<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 31, 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 combined financial statements are filed with this Report:
PHYSOURCE LTD. AND THEODORE M. HOMA, M.D., S.C.
Independent Auditors' Report of Habif, Arogeti & Wynne, P.C.
Combined Balance Sheet at December 31, 1996 and June 30, 1997 (unaudited)
Combined Statement of Operations for the period from Inception (February 28,
1996) through December 31, 1996 for PhySource Ltd. and for the year
ended December 31, 1996 for Theodore M. Homa, M.D., S.C. and for the
six months ended June 30, 1996 and 1997 (unaudited)
Combined Statement of Changes in Stockholder's Equity [Deficit] for the period
from Inception (February 28, 1996) through December 31, 1996 for
PhySource Ltd. and for the year ended December 31, 1996 for Theodore
M. Homa, M.D., S.C. and the six month period ended June 30, 1997
(unaudited)
Combined Statement of Cash Flows for the period from Inception (February 28,
1996) through December 31, 1996 for PhySource Ltd. and for the year
ended December 31, 1996 for Theodore M. Homa, M.D., S.C. and for the
six months ended June 30, 1996 and 1997 (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 31, 1997, among HALIS, Inc., PhySource Acquisition Co.,
PhySource Ltd. and the shareholders of PhySource Ltd.
(incorporated by reference from the Company's Current Report
on Form 8-K dated July 31, 1997).
-2-
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Physource Ltd. and
Theodore M. Homa M.D., S.C.
We have audited the accompanying combined balance sheet of PhySource Ltd. and
Theodore M. Homa, M.D., S.C. as of December 31, 1996 and the related combined
statements of operations, changes in stockholders' equity [deficit], and cash
flows for the period from inception [February 28, 1996] of PhySource, Ltd. and
for the year ended December 31, 1996 for Theodore M. Homa, M.D., S.C. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
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 combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of PhySource Ltd. and
Theodore M. Homa, M.D., S.C. at December 31, 1996, and the results of their
operations and their cash flows from inception [February 28, 1996] for PhySource
Ltd. and for the year ended December 31, 1996 for Theodore M. Homa, M.D., S.C.
in conformity with generally accepted accounting principles.
/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
September 26, 1997
-3-
<PAGE> 4
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
COMBINED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31, [Unaudited]
1996 June 30, 1997
------------ -------------
<S> <C> <C>
Current assets
Cash $ 41,621 $ 18,420
Accounts receivable, net of allowance for
doubtful accounts of $8,690 26,146 304,502
Prepaid expenses 6,620 -0-
Current portion of lease receivable 5,304 5,575
-------- ----------
Total current assets 79,691 328,497
-------- ----------
Property and equipment, at cost
Computer equipment 141,476 143,394
Furniture and fixtures 27,007 49,464
-------- ----------
168,483 192,858
Less accumulated depreciation [46,521] [75,113]
-------- ----------
121,962 117,745
-------- ----------
Other assets
Organization costs, net of accumulated
amortization of $1,644 10,683 10,683
Lease receivable, net of current portion 25,882 23,024
-------- ----------
36,565 33,707
-------- ----------
$238,218 $ 479,949
======== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Notes payable - related parties $786,542 $1,043,240
Retirement plan payable 12,479 12,479
Current portion of long-term debt - related parties 5,386 7,051
Accounts payable and accrued expenses 78,980 33,338
Accounts payable and accrued expenses -
related parties 29,858 221,568
-------- ----------
Total current liabilities 913,245 1,317,676
-------- ----------
Long-term liabilities
Long-term debt - related party, net of current portion 23,454 20,125
-------- ----------
Stockholder's deficit
Common stock - PhySource, Ltd. no par value,
12,000 shares authorized; 6,000 shares issued
and outstanding 1,000 1,000
Common stock - Homa, S.C. no par value, 20,000
shares authorized; 1,000 shares issued and
outstanding 3,000 3,000
Stock subscription receivable [1,000] [1,000]
Accumulated deficit [701,481] [860,852]
-------- ----------
[698,481] [857,852]
-------- ----------
$238,218 $ 479,949
======== ==========
</TABLE>
See auditors' report and accompanying notes.
-4-
<PAGE> 5
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION [FEBRUARY 28, 1996]
THROUGH DECEMBER 31, 1996 FOR PHYSOURCE, LTD. AND
FOR THE YEAR ENDED DECEMBER 31, 1996 FOR THEODORE M. HOMA, M.D., S.C.
<TABLE>
<CAPTION>
[Unaudited]
For the For the
Year Ended Six Months Ended
December 31, 1996 June 30,
----------------- ---------------------------
1996 1997
---------- -----------
<S> <C> <C> <C>
Revenues from services $ 601,983 $ 188,302 $1,223,115
---------- ---------- ----------
Cost of services 469,986 111,464 667,204
General and administrative 770,363 299,028 662,663
---------- ---------- ----------
1,240,349 410,492 1,329,867
---------- ---------- ----------
Loss from operations [638,366] [222,190] [106,752]
---------- ---------- ----------
Other income [expense]
Interest income 1,875 -0- 3,063
Interest expense [31,769] [4,641] [50,548]
Gain on asset disposal 21,285 2,070 -0-
---------- ---------- ----------
[8,609] [2,571] [47,485]
---------- ---------- ----------
Net loss $[646,975] $[224,761] $[154,237]
========== ========== ==========
</TABLE>
See auditors' report and accompanying notes.
-5-
<PAGE> 6
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY [DEFICIT]
FOR THE PERIOD FROM INCEPTION [FEBRUARY 28, 1996]
THROUGH DECEMBER 31, 1996 FOR PHYSOURCE, LTD. AND
FOR THE YEAR ENDED DECEMBER 31, 1996 FOR THEODORE M. HOMA, M.D., S.C. AND
FOR THE SIX MONTHS ENDED JUNE 30, 1997 [UNAUDITED]
<TABLE>
<CAPTION>
Theodore M. Total
PhySources, Ltd. Homa, M.D., S.C. Share-
Common Stock Common Stock Stock Retained holders'
-------------------- ------------------ Subscription Earnings Equity
Shares Amount Shares Amount Receivable [Deficit] [Deficit]
------ ------ ------- ------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1,
1996 -0- $ -0- 1,000 $3,000 $ -0- $ 21,344 $ 24,344
Issuance of stock 6,000 1,000 -0- -0- [1,000] -0- -0-
Dividends paid -0- -0- -0- -0- -0- [75,850] [75,850]
Net loss -0- -0- -0- -0- -0- [646,975] [646,975]
------ ------ ------- ------- ------------ --------- ----------
Balances, December 31,
1996 6,000 1,000 1,000 3,000 [1,000] [701,481] [698,481]
Dividends paid [unaudited] -0- -0- -0- -0- -0- [5,134] [5,134]
Net loss - six months
ended June 30,
1997 [unaudited] -0- -0- -0- -0- -0- [154,237] [154,237]
----- ------ ------ ------- ------- --------- ---------
Balances, June 30,
1997 [unaudited] 6,000 $1,000 1,000 $3,000 $[1,000] $[860,852] $[857,852]
----- ------ ------ ------- ------- --------- ---------
</TABLE>
See auditors' report and accompanying notes.
-6-
<PAGE> 7
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION [FEBRUARY 28, 1996]
THROUGH DECEMBER 31, 1996 FOR PHYSOURCE, LTD. AND
FOR THE YEAR ENDED DECEMBER 31, 1996 FOR THEODORE M. HOMA, M.D., S.C.
Increase [Decrease] in Cash
<TABLE>
<CAPTION>
[Unaudited]
For the For the
Year ended Six Months Ended
December 31, 1996 June 30,
----------------- -----------------------
1996 1997
--------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $[646,975] $[224,761] $[154,237]
--------- --------- ---------
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation and amortization 21,158 5,164 28,592
Gain on disposal of assets [21,285] [2,070] -0-
Changes in assets and liabilities
Increase in accounts receivable [26,146] [22,652] [278,356]
Decrease [Increase] in prepaid expenses [6,173] [15,954] 6,620
Decrease [Increase] in shareholder advances 21,919 [31,518] -0-
Increase in organizational costs [12,327] [2,005] -0-
Increase in retirement plan payable 12,479 -0- -0-
Increase [Decrease] in accounts payable
and accrued expenses 78,690 37,050 [45,642]
Increase in accounts payable and other
accrued expenses - related party 29,858 4,641 191,710
--------- --------- ---------
Total adjustments 98,173 [27,344] [97,076]
--------- --------- ---------
Net cash used by operating
activities [548,802] [252,105] [251,313]
--------- --------- ---------
Cash flows from investing activities
Acquisitions of property and equipment [83,588] [28,496] [24,375]
--------- --------- ---------
Cash flows from financing activities
Proceeds from repayment of lease receivable 2,919 -0- 2,587
Proceeds from notes payable - related parties 727,988 280,409 256,698
Payments on long-term debt [2,529] [665] [1,664]
Dividends [56,635] -0- [5,134]
--------- --------- ---------
Net cash provided by financing activities 671,743 279,744 252,487
--------- --------- ---------
Net increase [decrease] in cash 39,353 [857] [23,201]
Cash, beginning 2,268 2,268 41,621
--------- --------- ---------
Cash, ending $ 41,621 $ 1,411 $ 18,420
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the years and periods for
Interest $ 6,772 $ -0- $ 1,130
</TABLE>
See auditor's report and accompanying notes.
-7-
<PAGE> 8
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND JUNE 30, 1997 [UNAUDITED]
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations:
PhySource LTD. (PhySource), an Illinois Corporation, started business and
was incorporated on February 28, 1996. PhySource provides management,
consulting, billing and staffing services on a contract basis to medical
practices.
Theodore M. Homa, M.D., S.C., (Homa), an Illinois Corporation, was
incorporated in 1979 and is a medical practice providing internal medicine
services.
Principles of Combination:
The accompanying financial statements of PhySource and Homa (collectively,
the Companies) are presented on a combined basis due to the common
ownership and business activities of the Companies [Note B]. The combined
financial statements include the accounts of each of the Companies. All
significant intercompany accounts and transactions have been eliminated.
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.
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.
-8-
<PAGE> 9
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
NOTES TO COMBINED FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND JUNE 30, 1997 [UNAUDITED]
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]
Property and Equipment: [Continued]
Depreciation is provided using the straight-line method based on the useful
lives of the assets, which have been estimated to be five years.
Depreciation expense for the year ended December 31, 1996 was $19,514.
Income Taxes:
PhySource and Homa elected to be treated as S corporations pursuant to the
Internal Revenue Code for federal and state income tax purposes on February
28, 1996 and January 1, 1989, respectively. The income of an S corporation
is taxable and distributable to the individual stockholders of a
corporation without further consequences to PhySource or Homa. As discussed
further in Note B, the Companies ceased to be S corporations in July 1997,
in connection with Homa's merger into PhySource and PhySource's subsequent
merger into HALIS, Inc. (HALIS).
Interim Financial Statements:
The accompanying financial statements for the period from inception to June
30, 1996 for PhySource, for the six month period ended June 30, 1996 for
Homa, and for the six month period ended June 30, 1997 for the Companies
are unaudited but, in the opinion of management, reflect all 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 periods ended December 31, 1997.
B. SUBSEQUENT EVENT - MERGER AGREEMENT:
On July 31, 1997, the stockholder of Homa effected a merger agreement with
Physource, pursuant to which Homa was merged into PhySource. All issued and
outstanding shares of the common stock of Homa were surrendered by the
stockholder in consideration for 788 shares of common stock of PhySource.
On July 31, 1997, the stockholders of PhySource effected a merger agreement
with HALIS, pursuant to which PhySource was merged into a subsidiary of
HALIS. All issued and outstanding shares of PhySource were surrendered by
the stockholders in consideration for 1,502,963 shares of common stock of
HALIS.
These mergers were accounted for as purchase by HALIS.
Additionally, in connection with the merger, HALIS issued 1,129,648 shares
of common stock and 37,742 incentive stock options to satisfy certain
liabilities.
-9-
<PAGE> 10
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
NOTES TO COMBINED FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND JUNE 30, 1997 [UNAUDITED]
C. RELATED PARTY TRANSACTIONS:
In 1996, Homa received revenues from Buffalo Grove Internal Medicine (BGIM)
in the amount of $239,586. The sole shareholder of Homa is a 50%
shareholder of BGIM. The balance due from BGIM as of December 31, 1996 was
$-0-. Effective January 1, 1997, the shareholder no longer provided
services in BGIM and billed all services through Homa.
In 1996, PhySource purchased property and equipment in the amount of
$89,923 from Indeck Engery Services, Inc. (Indeck), which is majority owned
by Mr. Gerald R. Forsythe, a director of PhySource who is also the father
of four PhySource shareholders. The Companies also bank at American
Enterprise Bank, which is also majority owned by Mr. Forsythe.
In 1996, Homa paid billing fees to Medical Practice Management in the
amount of $15,728, which is owned 100% by the wife of the sole shareholder
of Homa.
In 1996, Homa sold property and equipment to the shareholder of Homa for
$19,215. The book value of the vehicle was $-0- and the gain is included in
gain from asset disposals in the statement of operations.
D. LEASE RECEIVABLES:
PhySource leases property and equipment under the provisions of a long-term
lease. For financial reporting purposes, the asset has been removed from
the books and a gain on the sale in the amount of $2,070 has been
recognized. The lease expires in May 2001.
The future minimum lease repayments under the capital lease and the net
present value of the future minimum lease repayments at December 31, 1996
are as follows:
<TABLE>
<S> <C>
Total minimum lease repayments $39,349
Less amount representing interest [8,163]
-------
Present value of minimum lease payments 31,186
Current portion of capital lease [5,304]
-------
Long-term capital lease less current portion $25,882
=======
</TABLE>
-10-
<PAGE> 11
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
NOTES TO COMBINED FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND JUNE 30, 1997 [UNAUDITED]
D. LEASE RECEIVABLES: [Continued]
Maturities of the lease receivable as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997 $ 5,304
1998 5,860
1999 6,474
2000 7,152
2001 6,396
-------
$31,186
=======
</TABLE>
E. NOTES PAYABLE - RELATED PARTIES:
The Company has the following unsecured notes payable to related parties as
of:
<TABLE>
<CAPTION>
December 31, June 30,
------------ -----------
<S> <C> <C>
Director - note payable with interest
of prime + 2% payable on demand
This note is unsecured. $677,000 $ 802,000
Indeck - note payable with interest
of prime + 2% payable on demand.
This note is unsecured. 84,542 84,542
Shareholder/Director - note payable with interest
of prime + 2% payable on demand; due on
demand. This note is unsecured. 25,000 25,000
Shareholder - note payable with interest at 7%
per annum; interest and principal due April
1998. This note is unsecured. -0- 18,000
Fawcett Insurance Agency, Inc. - note payable
with interest of prime + 2% payable on demand;
due on demand. This note is unsecured. -0- 85,000
Shareholder/Director - note payable with interest
of prime + 2% payable on demand; due on
demand. This note is unsecured. -0- 28,698
-------- ----------
$786,542 $1,043,240
======== ==========
</TABLE>
-11-
<PAGE> 12
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
NOTES TO COMBINED FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND JUNE 30, 1997 [UNAUDITED]
E. NOTES PAYABLE - RELATED PARTIES: [Continued]
The above debt, excluding the note payable of $18,000, was subsequently
satisfied at the merger [Note B] with HALIS stock. Fawcett Insurance
Agency, Inc. is wholly-owned by a shareholder/director of PhySource.
Accrued interest relating to the above notes at December 31, 1996 and June
30, 1997 was $29,858 and $79,276, respectively.
F. LONG-TERM DEBT - RELATED PARTY:
<TABLE>
<S> <C>
Director - installment loan with interest of 10% payable in monthly
installments of $665; due May 31, 2001.
This note in secured by an x-ray machine. $28,840
Less current portion [5,386]
-------
$23,454
=======
</TABLE>
Maturities of the installment note as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1997 $ 5,386
1998 5,950
1999 6,573
2000 7,261
2001 3,670
-------
$28,840
=======
</TABLE>
G. OPERATING LEASE COMMITMENTS:
The Companies lease equipment and office space under operating lease
agreements. Rent expense under these agreements was $49,131 in 1996.
The annual future minimum lease commitments under these leases are as
follows:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1997 $ 26,518
1998 28,761
1999 29,205
2000 29,227
2001 24,860
Thereafter 51,737
--------
$190,308
========
</TABLE>
-12-
<PAGE> 13
PHYSOURCE LTD. and THEODORE M. HOMA, M.D., S.C.
NOTES TO COMBINED FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1996 AND JUNE 30, 1997 [UNAUDITED]
H. EMPLOYEE BENEFIT PLAN:
PhySource sponsors a 401(k) retirement savings plan for all employees who
meet certain eligibility requirements. Employees may contribute to the plan
up to 15% of their salary or the maximum allowed by the IRS. The Company
may elect to make matching and/or discretionary contributions. Employees'
contributions are immediately 100% vested while the Company contributions
are subject to a six-year vesting schedule. The Company made a contribution
to the plan during 1996 for $12,479.
I. ECONOMIC DEPENDENCY - MAJOR CLIENTS:
A major client is defined as one from whom ten percent or greater of annual
revenues is derived. During 1996, the Companies had one such customer.
Homa received revenues of $239,586 from BGIM, a related party [Note C],
in 1996 which accounted for 40% of revenues.
J. SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
The Companies acquired property and equipment of $58,554 and $31,369 by
issuance of notes payable and long-term debt.
The Companies sold property and equipment by issuing a note receivable in
the amount of $34,105.
The Company sold property and equipment with a net book value of $-0- for
$19,215 which is included in dividends.
K. SUBSEQUENT EVENTS:
The Companies are currently negotiating a new operating lease for office
space.
In conjunction with the merger [Note B], the Companies have entered
into an employment agreement with Theodore M. Homa, M. D. which expires
in July 31, 1999. The agreement provides for an annual base salary of
$144,000 plus certain incentive compensation.
-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 transactions as if they occurred on June 30,
1997: the acquisitions of 100% of the capital stock of Physicians Resource
Network, Inc. (PRN) and of PhySource Ltd. (PhySource) by HALIS, Inc. and
Subsidiaries (HALIS) accounted for as a purchase. All issued and outstanding
shares of PRN and PhySource were surrendered by their stockholders in
consideration for 3,733,333 and 1,502,963, respectively of HALIS' shares; and
certain liabilities of PhySource were satisfied with 1,129,648 shares of common
stock and 37,742 incentive stock options. 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 acquisitions of PRN and PhySource as if they 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, PRN and the combined
statements of PhySource and Homa, 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
PhySource
HALIS, Inc. Physicians Ltd. and
and Resource Theodore M.
Subsidiaries Network, Inc. Homa, M.D., S.C. Adjustments ProForma
------------ ------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets $2,266,307 $ 311,423 $ 328,497 [a] $ 123,087 $ 2,949,314
[c] $ [80,000]
Property and equipment 453,039 456,351 117,745 [d] [33,333] 993,802
Other assets 746,085 6,214 33,707 786,006
Capitalized software
development costs 3,625,348 3,625,348
Goodwill 5,536,274 [a] 8,452,566 13,988,840
----------- ----------- ----------- ---------- -----------
Total assets $12,627,053 $ 773,988 $ 479,949 $8,462,320 $22,343,310
----------- ----------- ----------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY [DEFICIT]
<CAPTION>
PhySource
HALIS, Inc. Physicians Ltd. and
and Resource Theodore M.
Subsidiaries Network, Inc. Homa, M.D., S.C. Adjustments ProForma
------------ ------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Current liabilities $ 4,918,569 $ 1,256,571 $ 1,317,676 [a]$[1,222,002] $ 5,905,814
[c] [365,000]
Long-term debt 195,820 158,728 20,125 374,673
----------- ----------- ----------- ----------- ----------
Total liabilities 5,114,389 1,415,299 1,337,801 [1,587,002] 6,280,487
----------- ----------- ----------- ----------- ----------
Stockholders' equity [deficit]
Stockholders' equity [deficit] [641,311] [857,852] [b] 1,499,163 --
Common stock, par value $.01 329,794 [a] 63,659 393,453
Additional paid-in capital 22,098,793 [a] 9,733,996 30,618,626
[b] [1,499,163]
[c] 285,000
Common stock subscribed 13,417 13,417
Accumulated deficit [14,922,590] [d] [33,333] [14,955,923]
Less: Treasury stock
at cost [6,750] [6,750]
----------- ----------- ----------- ----------- ----------
Total stockholders' equity 7,512,664 [641,311] [857,852] 10,049,322 16,062,823
----------- ----------- ----------- ----------- ----------
Total liabilities and stock-
holders' equity $12,627,053 $ 773,988 $ 479,949 $ 8,462,320 $22,343,310
----------- ----------- ----------- ----------- ----------
Common stock issued and
outstanding (a) 32,979,413 6,365,944 39,345,357
----------- ----------- ----------
</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>
PhySource
HALIS, Inc. Physicians Ltd. and
and Resource Theodore M.
Subsidiaries Network, Inc. Homa, M.D., S.C. Adjustments ProForma
------------ ------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Systems sales and
other revenues $ 8,589,428 $ 6,526,822 $ 601,983 [h] $ [75,000] $ 15,643,233
----------- ----------- ----------- ----------- ------------
Costs and expenses
Cost of sales and revenues 4,186,359 5,029,433 469,986 9,685,778
Research and development 1,829,002 1,829,002
Selling, general, and
administrative 6,778,035 1,459,477 770,363 [e] 1,690,513 10,687,504
[g] 14,116
[h] [25,000]
----------- ----------- ----------- ----------- ------------
12,793,396 6,488,910 1,240,349 1,679,629 22,202,284
----------- ----------- ----------- ----------- ------------
Operating loss [4,203,968] 37,912 [638,366] [1,754,629] [6,559,051]
----------- ----------- ----------- ----------- ------------
Other income [expense]
Gain [Loss] on asset
disposal [85,696] [8,793] 21,285 [73,204]
Rental income 27,600 27,600
Interest expense [94,604] [132,616] [31,769] [f] 54,569 [204,420]
Interest income 29,468 1,875 31,343
Other income [expense] 69,034 10,773 79,807
Other expenses [378,588] [378,588]
----------- ----------- ----------- ----------- ------------
[432,786] [130,636] [8,609] 54,569 [517,462]
----------- ----------- ----------- ----------- ------------
Net loss $[4,636,754] $ [92,724] $ [646,975] $[1,700,060] $ [7,076,513]
----------- ----------- ----------- ----------- ------------
Net loss per share $[.21] $ [.25]
=========== ============
Weighted average shares
outstanding 21,766,884 6,365,944 28,132,828
=========== =========== ============
</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>
PhySource
HALIS, Inc. Physicians Ltd. and
and Resource Theodore M.
Subsidiaries Network, Inc. Homa, M.D., S.C. Adjustments ProForma
------------ ------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Systems sales and other
revenues $ 3,605,926 $ 2,879,782 $ 1,223,115 $ [31,800] $ 7,677,023
----------- ----------- ----------- --------- -----------
Costs and expenses
Cost of sales and revenues 1,399,064 2,246,381 667,204 4,312,649
Research and development 708,334 [h] [31,800] 676,534
Selling, general, and
administrative 3,379,773 624,991 662,663 [e] 845,257 5,557,869
[g] 45,185
----------- ----------- ----------- --------- -----------
5,487,171 2,871,372 1,329,867 858,642 10,547,052
----------- ----------- ----------- --------- -----------
Operating income [loss] [1,881,245] 8,410 [106,752] [890,442] [2,870,029]
----------- ----------- ----------- --------- -----------
Other income [expense]
Gain on asset disposal 8,678 3,063 11,741
Interest expense [77,492] [69,425] [50,548] [f] 65,948 [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] [47,485] 65,948 [106,026]
----------- ----------- ----------- --------- -----------
Net loss $[1,956,636] $ [40,688] $ [154,237] $[824,494] $[2,976,055]
=========== =========== =========== ========= ===========
Net loss per share $ [.07] $ [.08]
=========== ===========
Weighted average shares
outstanding 29,822,386 6,365,944 36,188,330
=========== ========= ===========
</TABLE>
-17-
See notes to unaudited pro forma condensed consolidated financial statements
<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 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.
To record the issuance of 788 shares of PhySource common stock on July
31, 1997, to the shareholder of Theodore M. Homa, M.D., S.C. (Homa) in
exchange for 100% of the outstanding stock of Homa; and to record the
issuance by HALIS of: a) 1,502,963 shares of common stock on July 31,
1997, to the shareholders of PhySource, in exchange for 100% of the
outstanding stock of PhySource; b) 1,129,648 shares of common stock and
37,742 incentive stock options of HALIS common stock to satisfy certain
liabilities and prepay certain expenses of PhySource; all in a
transaction to be accounted for as a purchase by HALIS.
Management estimates the value of the 6,365,944 shares to be $1.35 per
share. Management has allocated the purchase prices to the assets and
liabilities acquired based upon their relative fair values. These
transactions generated goodwill of $5,396,310 and $3,056,256 for PRN
and PhySource, respectively, to 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 and PhySource 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 acquisition of
PRN.
[d] To eliminate the book value of software PhySource purchased from HALIS.
-18-
<PAGE> 19
HALIS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED [CONTINUED]
PRO FORMA FINANCIAL STATEMENTS
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:
[e] To reflect amortization of goodwill generated in the PRN and PhySource
acquisitions.
[f] To reflect the 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 the reduction in interest expense as a result of the payoff
of the Mulberry Street Investment Company debt, in connection with the
PRN merger.
To reflect the reduction of interest expense as a result of the
satisfaction of approximately $1,000,000 in notes payable, in
connection with the PhySource merger.
[g] To reflect incremental compensation expense related to employment
agreements entered into with former stockholders of PRN and
PhySource.
[h] To eliminate HALIS revenues from the license of software to PhySource
of $50,000. To eliminate PhySource revenues and HALIS expenses for fees
HALIS paid to PhySource in the amount $25,000.
For the six months ended June 30, 1997:
[e] To reflect amortization of goodwill generated in the PRN acquisition
and PhySource acquisitions.
[f] To reflect the 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 the reduction in interest expense as a result of the payoff
of the Mulberry Street Investment Company debt, in connection with the
PRN merger.
To reflect the reduction of interest expense as a result of the
satisfaction of approximately $1,000,000 in notes payable, in
connection with the PhySource merger.
[g] To reflect the incremental compensation expense related to employment
agreements entered into with former stockholders of PRN and
PhySource.
[h] To eliminate PhySource revenues and HALIS expenses for fees HALIS paid
Physource in the amount of $31,800.
-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: October 13, 1997
---------------------
-20-
