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, 2000
[ ] 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, 2000 was 19,065,892.
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TABLE OF CONTENTS
Page #
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PART I
Item 1 Business 1
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of
Security Holders 9
PART II
Item 5 Market for the Registrant's Common
Equity and Related Stockholder Matters 9
Item 6 Selected Financial Data 10
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operation 11
Item 8 Financial Statements 16
Item 9 Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure 17
PART III
Item 10 Directors, Executive Officers, Promoters
and Control Persons of the Registrant:
Compliance with Section 16)a) of the
Exchange Act 17
Item 11 Executive Compensation 19
Item 12 Security Ownership of Certain Beneficial
Owners and Management 21
Item 13 Certain Relationships and Related
Transactions 22
PART IV
Item 14 Exhibits and Reports on Form 8-K 23
SIGNATURES
EXHIBITS Attached
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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.
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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.
EDNet is currently in its fifth release, (EDNet 32) as a
Windows 95/98/NT/2000 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 C++ using the
Borland's C++ Builder design environment. For smaller
installations, the application utilizes the Borland Database
Engine and Paradox 7/8 tables. This configuration requires
a Novell 4.x/5.x server and Windows 95/98 workstations. For
larger installations, or NT installations, EDNet32 is
configured using Microsoft's ADO components to attach
directly to MS SQL Server 7.0 on an NT server. Using the
ADO components allows the system to bypass ODBC calls, thus
improving performance. The system architecture and the use
of C++ Builder design environment allows the application to
attach to other client/server products through native
drivers should a client require a database engine other than
MS SQL Server.
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 10 GB of disk storage capacity.
The server should be equipped with mirrored drives for data
security and devices 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.4.1/5.x or NT. Network hardware
should be certified by Novell/Microsoft.
Individual workstations should be Pentium 300 MHz or better,
with at least 128MB 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
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interfaces from the hospital-wide information system. A 56K
baud modem or Internet communication is required for 24 x 7
support. 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.
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.
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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
easily updated 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. Authorized
personnel configure reports through a selection of menus.
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.
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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.
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
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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, 2000, the Company had sold its EDNet product
to 25 emergency department and urgent care sites. All sites
have annual maintenance contracts for continued support and
updates. As of June 30, 2000 the Company was in the process
of installing EDNet32 upgrades at 5 additional sites and 1
installation at a new client.
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, 2000 the Company was
providing consulting services to three hospitals, two of
which are industry "Top 100" Hospitals. One of the "Top
100" Hospitals has received "magnet" designation, which only
13 hospitals in the country have received.
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 required at each site and
are provided for a fixed price. Included in the annual
maintenance contracts are periodic product upgrades and
feature/function enhancements. New modules are furnished at
an additional cost.
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, (IntelliChart), building upon existing EDNet 32
software, is being beta-tested at a major consulting client
site. IntelliChart utilizes the main library set of EDNet32
to provide inpatient-nursing units with a real time patient
tracking system. The primary focus of IntelliChart is to
provide the nursing staff an automated methodology to
determine patient dependency. Patient dependency is
determined based upon the patient's care needs and is
translated into staffing requirements on shift and staff
skill level basis.
EDNet 32 is also migrating to a true client server based
version, which will greatly enhance the durability of the
product. A majority of the development effort has been
expended on this enhancement.
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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
"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.
Employees
At June 30, 2000, the Company employed eight full-time
employees, one part-time employee and several independent
service contractors. The number of employees and their
responsibilities are as follows: two professional, five
technical, and one administrative.
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.
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The Company's products target the emerging market for
computerized patient and data management products in
hospital and urgent care settings.
The Company faces 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 the
Company.
As a result, these potential competitors may be able to
devote greater resources to the development, promotion and
sale of their products than the Company.
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 30, 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
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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, 2000 a limited number of shares
traded on the bulletin board market at a price range of
$0.05 to $0.40. The number of shareholders of record for
the Company's Common Stock as of June 30, 2000 was 321 which
include depositories and broker/dealers who hold shares of
Common Stock in "nominee" or "street" names.
ITEM 6: SELECTED FINANCIAL DATA
The selected financial data as of and for the fiscal year
ended June 30, 1996 has been derived from the Company's
financial statements, which had been audited, by Arthur
Andersen, LLP, independent public accountants. Financial
Data for fiscal years ended June 30, 1997, 1998, 1999 and
2000 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,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(In thousands, except per share amounts)
----------------------------------------
Revenues $770 $879 $ 676 $ 757 $ 1,054
Gain (loss) from
operations 15 58 (48) (431) (571)
Net gain (loss) 9 69 (41) (435) (1,132)
Net gain (loss) per
common share 0.00 0.00 (.00) (.03) (.11)
Balance Sheet Data
As of June 30,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(In thousands)
--------------
Working capital
(deficit) (179) (180) (292) $ (470) $ (319)
Total assets 210 195 101 95 573
Long-term obligations 39 51 - - 4
Stockholders' equity
(deficit) (199) (208) (286) (453) (106)
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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, 2000, the Company had sold its EDNet product
to 25 emergency department and urgent care sites. All sites
have annual maintenance contracts for continued support and
updates. As of June 30, 2000 the Company was in the process
of installing EDNet32 upgrade at 5 additional sites and 1
installation at a new client.
On October 24, 1998 the Company signed a consulting contract
with a client in the Southwest to develop and install
IntelliChartr, an inpatient nursing product. IntelliChart
utilizes the main library set of EDNet32 to provide
inpatient nursing units with a real time patient tracking
system. The primary focus of IntelliChart is to provide the
nursing staff an automated methodology to determine patient
dependency. Patient dependency is determined based upon the
patient's care needs and is translated into staffing
requirements on shift and staff skill level basis.
Results of Operations
Fiscal 2000 Compared with Fiscal 1999
During fiscal year 2000, the Company had revenues of
$770,347, which represented a decrease of $108,621 or 12%
from revenues of $878,968 for the prior fiscal year. The
following table presents the components of revenues for
fiscal 2000 and 1999.
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ACTUAL
------------------------------------------------
Percent
Increase Increase
REVENUES FY 00 FY 99 (Decrease) (Decrease)
-------- ---------- ---------- ----------
EDNet Systems $555,352 $ 587,604 $ (32,252) (5%)
RCMS Systems 27,053 124,206 (97,153) (78%)
Consulting 187,942 167,158 20,784 12%
Total $770,347 $ 878,968 (108,621) (12%)
The following table details cost of revenue by product,
comparing the prior fiscal year as shown on financials.
2000 1999 Increase
(Decrease)
-------- -------- ----------
EDNet System and $236,853 $269,213 ($32,360)
RCMS & RCMS/X systems
Consulting 96,761 69,925 $26,836
Total $333,614 $339,138 (5,524)
Cost of revenues declined to $333,614, down 2% for fiscal
year 2000 compared with $339,138 for the previous fiscal
year. Costs of revenues related to the EDNet System and
Respiratory System for fiscal year 2000 were $236,853,
giving the system revenue products a gross margin of 59%.
This compares to cost of revenues of $269,213 with a gross
margin of 62% for the prior twelve-month period. Overall
gross profit for the fiscal year 2000 was 57% compared to
61% for the prior year. This modest decline was due to the
termination of the RCMS product line.
Selling, general and administrative expenses decreased by
$95,998 or 34%, to $184,120 for fiscal year 2000 compared
with $280,118 for the previous fiscal year. This decrease
resulted from personnel and expense reductions related to the
decline in revenue. Software development expenses increased
by $36,124 or 18%, to $237,450 for fiscal year 2000 from
$201,326 for fiscal 1999. This increase is the result of the
company adding new features to the EDNet product line.
As a result of the above factors, the net income from
operations was $15,163 for fiscal year 2000 compared with
income of $58,386 for fiscal year 1999.
Net interest expense declined slightly to $6,200 from $6,584
for the prior fiscal year.
Net income was $8,963 or $.00 per share for fiscal year 2000
compared with a net income of $68,705 or 0.00 per share for
fiscal year 1999.
12
<PAGE>
Liquidity and Capital Resources
The Company's cash position decreased from $32,039 to
$14,610 during its fiscal year 2000. The Company had a
working capital deficit of $179,178 as of June 30, 2000, as
compared with a deficit of $180,257 as of June 30, 1999.
Operating activities used $10,010 for the fiscal year ended
June 30, 2000 as compared to providing $36,050 in the
corresponding period of the prior fiscal year. The Company
received advances from related parties of $8,866 during the
year ended June 30, 2000 as compared to no advances during
the year ended June 30, 1999. There were debt payments of
$11,737 during the fiscal year ended June 30, 2000 as
compared with $661 for the corresponding period of the
previous year.
While a portion of the current liabilities, approximately
$17,000, 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.
Item 7A: Market Risk Sensitive Instruments
N/A
13
<PAGE>
ITEM 8: FINANCIAL STATEMENTS
Index to Financial Statements
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998 F-2
Consolidated Statements of Operations for the Years Ended
June 30, 1999,and 1998 F-3
Consolidated Statements of Shareholders' Equity 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 Financial Statements F-6
14
<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, 2000, and the related consolidated
statements of operations, shareholders' deficit and cash flows for
the years ended June 30, 2000 and 1999. 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 auditing standards
generally accepted in the United States. 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, 2000, and the results of their operations and their cash
flows for the years ended June 30, 2000 and 1999 in conformity with
accounting principles generally accepted in the United States.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
September 15, 2000
F-2
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
ASSETS
Current Assets
Cash $ 14,610
Accounts receivable, net of allowance for
doubtful accounts of $7,500 150,541
Prepaid expenses 5,609
Work performed in excess of billings 19,540
----------
Total Current Assets 190,300
----------
Furniture, Fixtures and Equipment 149,137
Less: accumulated depreciation (131,345)
----------
17,792
----------
Other Assets, Net 1,425
----------
Total Assets $ 209,517
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 135,578
Accrued expenses 63,054
Accrued interest 3,172
Deferred revenue 128,950
Billings in excess of work performed 9,118
Notes payable - current portion 12,500
Related party debt - current portion 17,106
------------
Total Current Liabilities 369,478
------------
Long Term Liabilities
Notes payable - long term 12,500
Related party debt - long term 26,436
------------
Total Long-Term Liabilities 38,936
------------
Total Liabilities 408,414
Shareholders' Deficit
Preferred stock, $0.01 par value; 1,000,000
shares authorized, no shares issued -
Common stock, $0.001 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 (5,069,426)
------------
Total Shareholders' Deficit (198,897)
------------
Total Liabilities and Shareholders' Deficit $ 209,517
============
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
2000 1999
---------- ----------
Revenues
Software license fees and maintenance $ 582,405 $ 711,810
Consulting services 187,942 167,158
---------- ----------
Total Revenues 770,347 878,968
Cost of Revenues
Software license fees and maintenance 236,853 269,213
Consulting services 96,761 69,925
---------- ----------
Total Cost of Revenues 333,614 339,138
---------- ----------
Gross Profit 436,733 539,830
Operating Expenses
Selling, general and administrative 184,120 280,118
Software development 237,450 201,326
---------- ----------
Total Operating Expenses 421,570 481,444
---------- ----------
Income From Operations 15,163 58,386
Other Income and (Expense)
Interest income 121 776
Interest expense (6,321) (7,360)
---------- ----------
Net Other Expense (6,200) (6,584)
---------- ----------
Income Before Extraordinary Item 8,963 51,802
Extraordinary Item - Forgiveness of Debt
(Net of $0 Tax Benefit) -0- 16,903
---------- ----------
Net Income $ 8,963 $ 68,705
========== ==========
Basic Earnings Per Share
Operations $ 0.00 $ 0.00
Extraordinary item 0.00 0.00
---------- ----------
Total Basic Earnings Per Share $ 0.00 $ 0.00
========== ==========
Diluted Earnings Per Share
Operations $ 0.00 $ 0.00
Extraordinary item 0.00 0.00
---------- ----------
Total Diluted Earnings Per Share $ 0.00 $ 0.00
========== ==========
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1999 AND 2000
<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, 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)
Net income - - - - 8,963 8,963
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 2000 19,065,892 $ 19,066 $ 4,843,476 $ 7,987 $(5,069,426) $ (198,897)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
2000 1999
---------- ----------
Cash Flows From Operating Activities
Net income $ 8,963 $ 68,705
Adjustments to reconcile net income to net
Cash from operating activities:
Depreciation and amortization 9,164 8,089
Stock issued for services - 9,287
Gain on forgiveness of debt - (16,903)
Change in assets and liabilities
Accounts receivable (28,027) (50,333)
Prepaid expenses (5,609) -
Accounts payable 38,148 3,467
Accrued liabilities 2,493 23,265
Deferred revenue 25,287 (59,534)
Work performed in excess of billings (2,864) (16,676)
Billings in excess of work performed (57,565) 66,683
---------- ----------
Net Cash Provided By (Used In)
Operating Activities (10,010) 36,050
---------- ----------
Cash Flows From Investing Activities
Acquisition of furniture, fixtures and equipment (4,548) (25,287)
---------- ----------
Net Cash Used In Investing Activities (4,548) (25,287)
---------- ----------
Cash Flows From Financing Activities
Proceeds from related party debt 8,866 -
Principal payments on related party debt (11,737) (661)
---------- ----------
Net Cash Used In Financing Activities (2,871) (661)
---------- ----------
Net Increase (Decrease) In Cash (17,429) 10,102
Cash at Beginning of the Year 32,039 21,937
---------- ----------
Cash at End of the Year $ 14,610 $ 32,039
========== ==========
Supplemental Disclosures of Cash
Flow Information:
Cash paid for interest $ 3,108 $ 3,069
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<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. Tenet 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 resulting in an accumulated deficit at June 30,
2000 of approximately $5,069,426. The Company has a negative
cash flow from operations of $10,010 for the current year
and a working capital deficit of approximately $179,178 at
June 30, 2000. 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
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. These factors reasonably mitigate the
concern about the Company's ability to continue as a going
concern.
F-7
<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
asset "work performed in excess of billings" represent costs
incurred and revenues earned in excess of billings on
uncompleted contracts. The liability "billings in excess of
work performed" represents billings in excess of costs
incurred and 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 $9,164 and $8,089 for the periods ended June 30,
2000 and 1999. 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
$140,464 of computer equipment used in operations and $8,673
of furniture, fixtures and other equipment at June 30, 2000.
F-8
<PAGE>
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, 2000.
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. The Company had no impaired assets at June 30,
2000.
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, 2000 and 1999 was $226 and $2,430,
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.
F-9
<PAGE>
Basic and Diluted Earnings Per Share -Basic earnings per
common share is computed by dividing net income available to
common stockholders by the weighted-average number of
common shares outstanding during the period. Diluted
earnings 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.
NOTE 3-BASIC AND DILUTED EARNINGS PER SHARE
The following data shows the amounts used in computing
earnings per share for the year ended June 30, 2000 and 1999
and the effect on income and weighted average number of
shares of dilutive potential common stock:
2000 1999
---------- ----------
Income available to common shareholders
used in basic earnings per share $ 8,963 $ 68,705
========== ==========
Income available to common shareholders
after assumed conversions of dilutive
securities $ 8,963 $ 68,705
========== ==========
Weighted average number of common shares
used in basic earnings per shares. 19,065,892 18,948,850
========== ==========
Effect of dilutive securities
Stock options 770,260 116,667
Stock warrants - 4,349,858
---------- ----------
Weighted average number of common shares
and dilutive potential common shares used in
dilutive earnings per share 19,836,152 23,415,375
========== ==========
NOTE 4- RELATED PARTY DEBT AND NOTES PAYABLE
Related party debt consists of the following at June 30, 2000:
Debt payable to a related party corporation owned by an
employee of the Company at an interest rate of 8.5%,
unsecured balance is due on demand. $ 4,144
Note payable to a company associated with a shareholder,
at an interest rate of 12% per annum. Balance is due on
demand 9,135
Debt payable to officers/shareholders at an interest rate
of 12%, unsecured, due on demand. 3,827
Note payable to an officer and shareholder, at an interest
rate of 8%, balance due by March 31, 2002, unsecured. 26,436
---------
Total related party debt 43,542
Less: current portion (17,106)
---------
Related party debt - long term 26,436
=========
Notes payable consist of the following at June 30, 2000
Note payable to Utah Technology Finance
Corporation at an interest rate of 9.75%, unsecured,
annual principal payments of $12,500
due on December 30, 2000 and 2001. 25,000
Less: current portion (12,500)
---------
Notes payable - long term 12,500
=========
Annual maturities on related party debt and notes payable as of
June 30, 2000 are as follows:
2001 29,606
2002 38,936
NOTE 5-OPERATING LEASE
The Company occupies its facilities and uses equipment under
non-cancelable operating leases that expire in fiscal year
2001. Lease expense for fiscal 2000 and 1999 was $52,973 and
$53,007, respectively.
Minimum future lease payments under non-cancelable operating
leases as of June 30, 2000 are as follows:
Year Ended June 30,
2001 21,465
--------
$ 21,465
========
F-10
<PAGE>
NOTE 6 - INCOME TAXES
No benefit for income taxes has been recorded during the
years ended June 30, 2000 and 1999. 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,
2000 are as follows:
Deferred Tax Assets
Tax net operating loss carry forward $ 1,544,873
Tax credits carry forward 92,000
Reserves and accrued liabilities 5,052
-----------
Total Deferred Tax Assets 1,641,925
-----------
Valuation allowance (1,641,925)
-----------
Net Deferred Tax Asset $ -
===========
During the years ended June 30, 2000 and 1999, the valuation
allowance decreased by $39,229 and $28,031 respectively.
As of June 30, 2000, the Company has net operating loss
carryforwards for federal income tax reporting purposes of
approximately $4,142,369 which have begun to expire and will
expire through 2013.
The Company has research and development tax credit and
investment tax credit carryforwards of approximately $95,000
and $8,000, respectively, of which $11,000 expired in 2000.
The remaining credits will expire through fiscal 2005.
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, 2000 and 1999:
2000 1999
---------- ----------
Income tax expense (benefit) at statutory rate $ 3,047 $ 23,360
Change in deferred tax valuation account (39,229) (28,031)
Non deductible taxes 2,753 2,404
Expired operating loss and tax credits 33,133 -
State taxes, net of federal benefit 296 2,267
---------- ----------
Provision for Income Taxes $ - $ -
========== ==========
F-11
<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.
NOTE 8-STOCK OPTIONS
During fiscal year ended June 2000, the Board of Directors
authorized the issuance of 830,000 stock options outside of
the Incentive Stock Option Plan to employees of the Company.
These options vest at a rate of 20% annually, are exercisable
at $0.10 per share and expire on June 4, 2004. No expense was
recognized related to the grant of these options. 205,000 of
these options were forfeited during the fiscal year ended
June 30, 2000.
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 fifth anniversary date
following the date of grant. The options expire five years
from the vesting date. Incentive stock options are forfeited
unless exercised within zero to 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, 2000 and 1999, and changes during the years then
ended is presented below:
For the year ended June 30,
2000 1999
---------------------- -----------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
---------- ---------- ---------- ----------
Outstanding at beginning 50,000 0.14 50,000 0.14
of year
Granted 830,000 0.10 0
Exercised 0 0
Forfeited (205,000) 0.10 0
---------- ---------
Outstanding at end of
year 675,000 0.10 50,000 0
========== =========
Options exercisable 50,000 0.14 50,000 0.14
Weighted average fair
value of options granted
during the year 0.04 n/a
F-12
<PAGE>
The following table summarizes information about stock
options outstanding at June 30, 2000:
Options Outstanding Options Exercisable
------------------------------- --------------------------------
Range Number Weighted Weighted Number Weighted
of Outstanding Average Average Exercisable Average
Exercise at Remaining Exercise at Exercise
Price 6/30/00 Contract Life Price 6/30/00 Price
--------------------------------- ------------------------------
0.10 625,000 4.0 years 0.10 - -
0.14 50,000 1.9 years 0.14 50,000 0.14
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 income and income per share
would have been increased to the pro forma amounts indicated
below:
2000 1999
---------- ----------
Net income (loss)
As reported $ 8,963 $ 68,705
Pro forma (5,750) 68,705
Basic earnings (loss) per share
As reported 0.00 0.00
Pro forma (0.00) 0.00
Diluted earnings (loss) per share
As reported 0.00 0.00
Pro forma (0.00) 0.00
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, 2000: expected
volatility of 137.77 %, risk-free interest rate of 5.8% 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. These warrants expired
during the year ended June 30, 2000. The following table
summarizes the warrants to purchase common stock issued and
outstanding, together with their respective exercise price
ranges:
Years Ended June 30,
2000 1999
---------- ----------
Warrants to purchase common
shares, beginning of the year,
at prices ranging from $0.14
to $0.42 per share 688,077 688,077
Warrants exercised 0 0
Warrants expired (688,077) 0
---------- ----------
Warrants to purchase common
shares, end of the year, at
prices ranging from $0.14
to $0.42 per share 0 688,077
========== ==========
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.
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
was recognized as an extraordinary gain on the forgiveness
of debt.
NOTE 12-SUBSEQUENT EVENT (UNAUDITED)
Because of employee turnover, an additional 20,000 options
granted during the fiscal year ended June 30, 2000
were forfeited subsequent to the fiscal year end June 30,
2000 bringing the total number of forfeited options to
225,000 and the number of options outstanding to 655,000.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
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 57 President(resigned) December 1, 1993
(July 10, 1996)
Chairman of the Board July 10, 1996
Director January 24, 1994
Frank Overfelt 57 Director September 29, 1995
Chief Operations Officer
(acting) July 10, 1996
President & Chief Operating
Officer August 31, 1998
Eric J. Nickerson 47 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
14
<PAGE>
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.
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.
14
<PAGE>
Other Key Personnel
The Company's other key personnel include the
following:
Donald W. Ballash. Mr. Ballash holds the position of
Vice-President of Product Development and Consulting and has
over 19 years of experience in the health care field. 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 $100,000 for the fiscal year.
<TABLE>
<CAPTION>
Annual Compensation /Long Term Compensation /
/ Awards /Payouts /
Name and Year Salary Bonus Other Restricted Securities LTIP All Other
Principal ($) ($) ($) Annual Stock Underlying Pay- Compen-
Compen- Awards Options/ outs sation
Position ($) SARs(#) ($) ($)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank C. Overfelt 1998 76,797 -0- -0- -0- -0- -0- -0-
Chief Operating Officer 1999 76,828 -0- -0- -0- -0- -0- -0-
2000 76,360 -0- -0- -0- -0- -0- 3,600
Jerald L. Nelson 1998 -0- -0- -0- -0- -0- -0- -0-
Chairman of the Board 1999 -0- -0- 600 -0- -0- -0- -0-
2000 -0- -0- -0- -0- -0- -0- -0-
All Executive Officers
(3 persons) 1998 76,797 -0- -0- -0- -0- -0- -0-
(1 person) 1998 76,828 -0- 600 -0- -0- -0- -0-
(2 person) 2000 76,360 -0- -0- -0- -0- -0- -0-
</TABLE>
The Company also may pay discretionary cash bonuses to
management and employees based on meritorious performance.
15
<PAGE>
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.
205,000 of these options were forfeited during the fiscal
year and at June 30, 2000 and an additional 20,000 were
forfeited during the three month period ended September 30,
2000. Only 655,000 remained outstanding as of October 1, 2000.
These options were issued outside of the Incentive Stock
Option Plan and authorized by the Board of Directors. There
are still outstanding 50,000 options to an employee
exercisable at $0.14 per share.
16
<PAGE>
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the holdings of common stock
as of October 1, 2000 (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 October 1, 2000
Common (1) Percent of Shares Outstanding
---------- -----------------------------
Michael R. Carlston 2 5,510,290 27.94%
Dennis C. Peterson 3 4,220,442 21.40%
Mark Oldroyd 4 3,975,559 20.16%
Scott Staker 5 3,975,559 20.16%
T-Acquisition 6 3,775,559 19.14%
Eric J. Nickerson 7 2,602,044 13.19%
Third Century II 7 2,602,044 13.19%
Donald W. Ballash 11 1,226,429 6.22%
Robert Smith 8 1,166,246 5.91%
Richard Gwinn 9 1,004,920 5.10%
Jerald L. Nelson 12 435,700 2.21%
Frank Overfelt 10 385,511 1.95%
All Officers and
Directors 4,649,684 23.58%
1. Based on 19,065,900 common shares outstanding and
options to acquire 655,000 shares of Common Stock at $0.10 -
$0.14 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
17
<PAGE>
8. Includes 1,166,240 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. Dr. Gwinns address is 304 W. Thorn, San Diego, CA
92103
10. Includes 50,000 shares of Common Stock held by IHCG and
335,511 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 435,700 shares of Common Stock .. Mr. Nelsons
address is 207 West Clarendon #3B, Phoenix, AZ 85013
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.
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.
18
<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, 2000 and 1999
Statements of Operations for the Years Ended
June 30, 2000, 1999, and 1998
Statements of Shareholders' Equity
for the Years Ended June 30, 1999 and 2000
Statements of Cash Flows for the Years ended
June 30, 2000, 1999
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
19
<PAGE>
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
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
20
<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.
October 12, 2000 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 Operating 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 Frank C. Overfelt, 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 October 12, 2000
-------------------- the Board of Directors
Jerald L. Nelson
/s/Frank C. Overfelt Director, President October 12, 2000
-------------------- Chief Operating Officer
Frank C. Overfelt
/s/ Eric J. Nickerson Director October 12, 2000
---------------------
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 or
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.
21
<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.
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 Operating 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 Frank C. Overfelt, 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 Chairman of the Board October 12, 2000
-------------------- Director
Jerald L. Nelson
/s/ Frank C. Overfelt Director, President and
--------------------- Chief Operating Officer October 12, 2000
Frank C. Overfelt
/s/ Eric J. Nickerson Director October 12, 2000
---------------------
Eric J. Nickerson
22
<PAGE>
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 or
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.
23
<PAGE>
