<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
` Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) July 7, 1997
-------------------------------
HALIS, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Georgia 0-16288 58-1366235
- ------------------------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
</TABLE>
9040 Roswell Road, Suite 470, Atlanta, Georgia 30350
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 641-5555
-----------------------------
Not applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
The following financial statements are filed with this Report:
PHYSICIANS RESOURCE NETWORK, INC.
Independent Auditors' Report of Habif, Arogeti & Wynne, P.C.
Balance Sheets at December 31, 1996 and June 30, 1997 (unaudited)
Statements of Operations for the years ended December 31, 1996 and 1995 and the
six months ended June 30, 1997 and 1996 (unaudited)
Statements of Changes in Stockholders' Deficit for the years ended December 31,
1996 and 1995 and the six month period ended June 30, 1997 (unaudited)
Statements of Cash Flows for the years ended December 31, 1996 and 1995 and
the six months ended June 30, 1997 and 1996 (unaudited)
Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION:
The following unaudited pro forma condensed financial statements are
filed with this Report:
Introduction
Unaudited Pro Forma Condensed Consolidated Balance Sheet - June 30, 1997
Unaudited Pro Forma Condensed Consolidated Statement of Operations - year ended
December 31, 1996 and six month period ended June 30, 1997
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements
(c) EXHIBITS:
2.1 Agreement and Plan of Merger and Reorganization, dated as of
July 7, 1997, among HALIS, Inc., PRN Acquisition Co.,
Physicians Resource Network, Inc. and the sole shareholder of
Physicians Resource Network, Inc. (incorporated by reference
from the Company's Current Report on Form 8-K dated July 7,
1997).
-2-
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Physicians Resource Network, Inc.
We have audited the accompanying balance sheet of PHYSICIANS RESOURCE NETWORK,
INC., as of December 31, 1996, and the related statements of operations, changes
in stockholder's deficit, and cash flows for the years ended December 31, 1996
and 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PHYSICIANS RESOURCE NETWORK,
INC., at December 31, 1996, and the results of its operations and its cash flows
for the years ended December 31, 1996 and 1995 in conformity with generally
accepted accounting principles.
/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
August 29, 1997
-3-
<PAGE> 4
PHYSICIANS RESOURCE NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, [Unaudited]
1996 June 30, 1997
------------ -------------
<S> <C> <C>
Current assets
Cash $ -0- $ 24,566
Accounts receivables, net of allowance for
doubtful accounts of $20,000 691,558 286,857
---------- ----------
Total current assets 691,558 311,423
---------- ----------
Property and equipment, at cost
Equipment 542,461 546,229
Furniture and fixtures 399,776 399,776
Leasehold improvements 57,115 57,115
---------- ----------
999,352 1,003,120
Less accumulated depreciation [466,185] [546,769]
---------- ----------
533,167 456,351
---------- ----------
Other assets 6,214 6,214
---------- ----------
$1,230,939 $ 773,988
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Cash overdraft $ 41,989 $ -0-
Notes payable 179,000 179,000
Current portion of capital lease obligations 106,854 122,991
Current portion of long-term debt 418,488 418,488
Accounts payable and other current liabilities 467,583 251,092
Notes payable - related parties 404,500 285,000
---------- ----------
Total current liabilities 1,618,414 1,256,571
---------- ----------
Long-term liabilities
Capital lease obligations, net of current portion 213,148 158,728
---------- ----------
Stockholder's deficit
Common stock, 1,000 shares of voting and 10,000
non-voting shares authorized; 1,000 shares $.10
par value and 1,000 non-voting shares $.10 par
value issued and outstanding 200 200
Additional paid-in capital 85,923 85,923
Accumulated deficit [686,746] [727,434]
---------- ----------
[600,623] [641,311]
---------- ----------
$1,230,939 $ 773,988
========== ==========
</TABLE>
See auditors' report and accompanying notes.
-4-
<PAGE> 5
PHYSICIANS RESOURCE NETWORK, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
[Unaudited]
For the For the
Years Ended Six Months Ended
December 31, June 30,
------------------------- ------------------------
1995 1996 1996 1997
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from services $ 3,171,271 $6,526,822 $3,397,720 $2,879,782
----------- ---------- ---------- ----------
Costs and expenses
Cost of services 2,190,349 5,029,433 2,513,336 2,246,381
General and administrative 1,097,415 1,459,477 823,716 624,991
----------- ---------- ---------- ----------
3,287,764 6,488,910 3,337,052 2,871,372
----------- ---------- ---------- ----------
Income [Loss] from operations [116,493] 37,912 60,668 8,410
----------- ---------- ---------- ----------
Other income [expense]
Other income 11,192 10,773 4,496 20,327
Interest expense [87,817] [132,616] [50,901] [69,425]
Loss on asset disposal [15,534] [8,793] [8,793] -0-
----------- ---------- ---------- ----------
[92,159] [130,636] [55,198] [49,098]
----------- ---------- ---------- ----------
Net income [loss] $ [208,652] $ [92,724] $ 5,470 $ [40,688]
=========== ========== ========== ==========
</TABLE>
See auditors' report and accompanying notes.
-5-
<PAGE> 6
PHYSICIANS RESOURCE NETWORK, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND THE SIX MONTH PERIOD ENDED JUNE 30, 1997 [UNAUDITED]
<TABLE>
<CAPTION>
Common Stock
------------- Additional
Number Paid-In Accumulated
of shares Amount Capital Deficit Total
------------ ---- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1995 2,000 $200 $85,923 $[385,370] $[299,247]
Net loss [208,652] [208,652]
----- ---- ------- --------- ---------
Balances, December 31, 1995 2,000 200 85,923 [594,022] [507,899]
Net loss [92,724] [92,724]
----- ---- ------- --------- ---------
Balances, December 31, 1996 2,000 200 85,923 [686,746] [600,623]
Net loss - six months ended
June 30, 1997 [Unaudited] [40,688] [40,688]
----- ---- ------- --------- ---------
Balances, June 30, 1997
[Unaudited] 2,000 $200 $85,923 $[727,434] $[641,311]
===== ==== ======= ========= =========
</TABLE>
-6-
See auditors' report and accompanying notes.
<PAGE> 7
PHYSICIANS RESOURCE NETWORK, INC.
STATEMENTS OF CASH FLOWS
Increase [Decrease] in Cash
<TABLE>
<CAPTION>
[Unaudited]
For the For the
Years ended Six Months Ended
December 31, June 30,
----------------------- -----------------------
1995 1996 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income [loss] $[208,652] $ [92,724] $ 5,470 $ [40,688]
--------- --------- --------- ---------
Adjustments to reconcile net income [loss] to net
cash provided [used] by operating activities
Depreciation 105,278 134,221 63,967 80,523
Loss on asset disposal 15,534 8,793 8,793 -0-
Changes in assets and liabilities
Decrease [Increase] in accounts receivables [126,410] [481,254] [176,952] 404,700
Increase in other assets [2,015] [3,119] [3,119] -0-
Increase [Decrease] in cash overdraft -0- 41,989 -0- [41,989]
Increase [Decrease] in accounts payable
and other current liabilities 94,387 266,201 122,185 [216,491]
--------- --------- --------- ---------
Total adjustments 86,774 [33,169] 14,874 226,743
--------- --------- --------- ---------
Net cash provided [used] by
operating activities [121,878] [125,893] 20,344 186,055
--------- --------- --------- ---------
Cash flows from investing activities
Acquisitions of property and equipment [160,133] [111,646] [67,479] [3,707]
--------- --------- --------- ---------
Cash flows from financing activities
Proceeds [Repayment] of notes payable [42,101] 99,000 99,000 -0-
Payments of capital lease obligations [41,879] [55,524] [27,639] [38,282]
Proceeds [payments] on long-term debt 158,639 21,155 [28,824] -0-
Proceeds [payment] of notes payable - related
parties 235,000 104,500 [7,500] [119,500]
--------- --------- --------- ---------
Net cash provided [used] by financing activities 309,659 169,131 35,037 [157,782]
--------- --------- --------- ---------
Net increase [decrease] in cash 27,648 [68,408] [12,098] 24,566
Cash, beginning 40,760 68,408 68,408 -0-
--------- --------- --------- ---------
Cash, ending $ 68,408 $ -0- $ 56,310 $ 24,566
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the years and periods for
Interest $ 82,660 $ 126,524 $ 69,397 $ 52,619
</TABLE>
During the years ended December 31, 1996 and 1995, the Company purchased
$141,392 and $71,347 of equipment by entering into capital leases,
respectively.
See auditors' report and accompanying notes.
-7-
<PAGE> 8
PHYSICIANS RESOURCE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995 [AUDITED]
AND JUNE 30, 1997 [UNAUDITED]
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations:
PHYSICIANS RESOURCE NETWORK, INC., a Florida Corporation, provides
management, consulting, billing and staffing services on a contract basis
to medical practices in the Tampa, Florida area.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
disclosures including the allowance for doubtful accounts, useful lives and
recoverability of long term assets. Actual amounts could differ from those
estimates. Any adjustments applied to estimated amounts are recognized in
the year in which such adjustments are determined.
Revenue Recognition:
Revenue consists primarily of fees earned from employee leasing, practice
management and consulting services.
Accounts Receivable:
The Company does not have a secured interest in its accounts receivable;
however, it does have legal recourse for defaulted amounts.
Property and Equipment:
Property and equipment is carried at cost. Expenditures for maintenance and
repairs are expensed currently, while renewals and betterments that
materially extend the life of an asset are capitalized. The cost of assets
sold, retired, or otherwise disposed of, and the related allowance for
depreciation, are eliminated from the accounts, and any resulting gain or
loss is included in operations.
Depreciation is provided using the straight-line method based on the useful
lives of the assets, which have been estimated to be five to seven years.
Income Taxes:
On October 1, 1988, the Company elected to be treated as an S corporation
pursuant to the Internal Revenue Code for federal and state income tax
purposes. The income of an S corporation is taxable and distributable to
the individual stockholder of a corporation without further tax
consequences to the Company. As discussed further in Note B, the Company
ceased to be an S corporation in July 1997.
-8-
<PAGE> 9
PHYSICIANS RESOURCE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND 1995 [AUDITED]
AND JUNE 30, 1997 [UNAUDITED]
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]
Compensated Absences:
Employees must be full time, permanent employees to accrue sick leave.
Employees earn 48 hours of sick leave a year and can carry over any unused
hours. Hours not used upon termination, voluntary or involuntary, will be
paid out. Effective January 1, 1997, only three days could be carried over
to the next year and three days may be surrendered for cash.
Interim Financial Statements:
The accompanying financial statements for the six month period ended June
30, 1996 and 1997 are unaudited but, in the opinion of management, reflect
all adjustments (consisting only of normal and recurring adjustments)
necessary for a fair presentation. The results of operations for the six
month period are not necessarily indicative of the results for the full
years ending 1996 and 1997.
B. SUBSEQUENT EVENT - MERGER AGREEMENT:
On July 7, 1997, the stockholder of the Company effected a merger agreement
with HALIS, Inc. (HALIS), whereby the Company was merged into a subsidiary
of HALIS in a transaction accounted for as a purchase by HALIS. All issued
and outstanding shares of the Company were surrendered by the stockholder
in consideration for 3,733,333 shares of common stock of HALIS.
Additionally, the merger agreement included a two year employment agreement
between HALIS and the stockholder of the Company which provides for an
annual base salary of $125,000 and incentive compensation as determined by
the Board of Directors of HALIS.
It is the opinion of management and legal counsel that this transaction
qualifies as a tax-free reorganization within the meaning of section 368(a)
of the Internal Revenue Code of 1986. As a subsidiary of HALIS, a publicly
traded company, the Company will no longer enjoy its status as an S
corporation for income tax purposes.
C. RELATED PARTY TRANSACTIONS AND ECONOMIC DEPENDENCY:
The Company is affiliated with a collection agency, Accounts Management,
Inc. of Tampa Bay (AMI), in which the Company's sole shareholder has a 50%
ownership. The Company does not pay AMI fees, but AMI earns fees from the
medical practices directly. Included in revenues for the years ended
December 31, 1996 and 1995 are $8,913 and $6,438 from AMI, respectively.
Related accounts receivable at December 31, 1996 was $1,431.
Interest expense to related parties (See Note H) for the years ended
December 31, 1996 and 1995 was $24,387 and $5,401, respectively. Accrued
interest at December 31, 1996 was $13,828.
-9-
<PAGE> 10
PHYSICIANS RESOURCE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND 1995 [AUDITED]
AND JUNE 30, 1997 [UNAUDITED]
C. RELATED PARTY TRANSACTIONS AND ECONOMIC DEPENDENCY: [Continued]
The Company also had transactions with a construction company which is
owned 50% by the shareholder. The construction company provided
construction services of which approximately $43,500 is included in
leasehold improvements at December 31, 1996.
The Company earned revenues from five medical practices in which the
shareholder's sibling has ownership. As of October 31, 1996, three of the
five medical practices are no longer considered related. Revenues
attributed to these three medical practices for the ten months ended
October 31, 1996 were $303,698 (see Notes D and K).
D. ACCOUNTS RECEIVABLES:
Accounts receivables as of December 31, 1996 consist of the following:
<TABLE>
<S> <C>
Customer receivables - Trade $ 631,686
Customer receivables - Related Parties 79,822
Employee receivables 50
---------
711,558
Allowance for doubtful accounts [20,000]
---------
$ 691,558
=========
</TABLE>
E. NOTES PAYABLE:
Line-of-Credit:
The Company has a $100,000 revolving line-of-credit with Central Bank of
Tampa, of which $99,000 was owed at December 31, 1996. The line-of-credit
is being refinanced and is expected to mature December 25, 1997. Bank
advances on the credit line are payable on demand and carry an interest
rate of prime plus 1.25% per annum. The credit line is secured by
substantially all corporate assets and is personally guaranteed by the
shareholder.
Mulberry Street Investment Company - secured note payable in the amount of
$80,000 at 10% per annum. Principal plus interest was paid in full on July
7, 1997.
-10-
<PAGE> 11
PHYSICIANS RESOURCE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND 1995 [AUDITED]
AND JUNE 30, 1997 [UNAUDITED]
F. CAPITAL LEASES PAYABLE:
The Company acquired computer equipment and office furniture under seven
long-term capital leases. These leases begin to expire in 1998.
Depreciation of the equipment and furniture purchased under these leases is
reported as a component of depreciation expense. The leased property had a
cost of $454,214, accumulated depreciation of $193,581, and a net book
value of $260,633 as of December 31, 1996.
The future minimum leases payments under the capital lease for each of the
next three years and in total and the net present value of the future
minimum lease payments at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 146,951
1998 135,068
1999 110,179
---------
392,198
Less amount representing interest [72,196]
---------
Present value of net minimum lease payments 320,002
Less current portion of capital lease obligation [106,854]
---------
Long-term capital lease obligation net of current portion $ 213,148
=========
</TABLE>
G. LONG-TERM DEBT:
Central Bank of Tampa - Secured note payable in the amount of $525,000 at
10.5% per annum, with monthly payments in the amount of $11,328 which
includes interest. Central Bank of Tampa has a blanket lien on the assets
of the Company and personal guarantee of Anthony Maniscalco. This note is
being refinanced and is expected to be called for a balloon payment due
December 25, 1997.
H. NOTES PAYABLE - RELATED PARTIES:
Shareholder: Amount
The Company has an unsecured note payable to the sole
shareholder of the Company as of December 31, 1996. The note
is due on demand and interest is being accrued at 8% per
annum. During the six months ended June 30, 1997, $27,500 of
principal was paid. The remaining $285,000 was converted to
equity on July 3, 1997. $312,500
-11-
<PAGE> 12
PHYSICIANS RESOURCE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND 1995 [AUDITED]
AND JUNE 30, 1997 [UNAUDITED]
H. NOTES PAYABLE - RELATED PARTIES: [Continued]
Anthony & Associates:
Unsecured note payable to a company owned 100% by the
shareholder. The note accrued interest at 8% per annum.
The outstanding principal amount and related interest
were paid in full on February 11, 1997. 42,000
TDM OF TAMPA, INC.:
Unsecured note payable to a company owned 50% by the
shareholder. The note accrued interest at 10.5%. The
outstanding principal amount and related interest
were paid in full on February 11, 1997. 50,000
---------
$ 404,500
=========
I. OPERATING LEASE COMMITMENTS:
The Company leases office space, automobiles and office equipment under
operating lease agreements. Rent expense under these agreements was
$171,015 in 1996.
The annual future minimum lease commitments under the building, automobile,
and the office equipment leases are as follows:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1997 $167,103
1998 170,358
1999 137,713
2000 11,928
---- --------
Total $487,102
========
</TABLE>
J. EMPLOYEE BENEFIT PLAN:
The Company sponsors a profit-sharing plan for all employees who meet
certain eligibility requirements. The Company may elect to make
discretionary contributions up to 2% of an employee's gross salary.
Employees are subjected to a five-year vesting schedule. The Company made
contributions to the plan of approximately $40,000 in 1996 and $17,000 in
1995.
-12-
<PAGE> 13
PHYSICIANS RESOURCE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND 1995 [AUDITED]
AND JUNE 30, 1997 [UNAUDITED]
K. ECONOMIC DEPENDENCY - MAJOR CLIENTS:
A major client is defined as one from whom ten percent or greater of annual
revenues is derived. During 1996 and 1995, the Company had three and one
such customers, respectively.
Individually, revenues from Maniscalco, Alagona, & Elchahal, MDs, PA (MAE)
were $1,197,496 (18%) in 1996 and $1,021,770 (32%) in 1995. The related
trade accounts receivable at December 31, 1996 was $66,958. As a group,
including MAE, five clients in which the shareholder's sibling has
ownership accounted for $2,267,555 (35%) and $1,976,370 (62%) of revenues
in 1996 and 1995, respectively.
During 1996, revenues from Associated Primary Care, PA were $1,686,413
(26%) and from Access Medical Care, Inc. were $1,189,128 (18%) with related
trade accounts receivable of $45,204 and $252,493, respectively, at
December 31, 1996.
-13-
<PAGE> 14
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND DECEMBER 31, 1996
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of HALIS,
Inc. gives effect to the following transaction as if it occurred on June 30,
1997: the acquisition of 100% of the capital stock of Physicians Resource
Network, Inc. (PRN) by HALIS, Inc. and Subsidiaries (HALIS) accounted for as a
purchase. All issued and outstanding shares of PRN were surrendered by the
stockholder in consideration for 3,733,333 of HALIS' shares. The Unaudited Pro
Forma Condensed Consolidated Statements of Operations for HALIS for the year
ended December 31, 1996 and for the six month period ended June 30, 1997 give
retroactive effect to the acquisition of PRN as if it had occurred January 1,
1996. The Unaudited Pro Forma Condensed Consolidated Financial Statements do not
purport to be indicative of the actual financial position or the results of
operations of HALIS had the acquisition been completed, and should be read in
conjunction with the audited financial statements of HALIS and PRN as of and for
the year ended December 31, 1996 and the related notes thereto.
-14-
<PAGE> 15
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
------
HALIS, Inc. Physicians
and Resource
Subsidiaries Network, Inc. Adjustments Pro Forma
------------ ------------- --------------- -----------
<S> <C> <C> <C> <C>
Current assets $ 2,266,307 $ 311,423 [c]$ [80,000] $ 2,497,730
Property and equipment 453,039 456,351 909,390
Other assets 746,085 6,214 752,299
Capitalized software development
costs 3,625,348 3,625,348
Goodwill 5,536,274 [a]5,396,311 10,932,585
----------- ------------ ------------ -----------
Total assets $12,627,053 $ 773,988 $ 5,316,311 $18,717,352
=========== ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY [DEFICIT]
----------------------------------------------
HALIS, Inc. Physicians
and Resource
Subsidiaries Network, Inc. Adjustments Pro Forma
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Current liabilities $ 4,918,569 $ 1,256,571 [c]$[365,000] $ 5,810,140
Long-term debt 195,820 158,728 354,548
----------- ------------ ------------ -----------
Total liabilities 5,114,389 1,415,299 [365,000] 6,164,688
----------- ------------ ------------ -----------
Stockholders' equity [deficit]
Stockholders' equity [deficit] [641,311] [b] 641,311 -0-
Common stock, par value $.01 329,794 [a] 37,333 367,127
Additional paid-in capital 22,098,793 [a]5,358,978 27,101,460
[b] [641,311]
[c] 285,000
Common stock subscribed 13,417 13,417
Accumulated deficit [14,922,590] [14,922,590]
Less: Treasury stock at cost [6,750] [6,750]
----------- ------------ ------------ -----------
Total stockholders' equity 7,512,664 [641,311] 5,681,311 12,552,664
----------- ------------ ------------ -----------
Total liabilities and stock-
holders' equity $12,627,053 $ 773,988 $ 5,316,311 $ 18,717,352
=========== ============ ============ ===========
Common stock issued and
outstanding [a] 32,979,413 3,733,333 36,712,746
=========== ============ ===========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
-15-
<PAGE> 16
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HALIS, Inc. Physicians
and Resource
Subsidiaries Network, Inc. Adjustments Pro Forma
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Systems sales and other
revenues $ 8,589,428 $ 6,526,822 $ -0- $ 15,116,250
------------ ------------ ------------ ------------
Costs and expenses
Cost of sales and revenues 4,186,359 5,029,433 9,215,792
Research and development 1,829,002 1,829,002
Selling, general, and
administrative 6,778,035 1,459,477 [d]1,079,262 9,341,890
[f]25,116
------------ ------------ ------------ ------------
12,793,396 6,488,910 1,104,378 20,386,684
------------ ------------ ------------ ------------
Operating income [loss] [4,203,968] 37,912 [1,104,378] [5,270,434]
------------ ------------ ------------ ------------
Other income [expense]
Loss on asset disposal [85,696] [8,793] [94,489]
Rental income 27,600 27,600
Interest expense [94,604] [132,616] [e]22,800 [204,420]
Interest income 29,468 29,468
Other income [expense] 69,034 10,773 79,807
Other expenses [378,588] [378,588]
------------ ------------ ------------ ------------
[432,786] [130,636] 22,800 [540,622]
------------ ------------ ------------ ------------
Net Loss $ [4,636,754] $ [92,724] $ [1,081,578] $ [5,811,056]
============ ============ ============ ============
Net loss per share $ [.21] $ [.23]
============ ============
Weighed average shares
outstanding 21,766,884 3,733,333 25,500,217
============ ============ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
-16-
<PAGE> 17
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
HALIS, Inc. Physicians
and Resource
Subsidiaries Network, Inc. Adjustments Pro Forma
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Systems sales and other
revenues $ 3,605,926 $ 2,879,782 $ -0- $ 6,485,708
------------ ----------- ------------- ------------
Costs and expenses
Cost of sales and revenues 1,399,064 2,246,381 3,645,445
Research and development 708,334 708,334
Selling, general, and administrative 3,379,773 624,991 [d]539,631 4,549,580
[f]5,185
------------ ----------- ------------- ------------
5,487,171 2,871,372 544,816 8,903,359
------------ ----------- ------------- ------------
Operating income (loss) [1,881,245] 8,410 [544,816] [2,417,651]
------------ ----------- ------------- ------------
Other income [expense]
Gain on asset disposal 8,678 8,678
Interest expense [77,492] [69,425] [e]15,400 [131,517]
Interest income 22,307 22,307
Other income 3,253 20,327 23,580
Merger costs [32,137] [32,137]
------------ ----------- ------------- ------------
[75,391] [49,098] 15,400 [109,089]
------------ ----------- ------------- ------------
Net loss $ [1,956,636] $ [40,688] $ [529,416] $ [2,526,740]
============ =========== ============= ============
Net loss per share $ [.07] $ [.08]
============ ============
Weighed average shares outstanding 29,822,386 3,733,333 33,555,719
============ ============= ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
-17-
<PAGE> 18
HALIS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
Balance Sheet - June 30, 1997:
[a] To record the issuance by HALIS of 3,733,333 shares of common stock on
July 7, 1997, to the stockholder of PRN and the principal payment of
$80,000 to Mulberry Street Investment Company, representing an
indebtedness of PRN, in exchange for 100% of the outstanding stock of
PRN in a transaction to be accounted for as a purchase by HALIS.
Management estimates the value of the 3,733,333 shares to be $1.35 per
share. Management has allocated the purchase price to the assets and
liabilities acquired based upon their relative fair values. This
transaction generated goodwill of $5,396,311 which will be amortized on a
straight-line basis over a five year life.
Management continues to study the allocation of the purchase prices; upon
completion of such study, the allocation may change.
[b] To eliminate the equity of PRN in consolidation.
[c] To record the conversion of $285,000 notes payable to sole shareholder of
PRN, into capital of PRN which occurred on July 3, 1997.
To record the payoff of $80,000 notes payable to Mulberry Street Investment
Company, in July 1997, in connection with the merger.
Statement of Operations:
The operations of HALIS as of December 31, 1996 include the pro forma effect of
the acquisitions of The Compass Group, Inc., Software Manufacturing Group, Inc.,
the combined entity of American Benefit Administrative Services, Inc. and Third
Party Administrators, Inc., all of which occurred in January 1997, and TG
Marketing Systems, Inc., which occurred in May 1997.
For the year ended December 31, 1996:
[d] To reflect one year of amortization of goodwill generated in PRN
acquisition.
[e] To reflect one year of reduction in interest expense as a result of the
conversion of $285,000 in notes payable to equity by the sole shareholder
of PRN, prior to the merger.
To reflect one year of reduction in interest expense as a result of the
payoff of the Mulberry Street Investment Company debt, in connection with
the merger.
[f] To reflect incremental compensation expense related to an employment
agreement entered into with the former stockholder of PRN.
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<PAGE> 19
HALIS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED [CONTINUED]
PRO FORMA FINANCIAL STATEMENTS
Statement of Operations [Continued]:
For the six months ended June 30, 1997:
[d] To reflect six months of amortization of goodwill generated in the PRN
acquisition.
[e] To reflect six months of reduction in interest expense as a result of the
conversion of $285,000 in notes payable to equity by sole shareholder of
PRN, prior to the merger.
To reflect six months of reduction in interest expense as a result of the
payoff of the Mulberry Street Investment Company debt, in connection with
the merger.
[f] To reflect six months of incremental compensation expense related to an
employment agreement entered into with the former stockholder of PRN.
-19-
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
HALIS, INC.
By: /s/ Larry Fisher
----------------------------------------------
Larry Fisher, Executive Vice President, Chief
Administrative Officer and Secretary
Dated: September 18, 1997
------------------
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