FORM 10-K(SB)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended June 30, 1999
[ ] 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 No.
0-18113
TENET INFORMATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0405405
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4885 SOUTH 900 EAST #107
SALT LAKE CITY, UTAH 84117
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (801) 268-3480
__________________________________________________________
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock
(Title of Class)
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 and 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. (1) Yes_X__ No_____ (2) Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K, or any amendment to this Form 10-K [ ].
The number of shares outstanding of the Registrant's Common Stock as
of June 30, 1999 was 19,065,892.
TABLE OF CONTENTS
Page #
PART I
Item 1 Business 1
Item 2 Properties 7
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a Vote of
Security Holders 7
PART II
Item 5 Market for the Registrant's Common Equity
and Related Stockholder Matters 7
Item 6 Selected Financial Data 8
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operation 8
Item 8 Financial Statements 12
Item 9 Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure 13
PART III
Item 10 Directors, Executive Officers, Promoters
and Control Persons of the Registrant:
Compliance with Section 16)a)
of the Exchange Act 13
Item 11 Executive Compensation 14
Item 12 Security Ownership of Certain Beneficial Owners
and Management 16
Item 13 Certain Relationships and Related Transactions 16
Item 14 Exhibits and Reports on Form 8-K 25
SIGNATURES
EXHIBITS Attached
ITEM 1: BUSINESS
GENERAL
In 1978, Telemed Cardio Pulmonary Systems ("Telemed") purchased a
pulmonary testing business based in Salt Lake City, Utah. Telemed's
business was developed from research performed at the University of
Utah on computer applications in medical data processing. Telemed
later became a division of Becton Dickinson & Co. ("Becton"), a
conglomerate of companies dealing primarily in disposable medical
supplies. Telemed's primary focus was in developing and marketing
diagnostic computer systems used in pulmonary testing and analysis.
In 1983, Becton's management decided to sell the high technology
pulmonary and respiratory care business. The Company was organized
on February 24, 1984 by employees of Telemed to purchase Telemed's
pulmonary and respiratory care information services business. In
March 1984, the Company purchased that business for cash and a
promissory note payable to Becton. The Company then repositioned
its business to focus on providing the RCMS family of products, with
a view to offering cost-effective information systems that allow
health care institutions to provide better care at less cost. The
Company built and serviced much of its mini-computer based hardware
and developed its own proprietary software, all state of the art for
the mid-eighties.
By 1988, annual revenue had grown to $2.4 million and the Company
completed an initial public offering of its common stock through
Schneider Securities in 1989. By September 15, 1989, 23 hospitals
were using the Company's respiratory care management systems (then
referred to as "RCMS") and the Company employed 23 full and
part-time employees.
Over time, with improvements in computer hardware and performance,
the mini-computer based product became dated. With the entrance of
two P.C. based competitors, the market shifted away from the
Company's Respiratory product. The last RCMS sale was made in
January 1991. The Company launched a technical development effort
to create a new generation of products and meet the competitive
challenge. New technology required new programmers, and in 1994 a
new senior management team was put in place.
A newly developed system, designated as the RCMS/X, was designed to
use off-the-shelf P.C. hardware, commercially available software
such as a UNIX operating system and the ORACLE relational data base.
The system's open architecture allowed it to share information
easily with other computers and networks. In 1993, the first two
Beta sites were installed and the system was thoroughly tested. In
the spring of 1995, after more than three years of development and
testing, a production system RCMS/X, including handhelds and
hospital interfaces was installed. There have not been any further
installations of the RCMS/X since 1995, when the Company decided to
focus its development efforts on its new Emergency Department
Management System.
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ACQUISITIONS:
INTERNATIONAL HEALTHCARE CONSULTING GROUP ACQUISITION
Effective September 5, 1995, the Company acquired certain assets of
The International HealthCare Consulting Group ("HCG"). The assets
acquired included certain accounts receivable, equipment, software
products and other intangible assets. In exchange for the assets
acquired, the Company agreed to issue 50,000 shares of its common
stock and assume $30,000 of debt.
In connection with the assets purchased, the Company also entered
into three-year employment agreements with HCG's two principal
shareholders and agreed to issue certain warrants to purchase common
stock and to grant certain options to purchase common stock based on
future performance.
HCG provides healthcare institutions, mainly hospitals, with
professional high-quality, cost effective, consulting services,
which produce a more efficient, lower cost care delivery model while
maintaining the highest quality of care standards. Consulting
services are provided in the following areas:
Nurse Staffing and Patient Classification
Cost Benefit Analysis for Computerized Patient Records (CPR)
Productivity
Cost Accounting
Operations Assessment
Modeling and Simulation
NATIONAL MICROCOMPUTER CORPORATION MERGER
On September 29, 1995, the Company and National MicroComputer
Corporation ("NMC") approved the terms of an Agreement and Plan of
Reorganization (the "Agreement") 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 developed and marketed an integrated information
management/patient tracking system (EDNet) designed specifically for
use in emergency departments.
Emergency Department Network System
Dr. Richard Gwinn, MD, an emergency medicine professional, founded
NMC in California in 1979. NMC originated the concept of a
computerized patient tracking and information management system
dedicated to emergency department operations. The Emergency
Department Network ("EDNet") was first developed in 1989. Early
versions ran on highly proprietary hardware and software with
limited flexibility and functionality.
In 1991, a decision was reached to completely rewrite and expand the
original EDNet software. The first installation of EDNet, version
3, occurred in April 1992. This version was designed for IBM
compatible PCs and utilized standard operating systems and database
software. With this version the cost of ownership of EDNet was
reduced substantially.
EDNet, is an integrated information management/patient tracking
system designed specifically for use in emergency departments. It
is a collaborative information management tool used in real time by
clinical and management personnel to collect data and provide
information at the most efficient points in the patient care
process. Demographic information is collected at registration
either by way of an interface from the main hospital information
system registration function or directly through the EDNet
registration process. Clinical flow information is generated and
recorded through the tracking system and at the time of discharge
through use of custom configured discharge routines. Auxiliary data
may be added at any time. Information is stored in linked
relational databases which are completely open and non-proprietary,
accessible both within the system and through other compatible
applications on a shared basis.
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EDNet is currently in its fifth release, (EDNet 32) as a Windows
95/NT compliant product. Recent enhancements include discharge
aftercare instructions database, a user-sortable patient tracking
display and the development of triage assessment protocols, auto
faxing, and auto paging. EDNet 32 for Windows was released in the
spring of 1998.
System Architecture - EDNet32 is written in Borland C++ Builder
using the Borland Database Engine. All permanent databases and most
control files use Paradox level 7 tables. Files are compatible with
either Borland Paradox 7 or Corel Paradox 8. EDNet32 is supplied
complete with all necessary licenses. EDNet 32 runs under Microsoft
Windows 95 or later along with other applications. The system can
be tied to mulitple data bases such as Oracle, Sybase, Informix,
Sequel Server and Paradox.
Hardware - EDNet32 Version 5.x runs on a standard Novell network
(3.11 or better) or Microsoft NT Server with Windows 95 or later
workstations. The Company recommends a Pentium-based server with at
least 2 GB of disk storage capacity. The server should be equipped
with mirrored drives for data security. Optical disk or tape drives
are recommended for backup and archive storage. The server should
be supported by an Intelligent uninterruptible power supply (UPS).
The server must be suitable for use with Novell Network, v.4.1.
Network communications hardware (Ethernet, Token Ring, 10BaseT)
should be certified by Novell. The Company supplies a fully
licensed copy of Paradox 7.0 with every EDNet system.
Individual workstations should be Pentium II's or better, with at
least 32MB of RAM. Workstations must fully support SVGA color
graphics. Stations should have Windows installed. In addition to
the appropriate number of end-user workstations, Tenet recommends a
dedicated station for remote access communication and a dedicated
station for interfaces from the hospital-wide information system. A
56K baud modem is required. PC Anywhere should be installed on the
communications station.
Tracking Functions - The EDNet Patient Tracking module replaces the
grease board, chalk board, magnets and markers with an on-screen
display, continuously updated and distributed throughout the
Emergency Department.
The EDNet Patient Tracking module is the heart of the EDNet System.
EDNet status screens are distributed throughout the emergency
department so up-to-the-second information on every patient is
available at a glance from wherever providers are currently working.
There is no need to return to a central point to check on the
status of orders, determine which patients have priority, or
discover the types of problems that have just been presented at
Triage. Updates from Triage, Registration, Order Communications and
Discharge are displayed immediately throughout the emergency
department.
EDNet provides color coded status screens for designated emergency
department areas such as Triage, Registration, Treatment1,
Treatment2, Trauma, Pediatrics, Major Medical, Fast Track, Holding,
Out in the Hall, etc. During system configuration customers
determine how to designate emergency department areas on their EDNet
System.
Following installation of EDNet, the department becomes quieter and
less hectic. Communication among staff is facilitated by convenient
interaction with the EDNet System and vital information is not
erased, but instead, recorded.
Time and Motion - EDNet Tracking Module keeps a time stamp record of
every patient visit. The system automatically records triage time,
the time a patient is registered, the time when a patient is made
ready to be seen, a patient is seen by a physician, orders are
placed, orders acknowledged, results available, the order is cleared
and three specific events in the discharge process. Time stamps and
all associated data become available for various analytical studies.
The goal is an accurate picture of emergency department operations,
greater efficiency, lower waiting times, faster turn around on
orders, and improved patient care.
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Triage Function - EDNet provides the ability to create triage
procedures that meet requirements for intake and initial assessment
of ambulatory patients. This function is separate from but fully
integrated with the Registration Module. Triage may take place
either before or after patient registration, as the patient's
medical condition requires. Data is merged when both functions have
been completed. The triage assessment function contributes to the
EDNet database to improve the quality management, research and
outcome tracking.
Order Entry Module - Automating the order process while maintaining
a database offers department managers improved turn around times and
may significantly impact costs. EDNet Order Entry Module (Optional)
allows users to automate the order requisition process while
simultaneously completing a detailed database entry for all
departmental orders. Physicians and nurses gain a simple,
consistent means of entering order information and generating a
requisition when appropriate. Unit clerks and technicians receive
consistent print or screen-based output.
Order status indicators display on the EDNet Tracking Screens and
detailed query capability is always available. Providers will know
precisely the elapsed time between steps in the order process.
EDNet Order Entry software records four time stamps in the permanent
database: Order placed, Order acknowledged, Results available and
Results reviewed. EDNet Report Writers can be used to examine the
order process in detail to improve turn around times, minimize
unnecessary procedures and generate a wide variety of routine
reports and ad hoc studies.
The EDNet Order Entry Module can be interfaced with laboratory or
other ancillary departmental systems or with the main hospital
information system (HIS). The Standard Order Status Interface
carries automated status notification flags from HIS order
communications software to the EDNet Tracking Screens. Additional
interface capability is offered on a custom basis. All EDNet
interfaces are available in HL-7 format.
Prescription Function - EDNet Prescription Writer generates printed,
signature ready prescriptions at discharge or at any time during or
after the patient visit. Warnings and instructions relating to
prescribed medication may be automatically incorporated into patient
discharge instructions.
The significance of an integrated prescription writer extends far
beyond the printing of the prescription itself. As the prescription
information is input, database files are simultaneously completed.
These database files may be used for many important medical and
quality management functions such as follow up of culture results,
utilization summaries, formulary management, and analysis of
patterns of antibiotic sensitivities.
Data tables are established during system configuration. Typically
menus list physicians, drug category, formulary, quantity, dosage,
frequency and special instructions. Password security can be
applied. Charges for each medication may be indicated if desired.
Data tables can be updated easily by emergency department managers,
information services personnel or by the Tenet support staff, using
remote access capability.
Charge Entry Module - Recording charges at the point of service
reduces lost revenues and produces an accurate record which can be
used to verify payments.
EDNet Charge Entry Module (optional) allows users to enter charges
at any time during the patient visit. Charges may also be recorded
during the discharge process or in a batch mode after a visit.
EDNet records charges in a specialized data base table that can be
configured to generate a flexible report of charges for individual
patients, all patients or special subsets of patients. Reports can
describe specific visits, a daily summary of all visits or various
date and hourly ranges may be selected. Reports are configured
through a selection of menus by authorized personnel. Reports may
be viewed on the screen, printed or sent to a computer file in HL-7
format for transmission to the hospital billing function.
Discharge Functions - EDNet aftercare instructions are selected from
a database of more than 1,000 aftercare instructions and are printed
individually for each patient. Instructions are available in both
English and Spanish. English instructions may be selected for
either a fifth grade reading level or a ninth grade reading level.
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EDNet Discharge Module is extremely flexible. During configuration,
various discharge procedures are created to handle standard
discharge, hospital admission, transfer, workers compensation cases,
trauma registry and other situations. A comprehensive ICD-9 code
database is available. Various database menus may be included to
record additional details of a patient visit.
Hospitals may wish to accompany the discharge instructions with
pertinent information about the facility. Individual instructions
are stored in an extensive database, and are chosen from a menu
where they can be catalogued by a physician, and related to ICD-9
codes. Free-form instructions are fully supported and multiple
instructions may be selected. Instruction sets may be imported from
other discharge instruction generating systems.
Multiple languages are supported by the system. Any set of
discharge instructions kept in the database, in up to 26 languages
and variations, may be selected upon discharge. The discharging
personnel need not be familiar with that language.
Management Report Writer - The EDNet system can be configured to
exceed all applicable JCAHO requirements. Data is collected
consistently, for all patients, all the time, without the need for
redundant entry or additional staff.
EDNet contains an open, relational database configured to create a
variety of standard and recurring reports and available for ad hoc
inquiries as well. EDNet will generate and recall logs, routinely
run statistical and comparative analyses and with the recently added
Crystal Reports feature, display graphical reports to answer
management questions without paging through charts and medical
records. Virtually any type of report desired can be constructed
from the standard report writing menus or by using the ad hoc report
writing capability of the databases.
Other Features of the latest version, EDNet32 include auto faxing,
auto paging, industrial medicine components, forms management and
the like.
MARKETING
The Company's marketing efforts are directed at broadening the
market for its products by increasing awareness among directors of
emergency departments and chief information officers. In support of
its sales efforts, the Company conducts programs that include
advertising, direct mail, trade shows and ongoing customer
communications programs. The Company also keeps its customers
informed of advances in the field through e-mail and other mailings.
The Company maintains a Web site on the Internet that provides
Company and product information for its products. (www.Tenetinfo.com)
The position of Vice President of Sales is vacant and is currently
being filled by the President of the company.
As of June 30, 1999, the Company had sold its EDNet product to 27
emergency department and urgent care sites. These sites have annual
maintenance contracts for continued support and updates. It is
anticipated that a vast majority, if not all of these sites, will
renew this maintenance on an annual basis. As of June 30, 1999 the
Company was in the process of installing EDNet32 upgrades at 13
additional sites. The Company has previously completed the
installations of its new Windows 32 product at 10 sites.
The Consulting division provides consulting support to major
hospitals throughout the country. These services consist primarily
of cost benefit evaluations, patient classification for nursing, and
productivity management for all other departments. Consulting
services are charged on a negotiated fee basis. As of June 30, 1999
the Company was providing consulting services to three hospitals.
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As of June 30, 1999, the Company had two clients still using its
Respiratory product. Both of these clients have been notified that
their products are not year 2000 compliant and that the Company
would not be supporting them after December 31, 1999.
The Company believes that high-quality customer service and
technical support are essential competitive factors in its
marketplace. Through its training, consulting, maintenance, and
support services, Tenet is aware of customers' needs and strives to
provide services that will maximize the results achieved by
customers using Tenet's products. Maintenance, support, and training
also provide valuable feedback that is used to refine, enhance, and
develop Tenet's products. Customers receive maintenance support
from a staff of experienced customer specialists via a telephone
"hot line". Annual maintenance contracts are available for a fixed
price per site. Customers with annual maintenance contracts also
receive periodic product upgrades and feature/function enhancements.
EDNET 32 PRODUCT DEVELOPMENT
Development efforts are focused on the enhancement of the EDNet 32
product. Research is being conducted on the integration of nursing
and physician documentation. Voice recognition and radio frequency
are being investigated as possible product enhancements. An
inpatient nursing application, building upon existing EDNet 32
software, is being developed in conjunction with a major consulting
client.
The Company's future success will depend on its ability to continue
to enhance its current product line and to continue to develop and
introduce new products that keep pace with competitive product
introductions and technological developments, satisfy diverse and
evolving customer requirements and otherwise achieve market acceptance.
PROTECTION OF PROPRIETARY RIGHTS
The Company holds a registered trademark on the name "Transit" and
"Intellichart". In addition, the Company expects to seek certain
patent, trademark and/or copyright protection in the further
development of its new products, if appropriate. The Company has
entered into non-disclosure agreements with employees, consultants
and customers to protect its proprietary technology.
CAPITAL STOCK
The Company's Articles of Incorporation authorize the board of
directors, without shareholder approval, to issue up to 1,000,000
shares of preferred stock with such rights and preferences as the
board of directors may determine in its discretion. The board of
directors has the authority to issue shares of preferred stock
having rights prior to the common stock with respect to dividends,
voting and liquidation.
The current authorized common stock of the Company is 100,000,000
shares.
WARRANT, OPTION, AND DEBT CONVERSIONS
On February 20, 1998 the Company's board of directors authorized a
reduction in exercise price on all outstanding Class A, B, C & D
Warrants and options to $.03/share contingent upon exercise by March
20, 1998. The original exercise prices ranged from $.05 to $.42 per
share. A total of 2,578,430 warrants and 1,164,286 options were
exercised. As a result of the exercise, the Company received cash
of $17,321 and extinguished $94,961 of debt held by the option and
warrant holders. In addition, the Company converted $62,174 of debt
into 2,072,496 of common stock.
EMPLOYEES
At June 30, 1999, the Company employed ten full-time employees, one
part-time employee and several independent service contractors. The
number of employees and their responsibilities are as follows: two
professional, seven technical, one administrative.
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COMPETITION
The health care information systems industry is highly competitive.
There are many companies of considerable size and expertise that
could enter the Company's market for emergency management systems.
The Company is aware of competing emergency department information
systems.
Our products target the emerging market for computerized patient and
data management products in hospital and urgent care settings.
We face direct competition in the emergency department market from
several other firms. Many of these competitors have significantly
greater resources, name recognition and larger installed bases of
customers than we do.
As a result, these potential competitors may be able to devote
greater resources to the development, promotion and sale of their
products than us.
The Company believes that it is imperative that it be competitive in
service and product performance. The Company stresses customer
service wherever the product is placed.
With the enhancements to the capabilities of networks, the Company
has determined it must adopt new technology in order to continue to
compete effectively in the large hospital marketplace. As discussed
in Product Development, the Company is further developing and
converting its products. This effort is expected to enable the
Company to compete in this marketplace.
ITEM 2: PROPERTIES
The Company's headquarters and operational facilities are located in
Salt Lake City, Utah. The Company leases approximately 3,490 square
feet of office space at a cost $4,050 per month. This is pursuant
to a lease that expires on November 15, 2000.
ITEM 3: LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings, nor to the knowledge of management, is any litigation
threatened against the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock began trading in the over-the-counter
market in May 1989. Prices were quoted on the National Association
of Security Dealers Automated Quotation System ("NASDAQ") under the
symbol "TISI" until November 1, 1991 at which time the Company was
suspended from NASDAQ for untimely filings and inadequate financial
resources. On September 3, 1996, the symbol was changed to "TISV."
Just prior to its suspension from NASDAQ on November 1, 1991, the
reported closing bid and asked prices of the Company's Common Stock
were $.03125 and $.0625, respectively. In 1996 limited public
trading of the Company's Common Stock resumed with price quotations
available on the over the counter "bulletin board". During fiscal
year ended June 30, 1999 a limited number of shares traded on the
bulletin board market at a price range of $0.05 to $0.10 (bid). The
number of shareholders of record for the Company's Common Stock as
of June 30, 1999 was 327 which includes depositories and
broker/dealers who hold shares of Common Stock in "nominee" or
"street" names.
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ITEM 6: SELECTED FINANCIAL DATA
The selected financial data as of and for each of the fiscal years
ended June 30, 1995 through 1996 has been derived from the Company's
financial statements which have been audited by Arthur Andersen,
LLP, independent public accountants. Financial Data for fiscal
years ended June 30, 1997, 1998 and 1999 has been derived from the
Company"s financial statements which have been audited by Hansen
Barnett & Maxwell, independent public accountants. The following
selected financial data should be read in conjunction with the
financial statements and accompanying notes appearing elsewhere in
this Form 10-KSB.
Statement of Operations Data
Year Ended June 30,
----------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except per share amounts)
Revenues 879 $ 676 $ 757 $ 1,054 $ 369
Gain (loss) from
operations 58 (48) (431) (571) (319)
Net gain (loss) 69 (41) (435) (1,132) (335)
Net gain (loss) per
common share .00 (.00) (.03) (.11) (.07)
Balance Sheet Data
As of June 30,
-----------------------------------------
1999 1998 1997 1996 1995
---- ----- ---- ---- ----
(In thousands)
Working capital
(deficit) (180) (292) $(470) $(319) $(60)
Total assets 195 101 95 573 406
Long-term
obligations 51 - - 4 11
Stockholders' equity
(deficit) (208) (286) (453) (106) 172
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion contains forward-looking statements
regarding the company, its business, prospects and results of
operations that are subject to risks and uncertainties posed by many
factors and events that could cause the company's actual business,
prospects and results of operations to differ materially from those
that may be anticipated by such forward-looking statements. Factors
that might cause such differences include, but are not limited to,
those discussed herein as well as those discussed under the captions
"risk factors" and "business" as well as those discussed elsewhere
in this prospectus. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of
the date of this report. The Company undertakes no obligation to
revise any forward-looking statements in order to reflect events or
circumstances that may subsequently arise. Readers are urged to
carefully review and consider the various disclosures made by the
company in this report and in the company's other reports filed with
the securities and exchange commission that attempt to advise
interested parties of the risks and factors that may affect the
company's business.
As of June 30, 1999, the Company had sold its EDNet product to 27
emergency department and urgent care sites. These sites have annual
maintenance contracts for continued support and updates. It is
anticipated that a vast majority, if not all of these sites, will
renew this maintenance on an annual basis. As of June 30, 1999 the
Company was in the process of installing EDNet32 upgrade at 13
additional sites. The Company has completed installation of its new
Windows 32 product at 10 sites.
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On October 24, 1998 the Company signed a consulting contract with a
client in the Southwest to develop and install Intellichart, an
inpatient nursing product.
As of June 30, 1999, the Company had sold or leased its RCMS/X
product to two hospitals. Since the product is not Y2K compliant,
this product will terminate on 12/31/99 if not before. The Company
evaluated the feasibility and marketability of converting the RCMS/X
code to be both year 2000 compliant and to run in a small hospital
situation utilizing a Windows environment for added flexibility. It
was decided that the Company"s limited resources would be better
spent on its Emergency Department product
RESULTS OF OPERATIONS
FISCAL 1999 COMPARED WITH FISCAL 1998
During fiscal year 1999, the Company had revenues of $878,968, which
represented an increase of $202,565 or 30% from $676,403 for the
prior fiscal year. The following table presents the components of
revenues for fiscal 1999 and 1998.
ACTUAL
REVENUES FY 99 FY 98 INCREASE PERCENT
------------- ----------- --------- ---------- ----------
EDNet Systems $ 587,604 $ 313,090 $ 274,514 89%
RCMS Systems 124,206 277,580 (153,374) (54%)
Consulting 167,158 85,733 81,425 95%
----------- --------- --------- ----------
TOTAL $ 878,968 $ 676,403 $ 202,565 30%
=========== ========= ========= ==========
The following table details cost of revenue by product, comparing
the prior fiscal year as shown on financials.
1999 1998 (DECREASE)
----------- --------- ------------
EDNet System and
RCMS & RCMS/X
Systems $ 269,213 $ 189,128 $ 80,085
Consulting 69,925 89,759 (19,834)
----------- ----------- ----------
TOTAL $ 339,138 $ 278,887 $ 60,251
=========== =========== ==========
Cost of revenues increased by $60,251, up 22% to $339,138 for fiscal
year 1999 compared with $278,887 for the previous fiscal year. Cost
of revenues related to the EDNet System and Respiratory System for
fiscal year 1999 were $269,213, a gross margin of 62%. This
compares to cost of revenues of $189,128 with a gross margin of 68%
for the prior twelve month period. Overall gross profit for the
fiscal year 1999 was 61% compared to 59% for the prior year. This
improvement was a direct result of higher EDNet and consulting
revenues.
Selling, general and administrative expenses increased by $35,890 or
15%, to $280,118 for fiscal year 1999 compared with $244,228 for the
previous fiscal year. Higher sales levels required a modest
expansion of overhead expenses. Software development expenses
increased by $33 or 0%, to $201,326 for fiscal year 1999 from
$201,293 for fiscal 1998. The Company's development effort
continues at the same level in 1999 as in 1998.
As a result of the above factors, the net gain from operations
increased to $58,386 for fiscal year 1999 compared with a loss of
$48,005 for fiscal year 1998.
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Net interest expense decreased to $7,360 for fiscal year 1999
compared with $20,716 for fiscal year 1998. This is the result of
reduced short term debt and debt forgiveness and the conversion of
short term debt to long term debt.
Net income was $68,705 or $.00 per share for fiscal year 1999
compared with a loss of $40,556 or (0.00) per share for fiscal year
1998.
FISCAL 1998 COMPARED WITH FISCAL 1997
During fiscal year 1998, the Company had revenues of $676,403, which
represented a decrease of $80,854 (11%) from $757,257 for the prior
fiscal year. The following table presents the components of
revenues for fiscal 1998 and 1997.
PERCENT
ACTUAL INCREASE INCREASE
REVENUES FY 1998 FY 1997 (DECREASE) (DECREASE)
------------- ---------- --------- ----------- ----------
EDNet Systems $ 313,090 $ 359,638 $ (46,548) (13%)
RCMS Systems 277,580 309,395 (31,815) (10%)
Consulting 85,733 88,224 (2,491) (0%)
---------- ---------- ----------- ----------
TOTAL $ 676,403 $ 757,257 $ (80,854) $ (11%)
========== ========== ========== =======
The following table details cost of revenue by product, comparing
the prior fiscal year as shown on financials.
INCREASE
1998 1997 (DECREASE)
------------ ------------ -----------
EDNet System and
RCMMS & RCMS/X
Systems $ 189,128 $ 203,985 $ (14,857)
Consulting 89,759 116,518 (26,759)
Amortization &
writedown of
deferred software
costs - 180,637 (180,637)
----------- ----------- ----------
TOTAL $ 278,887 $ 501,140 $ (222,253)
=========== =========== ===========
Cost of revenues decreased by $222,253 (44%) to $278,887 for fiscal
year 1998 compared with $501,140 for the previous fiscal year. Cost
of revenues related to the EDNet System and Respiratory System for
fiscal year 1998 were $189,128, with a gross margin of 68%. This
compares to cost of revenues of $203,985 with a gross margin of 70%
for the prior twelve month period.
Amortization and write-downs of deferred software costs were 0 for
fiscal year 1998 compared with$180,637 for the previous fiscal year.
Consulting cost of revenue decreased by 23% to $89,759 for fiscal
year 1998 from $116,518 for the fiscal year 1997.
Selling, general and administrative expenses decreased by $218,352,
or 47%, to $244,228 for fiscal year 1998 compared with $462,580 for
the previous fiscal year. Software development expenses decreased
by $23,628 or 11%, to $201,293 for fiscal year 1998 from $224,921
for fiscal 1997. This is the result of fewer administrative
personnel, and the use of outside contractors to finish the
development of EDNet 32.
Net interest expense increased to $19,959 for fiscal year 1998
compared with $3,785 for fiscal year 1997. This is the result of
the conversion of debt and accumulated interest expense converted
into equity.
10
(PAGE)
As a result of the above factors, the net loss from operations
decreased to $48,005 for fiscal year 1998 compared with a loss of
$431,384 for fiscal year 1997.
Net loss decreased to $40,556 or $.00 loss per share for fiscal year
1998 compared with loss of $435,169 or $.03 loss per share for
fiscal year 1997.
LIQUIDITY AND CAPITAL RESOURCES
On February 20, 1998 the Company"s board of directors authorized a
reduction in exercise price on all outstanding Class A, B, C & D
Warrants and options to $.03/share contingent upon exercise by March
20, 1998. The original exercise prices ranged from $.05 to $.42 per
share. A total of 2,578,430 warrants and 1,164,286 options were
exercised. As a result of the exercise, the Company received cash
of $17,321 and extinguished $94,961 of debt held by the option and
warrant holders. In addition, the Company converted $62,174 of debt
into 2,072,496 of common stock.
The Company"s cash position increased by $10,102 during the fiscal
year ended June 30, 1999 to $32,039 as compared to $21,937 as of
June 30, 1998. The Company had a working capital deficit of
$180,257as of June 30, 1999 as compared with a deficit of $292,487
as of June 30, 1998. Operating activities provided $36,050 for the
fiscal year ended June 30, 1999 as compared with using $20,584 for
the corresponding period of the previous year. There were debt
payments of $661 during the fiscal year ended June 30, 1999 as
compared with $31,445 for the corresponding period of the previous
year.
While a portion of the current liabilities, approximately $19,000,
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.
Year 2000 Disclosure - The Company does not anticipate incurring any
substantial expenses to modify its software or operations to adjust
for the year 2000.
ITEM 7A: MARKET RISK SENSITIVE INSTRUMENTS
N/A
11
(PAGE)
ITEM 8: FINANCIAL STATEMENTS
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-1
Consolidated Financial Statements:
Consolidated Balance Sheet - June 30, 1999 F-2
Consolidated Statements of Operations for the Years
Ended June 30, 1999 and 1998 F-3
Consolidated Statements of Shareholders' Deficit for
the Years Ended June 30, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the Years
Ended June 30, 1999 and 1998 F-5
Notes to Consolidated Financial Statements F-6
<PAGE>
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and the Stockholders
Tenet Information Services, Inc.
We have audited the accompanying consolidated balance sheet of Tenet
Information Services, Inc. (a Utah corporation) and subsidiary as of June
30, 1999, and the related consolidated statements of operations,
shareholders' deficit and cash flows for the years ended June 30, 1999 and
1998. 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 audits 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.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tenet
Information Services, Inc. and subsidiary as of June 30, 1999, and the
results of their operations and their cash flows for the years ended June
30, 1999 and 1998 in conformity with generally accepted accounting
principles.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
July 29, 1999
F-1
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
Current Assets
Cash $ 32,039
Accounts receivable, net of allowance for
doubtful accounts of $7,500 122,514
Work performed in excess of billings 16,676
-----------
Total Current Assets 171,229
-----------
Furniture, Fixtures and Equipment 144,589
Less: Accumulated depreciation (122,181)
-----------
22,408
-----------
Other Assets, Net 1,425
-----------
Total Assets $ 195,062
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 97,430
Accrued expenses 63,773
Accrued interest 1,057
Deferred revenue 103,663
Billings in excess of work performed 66,683
Payable to related parties 18,880
-----------
Total Current Liabilities 351,486
Long Term Liabilities
Notes payable 25,000
Note payable to officer/shareholder 26,436
-----------
Total Long-Term Liabilities 51,436
-----------
Total Liabilities 402,922
Shareholders' Deficit
Preferred stock, $0.01 par value; 1,000,000
shares authorized, no shares issued -
Common stock, $.001 par value; 100,000,000
shares authorized, 19,065,892 shares issued
and outstanding 19,066
Additional paid-in capital 4,843,476
Warrants outstanding 7,987
Accumulated deficit (5,078,389)
-----------
Total Shareholders' Deficit (207,860)
-----------
Total Liabilities and Shareholders' Deficit $ 195,062
===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
1999 1998
---------- ----------
Revenues
Software license fees and maintenance $ 711,810 $ 590,670
Consulting services 167,158 85,733
---------- ----------
Total Revenues 878,968 676,403
---------- ----------
Cost of Revenues
Software license fees and maintenance 269,213 189,128
Consulting services 69,925 89,759
---------- ----------
Total Cost of Revenues 339,138 278,887
---------- ----------
Gross Profit 539,830 397,516
Operating Expenses
Selling, general and administrative 280,118 244,228
Software development 201,326 201,293
---------- ----------
Total Operating Expenses 481,444 445,521
---------- ----------
Income (Loss) From Operations 58,386 (48,005)
Other Income and Expense
Interest income 776 757
Interest expense (7,360) (20,716)
---------- ----------
Net Other Expense (6,584) (19,959)
---------- ----------
Income (Loss) Before Extraordinary Item 51,802 (67,964)
Extraordinary Item - Forgiveness of Debt
(Net of $0 Tax Benefit) 16,903 27,408
---------- ----------
Net Income (Loss) $ 68,705 $ (40,556)
========== ==========
Basic Earnings (Loss) Per Share
Operations $ 0.00 $ (0.00)
Extraordinary item 0.00 (0.00)
---------- ---------
Total Basic Earnings (Loss) Per share $ 0.00 $ (0.00)
========== =========
Diluted Earnings (Loss) Per Share
Operations $ 0.00 $ (0.00)
Extraordinary item 0.00 (0.00)
---------- ---------
Total Diluted Earnings (Loss) Per Share $ 0.00 $ (0.00)
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional
Shares Paid-In Warrants Accumulated
Issued Amount Capital Outstanding Deficit Total
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 13,018,505 $ 13,019 $4,611,517 $ 29,721 $(5,106,538) $ (452,281)
Conversion of options and
warrants to common stock at
discounted rate for cash and
conversion of liabilities 3,742,716 3,743 130,273 (21,734) - 112,282
Issuance of common stock to
satisfy amounts owed 2,072,496 2,072 60,102 - - 62,174
Shares returned to Company (1,084,286) (1,084) 1,084 - - -
Shares issued to employees
as compensation and to third
parties as interest expense 1,084,286 1,084 31,445 - - 32,529
Net loss - - - - (40,556) (40,556)
---------- ---------- ---------- ---------- ----------- -----------
Balance, June 30, 1998 18,833,717 18,834 4,834,421 7,987 (5,147,094) (285,852)
Issuance of common stock
to satisfy amounts owed 232,175 232 9,055 - - 9,287
Net income - - - - 68,705 68,705
---------- ---------- ---------- ---------- ----------- -----------
Balance, June 30, 1999 19,065,892 $ 19,066 $4,843,476 $ 7,987 $(5,078,389) $ (207,860)
========== ========== ========== ========== =========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
F-4
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
1999 1998
---------- ----------
Cash Flows From Operating Activities
Net income (loss) $ 68,705 $ (40,556)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 8,089 10,859
Expenses related to the issuance of
stock and stock options - 32,529
Stock issued for services 9,287 -
Gain on forgiveness of debt (16,903) (27,408)
Change in assets and liabilities:
Accounts receivable (50,333) (22,188)
Accounts payable 3,467 (7,087)
Accrued liabilities 23,265 1,482
Deferred revenue (59,534) 31,785
Work performed in excess of billings (16,676) -
Billings in excess of work performed 66,683 -
---------- ----------
Net Cash Provided By (Used) In
Operating Activities 36,050 (20,584)
---------- ----------
Cash Flows From Investing Activities
Acquisition of furniture, fixtures and equipment (25,287) -
---------- ----------
Net Cash Used In Investing Activities (25,287) -
---------- ----------
Cash Flows From Financing Activities
Proceeds from the sale of common stock and
warrants to purchase common stock - 17,321
Proceeds from borrowings - 29,307
Principal payments on long-term debt (661) (31,445)
---------- ----------
Net Cash Provided By (Used) by
Financing Activities (661) 15,183
---------- ----------
Net Increase (Decrease) In Cash 10,102 (5,401)
Cash at Beginning of the Year 21,937 27,338
---------- ----------
Cash at End of the Year $ 32,039 $ 21,937
========== ==========
Supplemental Disclosures of Cash
Flow Information:
Cash paid for interest $ 3,069 $ 488
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
Organization - Tenet Information Services, Inc. ("Tenet"), a Utah
corporation, designs and markets a computer-based medical and health
information system related primarily to emergency departments (the
"EDNet System"). During fiscal 1996 Tenet expanded its operations by
merging with National Microcomputer Corporation ("NMC") and acquiring
certain assets of The International Healthcare Consulting Group, Inc.
("HCG"). NMC designed and marketed the integrated information
management/patient tracking system for use in emergency departments
of hospitals and urgent care centers (the "EDNet System"). HCG has
provided healthcare institutions, mainly hospitals, with consulting
services to assist the institutions in achieving a more efficient,
lower cost care delivery model while maintaining the highest quality
of care standards. Tenent has elected to phase out its respiratory
therapy product line.
Tenet and its wholly owned subsidiary, NMC, (collectively, "the
Company") sell and lease computer software license rights to
hospitals throughout the United States. In addition, the Company
sells maintenance contracts for these information systems.
Substantially all of the Company's revenues are generated from
hospitals and therefore, the Company's financial performance is
partially dependent upon 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 obtain adequate sources of financing.
Basis of Presentation - The accompanying financial statements have
been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company previously experienced losses
from operations. These factors previously caused substantial doubt
about the Company's ability to continue as a going concern for a
reasonable period of time. The Company has net income of $68,705 and
has a positive cash flow from operations of $36,050 for the current
year. The Company has phased out its respiratory therapy product line
and replaced it with the EDNet System which is deemed to be a more
marketable and profitable product line. Management is also
negotiating various sales agreements and is continuing to better
manage its cash flow. Management is also considering raising capital
through the issuance of warrants and other equity instruments. The
Company has restructured its management personnel in an effort to
streamline operations. In the current fiscal year, management has
shown positive earnings compared to prior periods. These factors
reasonablely mitigate the concern about the Company's ability to
continue as a going concern.
F-6
<PAGE>
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of Tenet and its wholly owned
subsidiary, NMC. All significant intercompany transactions and
account balances have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue Recognition - The Company recognizes revenue in accordance
with the provisions of Statement of Position No. 91-1 Software
Revenue Recognition as follows:
Revenues related to the EDNet System consist of sales of software
licenses, installation of information systems and related software
customization and enhancements. In addition, revenues are generated
from annual software support and maintenance. Installation revenues
are recognized on the percentage completion method measured by
completion and acceptance of contracted milestones. The assets "work
performed in excess of billings" represents revenues in excess of
billings on uncompleted contracts. The liability "billings in excess
of work performed" represents billings in excess of revenue
recognized.
Revenues from annual software and maintenance are recognized ratably
over the term of each contract. Amounts billed in advance of revenue
recognition for software and maintenance are recorded as deferred
revenue.
Revenues from consulting services are recognized when the services
have been provided.
Furniture, Fixtures and Equipment - Furniture, fixtures and equipment
are stated at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets,
generally 3 to 10 years. Depreciation expense was $8,089 and $10,859
for the periods ended June 30, 1999 and 1998. Maintenance and repairs
are charged to expense as incurred and major improvements or
betterments are capitalized. Gains or losses on sales or retirements
are included in the statement of operations in the year of
disposition. Furniture, fixtures and equipment include $135,916 of
computer equipment used in operations and $8,673 of furniture,
fixtures and other equipment at June 30, 1999.
Software Development Costs - Costs incurred in creating computer
software products are charged to operations as software development
expense prior to the development of a detailed program design or a
working model. After the detailed program design or working model is
established, costs of producing product masters are capitalized as
software development costs. The Company had no capitalized software
costs at June 30, 1999.
F-7
<PAGE>
Costs of maintenance and customer support are recognized as expense
when the related revenue is recognized or when those costs are
incurred, whichever occurs first.
Impairment - The Company records impairment losses on property and
equipment when indicators of impairment are present and undiscounted
cash flows estimated to be generated by those assets are less than
the assets' carrying amount.
Fair Value of Financial Instruments - The estimated fair value of
financial instruments is not presented because, in Management's
opinion, there is no material difference between carrying amounts and
estimated fair values of financial instruments as presented in the
accompanying balance sheet.
Income Taxes - The Company recognizes the amount of income taxes
payable or refundable for the current year and recognizes deferred
tax assets and liabilities for the future tax consequences
attributable to differences between the financial statement amounts
of certain assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years those
temporary differences are expected to be recovered or settled.
Deferred tax assets are reduced by a valuation allowance to the
extent that uncertainty exists as to whether the deferred tax assets
will ultimately be realized.
Advertising Costs - Advertising costs are charged to expense in the
period incurred. Advertising expense for the years ended June 30,
1999 and 1998 was $2,430 and $10,675 respectively.
Stock-Based Compensation - Stock-based compensation to employees is
measured by the intrinsic value method. This method recognizes
compensation based on the difference between the fair value of the
underlying common stock and the exercise price of the stock option on
the date granted. Compensation relating to options granted to non
employees is measured by the fair value of the options, computed by
an option pricing model.
Warranty Costs - A 90-day limited warranty is provided on sales of
hardware and software licenses. Warranty costs incurred on hardware
are passed through to the manufacturer. Warranty costs have not been
material in any year presented, accordingly, these costs are expensed
when incurred.
Earnings (Loss) Per Share - In 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
Under SFAS 128, earnings (loss) per common share is computed by
dividing net loss available to common stockholders by the
weighted-average number of common shares outstanding during the
period. Diluted earnings (loss) per share reflects the potential
dilution which could occur if all contracts to issue common stock
were exercised or converted into common stock or resulted in the
issuance of common stock.
F-9
<PAGE>
NOTE 3-EARNINGS (LOSS) PER SHARE
The following data shows the amounts used in computing earnings per
share for the year ended June 30, 1999 and the effect on income and
weighted average number of shares of dilutive potential common stock:
Income available to common shareholders
used in basic earnings per share $ 68,705
===========
Income available to common shareholders
after assumed conversions of dilutive securities $ 68,705
===========
Weighted average number of common shares
used in basic earnings per shares. 18,948,850
===========
Effect of dilutive securities
Stock options 50,000
Stock warrants 688,077
-----------
Weighted average number of common shares
and dilutive potential common shares used in
dilutive earnings per share 19,686,927
===========
The weighted average number of common shares used in the computation for
basic loss per share was 14,643,578, options on 50,000 shares of common
stock and warrants on 688,077 of common stock were not included in
computing diluted loss per share for the period ended June 30, 1998 because
their effects were antidilutive.
NOTE 4-NOTES PAYABLE AND RELATED-PARTY DEBT
Long-term notes payable consist of the following at June 30, 1999:
Note payable to Utah Technology Finance
Corporation at an interest rate of 9.75% per annum.
Repayment of principal shall be paid in two lump
sum payments of $12,500 due on December 30, 2000
and 2001. 25,000
---------
Total Notes Payable $ 25,000
=========
F-9
<PAGE>
Current related-party debt consists of the following at June 30, 1999:
Debt payable to a related party corporation owned by an
employee of the Company at an interest rate of 8.5%,
balance is due on demand $ 3,747
Debt payable to officers/shareholders at an interest rate
of 12% per annum, balance is due on demand 15,133
Long-term related party debt consists of the following
at June 30, 1999:
Note payable to an officer and shareholder, at an interest
rate of 8% per annum. Payment of principal shall be
made on or before March 31, 2002. 26,436
---------
Total Related Party Debt $ 45,316
=========
Annual maturities are as follows:
Period Ending June 30:
2000 18,880
2001 12,500
2002 38,936
NOTE 5-OPERATING LEASE
The Company occupies its facilities and uses equipment under
non-cancelable operating leases which expire in fiscal year 2001.
Lease expense for fiscal 1999 and 1998 was $53,007and $47,896,
respectively.
Minimum future lease payments under non-cancelable operating leases
having remaining terms in excess of one year as of June 30, 1999 are
as follows:
Year Ended June 30,
2000 $ 50,000
2001 21,073
--------
$ 71,073
========
F-10
<PAGE>
NOTE 6 - INCOME TAXES
No benefit for income taxes has been recorded during the years ended
June 30, 1999 and 1998. Certain risks exist with respect to the
Company's future profitability, and management has concluded that,
due to these uncertainties, the related net deferred tax asset may
not be realized. Accordingly, a valuation allowance has been recorded
to offset the deferred tax asset in its entirety.
The components of the net deferred tax assets at June 30, 1999 are as
follows:
Deferred Tax Assets
Tax net operating loss carry forward $ 1,572,655
Tax credits carry forward 103,000
Reserves and accrued liabilities 5,499
-----------
Total Deferred Tax Assets 1,681,154
-----------
Valuation allowance (1,681,154)
-----------
Net Deferred Tax Asset $ -
===========
During the years ended June 30, 1999 and 1998, the valuation
allowance decreased by $28,031 and increased by $13,184 respectively.
As of June 30, 1999, the Company has net operating loss carryforwards
for federal income tax reporting purposes of approximately
$4,216,893. The tax net operating losses will begin to expire in
fiscal 2000.
The Company has research and development tax credit and investment
tax credit carryforwards of approximately $95,000 and $8,000,
respectively, which will begin to expire in fiscal 2000.
The following is a reconciliation of the income tax at the federal
statutory rate of 34% with the provision for income taxes for the
years ended June 30, 1999 and 1998:
1999 1998
-------- ---------
Income tax expense (benefit) at statutory rate $ 23,360 $ (13,789)
Change in deferred tax valuation account (28,031) 13,184
Non deductible taxes 2,404 1,943
State taxes, net of federal benefit 2,267 (1,338)
-------- ---------
Provision for Income Taxes $ - $ -
======== =========
F-12
<PAGE>
NOTE 7-CAPITAL STOCK
The Company's Articles of Incorporation authorize the board of
directors, without shareholder approval, to issue up to 1,000,000
shares of preferred stock with such rights and preferences as the
board of directors may determine at its discretion. The board of
directors has the authority to issue shares of preferred stock having
rights prior to the common stock with respect to dividends, voting
and liquidation.
During the fiscal year ended June 30, 1999, the Company issued
232,175 shares of common stock to satisfy amounts owed of $9,287 for
legal work performed on behalf of the Company.
During 1998, the Company converted $62,174 of debt into 2,072,496
shares of common stock. As described in Notes 10 and 11, 2,578,430
warrants and 1,164,286 stock options were exercised at $0.03 per
share. As a result of the exercise, the Company received cash of
$17,321 and extinguished $94,961 of debt held by the option and
warrant holders.
In 1998, two officers returned 1,084,286 shares of common stock to
the treasury. These shares were then reissued to employees and
creditors as additional compensation of $25,951 and interest expense
of $6,578.
NOTE 8 - STOCK OPTIONS
The Company has adopted an incentive stock option plan and a
nonqualified stock option plan. Stock options for an aggregate of
600,000 shares of common stock may be granted under these plans.
Stock options under both option plans may be granted at a price per
share not less than 100 percent of the fair market value of the
common stock, as determined at the date of grant. Employees vest in
the right to exercise their options from immediately to the third
anniversary date following the date of grant. The options expire five
years from the vesting date. Incentive stock options are forfeited
unless exercised within three months following termination of
employment or twelve months if termination is due to death or
disability.
A summary of the status of the Company's option plan as of June 30,
1999 and 1998, and changes during the years then ended is presented
below:
1999 1998
---------------------- -----------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
-------- --------------- --------- ------------
Outstanding at beginning
of year 50,000 $ 0.14 1,014,286 $ 0.14
Granted - - 200,000 0.05
Exercised - - (1,164,286) 0.03
-------- --------- ----------- -------
Outstanding at end
of year 50,000 0.14 50,000 0.14
========= ===========
Options exercisable at
year-end 50,000 0.14 50,000 0.14
========= ===========
Weighted-average fair
value of options granted
during the year N/A $ 0.05
========= ===========
F-12
<PAGE>
On February 20, 1998, the Company's board of directors authorized a
reduction of the exercise price on all outstanding options to $0.03
per share contingent upon exercise by March 20, 1998. A total of
1,164,286 options with original exercise prices from $0.05 to $0.14
per share were exercised.
At June 30, 1999 and 1998, the exercise price for options outstanding
was $0.14 per share and the weighted-average remaining contractual
life was 2.5 and 3.5 years, respectively.
The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its stock
option plans. Had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method
of FASB Statement 123, Accounting for Stock-Based Compensation, the
Company's net loss and loss per share would have been increased to
the pro forma amounts indicated below:
1999 1998
---------- -----------
Net income (loss)
As reported $ 68,705 $ (40,556)
Pro forma 68,705 (50,963)
Income (loss) per share
As reported (0.00) (0.03)
Pro forma (0.00) (0.04)
The fair value of each option granted was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants during the year ended
June 30, 1998: expected volatility of 34.0 percent, risk-free
interest rate of 5.7% and expected lives of 5 years. There were no
issuances of options during the year ended June 30, 1999.
Option pricing models require the input of highly subjective
assumptions including the expected stock price volatility. Also, the
Company's employee stock options have characteristics significantly
different from those of traded options, and changes in the subjective
input assumptions can materially affect the fair value estimate.
Management believes the best input assumptions available were used to
value the options and the resulting values are reasonable.
F-13
<PAGE>
NOTE 9-WARRANTS TO PURCHASE COMMON STOCK
The Company has issued warrants to purchase common stock in
connection with various transactions. The following table summarizes
the warrants to purchase common stock issued and outstanding,
together with their respective exercise price ranges:
Years Ended June 30,
-----------------------
1999 1998
---------- -----------
Warrants to purchase common
shares, beginning of the year,
at prices ranging from $0.14
to $0.42 per share 688,077 3,266,507
Warrants exercised at prices ranging
from $0.03 to $0.05 per share - (2,578,430)
----------- ----------
Warrants to purchase common
shares, end of the year, at
prices ranging from $0.14
to $0.42 per share 688,077 688,077
=========== ==========
On February 20, 1998, the Company's board of directors authorized a
reduction of the exercise price on all outstanding Class A, B, C and
D warrants to $0.03 per share contingent upon exercise by March 20,
1998. The original exercise prices ranged from $0.05 to $0.42 per
share. A total of 2,578,430 warrants were exercised.
NOTE 10--SUPPLEMENTAL CASH FLOW INFORMATION ACTIVITIES
During fiscal year ended June 30, 1999, the Company issued 232,175
shares of stock to satisfy amounts owed for services performed on
behalf of the Company in the amount of $9,287.
As described in Note 8, the Company converted $62,174 of debt into
2,072,496 shares of common stock. In addition, 2,578,430 warrants and
1,164,286 stock options were exercised at $0.03 per share resulting
in 3,742,716 shares of common stock. As a result of the exercise the
Company received cash of $17,321 and extinguished $94,961 of debt
held by the option and warrant holders. Also during fiscal 1998,
$7,869 of accrued interest was converted to long term debt.
NOTE 11 -- EXTRAORDINARY ITEM
During the year ended June 30, 1999, $7,615 of unpaid accrued
interest was forgiven on a Note payable. In addition, $9,288 owed
for legal services performed on behalf of the Company was forgiven.
The total write off of $16,903 has been recognized as an
extraordinary gain on the forgiveness of debt.
During the year ended June 30, 1998, an officer forgave $9,933 of
debt. In addition the Company eliminated $17,475 worth of payables
between one and three years old for which the Company believes it is
no longer liable. The total write off of $27,408 has been recorded as
an extraordinary gain on the forgiveness of debt.
NOTE 12 -- SUBSEQUENT EVENTS
During July and August 1999, the Company granted 830,000 options to
purchase its common shares to various employees which was greater than
the market value on the date of grant which was greater than the market
value on the date of the grant. The term of the options shall
be for a period of 5 years and shall vest at a rate of 20% at the end
of each of the 5 years. (Unaudited)
F-14
12
(PAGE)
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On May 30, 1997, the Registrant dismissed Arthur Anderson LLP,
("Andersen") as its certifying accountant. Andersen's reports on
the Registrant's financial statements for the years ended June 30,
1995 and 1996 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified as to uncertainty, audit scope or
accounting principles. The Registrant's board of directors
unanimously approved dismissal of Arthur Anderson.
During the two most recent fiscal years ended June 30, 1996 and 1995
and the interim period subsequent to June 30, 1997, there were no
disagreements, as defined in Regulation S-K Item 304, with Andersen
on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements would have caused Anderson to make a reference to the
subject matter of the disagreement in connection with its reports.
On July 30, 1997 the Registrant engaged Hansen, Barnett & Maxwell
("Hansen") to perform its audits and provide various accounting
services thereafter. The Registrant did not consult with Hansen
prior to such date regarding any reportable matter.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS OF THE REGISTRANT;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The names of the executive officers and directors of the Company,
their respective ages and positions with the Company, and the dates
of their elections to the Board of Directors or as officers are as
follows:
Name Age Position with The Company Date of Election
- ---------------- -------- --------------------------- ------------------
Jerald L. Nelson 56 President (resigned) December 1, 1993
Chairman of the Board (July 10, 1996)
July 10, 1996
Director January 24, 1994
Frank Overfelt 56 Director September 29, 1995
Chief Operations Officer
(acting) July 10, 1996
President & Chief Operating
Officer August 31, 1998
Eric J. Nickerson 46 Director June 29, 1990
All directors hold office until the next annual meeting of
shareholders of the Company or until their successors have been
elected and qualified. The number of authorized directors may be
varied by the Board of Directors, but may not be less than three.
Executive officers serve at the discretion of the Board of
Directors. The directors are entitled to certain limitations on
their liabilities as directors of the Company as permitted under
Utah law and as included in the Company's Articles of Incorporation.
The Company's stock option plans permit the administration of the
plans through a Stock Option Plan Committee, composed of at least
three members of the Board of Directors. No such committee has been
appointed, and no other committees of the Board of Directors have
been formed.
On July 10, 1996 Jerald L. Nelson resigned as President and Chief
Operating Officer and was elected Chairman of the Board of
Directors. Frank C. Overfelt was also appointed Chief Operating
Officer on an interim basis. At a board of directors meeting held
on August 31, 1998 Frank Overfelt was elected to the position of
President and Chief Operating Officer.
13
(PAGE)
BUSINESS BIOGRAPHIES
Jerald L. Nelson. Jerald L. Nelson has served as a director,
president and chief operating officer of the Company since December
1993. Effective July 10, 1996 Dr. Nelson was appointed Chairman of
the Board of Directors, and relinquished his position as President
and Chief Operating Officer. Dr. Nelson received his Ph.D. in
Economics from North Carolina State University in 1974. From 1974
to 1984, Mr. Nelson worked or consulted with several Fortune 500
firms, including US Industries, TransWorld Airlines, GTE, Xerox,
Pitney Bowes and General Foods. From 1984 until December 1993, Mr.
Nelson worked with various businesses as an investment banker and
business advisor. He has also consulted with or served on the Board
of Directors of numerous Utah firms including Arrow Dynamics, Beacon
Financial, Interwest Home Medical, Gentner Communications and
One-2-One Communications, where he also served as chairman and chief
executive officer.
Frank C. Overfelt Frank Overfelt was elected to the Board on
September 29, 1995. As of July 10, 1996, Mr. Overfelt was appointed
interim Chief Operating Officer. Mr. Overfelt has been the managing
partner the International HealthCare Consulting Group, Inc. since
its inception in 1986. He is a recognized authority in workload
measurement systems for health care institutions. Prior to founding
the consulting company Mr. Overfelt was a senior manager in the
Healthcare Cost Accounting and Productivity Practice of Peat
Martwick. He holds an MBA from the University of Utah. His total
healthcare experience is 23 years.
Eric J. Nickerson. Eric J. Nickerson has served as a director
since June of 1990. Mr. Nickerson was a member of the faculty of
the United States Military Academy at West Point, New York from 1989
to 1993. In June 1993, Mr. Nickerson retired as a United States Air
Force officer. Currently, Mr. Nickerson is a private investor and
directs personal accounts and two investing partnerships: "Third
Century II" and "Z Fund." He also serves as a director of CSM
Environmental Systems, Inc.
Other Key Personnel
The Company's other key personnel include the following:
Donald W. Ballash. Mr. Ballash has over 19 years of experience
in the health care field in which he has specialized in management
engineering at two large multi-hospital systems; Intermountain
Health Care and Kaiser Permanente. Most recently he was a partner
in the International HealthCare Consulting Group. He holds a B.S.
Degree from BYU.
ITEM 11: EXECUTIVE COMPENSATION
The following table sets forth all cash compensation for services
rendered in all capacities to the Company during the fiscal year
ended June 30, 1999 paid to (i) the Company's president and each
executive officer whose cash compensation exceeded $100,000, and
(ii) all executive officers of the Company as a group. No executive
officers salary exceeded $100,000 for the fiscal year.
14
(PAGE)
<TABLE>
<CAPTION>
Annual Compensation /Long Term Compensation /
-------------------------------------------------------------------
/ Awards /Payouts/
----------------------------------
Other
Name Annual Restricted Securities LTIP All Other
and Compen- Stock Underlying Pay- Compensa-
Principal Salary Bonus sation Awards Options/ outs sation
Position Year ($) ($) ($) ($) SARs (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
Frank C. Overfelt 1997 76,797 0 0 0 0 0 0
Chief Operating Officer 1998 76,797 0 0 0 0 0 0
1999 76,828 0 0 0 0 0 0
Jerald L. Nelson 1997 0 0 0 0 0 0 0
Chairman of the Boaard 1998 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0
All Executive Officers
(3 persons) 1997 145,690 0 0 0 0 0 0
(1 person) 1998 76,797 0 0 0 0 0 0
(2 persons) 1999 76,828 0 600 0 0 0 0
</TABLE>
The Company also may pay discretionary cash bonuses to management
and employees based on meritorious performance.
Stock Option Plans
On October 15, 1984, the Company adopted an Incentive Stock Option
Plan (the "ISO Plan"), pursuant to which only "incentive stock
options" ("ISO's"), as defined in the Internal Revenue Code (the
"Code"), may be granted. On the same date, the Company adopted a
Nonqualified Stock Option Plan ("NQSO Plan"), pursuant to which only
"nonqualified stock options" ("NQSOs"), as defined in the Code, may
be granted. Stock options for an aggregate of 600,000 shares of
common stock may be granted under both Plans. ISOs may be granted
under the ISO Plan to employees owning less that 10% of the
Company's voting stock (as defined by Sections 422A and 425 of the
Code). NQSOs may be granted under the NQSO Plan to employees who
are ineligible to receive options under the ISO Plan.
Stock options may be granted under the Plans at a price per share
not less than 100% of the "fair market value" (as defined by the
Plans) of the common stock on the date of grant.
The Plans limit grants of stock options to any one employee to
60,000 shares of stock per plan year, with an aggregate option price
ceiling of $100,000 under the ISO Plan in any year. Each stock
option, unless sooner terminated, expires five years from the "date
of effectiveness", which is three years from the date of grant.
ISOs are exercisable until three months following termination of
employment (twelve months if termination is due to death or
disability). Termination of employment for any reason does not
affect the exercisability of NQSOs, regardless of whether the
option's effective date has been reached. Under both Plans, options
are exercisable during an optionee's lifetime only by such optionee
and are transferable only upon death by the laws of decent or
distribution.
The Board of Directors has the right to modify or amend the Plans at
any time, provided, however, that, unless ratified by the Company's
shareholders, no amendment will be effective which (i) changes the
number of shares which may be issued under the Plans, (ii) changes
the option price, other than the manner of determining the fair
market value of the shares, (iii) changes the periods during which
options may be granted or exercised, (iv) changes the provisions
relating to the determination of employees to whom options may be
granted and the number of shares to be covered by such options, or
(v) changes the provisions relating to adjustments to be made upon
changes in capitalization. Shareholder action is also required to
terminate the Plans.
As of August 1, 1999 the company had granted 830,000 options to key
employees exercisable at the rate of $.10 per share. There are
still outstanding 50,000 options to an employee exercisable at $.05
per share.
15
(PAGE)
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the holdings of common stock as of
August 1, 1999 (i) by each person who held of record, or was known
by the Company to own beneficially, more than five percent of the
outstanding common stock of the Company, (ii) by each Director, and
(iii) by all Directors and officers as a group. Unless otherwise
indicated, all shares are owned directly. The percentage
calculations for any individual stockholder assume that all
outstanding options and warrants held by that stockholder have been
exercised in full and that no other stockholder has exercised any
outstanding options or warrants.
Name and Address of Beneficial Owner as of August 1, 1999
- ---------------------------------------------------------
Common (1) Percent of Shares Outstanding
---------- -----------------------------
Michael R. Carlston 2 5,510,290 26.70%
Dennis C. Peterson 3 4,220,442 20.45%
Mark Oldroyd 4 3,975,559 19.27%
Scott Staker 5 3,975,559 19.27%
T-Acquisition 6 3,775,559 18.30%
Eric J. Nickerson 7 2,602,044 12.61%
Third Century II 7 2,602,044 12.61%
Robert Smith 8 1,166,246 5.65%
Richard Gwinn 9 1,054,920 5.11%
Frank Overfelt 10 1,102,143 5.34%
Donald W. Ballash 11 1,226,429 5.94%
Jerald L. Nelson 12 435,700 2.11%
All Officers and
Directors 5,366,316 26.01%
- -----
1. Based on 19,065,892 common shares outstanding, 688,075
warrants to purchase common shares at $0.07 - $0.42 and options to
acquire 880,000 shares of Common Stock at $0.05 -$0.10 per share.
2. The shares indicated include: (i) 1,734,731 shares of Common
Stock beneficially owned by Mr. Carlston (including shares owned by
his wife and held in trust for the benefit of his children); (ii)
3,775,559 shares of Common Stock held by T-Acquisition. Mr.
Carlson"s address is 855 Harwood Dr., Murray, UT 84107
3. Includes 444,883 shares of Common Stock beneficially owned by
Mr. Peterson, and 3,775,559 shares of Common Stock held by T
Acquisition L.L.C. Mr. Peterson"s address is 2508 W. Bueno Vista
Dr., W. Jordan, UT 84088
4. Includes 200,000 shares of Common Stock beneficially held by Mr.
Oldroyd, including shares held in trust for the Violet Johnson Brown
Family Trust. Also includes 3,775,559 shares of Common Stock held
by T-Acquisition. Mr. Oldroyd address is 55 North 800 West, Provo,
UT 84601
5. Includes 200,000 shares of Common Stock held by Mr. Staker and
also includes 3,775,559 shares of Common Stock held by
T-Acquisition. Mr. Stakers address is 880 North 98 West #9, Provo,
UT 84604
6. A Utah Limited Liability company of which Michael R. Carlston
owns or controls 56.7%, Mark Oldroyd owns or controls 32.1%, Dennis
C. Peterson owns or controls 6.4% and Scott Staker owns or controls
4.8%. The shares indicated consist of 3,775,559 shares of Common
Stock The address of T-Acquisition is 855 Harwood Dr., Murray, UT
84107.
7. Includes 2,602,044 shares of Common Stock held by Third Century
Fund II. Mr. Nickerson is Senior Partner of Third Century Fund II.
Mr. Nickerson is also a director of the Company. Mr. Nickerson and
Third Century Fund II"s address is 1711 Chateau CT., Fallston, MD 21047
8. Includes 803,497 shares of Common Stock held by Dr. Smith . Dr.
Smiths address is 2291 Greer Rd., Palo Alto CA 94303
9. Includes 1,004,920 shares of Common Stock held by Dr. Gwinn and
warrants to acquire 50,000 shares of Common Stock at a price of $.14
per share exercisable through September 29, 1998. Dr. Gwinns
address is 304 W. Thorn, San Diego, CA 92103
10. Includes 50,000 shares of Common Stock held by IHCG and
1,052,142 shares of Common Stock held by Mr. Overfelt, Mr.
Overfelts address is 4634 So. Ledgemont Dr., Holladay UT 84124
11. Includes 50,000 shares of Common Stock held by IHCG, and
726,429 shares of Common Stock held by Mr. Ballash and options to
acquire 450,000 shares of Common Stock at $0.10 per share. Mr.
Ballash"s address is 9777 So. Dunsinsame Dr., So. Jordan, UT 84095
12. Includes 735,706 shares of Common Stock .. Mr. Nelsons address
is 207 W. Clarendon #3B, Phoenix, AZ 85013
- ----
16
(PAGE)
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of the Company's last fiscal year, there have
been no transactions or series of transactions between the Company
and any executive officer, director or 5% beneficial owner of the
Company's common stock in which one of the foregoing individuals had
an interest of more than $60,000 except the transaction identified
below.
In accordance with the Board resolution of February 20, 1998 Franc
C. Overfelt, a director and officer of the Company exercised his
options (428,572 shares) and warrants (398,571 shares) and received
an additional 225,000 shares from a debt conversion and consequently
became a beneficial owner of more than 5% of the common stock of the
company.
The Company believes that all transactions between the Company and
related parties have been on terms and conditions no less favorable
to the Company than those available from third parties. Each
transaction was entered into to provide operating capital for the
Company. All future transactions between the Company and any
related party will be on terms and conditions no less favorable to
the Company than those available from third parties and will be
approved by a majority of the Company's disinterested directors.
Section 16(a) of the Securities Exchange Act of 1934 required the
Company's directors and executive officers, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Executive
officers, directors and holders of ten percent or more of the
Company's equity securities are required to furnish the Company with
copies of all Section 16(a) reports they file. However, because of
the recent mergers and conversions, these reports have not been
provided.
17
(PAGE)
PART IV
ITEM 14: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following financial statements are included in
Part II Item 8:
Report of Independent Public Accountants
Balance Sheets as of June 30, 1999 and 1998
Statements of Operations for the Years Ended
June 30, 1999, 1998, and 1997
Statements of Shareholders' Equity
for the Years Ended June 30, 1999, 1998
and 1997
Statements of Cash Flows for the Years
ended June 30, 1999, 1998 and 1997
Notes to Financial Statements
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant
during the last quarter of the period covered by this report.
(c) Exhibits
The following documents are incorporated by reference to the
Company's Registration Statement on Form S-18, filed with the
Commission on January 17, 1989, and as amended on February 10, 1989
and March 7, 1989, as declared effective on March 9, 1989:
3.1 Articles of Incorporation and all amendments thereto
3.2 Bylaws
10.1 Nonqualified Stock Option Plan
10.2 Incentive Stock Option Plan
10.3 Form of common stock Purchase Warrant issued to Rogers &
Anderson
10.4 Form of Rental Agreement
10.5 Form of 60 Month Lease Agreement
10.6 Form of Purchase Agreement
10.7 Form of Proprietary Information and Inventions
Agreement between all employees and consultants and the Company
10.8 Facilities Lease between the Company and J & V Management
Company
The following documents are incorporated by reference to the
Company's Annual report on Form 10-K dated September 25, 1989:
10.9 Underwriting Agreement, dated March 10 1989,
between the Company and Schnieder Securities, Inc.
10.10 Hemotech Purchase Agreement
The following documents are incorporated by reference to the
Company"s report on Form 10-K dated October 12, 1993
18
(PAGE)
10.11 Settlement Agreement between Tenet Information
Services, Inc., and Hewlett Packard
10.12 Release and Consent Agreement between Tenet
Information Services Inc., and First Security Bank.
10.13 Assignment of Note and Related Documents by First
Security Bank in favor of T Acquisition L.C.
10.14 Facility Lease
10.15 Debt Conversion
10.16 Series A Preferred Stock
10.17 Series B Preferred Stock
The following documents are incorporated by reference to the
Company's report on Form 10-K dated October 14, 1995 for the year
ended June 30, 1995.
2.1 Form of International Health Care Consulting Group Acquisition
2.2 Agreement and Plan of Reorganization
4.1 Conversion of Series A Preferred Stock
4.2 Conversion of Series B Preferred Stock
4.3 Conversion of T-Acquisition Debt
4.4 Conversion of Anderson Debt
4.5 Conversion of Carlston Debt
4.6 Form of Private Placement
4.7 Form of Class A Warrant
4.8 Form of Class B Warrant
4.9 Form of Class C Warrant
10.18 Form of F. Overfelt Employment Agreement
10.19 Form of D. Ballash Employment Agreement
19
(PAGE)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TENET INFORMATION SERVICES, INC.
September 28, 1999 By:/s/Jerald L. Nelson
--------------------------------
Jerald L. Nelson, Chairman of
the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person, which
include the Chief Executive Officer, Chief Financial Officer, and a
majority of the Board of Directors, on behalf of the Company and in
the capacities and on the dates indicated:
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints each of Jerald L. Nelson and
Fred J. Anderson, jointly and severally, his true and lawful
attorney in fact and agent, with full powers of substitution for him
and in his name, place and stead, in any and all capacities, to sign
any or all amendments to this Report on Form 10-K and to file the
same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorney in
fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Signature Title Date
--------- --------- --------
/s/ Jerald L. Nelson Director and Chairman of September 28, 1999
- -------------------- the Board of Directors
Jerald L. Nelson
- --------------------
/s/Frank C. Overfelt Director, President September 28, 1999
- --------------------
Frank C. Overfelt
/s/ Eric J. Nickerson Director September 28, 1999
- ---------------------
Eric J. Nickerson
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TENET INFORMATION SERVICES, INC.
By: /S/ Jerald L. Nelson
-----------------------------
Jerald L. Nelson, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person, which
include the Chief Executive Officer, Chief Financial Officer, and a
majority of the Board of Directors, on behalf of the Company and in
the capacities and on the dates indicated:
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints each of Jerald L. Nelson and
Fred J. Anderson, jointly and severally, his true and lawful
attorney in fact and agent, with full powers of substitution for him
and in his name, place and stead, in any and all capacities, to sign
any or all amendments to this Report on Form 10-K and to file the
same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorney in
fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Signature Title Date
- -------------------- --------------------- -----------------
- -------------------- Chairman of the Board Spetember 28, 1999
Jerald L. Nelson Director
- -------------------- Director, President September 28, 1999
Frank C. Overfelt Chief Operating Officer
- -------------------- Director September 28, 1999
Eric J. Nickerson
Supplemental Information to be Furnished With Reports Filed Pursuant
to Section 15(d) of the Act by Companies Which Have Not Registered
Securities Pursuant to Section 12 of the Act.
The Company has not prepared or distributed any annual report to
security holders covering the last fiscal year nor any proxy
statement, form for proxy or other proxy soliciting material to more
than ten of the Company's security holders with respect to any
annual or other meeting of security holders. In the event the
Company's management elects to distribute such an annual report or
proxy material subsequent to the filing of this annual report on
Form 10-K, the Company will furnish four copies of such materials to
the Commission when it is sent to security holders.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of June 30, 1999, and statements of operations for the year ended June
30, 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 32,039
<SECURITIES> 0
<RECEIVABLES> 130,014
<ALLOWANCES> 7,500
<INVENTORY> 0
<CURRENT-ASSETS> 171,229
<PP&E> 144,589
<DEPRECIATION> 122,181
<TOTAL-ASSETS> 195,062
<CURRENT-LIABILITIES> 351,486
<BONDS> 0
0
0
<COMMON> 19,066
<OTHER-SE> (226,926)
<TOTAL-LIABILITY-AND-EQUITY> 195,062
<SALES> 878,968
<TOTAL-REVENUES> 879,744
<CGS> 339,138
<TOTAL-COSTS> 820,582
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,360
<INCOME-PRETAX> 51,802
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,802
<DISCONTINUED> 0
<EXTRAORDINARY> 16,903
<CHANGES> 0
<NET-INCOME> 68,705
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
