<PAGE>
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) January 10, 1997
------------------
HALIS, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-16288 58-1366235
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(State or other (Commission File Number) (IRS Employer
jurisdiction Identification NO.)
of incorporation)
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
------------------------------
1950 Spectrum Circle, Suite 400, Marietta, Georgia 30067
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
- ------ ---------------------------------
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
The following financial statements are filed with this Report:
THE COMPASS GROUP, INC.
- -----------------------
Report of Habif, Arogeti & Wynne, P.C., Independent Certified Public Accountants
Balance Sheet at December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Stockholders' Equity for the year ended December 31, 1996
Statement of Cash Flows for the year ended December 31, 1996
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 - December 31, 1996
Unaudited Pro Forma Condensed Consolidated Statement of Operation - year ended
December 31, 1996
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements
(C) EXHIBITS:
2.1 Agreement and Plan of Merger and Reorganization, dated as of January
10, 1997, among HALIS, Inc. and The Compass Group, Inc., Compass
Acquisition Co. and Debra B. York (incorporated by reference from the
Company's Current Report on Form 8-K dated January 10, 1997).
2
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INDEPENDENT AUDITORS' REPORT
----------------------------
To the Shareholders
The Compass Group, Inc.
We have audited the accompanying balance sheet of THE COMPASS GROUP, INC. as of
December 31, 1996, and the related statements of operations, stockholder's
equity and cash flows for the year ended December 31, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 THE COMPASS GROUP, INC. at
December 31, 1996, and the results of its operations and its cash flows for the
year ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
March 20, 1997
3
<PAGE>
THE COMPASS GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
<TABLE>
<CAPTION>
Current assets
- --------------
<S> <C>
Cash and cash equivalents $28,287
Trade accounts receivable, net of allowance for
doubtful accounts of $-0- 22,580
Prepaid expenses 752
-------
Total current assets 51,619
-------
Furniture and equipment, at cost, less accumulated
- ------------------------
Depreciation of $4,866 4,475
-------
$56,094
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities
- -------------------
Accounts payable $ 5,310
Payroll taxes payable 12,651
Accrued retirement plan 10,146
-------
Total current liabilities 28,107
-------
Stockholders' equity
- --------------------
Common stock - $.50 par value,
1,000 shares authorized , issued and
outstanding 500
Retained earnings 27,487
-------
27,987
-------
$56,094
=======
</TABLE>
See auditor's report and accompanying notes
4
<PAGE>
THE COMPASS GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Revenues, net $ 234,696
---------
Costs and expenses
- ------------------
Contract consulting fees 165,854
Selling, general and administrative 100,922
---------
266,776
---------
Loss from operations [32,080]
Other income 1,016
---------
Net loss $ [31,064]
=========
See auditor's report and accompanying notes
5
<PAGE>
THE COMPASS GROUP, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
Common Retained
Stock Earnings Total
--------- ---------- ---------
Balance, January 1, 1996 500 $ 153,328 $ 153,828
Net loss - [31,064] [31,064]
Distributions - [94,777] [94,777]
---- --------- ---------
Balance December 31, 1996 $ 500 $ 27,487 $ 27,987
==== ========= =========
See auditor's report and accompanying notes
6
<PAGE>
THE COMPASS GROUP, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Cash flows from operating activities
- ------------------------------------
<S> <C> <C>
Net loss $[31,064]
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 1,794
Changes in assets and liabilities
Decrease in accounts receivable 127,993
Increase in prepaid expenses [135]
Decrease in other current assets 530
Increase in accounts payable 3,982
Decrease in payroll taxes payable [3,079]
Decrease in accrued retirement plan [179]
--------
Total adjustments 130,906
--------
Net cash provided by operating activities 99,842
--------
Cash flows from financing activities
- ------------------------------------
Distributions to shareholder [94,777]
--------
Net increase in cash 5,065
Cash and cash equivalents, beginning of year 23,222
--------
Cash and cash equivalents, end of year $ 28,287
========
</TABLE>
See auditor's report and accompanying notes
7
<PAGE>
THE COMPASS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Nature of Operations:
--------------------
THE COMPASS GROUP, INC. a Georgia corporation, provides implementation
training and other consulting services related to computer systems. The
Company does not develop or license proprietary software.
Revenue Recognition and Accounts Receivable:
---------------------------------------
Revenue is comprised primarily of consulting fees and is recognized as
services are provided. The Company considers all accounts receivable to be
fully collectible; therefore, no allowance for doubtful accounts has been
provided. The Company does not have a secured interest in its accounts
receivable; however, it does have legal recourse for defaulted amounts.
Cash and Cash Equivalents:
-------------------------
The Company classifies all highly liquid instruments with maturities of
ninety days or less as cash equivalents.
Income Taxes:
------------
The Company had 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
stockholders of a corporation without further tax consequences to the
Company. As discussed further in Note B, the Company ceased to be an S
corporation subsequent to year end upon consummation of a merger with
another company.
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 and 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.
B. SUBSEQUENT EVENT - MERGER AGREEMENT:
-----------------------------------
On January 10, 1997, the shareholders 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.
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.
8
<PAGE>
THE COMPASS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996
B. SUBSEQUENT EVENT - MERGER AGREEMENT: [Continued]
-----------------------------------
All 1,000 issued and outstanding shares were exchanged by the shareholders
in consideration for 350,000 of HALIS' shares. Additional consideration
given by HALIS consists of options to purchase 85,000 shares of HALIS stock
at $2.00 per share, exercisable for 10 years from the closing date. The
agreement also provides for contingent merger consideration, paid in the
form of HALIS common stock based upon certain, specified operating results
of the period ended December 31, 1997.
The managements of both companies represent that they have no plans or
intentions that would affect the operations of the Company.
C. FURNITURE AND EQUIPMENT:
-----------------------
Furniture 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
estimated useful lives of the assets which are as follows:
<TABLE>
<CAPTION>
Historical
Description Life Cost
----------- ---------- ----------
<S> <C> <C>
Computer software 3 years $ 453
Computer equipment 5 years 5,914
Office furniture and equipment 5 - 7 years 2,974
------
9,341
Less accumulated depreciation 4,866
------
$4,475
======
</TABLE>
Depreciation expense was $1,781 for the year ended December 31, 1996.
D. ORGANIZATIONAL COSTS:
--------------------
The Company recognized $13 of amortization expense in 1996 related to $100
of capitalized organizational costs which have been fully amortized at
December 31, 1996.
E. RETIREMENT PLAN CONTRIBUTION:
----------------------------
The Company made a discretionary contribution to the retirement plan of the
managing director of $10,146 for 1996, which was recorded as a current
liability at year end.
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THE COMPASS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996
F. MAJOR CUSTOMERS - ECONOMIC DEPENDENCY:
-------------------------------------
The Company derived 77% of its sales from 2 major customers, defined as
those who comprise ten percent or greater of annual revenues. Individually,
annual revenues from those customers, Intel, Inc. and Siemens, Inc., were
$133,967 (57%), and $46,341 (20%), respectively, with no related accounts
receivable at year end.
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<PAGE>
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of HALIS,
Inc. gives effect to the following transactions as if they occurred on December
31, 1996: the acquisition of The Compass Group, Inc. (Compass) by HALIS, Inc.
and Subsidiaries (HALIS). The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for HALIS for the year ended December 31, 1996 gives
retroactive effect to the acquisition 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 unaudited financial statements of HALIS and the audited
financial statements of Compass and the related notes thereto.
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<PAGE>
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
HALIS, Inc.
and The Compass
Subsidiaries Group, Inc. Adjustments Pro Forma
------------- -------------- ----------- -----------
ASSETS
------
<S> <C> <C> <C> <C>
Current assets $ 798,341 $51,619 $ - $ 849,960
Property and equipment 60,154 4,475 - 64,629
Other assets 118,639 - 118,639
Capitalized research and
development 160,995 - 160,995
Goodwill [a] 363,906 363,906
------------ ------- -------- ------------
Total assets $ 1,138,129 $56,094 $363,906 $ 1,558,129
============ ======= ======== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities $ 1,723,955 $28,107 $ - $ 1,752,062
Convertible promissory
notes 1,506,000 - - 1,506,000
------------ ------- -------- ------------
Total liabilities 3,229,955 28,107 - 3,258,062
------------ ------- -------- ------------
Stockholders' deficit
Net stockholders'
equity - 27,987 [b] [27,987] -
Common stock, par
value $.01 239,726 - [a] 3,500 243,226
Additional paid-in
capital 10,881,151 - [a] 360,406
[b] 27,987 11,269,544
Stock subscription
receivable [240,000] - - [240,000]
Accumulated deficit [12,965,953] - [12,965,953]
Less: Treasury stock
at cost [6,750] - - [6,750]
------------- ------- -------- ------------
Total stockholders'
[deficit] equity [2,091,826] 27,987 363,906 [1,699,933]
------------- ------- -------- ------------
Total liabilities and
stockholders' deficit $ 1,138,129 $56,094 $363,906 $ 1,558,129
============ ======= ======== ============
Common stock issued
and outstanding (c) 23,972,621 - 24,322,621
============ ======= ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
12
<PAGE>
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HALIS, Inc.
and The Compass
Subsidiaries Group, Inc. Adjustments Pro Forma
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Systems sales and services $ 1,925,412 $234,696 $ - $ 2,160,108
- -------------------------- ----------- -------- ------- -----------
Costs and expenses
- ------------------
Cost of goods sold 1,656,113 165,854 - 1,821,967
Research and development 1,516,572 - - 1,516,572
Selling, general, and
administrative 325,699 100,922 [c] 58,359 606,282
[d] 121,302
----------- -------- ------- -----------
3,498,384 266,776 179,661 3,944,821
----------- -------- ------- -----------
Operating loss [1,572,972] [32,080] [179,661] [1,784,713]
----------- -------- ------- -----------
Other income [expense]
- ---------------------
Loss on asset disposal [8,228] - - [8,228]
Rental income 27,600 - - 27,600
Interest expense [67,613] - - [67,613]
Interest income 546 1,016 - 1,562
Other income 9,559 - - 9,559
Other expenses [378,588] - - [378,588]
----------- -------- ------- -----------
[416,724] 1,016 - [415,708]
----------- -------- ------- -----------
Net loss $[1,989,696] $[31,064] [179,661] [2,200,421]
=========== ======== ======= ===========
Net loss per share [0.12] [.13]
=========== ===========
Weighed average shares
outstanding 15,956,824 16,306,824
=========== ===========
</TABLE>
13
<PAGE>
HALIS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
Balance Sheet - December 31, 1996:
- ---------------------------------
[a] To record the issuance by HALIS of 350,000 shares of common stock to the
shareholder of Compass in exchange for 100% of the outstanding stock of Compass
in a transaction to be accounted for as a purchase by HALIS.
Management estimates the value of the 350,000 shares to be $1.20 per share.
[b] To eliminate Compass equity in consolidation.
Statement of Operations:
- -----------------------
For the year ended December 31, 1996:
[c] To reflect incremental expense related to a new employment contact entered
into with an officer of Compass.
[d] To reflect twelve months of amortization of goodwill. Goodwill generated
in the merger is amortized on a straight-line basis over a three year life.
14
<PAGE>
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, President
Dated:March 25, 1997
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