<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) May 2, 1997
----------------------------
HALIS, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-16288 58-1366235
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
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:
TG MARKETING SYSTEMS, INC.
Independent Auditors' Report of Habif, Arogeti & Wynne, P.C.
Balance Sheets at December 31, 1996 and March 31, 1997 (unaudited)
Statements of Income for the year ended December 31, 1996 and for the three
month periods ended March 31, 1997 and 1996 (unaudited)
Statements of Changes in Stockholders' Equity for the year ended December 31,
1996 and for the three months ended March 31, 1997 (unaudited)
Statements of Cash Flows for the year ended December 31, 1996 and for the three
month periods ended March 31, 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 - March 31, 1997
UnauditedPro Forma Condensed Consolidated Statements of Operations - year ended
December 31, 1996 and three month period ended March 31, 1997
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements
(C) EXHIBITS:
2.1 Agreement and Plan of Merger and Reorganization, dated as of
May 2, 1997, among HALIS, Inc., TG Marketing Systems, Inc., TG
Marketing Systems Acquisition Co., and Joseph H. Neely
(incorporated by reference from the Company's Current Report
on Form 8-K dated May 2, 1997).
-2-
<PAGE> 3
[HABIF, AROGETI & WYNNE, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholder
TG Marketing Systems, Inc.
We have audited the accompanying balance sheet of TG MARKETING SYSTEMS, INC.,
as of December 31, 1996, and the related statements of income, changes in
stockholder's equity, and cash flows for the year then ended. 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 TG MARKETING SYSTEMS, INC., at
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
June 18, 1997
-3-
<PAGE> 4
TG MARKETING SYSTEMS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
[Unaudited]
December 31, 1996 March 31, 1997
----------------- --------------
<S> <C> <C>
Current assets
Cash $ 7,690 $ 59,013
Customer receivables, less allowance for
doubtful accounts of $17,661 156,761 163,420
Employee receivables 123 1,655
Accounts receivable - related party 29,176 37,944
--------- ---------
Total current assets 193,750 262,032
--------- ---------
Property and equipment, at cost
Equipment 119,940 132,705
Furniture and fixtures 10,196 10,196
--------- ---------
130,136 142,901
Less accumulated depreciation [22,372] [29,442]
--------- ---------
107,764 113,459
--------- ---------
Other assets 2,081 2,081
--------- ---------
$ 303,595 $ 377,572
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Line of credit $ 34,140 $ -0-
Current portion of capital lease obligations 18,019 17,883
Accounts payable and other current liabilities 34,948 11,366
--------- ---------
Total current liabilities 87,107 29,249
--------- ---------
Long-term liabilities
Capital lease obligations,
net of current portion 28,086 23,594
--------- ---------
Stockholder's equity
Common stock, $1 par value,
1,000 shares authorized; 1,000
shares issued and outstanding 1,000 1,000
Retained earnings 187,402 323,729
--------- ---------
188,402 324,729
--------- ---------
$ 303,595 $ 377,572
========= =========
</TABLE>
See auditors' report and accompanying notes.
-4-
<PAGE> 5
TG MARKETING SYSTEMS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
[Unaudited]
For the
Three Months Ended
For the March 31,
Year Ended --------------------
December 31, 1996 1996 1997
----------------- -------- ----------
<S> <C> <C> <C>
Net revenues
Services $750,083 $ 157,786 $ 368,827
Reimbursed expenses 66,937 30,860 25,515
-------- --------- ---------
817,020 188,646 394,342
-------- --------- ---------
Costs and expenses
Cost of services 402,600 84,622 148,244
Selling and marketing 104,322 33,288 40,184
General and administrative 188,036 32,906 66,921
-------- --------- ---------
694,958 150,816 255,349
-------- --------- ---------
Income from operations 122,062 37,830 138,993
-------- --------- ---------
Other income [expense]
Other income 5,551 3,227 -0-
Interest expense [ 4,092] [ 292] [ 2,666]
-------- --------- --------
1,459 2,935 [ 2,666]
-------- --------- --------
Net income - Historical 123,521 40,765 136,327
Pro Forma provision for income taxes 49,000 16,000 55,000
-------- --------- --------
Pro Forma net income $ 74,521 $ 24,765 $ 81,327
======== ========= ========
</TABLE>
See auditors' report and accompanying notes.
-5-
<PAGE> 6
TG MARKETING SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1997 [UNAUDITED]
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
------- --------- -----
<S> <C> <C> <C>
Balances, January 1, 1996 1,000 $ 63,881 $ 64,881
Net income - 123,521 123,521
----- ------- --------
Balances, December 31, 1996 1,000 187,402 188,402
Net income - three months ended
March 31, 1997 [Unaudited] - 136,327 136,327
----- ------- --------
Balances, March 31, 1997 [Unaudited] 1,000 $323,729 $324,729
===== ======== ========
</TABLE>
See auditors' report and accompanying notes.
-6-
<PAGE> 7
TG MARKETING SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
Increase [Decrease] in Cash
<TABLE>
<CAPTION>
[Unaudited]
For the
Three Months Ended
For the Year Ended March 31,
-----------------------
December 31, 1996 1996 1997
------------------ -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 123,521 $ 40,765 $ 136,327
--------- -------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 13,561 2,526 7,070
Changes in assets and liabilities
[Increase] in customer receivables [ 124,700] [ 1,227] [ 6,659]
Decrease [Increase] in employee receivables 5,195 2,739 [ 1,532]
Decrease [Increase] in accounts receivable -
related party 19,442 -0- [ 8,768]
Decrease in prepaid expenses 2,800 2,800 -0-
[Increase] in other assets [ 2,003] [ 1,431] -0-
[Decrease] in accounts payable and other
current liabilities [ 21,867] [ 16,380] [23,582]
--------- -------- ---------
Total adjustments [ 107,572] [ 10,973] [ 33,471]
--------- -------- ---------
Net cash provided by operating activities 15,949 29,792 102,856
--------- --------- ---------
Cash flows from investing activities
Purchases of property and equipment [ 35,284] [ 8,264] [ 12,765]
--------- -------- ---------
Cash flows from financing activities
Proceeds [Repayment] of line of credit 34,140 7,500 [ 34,140]
Payments of capital leases [ 7,115] - [ 4,628]
Deposit paid to secure capital lease - [ 863] -
--------- --------- ---------
Net cash provided [used] by financing activities 27,025 6,637 [ 38,768]
--------- --------- ---------
Net increase in cash 7,690 28,165 51,323
Cash, beginning of period -0- -0- 7,690
--------- --------- ---------
Cash, end of period $ 7,690 $ 28,165 $ 59,013
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for
Interest $ 4,092 $ 292 $ 2,666
Income taxes 8,190 8,190 -0-
</TABLE>
During the year ended December 31, 1996, the Company purchased $53,220 of
equipment by entering into capital leases.
See auditor's report and accompanying notes.
-7-
<PAGE> 8
TG MARKETING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
AND MARCH 31, 1997 [UNAUDITED]
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations:
TG MARKETING SYSTEMS, INC., a Georgia corporation, provides consulting and
programming services and information management software to customers to
assist them in the development of marketing systems.
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 consulting and programming services. The
Company accounts for such revenue in accordance with the American
Institute of Certified Public Accountants' (AICPA) Statement of Position
91-1, Software Revenue Recognition.
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 years.
Income Taxes:
On January 1, 1995, 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 stockholders of a corporation without further tax
consequences to the Company. However, during February 1996 the Company
paid $8,190 of income taxes related to pre-S election items recognized as
taxable income in 1995. As discussed further in Note B, the Company ceased
to be an S corporation in May 1997.
-8-
<PAGE> 9
TG MARKETING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996
AND MARCH 31, 1997 [UNAUDITED]
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]
Income Taxes: [Continued]
A pro forma provision for income taxes has been presented which represents
income taxes which would have been provided had the Company operated as a
C Corporation.
Interim Financial Statements:
The accompanying financial statements for the three month period ended
March 31, 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 three-month period are not necessarily indicative of the results
that may be expected for the full years ending 1996 and 1997.
B. SUBSEQUENT EVENT - MERGER AGREEMENT:
On May 2, 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 1,000
issued and outstanding shares were surrendered by the stockholder in
consideration for 2,388,060 of HALIS' shares.
Additionally, the merger agreement included a two year employment
agreement between HALIS and the stockholder of the Company as president
which provides for an annual base salary of $150,000. HALIS also executed
agreements with certain Company employees which provide for the issuance
of 500,000 fully-vested HALIS common stock options, exercisable at $1.50
per share for a period of ten years.
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. ACCOUNTS RECEIVABLE - RELATED PARTY:
At December 31, 1996, the Company had advanced to the stockholder $29,176
under an informal arrangement with no written agreement, stated interest
rate or repayment terms. In April 1997, this advance was satisfied by the
transfer of certain personally-owned equipment at book value by the
stockholder to the Company.
-9-
<PAGE> 10
TG MARKETING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996
AND MARCH 31, 1997 [UNAUDITED]
D. LINES OF CREDIT:
At December 31, 1996, the Company had drawn $34,140 under a $60,000 line
of credit from a bank. Interest is payable monthly and bears a variable
interest rate of prime plus 1% (an effective rate of 9.25% at December 31,
1996). Interest expense related to this facility was $604 during 1996. The
line of credit is collateralized by all accounts receivable, equipment,
furniture and fixtures of the company and bears the personal guarantee of
the stockholder and matures September 10, 1997.
In January 1997, the Company obtained a line of credit from a bank, which
provides for borrowing of up of $60,000. This line of credit bears a
variable interest rate of prime plus 1.5% (an effective rate of 9.75% upon
inception), and certain, specified financial covenants. Collateral pledged
for this instrument includes all assets of the Company as well as the
assignment of benefits a life insurance policy of the stockholder, and the
personal guarantees of the stockholder and his wife.
E. CAPITAL LEASES PAYABLE:
In 1996, the Company acquired equipment under two long-term leases which
are capital leases. These leases expire in 1999. Amortization of the
equipment purchased under these leases is reported as a component of
depreciation expense. The leased property had a cost of $53,220,
accumulated depreciation of $2,201, and a net book value of $51,019 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 $ 24,391
1998 18,872
1999 13,326
--------
56,589
Less amount representing interest [10,484]
--------
Present value of net minimum lease payments 46,105
Current portion of capital lease obligation [18,019]
--------
Long-term capital lease net of current portion $ 28,086
========
</TABLE>
F. OPERATING LEASE COMMITMENTS:
During 1996, the Company leased office space and an automobile under
operating lease agreements. Rent expense under these agreements was
$34,600 in 1996.
-10-
<PAGE> 11
TG MARKETING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996
AND MARCH 31, 1997 [UNAUDITED]
F. OPERATING LEASE COMMITMENTS: [Continued]
The Company has entered into a new office lease agreement, effective March
of 1997, which will commence upon the completion and loan closing of the
new building, expected in June 1997. The lessor is the Company's
stockholder, who is the owner of the buildings. The old lease will be
canceled upon inception of the new lease. The annual future minimum lease
commitments under the new building lease and the automobile lease are as
follows:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1997 $ 58,800
1998 77,000
1999 72,000
2000 36,000
--------
Total $243,800
========
</TABLE>
Rent paid to the stockholder was $33,600 during 1996.
G. ECONOMIC DEPENDENCY - MAJOR CUSTOMERS:
A major customer is defined as one from whom ten percent or greater of
annual revenues is derived. During 1996, the Company had four such
customers. Individually, revenues from G. E. Capital, Inc. were $195,577
(26%), from National Linen Services, Inc. were $141,064 (19%), from
Wachovia, Inc. were $93,992 (13%), and $83,536 from HBOC Corporation were
(11%) with related trade accounts receivable of $5,416, $42,283, $24,979,
and $2,188, respectively, at December 31, 1996.
The Company does not have a secured interest in any customer accounts
receivable; however, it does have legal recourse for defaulted accounts.
-11-
<PAGE> 12
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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
March 31, 1997: the acquisition of 100% of the capital stock of TG Marketing
Systems, Inc. (TGM) by HALIS, Inc. and Subsidiaries (HALIS) accounted for as a
purchase. All 1,000 issued and outstanding shares of TGM were surrendered by
the stockholder in consideration for 2,388,060 of HALIS' shares. The Unaudited
Pro Forma Condensed Consolidated Statements of Operations for HALIS for the
year ended December 31, 1996 and for the three month period ended March 31,
1997 give retroactive effect to the acquisition of TGM 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 TGM
and the related notes thereto.
-12-
<PAGE> 13
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
ASSETS
HALIS, Inc.
and TG Marketing
Subsidiaries Systems, Inc. Adjustments Pro Forma
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Current assets $ 751,198 $262,032 [a] $[ 37,944] $ 975,286
Property and equipment 303,974 113,459 [a] 37,944 455,377
Other assets 632,780 2,081 - 634,861
Capitalized software development
costs 1,794,902 - [b] 2,000,000 3,794,902
Goodwill 4,163,788 - [b] 230,495 4,394,283
---------- ------- ---------- -----------
Total assets $7,646,642 $377,572 $2,230,495 $10,254,709
========== ======= ========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
HALIS, Inc.
and TG Marketing
Subsidiaries Systems, Inc. Adjustments Pro Forma
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Current liabilities $ 4,462,310 $ 29,249 $ - $ 4,491,559
Long-term debt 75,551 23,594 - 99,145
Convertible promissory notes - - - -
------------ --------- ----------- -------------
Total liabilities 4,537,861 52,843 - 4,590,704
------------ --------- ----------- -------------
Stockholders' equity
Stockholders' equity - 324,729 [c] [324,729] -
Common stock, par value $.01 299,415 - [b] 23,881 323,296
Additional paid-in capital 18,645,667 - [b] 2,206,614 21,177,010
[c] 324,729
Stock subscription receivable [ 681,122] - - [ 681,122]
Accumulated deficit [15,148,429] - - [ 15,148,429]
Less: Treasury stock at cost [ 6,750] - - [ 6,750]
------------ --------- ----------- -------------
Total stockholders' equity 3,108,781 324,729 2,230,495 5,664,005
------------ --------- ----------- -------------
Total liabilities and stock-
holders' equity $ 7,646,642 $ 377,572 $ 2,230,495 $ 10,254,709
============ ========= =========== =============
Common stock issued and
outstanding (c) 29,941,551 2,388,060 32,329,611
============ =========== =============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
-13-
<PAGE> 14
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HALIS, Inc.
and TG Marketing
Subsidiaries Systems, Inc. Adjustments Pro Forma
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Systems sales and other
revenues $ 7,793,944 $ 817,020 [d]$ [ 21,536] $ 8,589,428
------------- ------------ -------------- -------------
Costs and expenses
Cost of sales and revenues 3,805,295 402,600 [d] [ 21,536] 4,186,359
Research and development 1,829,002 - - 1,829,002
Selling, general, and
administrative 5,893,089 292,358 [e] 446,099 6,778,035
------------- ------------
[f] 7,589
[g] 100,500
11,527,386 694,958 [g] 38,400
------------- ------------ -------------- -------------
571,052 12,793,396
Operating income [loss] [ 3,733,442] 122,062 [ 592,588] [ 4,203,968]
------------- ------------ -------------- -------------
Other income [expense]
Loss on asset disposal [ 85,696] - - [ 85,696]
Rental income 27,600 - - 27,600
Interest expense [ 90,512] [ 4,092] - [ 94,604]
Interest income 29,468 - - 29,468
Other income [expense] 63,483 5,551 - 69,034
Other expenses [ 378,588] - - [ 378,588]
------------- ------------ ------------- -------------
[ 434,245] 1,459 - [ 432,786]
------------- ------------ -------------
Net income [loss] $[ 4,167,687] $ 123,521 $ [ 592,588] [ 4,636,754]
============= ============ ============== =============
Net loss per share [ .22] - [ .25] [ .21]
============= ============ ============== =============
Weighed average shares
outstanding 19,378,824 - 2,388,060 21,766,884
============= ============ ============== =============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
-14-
<PAGE> 15
HALIS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
HALIS, Inc.
and TG Marketing
Subsidiaries Systems, Inc. Adjustments Pro Forma
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Systems sales and other
revenues $ 1,320,353 $ 394,342 [d] $[ 5,494] $ 1,709,201
------------- ------------- -------------- ------------
Costs and expenses
Cost of sales and revenues 431,085 148,244 [d] [ 5,494] 573,835
Research and development 284,674 - - 284,674
Selling, general, and administrative 1,486,291 107,105 [e] 111,525 1,741,543
------------- ------------- ------------
[f] 1,897
[g] 25,125
[g] 9,600
--------------
2,202,050 255,349 142,653 2,600,052
------------- ------------- -------------- ------------
Operating loss [ 881,697] 138,993 [ 148,147] [ 890,851]
------------- ------------- -------------- ------------
Other income [expense]
Gain on asset disposal 8,678 - - 8,678
Interest expense [ 38,379] [ 2,666] - [ 41,045]
Interest income 8,334 - - 8,334
Other income 8,668 - - 8,668
Merger costs [ 13,904] - - [ 13,904]
------------- ------------- -------------- ------------
[ 26,603] [ 2,666] - [ 29,269]
------------- ------------- -------------- ------------
Net income [loss] $[ 908,300] $ 136,327 $[ 148,147] $[ 920,120]
============= ============= ============== ============
Net loss per share [ .03] - [ .06] [ .03]
============= ============== ============
Weighed average shares outstanding 27,744,693 - 2,388,060 30,132,753
============= ============== ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
-15-
<PAGE> 16
HALIS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
Balance Sheet - March 31, 1997:
[a] To reflect the repayment of advances to the former stockholder of TGM by
TGM, by the transfer of certain personally-owned equipment at book value
by the former stockholder to the Company.
[b] To record the issuance by HALIS of 2,388,060 shares of common stock to the
stockholder of TGM, in exchange for 100% of the outstanding stock of TGM
in a transaction to be accounted for as a purchase by HALIS.
Management estimates the value of the 2,388,060 shares to be $1.07 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 $230,495 which will be amortized on a
straight-line basis over a five year life. Additionally, management has
attributed $2 million of the purchase price to software previously
developed by TGM under fee-for-service arrangements. The value of such
software will be capitalized and 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.
[c] To eliminate the equity of TGM in consolidation.
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.
and the combined entity of American Benefit Administrative Services, Inc. and
Third Party Administrators, Inc., all of which occurred in January 1997.
For the year ended December 31, 1996:
[d] To reflect the elimination of actual revenues and related costs for sales
occurring between HALIS and TGM.
[e] To reflect one year of amortization of capitalized software development
costs and goodwill generated in TGM acquisition.
[f] To reflect one year of depreciation related to equipment transferred by the
former stockholder of TGM to the Company.
[g] To reflect incremental compensation and rent expense related to an
employment agreement and a lease entered into with the former stockholder
of TGM in the amounts of $100,500 and $38,400, respectively.
-16-
<PAGE> 17
HALIS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED [CONTINUED]
PRO FORMA FINANCIAL STATEMENTS
Statement of Operations [Continued]:
For the three months ended March 31, 1997:
[d] To reflect the elimination of actual revenues and related costs for sales
occurring between HALIS and TGM.
[e] To reflect three months of amortization of capitalized software development
costs and goodwill generated in the TGM acquisition.
[f] To reflect three months of depreciation related to equipment transferred by
the former stockholder of TGM to the Company.
[g] To reflect three months of incremental compensation and rent expense
related to an employment agreement and lease entered into with the former
stockholder of TGM in the amounts of $25,125 and $9,600, respectively.
-17-
<PAGE> 18
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: July 16, 1997
-------------
-18-
