<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
March 31, 1998 0-16288
HALIS, INC.
(Exact name of small business issuer as specified in its charter)
Georgia 58-1366235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9040 Roswell Road, Suite 470, Atlanta, Georgia 30350
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (770) 641-5555
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the last 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $.01 Par Value 52,839,168
Class Outstanding at May 13, 1998
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
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<PAGE> 3
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS
- --------------
Cash $ 281,810
Customer claims and premium funds 385,790
Receivables, less allowance for possible losses
of $ 464,978 884,024
Other current assets 52,251
-----------
Total current assets 1,603,875
PROPERTY AND EQUIPMENT
- ----------------------
Computer equipment 475,004
Office furniture and fixtures 415,947
Leasehold improvements 47,685
Less: accumulated depreciation (214,338)
-----------
Total property and equipment, net 724,298
OTHER ASSETS
- ------------
Deposits 114,917
Goodwill, net of accumulated
amortization of $ 1,074,676 2,649,420
Capitalized software development costs,
net of accumulated amortization of $ 40,650 120,345
Other intangibles, net of
accumulated amortization of $ 19,300 88,027
Notes receivable - related parties 576,017
Long-term investments 125,000
-----------
Total other assets 3,673,726
TOTAL ASSETS $ 6,001,899
===========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 4
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<S> <C>
CURRENT LIABILITIES
- -------------------
Accounts payable and accrued expenses $ 1,515,651
10% Convertible promissory notes 50,000
Deferred revenue and customer deposits 921,400
Payroll and sales taxes payable 235,611
Notes payable 454,287
Notes payable - related parties 106,241
Obligations under capital leases - current portion 139,472
Other current liabilities 384,769
------------
Total current liabilities 3,807,431
LONG-TERM DEBT
- --------------
Obligations under capital leases - net of current portion 99,173
STOCKHOLDERS' EQUITY
Preferred stock $.10 par value 5,000,000
authorized; 0 issued and outstanding 0
Common stock $.01 par value 100,000,000
authorized; 51,226,011 issued and outstanding 512,260
Additional paid-in capital 36,731,342
Accumulated deficit (35,148,307)
------------
Total stockholders' equity 2,095,295
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,001,899
============
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 5
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
SALES REVENUE $ 2,191,097 $ 1,320,353
- -------------
COST AND EXPENSES
Cost of goods sold 733,270 431,085
Selling, general, and administrative 2,889,688 1,486,291
Research and development 233,398 284,674
------------ ------------
3,856,356 2,202,050
OPERATING LOSS (1,665,259) (881,697)
------------
OTHER INCOME (EXPENSES)
Gain (loss) on asset disposal 0 8,678
Interest expense (21,275) (38,379)
Interest income 6,604 8,334
Other income (expense) 0 8,668
Merger costs 0 (13,904)
------------ ------------
(14,671) (26,603)
============ ============
NET LOSS $ (1,679,930) $ (908,300)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.04) $ (0.03)
============ ============
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 46,883,412 27,744,693
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
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HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
MARCH 31, 1997
<TABLE>
<CAPTION>
Cash flows from operating activities 1998 1997
----------- -----------
<S> <C> <C>
Net loss $(1,679,930) $ (908,300)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization and depreciation 265,417 252,757
Provision for losses on accounts receivable 57,713
Changes in operating assets and liabilities, net of assets and
liabilities acquired and sold
Increase in customer claims and premium funds (35,115) 118,835
Increase in accounts receivable (244,402) (173,691)
Increase in accounts receivable - related parties (1,186) 0
Decrease in inventory 0 1,301
Decrease in other current assets 11,351 9,870
Increase in deposits 0 (30,355)
Decrease in accounts payable (353,405) 47,476
& accrued expenses
Decrease in sales & payroll taxes (37,023) (6,336)
Increase in deferred revenues 531,549 (12,136)
& customer deposits
Increase in other current liabilities 30,350 (89,317)
----------- -----------
Total adjustments 225,249 118,404
----------- -----------
Net cash used by operating activities 1,454,681 (789,896)
Cash flows from investing activities:
Purchases of equipment and furniture (9,670) (56,333)
Net costs of acquisitions 0 (79,877)
Net cash provided by investing activities (9,670) (136,210)
Cash flows from financing activities:
Proceeds from issuance of common stock 0 417,637
Proceeds from 6% convertible debentures 758,000 0
Proceeds from 4% convertible debentures 100,000 0
Private equity rescissions (50,000) 0
Net payments on 7% convertible promissory notes (190,000) 0
Net payments on lines of credit (92,334) 0
Net payments on capital leases (53,587) 0
Net proceeds from notes payable 73,273 (205,904)
Net proceeds from notes payable - related parties 40,000 7,592
----------- -----------
Net cash provided by financing activities 585,352 219,325
----------- -----------
Net Decrease in cash (878,999) (706,781)
Cash, beginning of the year 1,160,809 719,989
----------- -----------
Cash, end of period $ 281,810 $ 13,208
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 7
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In management's opinion, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. For further information, refer to the consolidated financial statements
and the footnotes thereto included in the Company's annual report on Form 10-KSB
for the year ended December 31, 1997.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Revenue consists primarily of physician practice management fees,
third party claims processing fees, consulting services, software licensing
fees, sales of related computer hardware, and post contract customer support
and maintenance.
Practice management, claims When the services are provided.
processing, consulting
services, installation,
training and education
Software Licensing Revenue After shipment of the product and
fulfillment of acceptance terms, provided no
significant obligations remain and
collection of resulting receivable is deemed
probable.
Contract Support Ratably over the life of the contract from
the effective date.
Hardware Upon shipment of computer equipment to the
customer, provided no significant
obligations remain and collection of
resulting receivable is deemed probable.
Subscription Sales Ratably over the life of the contract from
the effective date.
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<PAGE> 8
Goodwill
Goodwill represents the excess of cost over the fair value of assets
acquired and is amortized using the straight-line method over a period of 5
years. The Company assesses the recoverability of its goodwill whenever adverse
events or changes in circumstances or business climate indicate that expected
future cash flows (undiscounted and without interest charges) in individual
business units may not be sufficient to support recorded goodwill. If
undiscounted cash flows are not sufficient to support the recorded asset, an
impairment is recognized to reduce the carrying value of the goodwill based on
the expected discounted cash flows of the business unit.
Principles of Consolidation
The consolidated financial statements include the accounts of HALIS,
Inc. and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Realization of Assets
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate the
continuation of the Company as a going concern. The Company has sustained losses
during the years ended December 31, 1996 and 1997, and such losses are
continuing in fiscal year 1998. Additionally, the Company has used, rather than
provided, cash in its operating activities during the years ended December 31,
1996 and 1997, and this continues to be the case in 1998. The Company had a
working capital deficiency as of December 31, 1997 and as of March 31, 1998.
Specifically, the Company estimates that it incurred negative cash flow from
operating activities of approximately $1,500,000 from January 1, 1998 to March
31, 1998. Due to its cash flow situation, the Company has negotiated payment
terms with vendors representing a significant portion of the accounts payable
and is managing the payment of the remaining accounts payable on a case by case
basis. The Company's cash balance at May 11, 1998 was approximately $244,000.
In view of the matters described in the preceding paragraph, there is a
significant doubt about the Company's ability to continue as a going concern.
The recoverability of the recorded assets and satisfaction of the liabilities
reflected in the accompanying balance sheet is dependent upon continued
operation of the Company, which is in turn dependent upon the Company's ability
to meet its financing requirements on a continuing basis and to succeed in its
future operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Management plans to take the following steps to improve its operating
results and financial position, which it believes to be sufficient to provide
the Company with the ability to continue in existence during the ensuing twelve
month period.
The Company is presently raising capital in a private placement to
provide up to $1,300,000 of working capital. Management believes that the net
proceeds contemplated by this offering will be sufficient to fund the Company's
operations through June 1998. The Company has raised net proceeds of
approximately $1,020,000 from this offering as of May 11, 1998 primarily in the
form of convertible debentures. If the Company is unable to increase revenues
and cut costs in order to generate sufficient positive cash flow beginning in
July of 1998, an additional capital infusion will be required for the Company to
meet its obligations.
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<PAGE> 9
The Company has implemented a restructuring program to reduce its fixed
costs and move the Company towards profitability. The Company does not
anticipate that it will record a restructuring reserve related to these actions.
As part of this program, the Company consolidated its three Atlanta offices into
a single location on March 1, 1998. In addition to eliminating certain leases
and redundant occupancy costs, this move is also expected to produce synergistic
benefits among employees.
Thus far in 1998, the Company has had limited success entering into
contracts for the sale of the HES product. The Company continues to focus on the
sale of HES software, which the Company believes will continue to gain market
acceptance. In addition to focusing on near term profitability, the Company is
seeking strategic relationships, including possible business combinations, which
will enhance the Company's capital structure, as well as its sales and marketing
infrastructure.
While the Company believes the plan that it is undertaking will be successful
and in the interest of the Company, no assurances can be given that the Company
indeed will be successful and that the Company will continue as a going concern.
Risk factors include, among others, (i) timely completion of modifications and
enhancements to the Company's healthcare products, (ii) continued working
capital availability while such products are being developed, (iii) continued
availability of key members of management, (iv) acceptance of the Company's
products by customers in the healthcare market, (v) uncertainty of market
acceptance, (vi) reliance on a limited number of products, (vii) effective
integration of acquisitions, (viii) technological change, and (ix) competition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FINANCIAL CONDITION
Total assets at March 31, 1998 were $6,001,899, a decrease of $923,107
from total assets of $6,925,006 at December 31, 1997. This decrease is primarily
attributable to a reduction in cash resulting from the negative cash flow for
the quarter. This negative cash flow is largely attributable to higher selling,
general, and administrative expenses.
Current liabilities decreased from $4,063,213 at December 31, 1997 to
$3,807,431 at March 31, 1998. This decrease of $255,782 is largely attributable
to the net effect of a $353,405 reduction in accounts payable, the retirement of
$190,000 of 7% convertible notes, the conversion of convertible debentures to
equity, and a $531,549 increase in deferred revenue and customer deposits during
the three months ended March 31, 1998.
Stockholder's equity decreased from $2,717,225 to $2,095,295, a
decrease of $621,930. This difference is attributable to an operating loss
during the period, offset by the issuance of 6,364,336 shares of common stock
upon the conversion of convertible debentures during the three months ended
March 31, 1998.
RESULTS OF OPERATIONS
Sales revenue increased by $870,744 for the three months ended March
31, 1998 as compared to the prior year period. This increase is primarily the
result of the net impact of the Company's acquisition and divestiture activity
since March 31, 1997.
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<PAGE> 10
Cost of goods sold increased $302,185 in absolute terms for the three
months ended March 31, 1998. As a percentage of sales revenue, cost of goods
sold were 33.5% and 32.6% for the three months ended March 31, 1998 and the
three months ended March 31, 1997, respectively. This increase in cost as a
percentage of revenue is largely attributable to the accounting treatment of the
Company's subscription sales for the healthcare technology product.
Selling, general and administrative expenses increased by $1,403,397
for the three month period ended March 31, 1998. This increase resulted from the
net impact of the Company's acquisition and divestiture activity during the year
ended December 31, 1997, as well as the Company's investment in its corporate
infrastructure to support future growth. Included in selling, general and
administrative expenses is amortization and depreciation expense of $265,417 and
$252,757 for the three months ended March 31, 1998 and March 31, 1997,
respectively.
Research and development costs decreased by a total of $51,276 for the
three month period ended March 31, 1998, reflecting the Company's divestiture of
certain software assets and associated development overhead since March 31,
1997.
The net loss of $1,665,259 for the three month period ended March 31,
1998 is primarily attributable to increased selling, general and administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1998, operating activities
consumed $1,454,681 of cash, primarily due to the net loss of $1,319,455. As
discussed in the previous section, the primary reasons for the net loss are the
selling, general and administrative expenses and research and development
expenses incurred to fund the corporate infrastructure development, as well as
the ongoing investment in the Company's proprietary software products.
The Company recorded a net decrease in cash of $878,999 during the
three months ended March 31, 1997, offsetting the operational losses with
proceeds from private placements of convertible debentures. Management continues
to seek and evaluate potential sources of additional capital to support the
Company's expected future growth.
Financing activities during the period provided $582,027, primarily
from the issuance of convertible debentures and their subsequent conversion to
common stock during the three months ended March 31, 1998.
During January 1998 the Company received funds from the sale of 4%
Convertible Debentures and certain warrants. The Debentures and Reg. S Warrants
were issued to non-U.S. Persons with the assistance of GEM Advisors, Inc. acting
as a placement agent. The Debentures were convertible into the Company's Common
Stock at a fixed conversion price of $0.61 per share or a variable conversion
price (65% of the bid price average for the 10 trading days preceding the day
prior to the conversion date). The Company also issued 100,000 warrants with an
exercise price of $0.60 per share. The consideration received by the Company for
the Debentures was $100,000 in cash less certain expenses, including 9% of the
aggregate proceeds to GEM Advisors, Inc. The offers and sales of the Debentures
and Reg. S Warrants were made pursuant to a claim of exemption under rules 901
and 903 of Regulation S promulgated by the Securities Act of 1933, as amended.
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<PAGE> 11
During the three months ended March 31, 1998, the holders of all
$300,000 of the 4% Convertible Debentures elected to convert their investment
into the Company's Common Stock. As a result, the Company issued an aggregate of
1,267,497 shares of Common Stock in full satisfaction of principal and accrued
interest owed to the holders.
In response to the decline in price of the Company's Common Stock, the
Company offered the holders of the remaining $500,000 of Company's 7%
Convertible Promissory Notes due January 15, 1998 125,000 additional shares of
Common Stock to encourage them to execute their conversion option prior to
January 15, 1998. Holders of $210,000 of the Notes accepted the offer as of
January 15, 1998, resulting in the Company issuing 52,500 additional shares of
Common Stock. The additional shares had the effect of increasing the ratio of
shares issued to debt retired from 1:1 to 1.25:1. As an equitable adjustment
believed by the Board of Directors to be in the Company's best interest and for
fair consideration in light of all the facts and circumstances, the holders of
$1,006,000 of the Notes that had exercised their conversion option on or before
September 30, 1997 were issued 251,500 additional shares on January 20, 1998.
The Company issued 358,000 additional shares of Common Stock to
purchasers who had purchased Common Stock in a private placement completed in
September 1997. These shares were issued in exchange for a waiver of recission
rights and as an equitable adjustment to such private placement based on careful
consideration by the Company's Board of Directors of all the facts and
circumstances.
On January 15, 1998, the maturity date of the 7% Convertible Promissory
Notes, $190,000 was retired and $100,000 was converted into newly issued 10%
Convertible Notes. The 10% Convertible Notes are convertible into the Company's
Common Stock at a variable conversion price equal to 80% of the average closing
bid price for the 10 trading days preceding the day prior to the conversion
date.
During the three months ended March 31, 1998, the holders of $50,000 of
the 10% Convertible Debentures elected to convert their investment into the
Company's Common Stock. As a result, the Company issued an aggregate of 163,506
shares of Common Stock in full satisfaction of principal and accrued interest
owed to such holders.
Through a private placement of 6% Convertible Debentures the Company
raised $758,000 during the three months ended March 31, 1998. The holders of the
6% Convertible Debentures elected to convert their investment into the Company's
Common Stock immediately, and the Company issued an aggregate of 4,933,333
shares of Common Stock in full satisfaction of principal and accrued interest
owed to such holders.
During April and May 1998, the Company raised an additional $262,000
through a private placement of the 6% Convertible Debentures described above.
The holders of these 6% Convertible Debentures elected to convert their
investment into the Company's Common Stock immediately, resulting in the Company
issuing an aggregate of 1,800,000 shares of Common Stock in full satisfaction of
principal and accrued interest owed to such holders.
During March 1998 a manager of one of the Company's business units
extended a $40,000 unsecured, demand loan to the Company. This loan is evidenced
by a promissory note with interest of 10% payable together with principal at
maturity.
The Company will require additional capital or other financing to
finance its operations and continued growth. There can be no assurance that the
Company will be able to obtain such financing if and when needed, or that if
obtained, it will be sufficient or on terms and conditions acceptable to the
Company.
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<PAGE> 12
Because of the Company's limited cash flow, the Company negotiated
payment terms of up to six months for approximately $490,000 of accounts payable
during the three months ended March 31, 1998. During April 1998, the Company
requested a one month delay in the payment of approximately $75,000 related to
these payment plans.
No provision has been made in the financial statements for any
settlements or judgments relating to the matters discussed under "Item 3. Legal
Proceedings" of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. In the event of a material judgment or settlement resulting
from either of these matters, the Company would experience an adverse effect on
its liquidity.
FORWARD-LOOKING STATEMENTS
This Form 10-KSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
and Exchange Act of 1934, as amended, which are intended to be covered by the
safe harbors created thereby. These statements include the plans and objectives
of the Company for future operations. The forward-looking statements included
herein are based on current expectations that involve numerous risks and
uncertainties. The Company's plans and objectives are based on the assumption
that the Company's entry into the healthcare industry will be successful, that
competitive conditions within the healthcare industry will not change materially
or adversely, and that there will be no material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions, as well as future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions underlying the
forward-looking statements included herein are reasonable, the inclusion of such
information should not be regarded as a representation by the Company, or any
other person, that the objectives and plans of the Company will be achieved.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During January 1998 the Company received funds from the sale of 4%
Convertible Debentures and certain warrants. The Debentures and Reg. S Warrants
were issued to non-U.S. Persons with the assistance of GEM Advisors, Inc. acting
as a placement agent. The Debentures were convertible into the Company's Common
Stock at a fixed conversion price of $0.61 per share or a variable conversion
price (65% of the bid price average for the 10 trading days preceding the day
prior to the conversion date). The Company also issued 100,000 warrants with an
exercise price of $0.60 per share. The consideration received by the Company for
the Debentures was $100,000 in cash less certain expenses, including 9% of the
aggregate proceeds to GEM Advisors, Inc. The offers and sales of the Debentures
and Reg. S Warrants were made pursuant to a claim of exemption under rules 901
and 903 of Regulation S promulgated by the Securities Act of 1933, as amended.
During the three months ended March 31, 1998, the holders of all
$300,000 of the 4% Convertible Debentures elected to convert their investment
into the Company's Common Stock. As a result, the Company issued an aggregate of
1,267,497 shares of Common Stock in full satisfaction of principal and accrued
interest owed to the holders.
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<PAGE> 13
In response to the decline in price of the Company's Common Stock, the
Company offered the holders of the remaining $500,000 of Company's 7%
Convertible Promissory Notes due January 15, 1998 125,000 additional shares of
Common Stock to encourage them to execute their conversion option prior to
January 15, 1998. Holders of $210,000 of the Notes accepted the offer as of
January 15, 1998, resulting in the Company issuing 52,500 additional shares of
Common Stock. The additional shares had the effect of increasing the ratio of
shares issued to debt retired from 1:1 to 1.25:1. As an equitable adjustment
believed by the Board of Directors to be in the Company's best interest and for
fair consideration in light of all the facts and circumstances, the holders of
$1,006,000 of the Notes that had exercised their conversion option on or before
September 30, 1997 were issued 251,500 additional shares on January 20, 1998.
The Company issued 358,000 additional shares of Common Stock to
purchasers who had purchased Common Stock in a private placement completed in
September 1997. These shares were issued in exchange for a waiver of recission
rights and as an equitable adjustment to such private placement based on careful
consideration by the Company's Board of Directors of all the facts and
circumstances.
On January 15, 1998, the maturity date of the 7% Convertible Promissory
Notes, $190,000 was retired and $100,000 was converted into newly issued 10%
Convertible Notes. The 10% Convertible Notes are convertible into the Company's
Common Stock at a variable conversion price equal to 80% of the average closing
bid price for the 10 trading days preceding the day prior to the conversion
date.
During the three months ended March 31, 1998, the holders of $50,000 of
the 10% Convertible Debentures elected to convert their investment into the
Company's Common Stock. As a result, the Company issued an aggregate of 163,506
shares of Common Stock in full satisfaction of principal and accrued interest
owed to such holders.
Through a private placement of 6% Convertible Debentures the Company
raised $758,000 during the three months ended March 31, 1998. The holders of the
6% Convertible Debentures elected to convert their investment into the Company's
Common Stock immediately, and the Company issued an aggregate of 4,933,333
shares of Common Stock in full satisfaction of principal and accrued interest
owed to such holders.
During April and May 1998, the Company raised an additional $262,000
through a private placement of the 6% Convertible Debentures described above.
The holders of these 6% Convertible Debentures elected to convert their
investment into the Company's Common Stock immediately, resulting in the Company
issuing an aggregate of 1,800,000 shares of Common Stock in full satisfaction of
principal and accrued interest owed to such holders.
The issuance of securities described above were made in reliance on the
exemption from registration provided by Section 3(b) and/or 4(2) of the
Securities Act of 1933 as transactions by an issuer not involving a public
offering. All of the securities were acquired by the recipients thereof for
investment and with no view toward the resale or distribution thereof. In each
instance, the offers and sales were made without any public solicitation, the
certificates bear restrictive legends and appropriate stop transfer instructions
have been or will be given to the transfer agent. Except as described above, no
underwriter was involved in the transaction and no commissions were paid.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed with or
incorporated by reference into this report:
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<PAGE> 14
3.1 Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-2 (No.
333-45783) filed February 6, 1998).
3.2 Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-2 (No. 333-34215)
filed August 22, 1997)
4.1 Form of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-18, Reg. No.
33-14114-A, filed May 7, 1987, as amended ("Form
S-18"))
10.20 Form of 4% Convertible Debenture (incorporated by
reference to Exhibit 4.1 of the Company's Current
Report on Form 8-K filed January 13, 1998)
10.21 Form of Common Stock Purchase Warrant Certificate
(incorporated by reference to Exhibit 4.2 of the
Company's Current Report on Form 8-K filed January
13, 1998)
10.22 Asset Purchase Agreement dated December 31, 1997
among HALIS Services, Inc., Orthodontic Practice
Management System, Inc., Infocure Corporation, and
the Company (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K
filed January 12, 1998)
10.23 Asset Purchase Agreement dated December 31, 1997
between Communications Wiring and Accessories, Inc.
and HALIS Services, Inc. (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on
Form 8-K filed January 12, 1998)
21.1 List of Subsidiaries (incorporated by reference
to Exhibit 21.1 to the Company's Current Report on
Form 10-KSB filed April 15, 1998)
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the
quarter ended March 31, 1998.
Current Report on Form 8-K filed January 12, 1998
- Disposition of Assets
- HALIS, Inc. Unaudited Pro Forma Condensed
Consolidated Financial Statements dated
September 30, 1997
Current Report on Form 8-K filed January 13, 1998
- Sale of certain securities under Regulation S
Current Report on Form 8-K filed January 15, 1998 -
- Change in Registrant's certifying accountant
-14-
<PAGE> 15
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 thereunto duly authorized.
HALIS, INC.
Dated: May 14, 1998 By: /s/ Paul W. Harrison
------------ ----------------------------------------------
Paul W. Harrison, Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
Dated: May 14, 1998 By: /s/ Larry Fisher
------------ ----------------------------------------------
Larry Fisher, Executive Vice President,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
-15-
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-2 (No.
333-45783) filed February 6, 1998).
3.2 Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-2 (No. 333-34215)
filed August 22, 1997)
4.1 Form of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-18, Reg. No.
33-14114-A, filed May 7, 1987, as amended ("Form
S-18"))
10.20 Form of 4% Convertible Debenture (incorporated by
reference to Exhibit 4.1 of the Company's Current
Report on Form 8-K filed January 13, 1998)
10.21 Form of Common Stock Purchase Warrant Certificate
(incorporated by reference to Exhibit 4.2 of the
Company's Current Report on Form 8-K filed January
13, 1998)
10.22 Asset Purchase Agreement dated December 31, 1997
among HALIS Services, Inc., Orthodontic Practice
Management System, Inc., Infocure Corporation, and
the Company (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K
filed January 12, 1998)
10.23 Asset Purchase Agreement dated December 31, 1997
between Communications Wiring and Accessories, Inc.
and HALIS Services, Inc. (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on
Form 8-K filed January 12, 1998)
21.1 List of Subsidiaries (incorporated by reference
to Exhibit 21.1 to the Company's Current Report on
Form 10-KSB filed April 15, 1998)
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HALIS, INC. FOR THE THREE MONTH PERIOD ENDED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 281,810
<SECURITIES> 0
<RECEIVABLES> 1,349,002
<ALLOWANCES> 464,978
<INVENTORY> 0
<CURRENT-ASSETS> 1,603,875
<PP&E> 938,636
<DEPRECIATION> 214,338
<TOTAL-ASSETS> 6,001,899
<CURRENT-LIABILITIES> 3,807,431
<BONDS> 0
0
0
<COMMON> 512,260
<OTHER-SE> 1,583,035
<TOTAL-LIABILITY-AND-EQUITY> 6,001,899
<SALES> 2,191,097
<TOTAL-REVENUES> 2,191,097
<CGS> 733,270
<TOTAL-COSTS> 3,856,356
<OTHER-EXPENSES> (6,604)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,275
<INCOME-PRETAX> (1,679,930)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,679,930)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
