity capital. However, there can be no assurance that the combined
operations of Tenet and National MicroComputer Corporation will generate
positive cash flows or profitable results.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of National MicroComputer
Corporation as of June 30, 1995, and the results of its operations and its
cash flows for each of the two years in the period then ended in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
November 17, 1995
F-1
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NATIONAL MICROCOMPUTER CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1995
ASSETS
CURRENT ASSETS:
Cash $ 58,899
Accounts receivable, net of allowance
for doubtful accounts of $7,500 104,004
Prepaid expenses and other 19,027
---------
Total current assets 181,930
DEFERRED SOFTWARE COSTS, net of accumulated
amortization of $19,511 42,618
EQUIPMENT, net of accumulated depreciation
of $4,889 2,968
---------
Total assets $ 227,516
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 12,987
Deferred revenue 248,318
Other 1,926
---------
Total current liabilities 263,231
---------
CONTINGENCIES (Note 1)
SHAREHOLDERS' DEFICIT:
Common stock, no par value; 1,000,000 shares
authorized, 2,439 shares issued and 66,597
outstanding
Accumulated deficit (102,312)
---------
Total shareholders' deficit (35,715)
---------
Total liabilities and shareholders'
deficit $ 227,516
=========
The accompanying notes to financial statements
are an integral part of this balance sheet.
F-2
<PAGE>
NATIONAL MICROCOMPUTER CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
1995 1994
-------- --------
REVENUES $326,473 $282,582
-------- --------
COSTS AND EXPENSES:
Cost of revenues 143,016 64,180
Sales and marketing 107,313 112,210
Software development 71,268 63,152
General and administrative 41,262 44,032
-------- --------
362,859 283,574
-------- --------
LOSS FROM OPERATIONS (36,386) (992)
OTHER EXPENSE (353) (10,017)
-------- --------
LOSS BEFORE PROVISION FOR INCOME
TAXES (36,739) (11,009)
PROVISION FOR INCOME TAXES (800) (800)
-------- --------
NET LOSS $(37,539) $(11,809)
======== ========
The accompanying notes to financial statements
are an integral part of these statements.
F-3
<PAGE>
NATIONAL MICROCOMPUTER CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
Common Accumulated
---------------- -----------------
Shares Amount Deficit Total
------ ------ ------- -----
BALANCE, June 30, 1993 1,572 $ 1,572 $ (52,964) $(51,392)
Issuance of common
stock for cash at
approximately $75
per share 459 34,395 - 34,395
Issuance of common
stock for services at
approximately $75
per share 408 30,630 - 30,630
Net loss - - (11,809) (11,809)
----- ------- --------- --------
BALANCE, June 30, 1994 2,439 66,597 (64,773) 1,824
Net loss - - (37,539) (37,539)
----- ------- --------- --------
BALANCE, June 30, 1995 2,439 $66,597 $(102,312) $(35,715)
===== ======= ========= ========
The accompanying notes to financial statements
are an integral part of these statements.
F-4
<PAGE>
NATIONAL MICROCOMPUTER CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
Increase (Decrease) in Cash
1995 1994
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(37,539) $(11,809)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Issuance of common stock for services - 30,630
Depreciation and amortization 21,932 9,447
Loss on sale of equipment 709 -
(Increase) decrease in operating
assets:
Accounts receivable (60,129) 40,473
Prepaid expenses and other (14,956) 227
Increase (decrease) in operating
liabilities:
Accounts payable 6,326 (19,917)
Deferred revenue 195,814 (5,631)
Deferred salaries (65,220) (34,364)
Other current liabilities (7,533) (5,833)
-------- --------
Net cash provided by operating
activities 39,404 3,223
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (450) (3,696)
Additions to deferred software costs (17,140) (28,277)
-------- --------
Net cash used in investing
activities (17,590) (31,973)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock - 34,395
-------- --------
NET INCREASE IN CASH 21,814 5,645
CASH AT BEGINNING OF YEAR 37,085 31,440
-------- --------
CASH AT END OF YEAR $ 58,899 $ 37,085
======== ========
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE>
NATIONAL MICROCOMPUTER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE BUSINESS
National MicroComputer Corporation (the "Company"), a California
corporation, designs and markets computer-based medical and health
information systems used in certain hospital emergency departments and
urgent care centers. The Company sells its computer software license
rights to hospitals throughout the United States. In addition, the Company
sells maintenance contracts for telephone support of the licensed software
systems. Substantially all of the Company's revenues have been generated
from hospitals and, therefore, the Company's financial performance is
partially dependent on the viability of the healthcare economic sector.
The Company is subject to various risks associated with companies in a
similar stage of operations including dependence on key individuals,
potential competition from larger and more established companies, and the
need to maintain adequate sources of financing.
The Company has experienced recurring losses from operations and as of
June 30, 1995 has a working capital deficit of $81,301 and a shareholders'
deficit of $35,715. As discussed in Note 6, subsequent to June 30, 1995,
the Company was merged into Tenet Information Services, Inc. ("Tenet").
Tenet also has experienced recurring losses from operations and its ability
to fund the combined operations is dependent upon obtaining additional debt
or equity capital. Tenet has been successful in recently raising $252,000
of equity capital. However, there can be no assurance that the combined
operations of Tenet and the Company will generate positive cash flows or
profitable results.
(2) SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position No. 91-1, "Software Revenue Recognition."
Revenues are generated from the sale of software licenses, installation of
information systems and related software customization and enhancements.
In addition, revenues are generated from annual software support and main-
tenance. Sales of software licenses and installation revenues are
recognized at the time a system is installed, accepted and customer
personnel are trained in the system's use. Software customization and
enhancement revenue is recognized upon completion and customer acceptance.
Revenues from annual software support and maintenance are recognized
ratably over the term of each contract.
F-6
<PAGE>
Equipment
Equipment consists of computer equipment and office furniture and is stated
at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets ranging from three to five
years.
Software Development Expense
The costs of new product research and development are charged to expense
in the year incurred.
Income Taxes
The Company recognizes a liability or asset for the deferred tax
consequences of temporary differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements that
will result in taxable or deductible amounts in future years when the
reported amounts of the assets or liabilities are recovered or settled.
For income tax reporting purposes, the Company has elected to use the cash
basis of accounting.
Warranty Costs
A 90-day limited warranty is provided on sales of software licenses.
Warranty costs since inception of the Company have not been material in any
year and are expensed as incurred.
(3) DEFERRED REVENUE
Sales of software licenses are generally billed in three installments:
(1) at contract inception, (2) at installation, and (3) from 60 to 90 days
after installation. Amounts billed in advance of installation are recorded
as deferred revenue until installation has been completed.
Annual software support and maintenance agreements are generally billed in
advance at the beginning of each one year term and are recorded as deferred
revenue. Support and maintenance generally commence at the completion of
the 90-day warranty period.
As of June 30, 1995, deferred revenue includes $161,239 from sales of
software licenses and $87,079 from annual software support and maintenance
contracts.
(4) DEFERRED SOFTWARE COSTS
The Company capitalizes computer software development costs subsequent to
the establishment of technological feasibility. Technological feasibility
for the Company's computer software products is based upon achievement of a
detail program design free of high-risk development issues. The
establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized computer software development costs requires
considerable judgment by management with respect to certain external
factors, including, but not limited to, technological feasibility,
anticipated future gross revenues, estimated economic life and changes in
software and hardware technology. Costs incurred prior to the
establishment of technological feasibility are expensed as software
development costs in the accompanying statements of operations.
F-7
<PAGE>
Amortization of deferred software costs is provided on a product-by-product
basis at the greater of the amount computed using: (1) the ratio of current
gross revenues for a product to the total of current and anticipated future
gross revenues or (2) the straight-line method over the remaining estimated
economic life of the product. Estimated economic lives of three years have
been assigned to deferred software costs. Amortization amounted to $17,033
and $2,478 for fiscal years 1995 and 1994, respectively. Amortization is a
component of cost of revenues in the accompanying statements of operations.
(5) INCOME TAXES
The provision for income taxes for the years ended June 30, 1995 and 1994
reflects minimum state income tax expense. During the year ended June 30,
1995, the Company utilized approximately $5,200 of tax net operating loss
carryforwards and $200 of research and development tax credits to offset
$3,200 of current federal income taxes and $2,200 of current state income
taxes.
The components of the net deferred income tax assets as of June 30, 1995
and 1994 are as follows:
June 30, June 30,
1995 1994
--------- ---------
Net operating loss carryforwards $ - $ 5,200
Accrual to cash basis differences 23,400 9,500
Tax credits 13,200 8,800
-------- --------
Total net deferred tax assets 36,600 23,500
Valuation allowance (36,600) (23,500)
-------- --------
Net deferred tax assets $ - $ -
======== ========
The Company has research and development tax credit carryforwards of
approximately $13,200 as of June 30, 1995.
(6) SUBSEQUENT EVENT
On September 29, 1995, the Company's shareholders and Tenet Information
Services, Inc. ("Tenet") of Salt Lake City, Utah, approved the terms of an
Agreement and Plan of Reorganization (the "Agreement"), pursuant to which
the Company was merged with and into Tenet Merger Subsidiary, Inc., a
wholly owned subsidiary of Tenet which was formed for purposes of effecting
the merger. The Agreement provided for shareholders of the Company to
receive 3,000,000 shares of Tenet's common stock in exchange for all
outstanding shares of the Company.
F-8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Fred J. Anderson
_____________________________________
Fred J. Anderson, Chief Financial Officer
Dated: October 28, 1996
