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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File Number
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March 31, 2000 0-16288
HALIS, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Georgia 58-1366235
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3525 Piedmont Road, 7 Piedmont Center Suite 300, Atlanta, GA 30305
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(Address of Principal Executive Offices)
(404) 262-0181
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(Issuer's Telephone Number, Including Area Code)
N/A
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(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 Exchange Act during the past 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 ______
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Number of registrant's common shares outstanding at April 30, 2000
57,317,222
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Transitional Small Business Disclosure Format (check one)
Yes _______ No X
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HALIS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2000
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash $ 171,113
Receivables, less allowance for possible losses
of $229,800 238,566
Other current assets 49,584
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Total current assets 459,263
Property and Equipment
Computer equipment 435,976
Vehicles 36,588
Office furniture and fixtures 65,233
Leasehold improvements 29,770
Less: accumulated depreciation (215,257)
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Total property and equipment, net 352,310
Other Assets
Deposits 102,840
Goodwill, net of accumulated
amortization of $1,247,444 766,969
Other intangibles, net of
accumulated amortization of $84,129 34,641
Long-term investments 79,163
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Total other assets 989,163
Total assets $1,795,185
==========
</TABLE>
(The accompanying notes are an integral part of these statements)
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HALIS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C>
Current liabilities:
Accounts payable and accrued expenses $ 1,499,503
Deferred revenue and customer deposits 24,300
Accrued payroll and payroll taxes payable 186,629
Due to HealthWatch, Inc. 396,456
Notes payable -- bank 295,695
Obligations under capital leases -- current portion 60,880
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Total current liabilities 2,463,463
Long-term debt
Obligations under capital leases -- net of current portion 209,808
Shareholders' Equity (Deficit)
Common stock $.01 par value 100,000,000
authorized; 56,078,880 issued and outstanding 560,788
Additional paid-in capital 36,885,036
Unrealized loss on investment (45,837)
Accumulated deficit (38,278,073)
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Total stockholders' equity (deficit) (878,086)
Total liabilities and stockholders' equity (deficit) $ 1,795,185
============
</TABLE>
(The accompanying notes are an integral part of these statements)
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HALIS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
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<S> <C> <C>
Sales Revenue $ 1,048,240 $ 1,582,836
Cost and Expenses
Cost of goods sold 9,870 367,226
Selling, general, and administrative 1,067,058 959,352
Research and development 46,377 69,702
Amortization and depreciation 152,489 139,516
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1,275,795 1,535,796
Operating Income (Loss) (227,554) 47,040
Other Income (Expenses)
Gain (loss) on asset disposal 35,000 -
Interest expense (23,517) (17,829)
Interest income - 6,630
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11,483 (11,199)
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Net Income (Loss) $ (216,072) $ 35,841
=========== ===========
Basic and Diluted Loss per Common Share $ 0.00 $ 0.00
=========== ===========
Basic and Diluted Weighted Average Shares Outstanding 54,405,597 48,887,856
=========== ===========
</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, 2000 AND
THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(216,072) $ 35,841
--------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 152,489 139,516
Decrease in allowances for losses on accounts
receivable - (16,654)
Issuance of stock for current services 26,000 -
Changes in operating assets and liabilities, net of
assets and liabilities acquired and sold:
Decrease in customer claims and premium funds - 33,148
Decrease (increase) in accounts receivable 18,823 (114,887)
Increase in notes receivables -- related parties - (6,833)
Decrease (increase) in other current assets 26,491 (15,352)
(Increase) decrease in deposits (3,590) 70,137
Decrease in accounts payable & accrued expenses (188,348) (159,740)
Decrease in sales & payroll taxes (75,969) (12,776)
(Decrease) increase in deferred revenues &
customer deposits (11,994) 76,325
Decrease in other current liabilities 270 (101,060)
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Total adjustments (55,828) (108,176)
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Net cash provided (used) by operating activities (271,900) (72,335)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (13,480) -
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Net cash used by investing activities (13,480) -
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 70,000 50,000
Proceeds (payments) on capital leases - (6,244)
Net increase in Due to HealthWatch, Inc. 396,186
Net (payments)/proceeds from notes payable (23,196) (15,979)
Net proceeds form notes payable -- related parties - 77,741
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Net cash provided by financing activities 442,990 105,518
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Increase (decrease) in cash 157,610 33,183
Cash - beginning of period 13,503 52,483
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Cash - end of period $ 171,113 $ 85,666
========= =========
</TABLE>
(The accompanying notes are an integral part of these statements.)
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HALIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
PRINCIPLES OF PRESENTATION
The accompanying unaudited 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, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements and the notes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1999.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Halis, Inc. and
its wholly owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Revenue consists primarily of third party claims processing fees, consulting
services, software licensing fees, sales of related computer hardware, and post
contract customer support and maintenance. Revenues are recognized as follows:
<TABLE>
<CAPTION>
Claims processing, consulting services, When the services are provided.
installation, training and education
<S> <C>
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.
</TABLE>
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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 five 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 the recorded asset. An impairment is
recognized by reducing the carrying value of the goodwill based on the expected
discounted cash flows of the business unit.
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, 1998 and 1999, and such losses are continuing in fiscal
year 2000. Additionally, the Company has used, rather than provided, cash in its
operating activities during the years ended December 31, 1998 and 1999, and this
was also the case for the quarter ended March 31, 2000. The Company had working
capital deficiencies of $2,115,798 and $2,004,200 as of December 31, 1999 and
March 31, 2000, respectively. The Company's negative cash flow from operating
activities was $173,467 and $271,900 for year ended December 31, 1999 and the
three months ended March 31, 2000, respectively. 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.
In view of the matters described in the preceding paragraph, there is
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'S OPERATING PLANS
Halis, Inc. ("Halis" or the "Company"), headquartered in Atlanta, Georgia, is a
systems developer of information technology and a provider of related services,
focusing on the healthcare industry. The Company also provides third party
administrative services for healthcare plans of large and small companies
throughout the United States. Halis' offices are located in Atlanta, Georgia
and Chicago, Illinois.
In 1996, the Company focused its attention on developing a new healthcare
software system that
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it believed would revolutionize the way that a healthcare organization operates.
Historically, a healthcare organization's system needs have been met with old
legacy systems that are not integrated across all of the functions that a
healthcare organization may utilize through its encounter with a patient or
other users of their services. As a result, the Company developed the Halis
Healthcare Enterprise System (the "HES System"), a comprehensive advanced
integrated system capable of being applied to all the main participants in the
healthcare process, including: providers, payors, office-based physician
practices, management practice companies, hospitals, laboratories, pharmacies,
home healthcare providers and long-term care facilities. The HES System is
integrated by design (not "interfaced") and is contained in one program and
distributed database that performs over 270 functions in 20 different
applications.
The technical innovation that enables the HES to be powerful, yet simple to
install and maintain, is the virtual software and information media processing
utility known as "MERAD," that the Company licenses from its affiliate,
HealthWatch, Inc.("HealthWatch"). MERAD enables the HES System to store
programming code in a database, thereby removing the repetitive processing
required in conventional programming. The HES System integrates all of the major
functions needed by clinics, hospitals, physician practices, payors, long-term
care facilities, laboratories, pharmacies and home healthcare providers, the
eight major markets in which Halis plans to compete. Halis is currently building
out the specific features required by each of these eight markets. Presently,
the Company is marketing the HES System to clinics and physician and
management practices.
The Company's systems and services business is targeted to healthcare industry
participants, such as physician practices, HMO's, home healthcare providers and
hospitals that generally have 100 users or more. The Company expects to
capitalize on the healthcare industry's demand for more software variety,
frequent updates, convenience, lower pricing and better support services.
The Company's third party administrator subsidiary, American Benefit
Administrative Services, Inc. ("ABAS"), provides claims processing and other
administrative services to major companies throughout the United States.
During fiscal year 1998, Halis' relationship with HealthWatch expanded with
HealthWatch owning approximately 20% of Halis' outstanding common stock .
HealthWatch owns the MERAD technology which is licensed to the Company under a
Business Collaboration Agreement. Under that Agreement, the Company is obligated
to pay HealthWatch a royalty equal to 10% of the gross revenues generated by the
Company from sales of the products and services that incorporate HealthWatch's
information technology software. During the first quarter of fiscal year 1999,
the Company's Board of Directors decided that in order to conserve its resources
and to operate more efficiently, the Company would focus its attention on the
sales of the HES System and its claims processing capabilities, and would rely
upon HealthWatch to supply support and services to Halis' customers. In
addition, Halis and HealthWatch are currently sharing office space and
administrative resources under a cost sharing arrangement for the corporate
offices of both companies. The Company's Chicago facility is the location for
its ABAS subsidiary, which performs healthcare claims processing and other
healthcare related services for employers.
Management plans to take the following steps to improve its operating results
and financial
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position, which it believes to be sufficient to provide the Company with the
ability to continue in existence during the ensuing twelve month period.
1. The Company continues to focus on the sale of the HES System, which
management believes will continue to gain market acceptance.
2. 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. As such, on March 8, 2000, the Company executed
a letter of intent that provides that Halis would merge with and into a
wholly-owned subsidiary of HealthWatch. (See "The HealthWatch Merger"
below).
3. The Company plans to continue to develop its s third party administrator
subsidiary, ABAS, which provides claims processing and other administrative
services to major companies throughout the United States. ABAS is currently
operating profitably and management believes that the business contacts
generated in this business may provide cross marketing opportunities for
its HES System.
While the Company believes the plan that it is undertaking will be successful
and is in the best 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.
The HealthWatch Merger
On March 8, 2000, Halis executed a letter of intent with HealthWatch, Inc.,
Nasdaq SmallCap Market: "HEAL" ( "HealthWatch"), to merge with and into a
wholly-owned subsidiary of HealthWatch. As of March 31, 2000, HealthWatch was
Halis' single largest shareholder, owning approximately 20% of the outstanding
common stock of Halis. Halis and HealthWatch currently operate under a Business
Collaboration Agreement for the HES System and MERAD technologies and a cost
sharing arrangement for corporate office space and administrative resources.
Under the terms of the letter of intent, Halis would merge with and into a new
wholly-owned subsidiary of HealthWatch. As a result of the merger, Halis
shareholders would receive $0.33 for each share of Halis common stock. The
$0.33 per share purchase price will be paid in shares of HealthWatch common
stock. The actual number of shares to be issued will be based upon the average
closing price of HealthWatch's common stock for the 10 trading days immediately
preceding the closing date of the proposed merger.
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The letter of intent also contains a binding provision providing HealthWatch an
unconditional right to purchase, prior to the closing of the merger, up to
$1,000,000 of Halis' common stock at $.20 per share, and upon consummation of
such financing, HealthWatch shall have a three month option to purchase an
additional $5,000,000 of Halis' common stock at a price of $.20 per share.
In April 2000, HealthWatch exercised its option to purchase 5,000,000 shares of
Halis' common stock for a total investment of $1,000,000. As a result,
HealthWatch now has an option to purchase an additional 25,000,000 shares of
common stock for a total purchase price of $5,000,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FINANCIAL CONDITION
Total assets as of March 31, 2000 were $1,795,185, an increase of $8,999 from
total assets of $1,786,186 at December 31, 1999. The increase is primarily
attributable to a $157,610 increase in cash (which was received from
HealthWatch) and an increase in the market value of the Company's investment in
HealthWatch of $30,205, partially offset by depreciation and amortization of
$152,489 and a decrease in receivables of $18,822.
Current liabilities decreased by $2,615 from $2,460,847 at December 31, 1999 to
$2,463,462 at March 31, 2000. The decrease is primarily attributable to
reducing accounts payable and accrued expenses, and accrued payroll and payroll
taxes by $344,319, and decreases in notes payable-bank and notes payable-related
party of $23,196 and $15,000, respectively. These decreases were offset by an
increase in Due to HealthWatch, Inc. of $396,456.
Stockholder's equity increased from $(883,221) at December 31, 1999 to
$(878,086) at March 31, 2000, an increase of $5,135. This increase is
attributable to the sale of 1,000,000 shares of common stock of the Company for
$70,000 in a private placement, the issuance of 400,000 common shares for
current services valued at $26,000, and the issuance of 1,187,500 shares to Paul
W. Harrison, Halis' Chairman and CEO, in payment of $80,000 of accrued salaries
and a $15,000 loan. The increases are offset by a an increase in the market
value of the Company's investment in HealthWatch, Inc. of $30,205 and a net loss
for the period of $216,072.
RESULTS OF OPERATIONS
Sales revenue decreased by $534,596 for the three-month period ended March 31,
2000 as compared to the same period for the prior year. The decrease is
primarily the result of significantly decreased consulting fees and HES System
revenues. Due to cash resource limitations, the Company made the decision in
late 1999 to no longer aggressively pursue its consulting business. The
decrease is partially offset by increased revenues at the Company's ABAS
subsidiary.
Cost of goods sold decreased $357,356 for the three-month period ended March 31,
2000 as compared to the same period for the prior year. This decrease is
directly attributable to the
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reduction of consulting revenues.
Selling, general and administrative expenses increased by $107,706 to $1,067,058
for the three-month period ended March 31, 2000. The increase is primarily the
result of increased consulting and professional fees associated with the
Company's change in business focus and increased overhead resulting from growth
at the Company's ABAS subsidiary.
Research and development costs decreased by $23,325 for the three-month
period ended March 31, 2000 as compared to the same period for the prior year.
These reductions are primarily the result of the shift of certain research and
development personnel to work as part of the Merad Software services group for
HealthWatch, Inc. effective March 1, 1999.
The Company incurred a net loss of $216,072 for the three months ended March 31,
2000 as compared to a net income of $35,841 for the three months ended March 31,
1999, which is a decrease of $251,913. The decrease is attributable to a
significant decrease in HES System and consulting revenues combined with an
increase the selling, general and administrative expenses resulting from
increase consulting and professional fees in connection with the Company's
change in business focus.
LIQUIDITY AND CAPITAL RESOURCES
During the three month period ended March 31, 2000, operating activities
consumed $271,900 of cash as compared to $72,335 for the same period for the
prior year. The primary reasons for the decrease is the Company's aggressive
approach to settling liabilities with past due vendors. The Company was able to
do this through the use of cash provided by HealthWatch. The Company paid down
its accounts payable and accrued expenses by $344,319, of which $264,319 was
paid in cash and $80,000 was converted to common stock of the Company.
The Company continues to monitor its cash situation very closely. Due to the
down-sizing of the Company, its cash needs are not as acute as they were during
1998 and 1999. However, if the Company is unable to increase sales of its HES
System or consummate the merger with HealthWatch, the Company may not be able to
continue to generate sufficient positive cash flow to meet its obligations
without seeking additional capital. Halis' immediate cash needs have been
partially provided for due to HealthWatch executing its financing option, which
provided $1 million cash in exchange for 5,000,000 shares of Halis' common
stock. See "The HealthWatch Merger" above.
FORWARD-LOOKING STATEMENTS
This Form 10-QSB 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
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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 the three month period ended March 31, 2000, the Company issued a total
of 2,587,500 shares of common stock. The Company executed the following equity
transactions; 1,000,000 shares of common stock were sold for $70,000 in a
private placement, the issuance of 400,000 common shares for current services
valued at $26,000, and the issuance of 1,187,500 shares to Paul W. Harrison,
Halis' Chairman and CEO, in payment of $80,000 of accrued salaries and a
$15,000 loan. The Company issued the securities without registration under the
Securities Act of 1933, as amended, in reliance upon an exemption from the
registration requirements of such Act contained in Section 4(2) thereof. All of
the foregoing securities were acquired for investment purposes.
ITEM 3. LEGAL PROCEEDINGS.
(A) Penelope Sellers v. Halis, Inc., Larry Fisher and Paul W. Harrison
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Fulton State Court
Civil Action File No. 97VS1294SD
On July 18, 1997, the Company was sued by Penelope Sellers, in an action seeking
actual damages against the Company in the amount of $480,534.70, unspecified
attorneys fees, and punitive damages of not less than $1,000,000. Ms. Sellers
contends that a finder's Fee Agreement into which she entered with the Company
in August 1995, and under which she was to receive a commission equal to 10% of
the amount of any equity investments in the Company or software licensing fees
paid to the Company, in respect of transactions introduced to the Company by
her, entitles her to an amount in excess of the approximately $19,350 which she
has been paid to date under that agreement. That amount represents 10% of the
investment made by the principals of AUBIS, LLC ("AUBIS") in a private placement
of convertible notes (in which private placement other investors besides the
AUBIS principals participated) and 10% of the amounts received by the Company
from the sale of Fisher Restaurant Management Systems by AUBIS.
Ms. Sellers claims that the entirety of the convertible notes offering described
above (in which an
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aggregate of $1,470,000 was raised by the Company) would not have been
successful but for her introduction of the AUBIS principals to the Company. As a
result, Ms. Sellers has made a claim for 10% of all amounts raised in the notes
offering. Ms. Sellers has also made a claim, based on the same rationale, to 10%
of all capital funding raised by the Company (up to the $500,000 maximum
compensation), including the proceeds of a private placement which raised gross
proceeds of approximately $2.0 million. Finally, Ms. Sellers has made a claim
for 10% of the value of AUBIS and Halis Systems, Inc.
Discovery has been completed. Defendants filed a motion for partial summary
judgment, which was granted, the effect of which is to eliminate Larry Fisher
and Paul W. Harrison on claims asserted against them for tortious interference
and contractual relations. The Company continues to vigorously defend this
lawsuit.
There can be no assurance, however, that the Company will be successful in its
defense of the plaintiff's complaint, or that the final resolution of this
matter will not have a material adverse effect on the financial condition or
results of operation of the Company.
(B) Advanced Custom Computer Solutions, Inc., Wayne W. Surman and Charlotte
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Surman v. Fisher Business Systems, Inc., Halis, Inc., Larry Fisher, Paul W.
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Harrison and Nathan I. Lipson
-----------------------------
Fulton State Court
Civil Action File No. 97VS0123082.
In February 1997, Advanced Custom Computer Solutions, Inc. ("ACCS"), Wayne W.
Surman and Charlotte Surman sued the Company alleging, among other things,
breach of contract in connection with the termination by the Company of a merger
agreement with ACCS, which the Company advised ACCS was terminated in November
1996 due to the impossibility of ACCS's fulfilling certain conditions to closing
therein. In addition, the complaint alleges that the defendants made false and
misleading statements to the plaintiffs for the purpose of inducing plaintiffs
to lend money to the Company, and that the Company, or individuals related to
it, tortuously interfered with the business relationships of ACCS, and
fraudulently induced ACCS management to permit Company management to take over
and "systematically destroy" the ongoing business of ACCS. The Surman's are the
principals of ACCS and claim personal damages against the Company on certain of
the claims, and claim a right to at least 150,000 shares of the Company's common
stock, the exact amount to be determined at trial, based on a claim of a breach
of an alleged oral contract to pay them shares of Halis stock as compensation
for soliciting investors (the "Oral Contract Claim"). The Surman's further claim
that the Company fraudulently induced them to solicit investors for the Company
(the "Investor Solicitation Claim"). The complaint sought damages in the amount
of at least $2.0 million (the exact amount of such damages to be proved at
trial), additional damages to be determined by the jury at trial and punitive
damages. The Company answered, denying the allegations of liability in the
complaint, and the Company vigorously defended the lawsuit. On November 19,
1998, the trial court granted summary judgment in favor of the Company on all
but two counts of the plaintiff's complaint, as amended. The two counts
remaining include the Oral Contract Claim and Investor Solicitation Claim. The
plaintiffs have appealed to the Georgia Court of Appeals from the order granting
partial summary judgment to the Company on all other claims, and the Company has
cross-appealed the portions of the order denying summary judgment on the two
surviving counts. The Georgia Court of Appeals has affirmed the trial court's
granting of
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summary judgment in favor of the Company on seven of the nine count
in the Complaint, and affirming the denial of the company's cross appeal denying
summary judgment on the two surviving counts.
There can be no assurance, however, that the Company will be successful in its
defense of the plaintiff's petition for certiorari, or that the final resolution
of this matter will not have a material adverse effect on the financial
condition or results of operation of the Company.
(C) Carrera-Maximus, Inc. (previously known as Carrera Consulting Group, v.
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Halis, Inc., and Does 1 to 30, inclusive,
----------------------------------------
Superior Court of the State of California, County of Sacramento
Case No. 00-AS-01605
Company was served with this complaint on April 1, 2000. The complaint asserts
counts for the following:
Breach of contract seeking return of professional service fees it paid of
$425,638; product support fees in the amount of $55,601; license fees in the
amount of $56,750.
The Company intends to vigorously defend this case. The Company has filed an
answer asserting various defenses and denying liability, and has asserted a
counterclaim.
There can be no assurance, however, that the Company will be successful in its
defense of the plaintiff's complaint, or that the final resolution of this
matter will not have a material adverse effect on the financial condition or
results of operation of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(D) EXHIBITS.
The following exhibits are filed with or incorporated by reference into this
report.
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
(No. 333-45783) filed February 6, 1998 of the Company's Registration
Statement on Form S-2 (No. 333-34215) filed August 29, 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")).
4.2 Form of 4% Convertible Debenture (incorporated by reference to Exhibit
4.1 of the Company's Current Report on Form 8-K dated January 13,
1998).
-14-
<PAGE>
10.1 Employment Agreement dated November 18, 1996, as amended on January
3, 1997, by and between the Registrant Halis and Paul W. Harrison
(incorporated by reference to Exhibit 10.1 of the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996).
10.4 Warrant Agreement, dated November 19, 1996, by and between the
Registrant and SunTrust Bank, Atlanta (incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1996).
27.1 Financial Data Schedule (for SEC use only).
99.2 Letter of Intent dated March 8, 2000 by and between Registrant and
HealthWatch, Inc. (incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999).
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter ended March 31,
2000:
None.
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed by the undersigned, thereunto duly authorized.
Date: May 15, 2000 Halis, Inc.
By: /s/ Paul W. Harrison
----------------------------------------
Paul W. Harrison,
Chairman, President and Chief Executive Officer
(Principal Financial Officer)
-15-
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
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 (No.
333-45783) filed February 6, 1998 of the Company's Registration Statement
on Form S-2 (No. 333-34215) filed August 29, 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")).
4.2 Form of 4% Convertible Debenture (incorporated by reference to Exhibit 4.1
of the Company's Current Report on Form 8-K dated January 13, 1998).
10.1 Employment Agreement dated November 18, 1996, as amended on January 3,
1997, by and between the Registrant Halis and Paul W. Harrison
(incorporated by reference to Exhibit 10.1 of the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996).
10.4 Warrant Agreement, dated November 19, 1996, by and between the
Registrant and SunTrust Bank, Atlanta (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1996).
27.1 Financial Data Schedule (for SEC use only).
99.2 Letter of Intent dated March 8, 2000 by and between Registrant and
HealthWatch, Inc. (incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999).
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Halis, Inc. for the three months ended March 31, 2000
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000790733
<NAME> HALIS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 171,113
<SECURITIES> 0
<RECEIVABLES> 468,366
<ALLOWANCES> 229,800
<INVENTORY> 0
<CURRENT-ASSETS> 459,263
<PP&E> 567,567
<DEPRECIATION> 215,257
<TOTAL-ASSETS> 1,795,185
<CURRENT-LIABILITIES> 2,463,463
<BONDS> 0
0
0
<COMMON> 560,788
<OTHER-SE> (1,438,847)
<TOTAL-LIABILITY-AND-EQUITY> 1,795,185
<SALES> 1,582,836
<TOTAL-REVENUES> 1,582,836
<CGS> 9,870
<TOTAL-COSTS> 1,275,795
<OTHER-EXPENSES> (11,483)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,517
<INCOME-PRETAX> (216,072)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (216,072)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
