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, 2002
[ ] 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.)
53 West 9000 South
Sandy, Utah 84070
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (801) 568-0899
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-KSB, or any amendment to
this Form 10-KSB [ ].
State issuer's revenues for its most recent fiscal year: $ 717,005
State the aggregate market value of voting stock held by non-affiliates computed
by reference to the price at which the common equity was sold, or the average
bid and asked price of such common equity, as of a specified date within the
past 60 days. No current market value for common stock within last 60 days.
The number of shares outstanding of the Registrant's Common Stock as of
September 27, 2002 was 19,336,205.
TABLE OF CONTENTS
Page #
PART I
Item 1 Business 1
Item 2 Properties 4
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of Security Holders 5
PART II
Item 5 Market for the Registrant's Common Equity
and Related Stockholder Matters 5
Item 6 Management's Discussion and Analysis of Financial
Condition and Results of Operation 5
Item 7 Financial Statements 8
Item 8 Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 9
PART III
Item 9 Directors, Executive Officers, Promoters and
Control Persons of the Registrant: Compliance with
Section 16)a) of the Exchange Act 9
Item 10 Executive Compensation 11
Item 11 Security Ownership of Certain Beneficial
Owners and Management 13
Item 12 Certain Relationships and Related Transactions 14
PART IV
Item 13 Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBITS Attached
ITEM 1: BUSINESS
General
The Company was incorporated on February 24, 1984 by employees of Telemed who
organized the buyout of Telemed's pulmonary and respiratory care information
services business. In March 1984, the Company purchased that business for cash
and a promissory note.
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 RCMS product became dated. The last RCMS sale was made in January
1991. In 1994 a new senior management team was put in place.
In the following year, the Company acquired two complimentary businesses (see
Acquisitions). Based on Y2K issues, a business decision was made to discontinue
the RCMS product line.
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.
Since 1986 HCG has provided 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
1
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.
NMC was founded in California in 1979 and 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, the software was completely redesigned for IBM compatible PCs and
utilized standard operating systems and database software.
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 sixth release, (EDNet) 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 for Windows was
released in the spring of 1998.
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 Chief Operating Officer of the company.
2
As of June 30, 2002, the software division of the Company had sold its EDNet
product to 24 emergency department and urgent care sites. All sites have annual
maintenance contracts for continued support and updates. As of June 30, 2002
the Company was in the process of installing EDNet upgrades at 5 DOS clients.
In response to client requests the company has enhanced its basic EDNet software
to other hospital applications. ARCNet, which is used in same day surgery and
ambulatory care departments and IntelliChartr which helps to make hospital
staffing decisions based on patient care needs have been developed and
installed.
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
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 Product Development
Development efforts are focused on the enhancement of the EDNet 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 software, is being beta-tested at a
major consulting client site. IntelliChart utilizes the main library set of
EDNet 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 is now an enterprise level solution, which has greatly enhanced the
durability of the product by being able to serve at either single or multi
location hospitals. A majority of the development effort has been expended
on this enhancement.
The software divisions 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
3
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, 2002, the Company employed seven full-time employees, one parttime
employee and several independent service contractors. The number of employees
and their responsibilities are as follows: three professional, three technical,
and two 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.
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.
4
ITEM 2: PROPERTIES
The Company's headquarters were relocated to Sandy, Utah in March 2001. The
Company leases approximately 1,920 square feet of office space at a total cost
of approximately $2,350 per month. This is pursuant to a lease that expires on
November 9, 2004.
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, 2002 a limited number of shares
traded on the bulletin board market at a price range of $0.05 to $0.15.
In March, the Company was advised that the bulletin board listing had been
suspended pending completion of the appropriate filings.
The number of shareholders of record for the Company's Common Stock as of June
30, 2002 was 314, which include depositories and broker/dealers who hold shares
of Common Stock in "nominee" or "street" names.
5
ITEM 6: 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.
Results of Operations
Fiscal 2002 Compared with Fiscal 2001
During fiscal year 2002, the Company had revenues of $717,005, which represented
an increase of $175,908 or 33% from revenues of $541,097 for the prior fiscal
year. The following table presents the components of revenues for fiscal 2002
and 2001.
ACTUAL
REVENUES FY 02 FY 01 Increase % Change
-------- --------- -------- --------
EDNet Systems $467,542 $ 419,096 $ 48,446 12%
Consulting $249,463 $ 122,001 $127,462 104%
Total $717,005 $ 541,097 $175,908 33%
The following table details cost of revenue by product, comparing the prior
fiscal year as shown on financials.
2002 2001 Change %Change
-------- -------- --------- -------
EDNet System and $225,205 $245,461 $(20,256)
Consulting $139,927 $ 98,160 $ 41,767
Total $365,132 $343,621 $ 21,511 6%
Cost of revenues increased to $365,132, up 6% for fiscal year 2002 compared with
$343,621 for the previous fiscal year. Costs of revenues related to the EDNet
System for fiscal year 2002 were $225,205 giving the system revenue products a
gross margin of 52%. This compares to cost of revenues of $245,461 with a gross
margin of 41% for the prior twelve-month period. Overall gross profit for the
6
fiscal year 2002was 49% compared to 36% for the prior year. 70% of this profit
improvement was due to increased revenue while 30% was due to improved margins.
Selling, general and administrative expenses increased by $9,473 or 6%, to
$178,015 for fiscal year 2002 compared with $168,542 for the previous fiscal
year. Software development expenses were unchanged at $104,700 for fiscal year
2002 from fiscal 2001.
As a result of the above factors, the net gain from operations was $69,200 for
fiscal year 2002 compared with loss of $(75,862) for fiscal year 2001.
Interest expense increased to $20,446 from $15,610 for the prior fiscal year.
The net gain was $70,890 or $.00 per share for fiscal year 2002 compared with a
net loss of $(90,515) or ($0.00) per share for fiscal year 2001.
Liquidity and Capital Resources
The Company's cash position increased from $37,022 to $78,585 during its fiscal
year 2002. The Company had a working capital deficit of $238,431 as of June 30,
2002, as compared with a deficit of $304,192 as of June 30, 2001. Operating
activities provided $62,915 for the fiscal year ended June 30, 2002 as compared
to providing $26,132 in the corresponding period of the prior fiscal year.
The Company's investing activities used $17,977 of cash for the current
year compared to using $3,720 in the corresponding period of the prior fiscal
year.
There were no related party advances to the Company during the current year
ended June 30, 2002.
While a portion of the current liabilities, approximately $200,000, 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
7
ITEM 7: FINANCIAL STATEMENTS
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Page
Report of Independent Certified Public Accountants F-1
Consolidated Financial Statements:
Consolidated Balance Sheet - June 30, 2002 F-2
Consolidated Statements of Operations for the Years
Ended June 30, 2002 and 2001 F-3
Consolidated Statements of Shareholders' Deficit for
the Years Ended June 30, 2001 and 2002 F-4
Consolidated Statements of Cash Flows for the Years
Ended June 30, 2002 and 2001 F-5
Notes to Consolidated Financial Statements F-6
HANSEN, BARNETT & MAXWELL (801) 532-2200
A Professional Corporation Fax (801) 532-7944
CERTIFIED PUBLIC ACCOUNTANTS 5 Triad Center, Suite 750
Salt Lake City, Utah 84180-1128
www.hbmcpas.com
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACOUNTANTS
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, 2002, and the
related consolidated statements of operations, shareholders' deficit and cash
flows for the years ended June 30, 2002 and 2001. 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 of America. 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, 2002, and the results of their
operations and their cash flows for the years ended June 30, 2002 and 2001 in
conformity with accounting principles generally accepted in the United States.
/s/ HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
August 16, 2002
F-1
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
ASSETS
Current Assets
Cash $ 78,585
Accounts receivable, net of allowance for
doubtful accounts of $7,500 95,430
Prepaid expenses 4,300
Work performed in excess of billings 20,631
Total Current Assets 198,946
Furniture, Fixtures and Equipment 131,824
Less: accumulated depreciation (112,887)
-----------
18,937
-----------
Other Assets, Net 3,675
-----------
Total Assets $ 221,558
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 117,977
Accrued expenses 73,238
Accrued interest 7,402
Deferred revenue 153,599
Billings in excess of work performed 38,485
Related party debt 46,676
-----------
Total Current Liabilities 437,377
-----------
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, 19,336,205 shares issued
and outstanding 19,336
Additional paid-in capital 4,853,896
Accumulated deficit (5,089,051)
-----------
Total Shareholders' Deficit (215,819)
-----------
Total Liabilities and Shareholders' Deficit $ 221,558
===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
---------- ----------
Revenues
Software license fees and maintenance $ 467,542 $ 419,096
Consulting services 249,463 122,001
---------- ----------
Total Revenues 717,005 541,097
Cost of Revenues
Software license fees and maintenance 225,205 245,461
Consulting services 139,927 98,160
---------- ----------
Total Cost of Revenues 365,132 343,621
---------- ----------
Gross Profit 351,873 197,476
Operating Expenses
Selling, general and administrative 178,015 168,542
Software development 104,658 104,796
---------- ----------
Total Operating Expenses 282,673 273,338
---------- ----------
Income (Loss) From Operations 69,200 (75,862)
Other Income and (Expense)
Interest income 511 -
Miscellaneous income - 957
Interest expense (20,446) (15,610)
Gain on forgiveness of debt 21,625 -
---------- ----------
Net Other Income (Loss) 1,690 (14,653)
---------- ----------
Net Income (Loss) $ 70,890 $ (90,515)
========== ==========
Basic and Diluted Earnings (Loss) Per Share $ - $ -
Weighted Average Number of Common Shares
Used in Per Share Calculation 19,065,892 19,065,892
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 2001 AND 2002
Common Stock
------------------------ Additional
Shares Paid-In Warrants Accumulated
Issued Amount Capital Outstanding Deficit Total
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 2000 19,065,892 $ 19,066 $ 4,843,476 $ 7,987 $(5,069,426) $ (198,897)
Expiration of warrants - - 7,987 (7,987) - -
Net loss - - - - (90,515) (90,515)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 2001 19,065,892 19,066 4,851,463 - (5,159,941) (289,412)
Shares issued to director
for services 270,313 270 2,433 - - 2,703
Net income - - - - 70,890 70,890
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 2002 19,336,205 $ 19,336 $ 4,853,896 $ - $(5,089,051) $ (215,819)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
---------- ----------
Cash Flows From Operating Activities
Net income (loss) $ 70,890 $ (90,515)
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation 10,145 10,407
Stock issued for services 2,703 -
Gain on forgiveness of debt (21,625) -
Change in assets and liabilities
Accounts receivable (10,797) 65,908
Deposits - (2,250)
Prepaid expenses (2,300) 3,609
Accounts payable (22,059) 4,458
Accrued liabilities (27,522) 45,070
Deferred revenue 45,001 (20,352)
Work performed in excess of billings 5,819 (6,910)
Billings in excess of work performed 12,660 16,707
---------- ----------
Net Cash Provided By Operating Activities 62,915 26,132
---------- ----------
Cash Flows From Investing Activities
Acquisition of furniture, fixtures and equipment (17,977) (3,720)
---------- ----------
Net Cash Used In Investing Activities (17,977) (3,720)
Cash Flows From Financing Activities
Principal payments on short term debt (3,375) -
---------- ----------
Net Cash Used In Financing Activities (3,375) -
---------- ----------
Net Increase In Cash 41,563 22,412
Cash at Beginning of the Year 37,022 14,610
---------- ----------
Cash at End of the Year $ 78,585 $ 37,022
========== ==========
Supplemental Disclosures of Cash
Flow Information:
Cash paid for interest $ 1,625 $ 1,396
========== ==========
Non-Cash Investing and Financing Activities
Disposal of furniture, fixtures and equipment $ 20,387 $ 18,623
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
TENET INFORMATION SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
Concentration of Risk - Sales to major customers are defined as revenues to
any one customer which exceeds 10% of total sales. During the year ended
June 30, 2002, the Company had revenues from two customers which accounted
for 44% of the Company's total revenue. The risk of loss of these major
customers subjects the Company to the possibility of decreased revenues.
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 accounting
principles generally accepted in the United States of America 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.
F-6
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 of 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 $10,145 and $10,407 for the periods ended
June 30, 2002 and 2001, respectively. 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 $128,105 of computer equipment used in operations and
$3,719 of furniture, fixtures and other equipment at June 30, 2002.
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, 2002.
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, 2002.
F-7
Cash Equivalents and Fair Value of Financial Instruments -Cash Equivalents
include highly liquid investments with original maturities of three months
or less readily convertible to known amounts of cash.
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.
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 one-year limited warranty from date of first use is
provided on sales of software licenses. The terms of the warranty are
extended to all periods where the System is covered by an applicable
Support Agreement. Warranty costs have not been material in any year
presented; accordingly, these costs are expensed when incurred.
Basic and Diluted Earnings (Loss) Per Share -Basic earnings (loss) per
common share is computed by dividing net income (loss) 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. A total of 605,000 potentially issuable shares were excluded
from the calculation of diluted income (loss) per common share at June 30,
2002 and 2001 because the effects would be anti-dilutive.
Recently Enacted Accounting Standards - In April 2002, the FASB issued SFAS
No. 145. Among other provisions, this statement modifies the criteria for
classification of gains or losses on debt extinguishments such that they
are not required to be classified as extraordinary items if they do not
meet the criteria for classification as extraordinary items in APB Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." The Company has elected to
adopt this standard during the year ended June 30, 2002. Adopting this
standard had an affect on income statement classification but no effect on
net income for the year ended June 30, 2002.
F-8
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The statement requires
companies to recognize costs associated with exit or disposal activities
when they are incurred rather than at the date of a commitment to an exit
or disposal plan. Examples of costs covered by the standard include lease
termination costs and certain employee severance costs that are associated
with a restructuring, discontinued operation, plant closing, or other exit
or disposal activity. The Company will be required to apply this statement
prospectively for any exit or disposal activities initiated after December
31, 2002. The adoption of this standard is not expected to have a material
effect on the Company's financial position or results of operations.
NOTE 2- RELATED PARTY DEBT AND NOTES PAYABLE
Related-party debt consists of the following at June 30, 2002:
Debt payable to a related party corporation owned by an
employee of the Company at an interest rate of 8.0%,
unsecured, balance is due on demand. $ 4,666
Note payable to a company associated with a shareholder,
at an interest rate of 8% per annum, balance is due on
demand 10,714
Debt payable to officers/shareholders at an interest rate
of 12%, unsecured, due on demand. 4,860
Note payable to an officer and shareholder, at an interest
rate of 8%, balance due by June 30, 2003, unsecured. 26,436
--------
Total related party debt $ 46,676
========
On November 1, 2001, the Company paid $5,000 to a creditor as payment in
full of all obligations on an unsecured note for $25,000. After deducting
$1,625 for payment of outstanding interest, $3,375 was applied to the
outstanding principal and the creditor forgave the balance due on the note
resulting in a one-time gain of $21,625. In accordance with SFAS 145, the
gain from debt forgiveness did not meet the conditions for being classified
as extraordinary and therefore was included in continuing operations. On
June 30, 2002, the Company issued 270,313 shares of common stock to a
director for services in negotiating the debt settlement. The shares were
valued at $2,703 or $0.01 per share and were expensed.
F-9
NOTE 3 - INCOME TAXES
No benefit for income taxes has been recorded during the years ended June
30, 2002 and 2001. 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, 2002 are as follows:
Deferred Tax Assets
Tax net operating loss carry forward $ 1,829,441
Tax credits carry forward 4,822
Reserves and accrued liabilities 51,462
-----------
Total Deferred Tax Assets 1,885,725
-----------
Valuation allowance (1,885,725)
-----------
Net Deferred Tax Asset $ -
===========
As of June 30, 2002, the Company has net operating loss carryforwards for
federal income tax reporting purposes of approximately $4,913,889 which
will expire through 2021.
As of June 30, 2002, the Company had research and development tax credits
and investment tax credit carryforwards of approximately $51,462. These
credits will expire through fiscal 2006.
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, 2002 and 2001:
2002 2001
---------- ----------
Income tax expense (benefit) at statutory rate $ 24,103 $ (30,775)
Change in deferred tax valuation account (50,420) (8,247)
(Non taxable income) /non deductible taxes 2,675 2,675
Expired operating losses and tax credits 21,303 39,334
State taxes, net of federal benefit 2,339 (2,987)
---------- ----------
Provision for Income Taxes $ - $ -
========== ==========
F-10
NOTE 4 - STOCK OPTIONS
During fiscal year ended June 2002, the Board of Directors did not
authorize the issuance of any stock options outside of the Incentive Stock
Option Plan to employees of the Company.
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 the first
anniversary date following the date of grant 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 options outstanding as of June 30,
2002 and 2001, and changes during the years then ended is presented below:
For the year ended June 30,
2002 2001
-------------------- -----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-------------------- -----------------
Outstanding at beginning of year 605,000 0.10 675,000 0.10
Granted - - - -
Forfeited - - (70,000) 0.13
------- -------
Outstanding at end of year 605,000 0.10 605,000 0.10
======= =======
Options exercisable 242,000 0.10 121,000 0.10
======= =======
Weighted average fair value
of options granted during
the year n/a n/a
The following table summarizes information about stock options outstanding
at June 30, 2002:
Options Outstanding Options Exercisable
-------------------------------------- ----------------------------------
Number Weighted Weighted Number Weighted
Range of Outstanding Average Average Exercisable Average
Exercise at Remaining Exercise at Exercise
Price 6/30/02 Contract Life Price 6/30/02 Price
-------------------------------------- -----------------------------------
$ 0.10 605,000 2.1 years $ 0.10 242,000 $ 0.10
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
F-11
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:
For the year ended June 30,
2002 2001
--------- ---------
Net income (loss)
As reported $ 70,890 $ (90,515)
Pro forma 68,045 (93,514)
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)
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.
NOTE 5-OPERATING LEASE
The Company occupies its facilities under a non-cancelable operating lease
that expires in October 2005. Lease expense for fiscal 2002 and 2001 was
$26,535 and $31,745, respectively.
Minimum future lease payments under non-cancelable operating leases as of
June 30, 2002 are as follows:
Year Ended June 30,
2003 24,480
2004 25,214
2005 8,487
F-12
ITEM 8: 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 9: 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 59 President (resigned) December 1, 1993
(July 10, 1996)
Chairman of the Board July 10, 1996
Director January 24, 1994
Corporate Treasurer June 5, 2001
Frank Overfelt 59 Director September 29, 1995
Chief Operations Officer (acting) July 10, 1996
President & Chief Operating
Officer August 31, 1998
(Resigned as COO) (June 5, 2001)
Donald W. Ballash 44 Chief Operations Officer June 5, 2001
Corporate Secretary June 5, 2001
Eric J. Nickerson 49 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.
9
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.
On June 5, 2001 a board of directors meeting was held. Mr. Overfelt resigned
his title of Chief Operating Officer while retaining his position as President.
The board elected Donald Ballash to the positions of Corporate Secretary and
Chief Operating Officer. The board further elected
Jerald Nelson to the position of Corporate Treasurer.
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. On June 5,
2001 the board elected Dr. Nelson to the position of Corporate Secretary. 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. At the current time, Mr. Overfelt holds the position of President. 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."
Donald W. Ballash. Mr. Ballash holds the positions of Corporate
Secretary and Chief Operating Officer, Vice-President of Product Development and
Consulting and has over 19 years of experience in the health care field. He has
10
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 10: EXECUTIVE COMPENSATION
The following table sets forth all cash compensation for services rendered in
all capacities to the Company during the fiscal years ended June 30, 2002, 2001,
and 2000 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 $100,000 for the
fiscal year.
Annual Compensation /Long Term Compensation /
--------------------------------------------------------------
/ Awards /Payouts/
-------------------------------------
Name Year Salary Bonus Other Restricted Securities LTIP All Other
and ($) ($) ($) Annual Stock Underlying Pay- Compen-
Principal Compen- Awards Options/ outs sation
Position ($) SARs(#) ($) ($)
-----------------------------------------------------------------------------------------------
Frank C. Overfelt 2000 76,360 -0- -0- -0- -0- -0- 3,600
President 2001 57,270 -0- -0- -0- -0- -0- 5,325
2002 104,810 -0- -0- -0- -0- -0- -0-
Jerald L. Nelson 2000 -0- -0- 600 -0- -0- -0- -0-
Chairman of the Board 2001 -0- -0- -0- -0- -0- -0- -0-
Corporate Treasurer 2002 -0- -0- 1,000 2,703 -0- -0- -0-
Donald W. Ballash 2001 61,500 -0- -0- -0- -0- -0- 250
Chief Operating Officer 2002 102,625 -0- -0- -0- -0- -0- -0-
Corporate Secretary
All Executive Officers
(1 person) 2000 76,360 -0- -0- -0- -0- -0- 3,600
(3 persons) 2001 118,750 -0- -0- -0- -0- -0- 5,325
(3 persons) 2002 207,434 -0- 1,000 2,703 -0- -0- -0-
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"),
11
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 end at June 30, 2000 and an additional 70,000
were forfeited during the year ended June 30, 2001. Only 605,000 remained
outstanding as of September 27, 2002 These options were issued outside of the
Incentive Stock Option Plan and authorized by the Board of Directors.
12
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the holdings of common stock as of September 27,
2002 (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 September 27, 2002
Common (1) Percent of Shares Outstanding
---------- -----------------------------
Michael R. Carlston 2 4,673,977 24.17%
Dennis C. Peterson 3 4,220,442 21.83%
Mark Oldroyd 4 3,975,559 20.56%
Scott Staker 5 3,975,559 20.56%
T-Acquisition 6 3,775,559 19.53%
Eric J. Nickerson 7 2,173,500 11.24%
Third Century II 7 2,173,500 11.24%
Jerald L. Nelson 12 1,542,326 7.98%
Donald W. Ballash 11 1,226,429 6.34%
Robert Smith 8 1,166,246 6.03%
Richard Gwinn 9 1,004,920 5.20%
Frank Overfelt 10 670,204 3.47%
All Officers and
Directors 5,612,459 29.03%
1. Based on 19,336,205 common shares outstanding and options to acquire 605,000
shares of Common Stock at $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 TAcquisition is 855
Harwood Dr., Murray, UT 84107.
7. Includes 2,173,500 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 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 620,204 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 1,542,326 shares of Common Stock .. Mr. Nelsons address is 207
West Clarendon #3B, Phoenix, AZ 85013
13
ITEM 12: 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.
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.
PART IV
ITEM 13: 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, 2002 and 2001
Statements of Operations for the Years Ended June 30, 2002
and 2001
Statements of Shareholders' Equity for the Years Ended June 30,
2002 and 2001
Statements of Cash Flows for the Years ended June 30, 2002 and
2001
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
Exhibit 99.1 Certification under Section 906 of the Sarbanes-Oxley
Act (18 U.S.C. Section 1350)
14
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 27, 2002 By: /s/ Jerald L. Nelson
----------------------
Jerald L. Nelson, Chairman of the Board
Corporate Treasurer
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:
Signature Title Date
--------- ----- ------
/s/ Jerald L. Nelson Director and Chairman September 27, 2002
-------------------- Corporate Treasurer
Jerald L. Nelson of the Board of Directors
/s/ Donald W. Ballash Corporate Secretary, Chief September 27, 2002
--------------------- Operations Officer
Donald W. Ballash
/s/ Frank C. Overfelt Director, President September 27, 2002
---------------------
Frank C. Overfelt
/s/ Eric J. Nickerson Director September 27, 2002
---------------------
Eric J. Nickerson
CERTIFICATIONS
I, Frank C. Overfelt, certify that:
1. I have reviewed this annual report on Form 10-Ksb of Tenet
Information Services, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
annual report.
Date: September 27, 2002
/S/ Frank C. Overfelt
--------------------------
Frank C. Overfelt
Director, President
I, Jerald L. Nelson, certify that:
1. I have reviewed this annual report on Form 10-Ksb of Tenet
Information Services, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;
and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
Date: September 27, 2002
/S/ Jerald L. Nelson
---------------------------
Jerald L. Nelson
Corporate Treasurer, Chairman of the Board
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:
Signature Title Date
/s/ Jerald L. Nelson
______________________ Chairman of the Board September 27, 2002
Jerald L. Nelson Director and Corporate
Treasurer
Frank C. Overfelt
_________________________ Director, President September 27, 2002
Frank C. Overfelt
Donald W. Ballash
_________________________ Corporate Secretary and
Donald W. Ballash Chief Operating Officer September 27, 2002
Eric J. Nickerson
______________________ Director September 27, 2002
Eric J. Nickerson
CERTIFICATIONS
I, Frank C. Overfelt, certify that:
1. I have reviewed this annual report on Form 10-Ksb of Tenet
Information Services, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report.
Date: September 27, 2002
/S/ Frank C. Overfelt
--------------------------
Frank C. Overfelt
Director, President
I, Jerald L. Nelson, certify that:
1. I have reviewed this annual report on Form 10-Ksb of Tenet
Information Services, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report.
Date: September 27, 2002
/S/ Jerald L. Nelson
---------------------------
Jerald L. Nelson
Corporate Treasurer, Chairman of the Board