<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                Annual Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 1996


                         Commission File Number 0-16288


                                   HALIS, INC.
             (Exact name of Registrant as specified in its charter)


                 Georgia                                    58-1366235
    (State or other jurisdiction of                        (IRS Employer
     incorporation or organization)                      Identification No.)


                          9040 Roswell Road, Suite 470
                             Atlanta, Georgia 30350
                                 (770) 641-5555
                    (Address of principal executive offices,
         including zip code, and telephone number, including area code)


Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Common Stock, $.01
par value

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
                                              ---       ---

         Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

         Revenues for the fiscal year ended December 31, 1996: $1,925,412

         The aggregate market value of the Common Stock of the Registrant held
by nonaffiliates of the Registrant (approximately 12,208,221 shares) on April 7,
1997 was approximately $22,463,000. The aggregate market value was computed by
reference to the average of the bid and asked prices of the Common Stock the
Nasdaq Bulletin Board on April 7, 1997. For the purposes of this response,
officers, directors and holders of 5% or more of the Registrant's Common Stock
are considered to be affiliates of the Registrant at that date.

         The number of shares outstanding of the Registrant's Common Stock as of
April 7, 1997 was 29,943,021 shares.



                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

Transitional Small Business Disclosure Format (check one):

         Yes            No  X
             ---           ---
<PAGE>   2
                                     PART I

ITEM 1. BUSINESS

GENERAL

         HALIS, Inc. ("HALIS" or the "Company"), based in Atlanta, Georgia, is a
publicly traded company and supplier of information technology and services,
focusing on the healthcare industry. HALIS currently is implementing a corporate
strategy which combines external acquisitions and internal sales growth,
including the development of business partner relationships.

         HALIS has offices in Atlanta and Chicago and intends to expand its
geographic presence to Florida, Texas, California and the Northeast. The Atlanta
operation includes sales, service, and consulting functions, and currently
serves as the HALIS national Customer Service Center. The Chicago facility
performs healthcare technology-driven services and may serve as the Company's
outsourcing center for customers who wish to take advantage of the HALIS
technology, but do not wish to operate their own internal systems.

         Utilizing advanced healthcare models and information technology not
previously available to the marketplace, HALIS has developed a single program
for the healthcare industry. This Healthcare Enterprise System integrates all of
the major functions needed by the eight major markets into which HALIS competes.
Subsets of or all of the Healthcare Enterprise System can be used by each of
these markets and can be combined to provide a complete solution for Integrated
Healthcare Delivery Networks. These Networks are being formed by hospitals,
clinics, payers, practice management companies, individual practices, and other
entities which are involved in the delivery and management of healthcare
services.

         The Company's systems business will be targeted to healthcare industry
participants such as physician practices, HMO's, home healthcare providers and
hospitals. The Company expects to capitalize on the healthcare industry's demand
for more software variety, updates, convenience, lower pricing, and better
support services. In addition, the Company will provide information management
systems to management companies to help manage their point-of-care systems
information. For example, in the healthcare industry, the Company will provide
an information management system to managed care organizations that will aid in
managing the networks of medical practices.

COMPANY BACKGROUND

         The Company was organized in 1979 by Larry Fisher to provide vertical
software applications for potential business users of IBM minicomputers. The
initial applications provided by the Company consisted principally of business
management software directed at a variety of different businesses, including
pharmacies, supermarkets and general retail, as well as restaurants. Spurred by
the introduction of the IBM Personal Computer, or "PC," the Company developed
its own proprietary PC-based business applications software in 1984. At the same
time, the Company's previously diffuse marketing approach was restructured to
focus on its most successful market niche - the restaurant industry.

         Due to a downturn in its business in 1994, the Company was unable to
commit sufficient resources to continue research and development of its products
to keep pace in the hospitality market place. As a result, the market was not
receptive to its products because the Company's competitors were


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able to provide enhancements that were being demanded by hospitality customers.
In 1995, the Company's Board of Directors concluded that the Company needed a
significant shift in its strategic plan to continue in operation. As a
consequence, the Company developed a strategy to grow its business through the
acquisition of select software companies in the hospitality and healthcare
markets. See "--Company Strategy." Pursuant to this strategy, the Company merged
with AUBIS Hospitality Systems, Inc. ("AHS"), AUBIS Systems Integration, Inc.
("ASI") and HALIS Software, Inc. ("HSI") in November 1996. The Company made
three additional acquisitions in January 1997. See "--Recent Acquisitions."

INDUSTRY BACKGROUND

         The healthcare industry is undergoing change at an unprecedented rate.
As a user of healthcare services, most of its people have direct experience with
some of these changes. Hospitals are buying physician practices; individual
practices are combining their efforts and forming independent practice
Associations; Physician Practice Management companies are either buying or
managing groups of practices and clinics; and insurance companies are entering
many of these markets.

         The implications of these changes are numerous, but one of the key
factors in the success of each of these organizations is the availability of
information throughout the organization, beginning at the point of service. It
is estimated that as many as 90 manual steps are required to service a patient
and process a claim generated by an office visit. The process is fraught with
error; the physician often does not know all of the patient's history, and if
and how much he or she will be paid for the performance of a given service due
to the complexities in the benefit plans and management contracts under which
the practice operates.

         As a result of the new healthcare environment, management expects
significant increases in spending on healthcare technology and related services
over the next several years. Historically, the industry has spent approximately
two to three percent of its revenues on information technology and services,
compared to six to ten percent of revenues for companies in other industries,
according to published research reports. Management believes that, over the next
several years, spending on healthcare technology and related services will
approach the levels experienced by other industries. This trend, combined with
the overall growth of the health care industry, is expected by management to
yield significant opportunities for companies who deliver information technology
products and services to the healthcare market.

         Healthcare delivery costs have increased dramatically in recent years.
The growing influence of managed care has resulted in increasing pressure on
participants in the healthcare system to contain costs. Accordingly, healthcare
systems are migrating toward more managed care reimbursement, including
discounted fee for service and capitation. Under capitation, providers are paid
a predetermined fee per individual to provide all healthcare services, thereby
assuming the potential financial risks of escalating healthcare costs.

         To deliver care in a more cost-effective manner, providers are forming
integrated health delivery networks that may include acute-care hospitals,
physicians' offices, outpatient clinics, homecare and long-term care facilities.
The success of these comprehensive delivery networks is dependent on, among
other things, effectively managing and delivering information to caregivers and
managers across multiple points of care.


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         Traditionally, the hospital information systems market has been the
largest segment of healthcare information services. According to industry
analysts, in 1995 the healthcare industry spent approximately $10 billion for
products and services to support automated information systems, and the growth
rate is expected to continue to rise, reaching an expected $28 billion by the
year 2000.

         The current market of healthcare and related businesses in the United
States is estimated to be more than $1 trillion. International markets provide
even greater opportunity. The immediate domestic market potential for the
Company's software products and technology services is estimated to be a
universe of 3.4 million businesses representing more than $15 billion in annual
revenue.

         In addition to this expanding market opportunity, the demand for
healthcare information systems is also increasing as hospitals and other
providers come under increased pressure to quantify and control their costs. As
a result, many providers are spending more on systems which enable them to
access such information. According to the 1995 Annual HIMSS/HP Leadership
Survey, an industry survey conducted by Hewlett Packard at the Healthcare
Information and Management Systems Society conference, 75% of the respondents
stated that their information system investments will increase at a rate of 20%
or more over the next two years.

         Healthcare information systems are evolving to meet the needs of a
changing marketplace. Initially, these systems were financially oriented,
focusing on the ability to capture charges and generate patient bills. However,
as reimbursement has shifted more toward risk sharing and capitation, providers
and payers are seeking to better manage risk by controlling costs, demonstrating
quality, measuring outcomes and influencing utilization. Each of these goals
requires the collection, analysis and interpretation of clinical and financial
information related to the delivery of healthcare.

        Management believes that the availability of a complete, timely and
cost-effective patient focused information system is essential to controlling
costs while providing high quality patient care. Source of patient information
usually includes a number of different sites. Therefore, current and historical
paper records must be made available by computer to all points-of-care. All
participants in the delivery network need information systems that can capture
data at the point-of-care, communicate data across the continuum of care and
process and store large volumes of data necessary for the development of the
computer-based longitudinal patient record.

         Information technology in healthcare has historically had a "bottom up"
approach. Software applications such as billing, admissions, claims processing,
patient registration, medical records, contract management, and others were
developed individually using rigid programming techniques. Over time, many of
these systems were "interfaced" to each other in order to provide a more
complete solution. The piecing together of these disparate applications,
however, has caused significant problems in the development, implementation, and
enhancement of any or all of these systems. Each time a change is made to one
area of the system, many other different programs, normally written by different
groups of people, have to be changed to match each other. This process results
in long lead times and high cost of both acquisition and on-going utilization
and upgrading of the system.

         It is not uncommon for a hospital to have more than 10 different
application systems (up to 50 different systems in larger hospitals) installed
to perform the functions of admissions, billing, patient registration, insurance
processing, internal reporting, laboratory information, pharmacy records,
contract management, and eligibility, as well as up to 20 additional
applications. A typical software application can cost in excess of $200,000, and
the total expenditure for the hospital can be over $5.0 million for


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software alone. Annual software support can run as much as $600,000 or more, and
changes to the software programs create additional charges to the hospital.
Physician practices have the same situation on a smaller cost scale, and can
spend up to $10,000 or more for the initial software license fees, plus support
and customization.

         There are estimated to be approximately 120 million combinations of
computer instructions required to perform today's healthcare industry and
enterprise-wide applications. Using traditional "hard coding" of computer
instructions, this simply cannot practically be done. Therefore, most systems in
the market today have difficulty producing the total solution that the changing
healthcare environment demands. Traditional programming techniques do not offer
a quality, cost effective path to the future for today's customers.

THE HALIS HEALTHCARE ENTERPRISE SYSTEM

         HALIS has developed an advanced and modern healthcare information model
and a single program for the healthcare industry, the HALIS Healthcare
Enterprise System. Using superior healthcare information models and advanced
database techniques, HALIS offers a totally integrated, not interfaced, top down
approach to healthcare information systems. The HALIS Healthcare Enterprise
System can be used in its entirety for an Integrated Healthcare Delivery
Network, or subsets can be used for clinics, hospitals, practices, payers, long
term care facilities, laboratories, pharmacies, and home healthcare.

         In addition, HALIS' system is telemedicine-ready for remote
capabilities. HALIS has eliminated more than 90% of the programming effort and
duplicity that other systems have required by placing most of the program logic
into its multi-media object database. Instead of literally thousands of
"if/then" programming statements for each healthcare event, which require
significant personnel and computer time to execute, the HALIS system directly
locates the relevant mathematical and decision operations and relationships in
the database. In addition, the HALIS system is designed to allow the user to
update most items in the database directly, virtually eliminating the user's
dependence on the software supplier to make such changes. In addition, the
single HALIS system eliminates the need for redundant data found in all other
systems. It is estimated that more than half, and possibly up to 80% of the
information used by each individual software application is the same as required
by every other application in the system. The HALIS philosophy utilizes the
relational data-base concept to eliminate this redundancy and streamlines the
development, enhancement and operational process dramatically.

         The HALIS technology provides a new level of economies in the
production and maintenance of healthcare systems. HALIS systems are being sold
at over 50% less than competitive systems, with a huge corresponding reduction
in maintenance and support costs. HALIS' cost to continue to provide new
features and functions to its system will be substantially below today's market
costs, since there is only one system to modify, not up to 10 or more disparate
systems. HALIS will use state-of-the-art technology such as videoconferencing
and the Internet to deliver training and product support sales support and
customer service. Each of these techniques is designed to improve user
satisfaction while lowering cost.

         In 1997, HALIS will focus on four of the eight primary markets it
expects to penetrate: physician practices, including individual, group and
combinations; hospitals; clinics; and payers. The HALIS Practice Management
System is installed in the field, and is being sold today to practices, practice
management organizations, clinics and hospitals. The HALIS Payer System is
installed in a pilot site and is expected to be ready for general release before
the end of 1997. The HALIS Hospital and Clinic Systems are both currently being
sold as pilots and are expected to be ready for general release by the


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end of 1997. A pilot site is a customer who acknowledges that while the
particular HALIS system being offered is theoretically complete, it must be
field tested in an operational environment, where additional features may be
added to further enhance its usability.

         The HALIS Healthcare Enterprise System was developed by the Company
through the healthcare prototype licensed from Paul Harrison Enterprises, Inc.
("PHE"). In November 1996, the Company entered into a perpetual, non-exclusive
transferable license to utilize proprietary technology known as MERAD ("MERAD")
owned by PHE for a license fee of 10% of gross revenues generated from MERAD and
any derivatives thereof by the Company or any of its affiliates. In July 1995,
PHE acquired from Paul Harrison, the Chairman of the Board and Chief Executive
Officer of the Company, certain algorithms and concepts for the creation of an
advanced artificially intelligent software tool called "MERAD." MERAD is a tool
that is utilized to develop application software. Through the use of artificial
intelligence, MERAD can substantially decrease the development time necessary to
create and debug application software. The Company uses MERAD to develop its
medical practice software.

         HALIS MEDICAL PRACTICE SYSTEM

         The HALIS Medical Practice System is multimedia-ready and open database
compliant (ODBC-SQL Relational), which enables users to add day-to-day changes
in patient data, billing criteria, and quality management in one system. The
principal benefits of the medical practice system include (i) centralization of
patient data, (ii) coverage verification, and (iii) increased collections and
lower billing costs. Applications provided include registration, medical
records, patient encounters, billing, managed care, reports and system support.

         HEALTHCARE ENTERPRISE SYSTEM

         The Company's Healthcare Enterprise System ("HES") uses a fifth
generation database system that manages data through its integrated
multimedia-object and SQL-relational databases. The HES technology platform
consists of five major integrated parts: the graphical end-user interface; the
program object processor; the multimedia object database; the SQL relational and
open database driver; and the communications network manager.

         HES provides a direct connection between the consumer or end-user and
the ready-to-use database driven system. Program data and instruction can be
added in an automated manner without traditional programming knowledge.
Currently, competing software technology and the healthcare industry requires
technical expertise to connect data and processing instructions to a running
program.

         HES's ability to respond to conditions and changes makes it appealing
to healthcare industry participants. HES can handle over 100 million conditions
on a single computer workstation by processing database instructions through
reusable formulas. Programmer coded instructions or computer generated coded
instructions often exceed the computer workstation capacity. Therefore, in
industries such as healthcare, many of the conditions and processing needs are
not included in the currently available commercial systems, and most of the
processing is inaccurate and must be handled manually. Alternatively, HES can
handle all the processing conditions and needs of healthcare and other database
information intensive industries.


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COMPANY STRATEGY

         The Company has focused on the point-of-service system business in the
healthcare industry (physician practices, MSO's and other managed care
organizations) and is expanding to larger markets such as hospitals. Management
believes that the Company is well positioned to produce new software products
for special segments of the healthcare market using HES and its industry
knowledge obtained from HSI personnel. Management believes that the cost to
produce and support all of the Company's products will be less than other
companies in the marketplace due to the flexibility of the Company's technology
and the fact that the Company has no "legacy" systems to maintain, enhance, or
otherwise invest in. Management believes that the flexibility of the Company's
healthcare software will allow the Company to keep up with the user's demands
for updates to health plan changes, management contract revisions, availability
of new pharmaceutical products, and changes in managed care-driven plans and
practices.

         The Company's strategy is to use its software technology to produce
lower cost applications software without compromising margins, to provide full
service to augment its software products, and to build superior distribution
channels, consolidating healthcare information systems distribution and service
companies into the Company as independent business units, and through supplying
distribution companies with the Company's superior healthcare software products.
The Company will manage its operations through its corporate headquarters in
Atlanta, Georgia and strategically located regional offices that can be managed
as profit and loss centers and that can focus on sales and service in different
geographical areas.

         The Company's strategic plan is a significant shift in the Company's
past business direction. As a result of the acquisitions of AHS, ASI and HSI in
November 1996 (see "--Recent Acquisitions"), the Company anticipates positioning
itself to capture a portion of the healthcare information systems network and
integration markets. There can be no assurance, however, that the Company will
be successful in this endeavor or that it will be able to achieve or sustain
profitability in the future.

         The Company offers current and prospective customers a complete
solution to their healthcare information needs. The Company will be able to
deliver integrated software to virtually every healthcare market segment
including medical practices, home health agencies, hospitals, clinics, long-term
care, labs, pharmacies and payers.

         The Company will be able to offer a wide array of healthcare software
through its advanced database technology. The advanced database technology of
HES will enable the Company to market new software by adding a new
market-specific healthcare database to the reusable advanced database
technology. Most companies have had to build or buy each system separately for
each market segment, which has created a mass of fragmented systems for the
healthcare industry.

         The Company will address the healthcare systems industry's needs by
automating the production and maintenance of software for all healthcare market
segments through its own version of an automated factory based on the advanced
database technology. Several competitors have attempted to create one technology
to build software for multiple healthcare segments but have had limited success.
The Company believes that the advanced database technology will be instrumental
in automating and integrating the healthcare industry's information cycle.


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         In addition to providing a set of integrated software products, the
Company will deliver a complete solution to healthcare organizations through its
ability to implement customized computer hardware, networks, and other
complimentary services through its systems integration and outsourcing groups.

         The Company believes that it will have an advantage over its
competitors because its products' "engines" -- the integrated health software
products and its information technology core -- are expected to be effective in
keeping pace with the ongoing changes in healthcare. Many competitors currently
have fragmented, inflexible healthcare software. The Company believes that a
systems integration project can succeed only if the core software foundation
meets the needs of the healthcare customer and the ongoing market changes. The
Company believes that the advanced database technology addresses the information
needs of healthcare companies.

         In addition to providing an improved healthcare systems solution, the
Company plans to use an aggressive acquisition strategy. The Company generally 
focuses on acquisitions that expand its distribution and service capabilities, 
and will be able to market internally generated software products based on one 
common advanced database technology. This strategy will assist the Company in
delivering integrated systems to the healthcare markets.

         HALIS will utilize business partners, in addition to its acquired
independent business units, to facilitate entry into certain markets and to
increase its geographic presence in key areas of the United States. Presently,
HALIS is pursuing a business relationship with a "big six" accounting firm,
which has conducted a preliminary review of the HALIS products and is currently
recommending HALIS to certain of its healthcare clients that are reviewing
software systems. In addition, through its acquisition of The Compass Group,
Inc., an Atlanta based consulting firm, HALIS is a Global Alliance Partner with
Geac (formerly Dun & Bradstreet Software). HALIS is currently pursuing the
expansion of its relationship with Geac at a corporate and regional level. The
Company has recently been selected as a Geac global alliance partner for
healthcare, and is working with Geac sales and marketing management to identify
Geac customers who are prospects for the Company's software and services. The
Company is also negotiating with other prospective HALIS business partners.

         HALIS acquisitions will typically be healthcare technology service
companies (as opposed to product producing companies). HALIS will convert the
"service only" oriented companies to technology-driven companies to increase
market share and value. These companies must project a positive cash flow 
within the first year following acquisition in order to be candidates for 
acquisition. HALIS intends to use its stock for these acquisitions and infuse
cash only when growing the companies. This model has been followed for the 
initial acquisitions. HALIS typically pays between one and two times annual
revenues for an acquisition, deducting from the purchase price any debt.

         The acquired companies will be operated as independent business units
("IBU"), with HALIS serving as the managing entity and providing its HALIS
software for sale by each IBU. Each IBU will continue to pursue its current
business interests, while integrating the HALIS products and services to augment
its revenue and profit stream. In addition, certain IBU's may be focused on a
specific market segment, which will provide leverage for HALIS' entry into that
segment in a more timely manner.

         HALIS will endeavor to keep its corporate overhead costs low, while
maintaining sufficient staff to implement the business plan and manage holding
company activities such as research and development and customer services. It is
currently planned that each IBU will contribute a very small percentage of


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its revenues to HALIS in exchange for the HALIS management services, and HALIS
will have its own corporate sales force to supplement IBU's and business
partners, which will focus on the larger sales and business development
transactions. During 1997, HALIS intends to implement several pilot sites for
its Hospital, Clinic, and Payer systems, while selling its Practice Management
System product to individual and group practices, practice management companies,
hospital, clinics, and other entities which own or manage practices. Each IBU
will receive training on the HALIS products and services and begin to integrate
them into its own operations.

         While the Company believes the strategic plan that it is undertaking
will be successful and in the best interest of the Company, no assurances can be
given that the Company indeed will be successful and that shareholder value will
be enhanced. Risk factors include, among others, (i) timely completion of
modifications and enhancements of the Company's healthcare products, (ii)
continued working capital availability while such products are being developed,
(iii) continued availability of Messrs. Fisher and Harrison (each is subject to
a three year employment agreement), (iv) acceptance of the Company's products by
customers in the healthcare market, and (v) availability of capital for working
capital and acquisitions over the next 12 to 24 months.

RECENT ACQUISITIONS

         In November 1996, the Company merged AUBIS Hospitality Systems, Inc.
("AHS") and AUBIS Systems Integration, Inc. ("ASI"), each a wholly-owned
subsidiary of AUBIS, L.L.C. ("AUBIS"), with and into two wholly-owned
subsidiaries of the Company. In connection therewith, AUBIS received 10,000,000 
shares of Common Stock of the Company. AHS and ASI are suppliers of network 
integration products and services to the healthcare and a variety of other 
industries.

         ASI has provided value added computer services, network solutions,
connectivity solutions and system integration, principally to Atlanta area
businesses, since 1985. Its trained technical staff has experience in computer
system integration, network configuration and network implementation. ASI has
certified network engineers on staff for LAN and WAN network services. ASI
sells, services and supports many major brands of computers, peripherals and
networks. ASI support services include onsite hardware maintenance as well as
network support programs. ASI offers a local area network design and
installation, wide area network design and installation, cable plant design,
installation and management, network management systems and network trouble
shooting, protocol debugging and performance analysis.

         In November 1996, the Company also acquired HALIS Software, Inc.
("HSI"), a wholly-owned subsidiary of HALIS, L.L.C. In connection therewith,
HALIS, L.L.C. received 5,000,000 shares of Common Stock of the Company. HSI is a
supplier of healthcare systems to managed healthcare markets and to medical
practices and related point of service markets. HSI represents an alternative
information system for today's dynamic healthcare environment. The HSI
application software provides a comprehensive system solution to two primary
groups, medical practices and managed care organizations

         In January 1997, the Company acquired The Compass Group, Inc., a
software consulting company ("Compass"). In connection therewith, Debra York,
the sole shareholder of Compass, was issued an aggregate of 350,000 shares of
the Company's Common Stock and Compass became a wholly-owned subsidiary of the
Company (the "Compass Subsidiary"). In addition, the Merger Agreement provides
for the issuance of additional shares of the Company's Common Stock at a future
date if certain financial targets are achieved for the year ending December 31,
1997.


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         In connection with the Compass merger, the Compass Subsidiary entered
into an employment agreement with Ms. York providing for the employment of Ms.
York as President of the Compass Subsidiary for a term of two years at an annual
base salary of $120,000. In addition, in connection with the consummation of the
Merger, the Company granted to Ms. York non-qualified options to purchase 85,000
shares of the Company's Common Stock at an option price of $2.00 per share. The
options granted to Ms. York are fully exercisable and expire January 10, 2007.

         In January 1997, the Company also acquired Software Manufacturing
Group, Inc., a developer and seller of practice management systems for
orthodontists ("SMG"). In connection therewith, the SMG shareholders were issued
an aggregate of 3,072,000 shares of Common Stock and SMG became a wholly-owned
subsidiary of the Company (the "SMG Subsidiary"). In addition, the Merger
Agreement provides for the issuance of additional shares of Common Stock at a
future date if certain financial targets are achieved for the year ending
December 31, 1997.

         In connection with the SMG merger, the SMG Subsidiary entered into an
employment agreement with Charles Cone, Jr. providing for the employment of Mr.
Cone as President of the SMG Subsidiary for a term of two years at an annual
base salary of $192,000 plus incentive compensation determined in accordance
with the provisions of his Employment Agreement.

         In January 1997, the Company also acquired American Benefit
Administrative Services, Inc. ("ABAS") and Third Party Administrators, Inc.
("TPA"), which provide third party administrative services for healthcare plans
of large and small companies throughout the United States. In connection
therewith, the ABAS and TPA shareholders were issued an aggregate of 1,875,000
shares of Common Stock and ABAS and TPA became a wholly-owned subsidiary of the
Company (the "ABAS/TPA Subsidiary").

         Upon consummation of the ABAS and TPA mergers, the ABAS/TPA Subsidiary
entered into an Employment Agreement with Philip E. Spicer providing for the
employment of Mr. Spicer as President and a director of the ABAS/TPA Subsidiary
for a term of three years following the consummation of the mergers (subject to
extension in accordance with the terms of the Employment Agreement). The
Employment Agreement provides for Mr. Spicer to receive an annual base salary of
$200,000 plus incentive compensation determined in accordance with the terms of
Mr. Spicer's Employment Agreement. In addition, Mr. Spicer will receive a
$100,000 signing bonus, payable in two installments with $50,000 due upon
execution of his Employment Agreement and the remainder due on or before July 1,
1997. In addition, the Company granted to Mr. Spicer non-qualified options to
purchase 1,250,000 shares of common stock at an option price of $2.00 per share.
The options granted to Mr. Spicer are fully exercisable and expire on the tenth
anniversary of the date of issuance. Mr. Spicer's Employment Agreement also
provides for certain payments to be made to Mr. Spicer in the event he is
terminated without cause or in the event of a change in control of the ABAS/TPA
Subsidiary.

         Upon consummation of the ABAS and TPA mergers, the ABAS/TPA Subsidiary
also entered into an Employment Agreement with Patricia M. Toledano providing
for the employment of Ms. Toledano as Vice President and a director of the
ABAS/TPA Subsidiary for a term of three years following the consummation of the
mergers (subject to extension in accordance with the terms of the Employment
Agreement). The Employment Agreement provides for Ms. Toledano to receive an
annual base salary of $77,000 plus incentive compensation determined in
accordance with the terms of Ms. Toledano's Employment Agreement. In addition,
the Company granted to Ms. Toledano non-qualified options to purchase 100,000
shares of common stock at an option price of $2.00 per share. The options


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<PAGE>   11
granted to Ms. Toledano are fully exercisable and expire on the tenth
anniversary of the date of issuance. Ms. Toledano's Employment Agreement also
provides for certain payments to be made to Ms. Toledano in the event she is
terminated without cause or in the event of a change in control of the ABAS/TPA
Subsidiary.

CUSTOMERS

         The Company's customers are expected to include numerous healthcare
industry participants located throughout the United States, including provider
groups and managed care organizations.

COMPETITION

         The Company believes that the principal competitive factors in the
healthcare information market are the breadth and quality of system and product
offerings, access to proprietary data, the proprietary nature of methodologies
and technical resources, price and the effectiveness of marketing and sales
efforts. In addition, the Company believes that the speed with which information
companies anticipate and respond to the evolving healthcare industry structure
and identify unmet information needs is an important competitive factor. The
Company believes that, with adequate capital, it will be able to compete
favorably with respect to each of these factors.

         The market for healthcare information products and services is
intensely competitive. Competitors vary in size and in the scope and breadth of
products and services offered, and the Company competes with different companies
in each of its target markets. Many of the Company's competitors, such as HBO &
Company, have significantly greater financial, technical, product development
and marketing resources than the Company.

         The Company's potential competitors include specialty healthcare
information companies, healthcare information system and software vendors and
large data processing and information companies. Many of these competitors have
substantial installed customer bases in the healthcare industry and the ability
to fund significant product development and acquisition efforts.

PROPRIETARY RIGHTS

         The Company's success and ability to compete is dependent in part upon
its proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of trade secret,
nondisclosure and copyright law, which may afford only limited protection. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. Although the Company relies on the limited
protection afforded by such intellectual property laws, it also believes that
factors such as the technological and creative skills of its personnel, new
product developments, frequent product enhancements, name recognition and
reliable maintenance are essential to establishing and maintaining a technology
leadership position. The source code for the Company's proprietary software is
protected both as a trade secret and as a copyrighted work. The Company
generally enters into confidentiality or license agreements with its employees,
consultants and customers and generally controls access to and distribution of
its software, documentation and other proprietary information. Although the
Company restricts the use by the customer of the Company's software and does not
permit the re-sale, sublicense or other transfer of such software, there can be
no assurance that unauthorized use of the Company's technology will not occur.


                                      -10-
<PAGE>   12
         Despite the measures taken by the Company to protect its proprietary
rights, unauthorized parties may attempt to reverse engineer or copy aspects of
the Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult. In addition, litigation may be necessary in the future to enforce the
Company's intellectual property rights, to protect the Company's trade secrets,
to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, operating results and financial
condition.

         Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. These licenses
usually require the Company to pay royalties and fulfill confidentiality
obligations. The termination of any such licenses, or the failure of the
third-party licensors to adequately maintain or update their products, could
result in delay in the Company's ability to ship certain products while it seeks
to implement technology offered by alternative sources. Any required replacement
licenses could prove costly. Also, any such delay, to the extent it becomes
extended or occurs at or near the end of a fiscal quarter, could result in a
material adverse effect on the Company's results of operations. While it may be
necessary or desirable in the future to obtain other licenses relating to one or
more of the Company's products or relating to current or future technologies,
there can be no assurance that the Company will be able to do so on commercially
reasonable terms or at all.

         In the future, the Company may receive notices claiming that it is
infringing on the proprietary rights of third parties, and there can be no
assurance that the Company will not become the subject of infringement claims or
legal proceedings by third parties with respect to current or future products.
In addition, the Company may initiate claims or litigation against third parties
for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Any such claim could be time
consuming, result in costly litigation, cause product shipment delays or force
the Company to enter into royalty or license agreements rather than dispute the
merits of such claims. Moreover, an adverse outcome in litigation or similar
adversarial proceedings could subject the Company to significant liabilities to
third parties, require the expenditure of significant resources to develop
non-infringing technology, require disputed rights to be licensed from others or
require the Company to cease the marketing or use of certain products, any of
which could have a material adverse effect on the Company's business, operating
results and financial condition. To the extent the Company desires or is
required to obtain licenses to patents or proprietary rights of others, there
can be no assurance that any such licenses will be made available on terms
acceptable to the Company, if at all. As the number of software products in the
industry increases and the functionality of these products further overlaps, the
Company believes that software developers may become increasingly subject to
infringement claims. Any such claims against the Company, with or without merit,
as well as claims initiated by the Company against third parties, can be time
consuming and expensive to defend, prosecute or resolve.

EMPLOYEES

         As of April 1, 1997, the Company had approximately 82 full-time
employees, including two in senior management. The Company also utilizes
contract personnel for support services, installations of Company systems and
programming. None of the Company's employees is subject to a collective
bargaining agreement, and the Company considers its employee relations to be
good.

         The Company's future operating results depend in significant part upon
the continued service of its key technical, consulting and senior management
personnel and its continuing ability to attract and


                                      -11-
<PAGE>   13
retain highly qualified technical and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will retain
its key managerial or technical personnel or attract such personnel in the
future. The Company has at times experienced difficulty recruiting qualified
personnel, and there can be no assurance that the Company will not experience
such difficulties in the future. The Company actively recruits qualified product
development, consulting and sales and marketing personnel. If the Company is
unable to hire and retain qualified personnel in the future, such inability
could have a material adverse effect on the Company's business, operating
results and financial condition.

FORWARD-LOOKING STATEMENTS

         This Report 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 and 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.

ITEM 2. DESCRIPTION OF PROPERTY.

         The Company's headquarters is located in 4,000 square feet of office
space at 9040 Roswell Road, Atlanta, Georgia. This facility is leased pursuant
to a 55-month lease at a monthly rental of $6,223. The Company also leases
additional space in the greater Atlanta area (approximately 15,000 square feet
in four separate offices) and in Chicago (approximately 10,000 square feet).

ITEM 3. LEGAL PROCEEDINGS.

         In February 1997, a complaint styled Advanced Custom Computer
Solutions, Inc., Wayne W. Surman and Charlotte Surman v. Fisher Business
Systems, Inc., HALIS, Inc., Larry Fisher, Paul W. Harrison and Nathan I. Lipson,
was filed in the State Court of Fulton County, Georgia. The complaint alleges,
among other things, breach of contract in connection with the termination by the
Company of its merger agreement with Advanced Custom Computer Solutions, Inc.
("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. The complaint seeks 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. On March 6,
1997, the defendants filed an answer denying liability and a counterclaim
against Wayne and Charlotte Surman alleging that they made intentional
misrepresentations and concealed material facts for the purpose of inducing the
Company to pursue a merger with ACCS. On March 6, 1997, HALIS Software, Inc.,
moved the Court for permission to intervene in the case to assert a


                                      -12-
<PAGE>   14
counterclaim against ACCS. That motion was granted on March 26, 1997, and on
March 28, 1997, HALIS Software, Inc., filed a counterclaim alleging that ACCS
breached the terms of its Marketing and Licensing Agreement with HALIS Software,
Inc. There can be no assurance that the Company will be successful in its
defense of this lawsuit or that the resolution of this matter will not have a
material adverse effect on the financial condition or results of operation of
the Company.

         In August 1995, the Company entered into a Finder's Fee Agreement with
Penny Sellers, pursuant to which the Company agreed to pay Ms. Sellers 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 Ms. Sellers. The compensation payable to Ms.
Sellers pursuant to the Finder's Fee Agreement is limited to $500,000. In late
August 1995, Ms. Sellers introduced the Company to the principals of AUBIS,
L.L.C. ("AUBIS"). To date, the Company has paid $19,350 to Ms. Sellers, which
represents 10% of the investment made by the principals of 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 has claimed that the entirety of a convertible notes
offering completed in 1996 (in which an 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 future capital funding raised
by the Company (up to the $500,000 maximum compensation). In this regard, the
Company has recently completed 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 AHS, ASI and HSI, which were acquired by the Company in November
1996. Ms. Sellers has not filed suit with respect to these claims. Management of
the Company believes that these claims are outside the scope of the Finder's Fee
Agreement and intends vigorously to contest them. There can be no assurance,
however, that the Company will be successful in its defense or that the
resolution of this matter will not have a material adverse effect on the
financial condition or results of operation of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         On November 18, 1996, the Company held its 1996 Annual Meeting of
Shareholders. At the meeting, the Company's shareholders approved an amendment
to the Articles of Incorporation of the Company to increase the number of
authorized shares of Common Stock from 10,000,000 shares to 100,000,000 shares.
The number of votes cast in favor of the amendment was 5,956,457 shares and the
number of those cast against the amendment was 40 shares. There were no
abstentions.

         In addition, the Company's shareholders approved a proposal to ratify
the merger of AUBIS Hospitality Systems, Inc. and AUBIS Systems Integration,
Inc. with and into two wholly owned subsidiaries of the Company; the acquisition
of HALIS Software, Inc.; and the merger of Advanced Custom Computer Solutions,
Inc. with and into a wholly owned subsidiary of the Company. The number of votes
cast in favor of the ratification of these transactions was 5,956,497 shares.
There were no votes cast against the ratification of these transactions and no
abstentions.

         The following persons were elected to serve on the Company's Board of
Directors: Paul W. Harrison, Larry Fisher, Jeffrey C. Brenner and Nate Lipson.
The number of votes cast for the election


                                      -13-
<PAGE>   15
of each of the directors was 5,956,497 shares. There were no votes cast against 
any of the  directors and no abstentions.

         Also, the Company's shareholders approved the adoption of the 1996
Stock Option Plan of the Company. The number of votes cast in favor of the Plan
was 5,956,057 shares. There were no votes cast against the Plan. There were 440
abstentions.


                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         On October 30, 1992, the Company's Common Stock ceased quotation on the
Nasdaq Small Cap Market. Price information on the Company's Common Stock is now
available on the Nasdaq "Bulletin Board." The trading symbol for the Common
Stock is "HLIS."

         As of March 17, 1997, there were approximately 188 holders of record of
the Company's Common Stock; however, the Company believes that there are more
than 300 beneficial owners of its Common Stock.

         The Company has not paid any dividends and does not expect to do so in
the foreseeable future. Although the payment of dividends rests with the
discretion of the Board of Directors, the Company intends to employ its
earnings, if any, to finance its ongoing operations and to further develop its
business.

         Recent Sales of Unregistered Securities. From February 15, 1996 to
September 5, 1996, the Company issued an aggregate of $1,506,000 of 7.0%
Convertible Promissory Notes due January 15, 1998 (the "Notes"). Of this amount,
$36,000 of Notes were issued as consideration for finders fees. Interest on the
Notes is payable quarterly by the Company and the principal thereof (plus any
accrued interest) may, at the option of the holder, be converted into shares of
Common Stock of the Company at a conversion price of $1.00 per share. Any such
conversion must be made on or before January 15, 1998.

         On November 19, 1996, the Company issued 10,000,000 shares of Common
Stock to AUBIS, L.L.C. in connection with the merger of AHS and ASI with and
into two wholly-owned subsidiaries of the Company.

         On November 19, 1996, the Company also issued 5,000,000 shares of
Common Stock to Healthcare Technology Investments, L.L.C. (formerly, HALIS,
L.L.C.) in connection with the acquisition by the Company of HSI.

         On November 19, 1996 and on December 31, 1996, the Company issued an
aggregate of 1,516,975 shares of Common Stock and 657,356 Warrants, resulting in
proceeds of $1,820,370. Each Warrant entitles the holder to purchase one share
of Common Stock at a price of $1.75 per share. Warrants are exercisable for a
period expiring on December 31, 1999. The securities were sold on behalf of the
Company by Attkisson, Carter & Akers Incorporated (the "Placement Agent"), who
received a commission of 8.0% of the sales price of each share sold in the
offering, plus one Warrant to purchase


                                      -14-
<PAGE>   16

shares of Common Stock for each ten (10) shares of Common Stock sold in the
offering. Commissions totaling $145,630 were paid to the Placement Agent and
warrants to purchase 151,698 shares of Common Stock were issued to the Placement
Agent in 1996.

         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 transactions and no commissions were paid.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         The following discussion should be read in conjunction with the
consolidated financial statements of HALIS, Inc. and subsidiaries contained
elsewhere herein. As a result of the acquisitions of AHS, ASI and HSI in
November 1996, which acquisitions were accounted for as a "reverse acquisition,"
the financial statements of the Company are the financial statements of the
"accounting entity," consisting of AHS, ASI and HSI. Accordingly, the financial
statements of the Company are the financial statements of the "accounting
entity" adjusted for the assumed acquisition of the net assets of the Company in
exchange for the issuance of Company common stock outstanding before the
transaction. As a result, the Company's results of operations for the years
ended December 31, 1996 and 1995 consist of the operations of AHS, ASI and HSI
for the entire years and the operations of HALIS, Inc. from November 19, 1996 to
December 31, 1996.

FINANCIAL CONDITION

         Total assets increased $492,521 or 76% during the year ended December
31, 1996, due primarily to an increase in cash of $591,338. The increase in cash
results from proceeds of a private placement of Common Stock and Warrants in the
fourth quarter of 1996, and the sale of convertible promissory notes earlier in
the year. See "- Liquidity and Capital Resources."

         Total liabilities increased $1,748,101, due primarily to the issuance
of $1,506,000 in convertible promissory notes. At December 31, 1996, the Company
had a working capital deficit of $925,614. The Company's current liabilities
include accounts payable and accrued expenses of $984,444, including accrued
severance payable to a former officer of HSI ($138,000),and notes payable 
totalling $354,000, the proceeds of which were utilized to fund operations, and 
payroll and sales tax payable of $366,405. Payroll and sales taxes payable at 
December 31, 1996, consisted primarily of sales and use taxes for the State of 
Georgia.  The Company is in the process of negotiating an agreement with the 
Georgia Department of Revenue which will call for regular monthly payments. In 
January 1997, the Company paid all trust fund taxes owed relative to its 
federal payroll tax liability.

         As a result of the Company's working capital deficit, coupled with the
fact that the Company has sustained losses from operations since inception, the
Company's independent certified public accountants have included a paragraph in
their audit report accompanying the Company's financial statements regarding the
uncertainties surrounding the Company's ability to continue as a going concern. 
Until such time as the Company's healthcare software is accepted in the 
marketplace and generates revenues sufficient to support the operations of the 
Company, operations will be financed, in


                                      -15-
<PAGE>   17
part, from outside sources. See "- Liquidity and Capital Resources." The Company
also intends to implement certain cost containment measures.

RESULTS OF OPERATIONS

         Revenues, which consist of system sales and services, declined 53.7%
from $3,582,896 for the year ended December 31, 1995 ("fiscal 1995") to
$1,925,412 for the year ended December 31, 1996 ("fiscal 1996"), primarily due
to the termination on December 31, 1995 of a distribution agreement with a
significant supplier of AHS and the subsequent withdrawal by AHS from the
hospitality business. This business line accounted for approximately $1.75
million, or 48.8%, of the Company's revenue for fiscal 1995. To offset this
anticipated loss of revenue, AHS had attempted to increase its sales efforts
with respect to selling its other product lines in the fast food segment of the
market and attempted during the first quarter of 1996 to sell the Fisher
Restaurant Management System(R) in the fine dining segment of the market. In
March 1996, AHS made a strategic decision to discontinue the resale of third
party products by AHS in the hospitality market, and the related support
services provided by AHS to the customers thereof. This line of business
accounted for approximately $1.9 million of the Company's revenues in 1995, or
53.0% of total revenues.

         During fiscal 1996, AHS experienced a severe cash drain caused by the
loss of its previously referenced product line and slower than expected sales of
its other products. This caused management to reevaluate the focus of AHS'
business, which has been primarily directed to small independent restaurant
operators that require a substantial staff to provide support services. In the
second quarter of 1996, management redirected the focus of AHS and, in
anticipation of the merger of AHS into the Company, decided to direct its
resources to providing software and systems integration services to the
healthcare market through ASI and its relationships with the Company and HSI.

         In addition, during fiscal 1996, revenues from HSI decreased by
$263,616, primarily as a result of its decision to terminate the Partners in
Prevention Program and the Managed Care Guide. HSI's major customer for the
Partners In Prevention(TM) program had been Prudential Health Care Systems of
Georgia ("Prudential"). Prudential notified HSI in mid-1996 that it did not
intend to honor the balance of its contract, which had two years remaining.
Prudential is not honoring the balance of its contract for two reasons. First,
the Partners in Prevention Program was inadequate to meet Prudential's needs.
Second, Prudential has decided to cancel the project that utilizes Partners in
Prevention. Lost revenues to HSI as a result of the termination of the contract
by Prudential is approximately $270,000.

         The major client for the Managed Care Guide(TM) has been Hoechst Marion
Roussel ("HMR"), an international pharmaceutical company. A contract is
currently in force with HMR that provides HMR a right of first refusal to
distribute the Managed Care Guide(TM) in all major markets in the United States.
The impact upon HSI of HMR's right of first refusal concerning the Managed Care
Guide on a historical basis has been immaterial. HSI has not focused on the
Managed Care Guide as a product in itself and only plans to incorporate the
generic information used to produce the Guide. HSI did not expect to generate
revenues from the Managed Care Guide as a separate product.

         The projected impact HMR will have on HSI in general is negligible
because HSI does not plan to market the Managed Care Guide as a product in
itself. HSI plans to only use generic information (public domain type of
information) available to incorporate in the HALIS Healthcare Enterprise System.
In addition, HSI believes that HMR will not exercise its right of first refusal
and would allow HSI to


                                      -16-
<PAGE>   18

distribute (if HSI chose to do so) the Managed Care Guide through other
organizations. If HMR does exercise its right of first refusal, HSI will receive
revenues it would otherwise not generate on its own.

         No other contracts contain unilateral customer cancellation features.

         The Company's management has been encouraged by the initial marketplace
response to its HES product, as evidenced by four executed contracts for pilot
sales during the first quarter of 1997. Sales of the HES product accounted for
revenues of only $67,615 in fiscal 1996, as it was still in the development
stage for most of 1996. The Company will follow a strategy of carefully
selecting a limited number of pilot sites and subjecting the software to
extensive field use in selected markets prior to officially launching the
product. For that reason, revenues recognized from the HES product in 1997 will
be minimal, but are expected to be more significant in 1998 and beyond.

         Selling, general and administrative expenses increased 15.3% from
$1,249,790 in fiscal 1995 to $1,441,572 in fiscal 1996. Although the Company
reduced operating expenses in the ASI and AHS operating units to compensate for
the loss of business addressed above, significant financial resources were
invested in the development of the HALIS Healthcare Enterprise System
($561,694), and the staffing of a senior corporate management team ($295,676).
Additionally, the Company made the decision to merge ProHealth Solutions into
HSI in March of 1996. ProHealth Solutions had developed a database program
called Partners in Prevention, as well as the Managed Care Guide.  Management 
decided in early 1996 that neither product had marketplace viability as 
stand-alone offerings. ProHealth's operating expenses for 1996, prior to being 
merged into HSI, were $129,109.

         Other expenses in fiscal 1996 include interest expense of $67,613
related to the Company's convertible promissory notes and other notes payable,
as well as interest on the Company's sales and use tax liabilities. Other
expenses also include merger costs of $378,588 incurred primarily in connection
with the reverse acquisition of the Company by AHS, ASI and HSI during the year.

         As a consequence of the decrease in revenues during fiscal 1996,
coupled with the increase in selling, general and administrative and other
expenses during the year (both in absolute terms and as a percentage of
revenue), the Company incurred a net loss of $1,989,824 or $0.12 per share for
fiscal 1996. This compares to a net loss of $372,938 for fiscal 1995.

         Management believes that the January 1997 acquisitions of Compass, SMG
and ABAS/TPA (see "Business - Recent Acquisitions"), help to position the
Company to capitalize on the HES product as it is introduced into the various
healthcare marketplaces during 1997 and 1998. ABAS, for example, will utilize
the HES product in its current healthcare administration business, and will
serve what the Company believes will be a substantial market of clients who wish
to take advantage of this new technology, but would prefer a transaction fee
arrangement, rather than in-house implementation. SMG will continue to market
its existing software product to the orthodontics market, and will utilize its
sales force to introduce the HES product into the southeastern region of the
U.S. Compass will continue to provide technical electronic data processing
consulting to a variety of businesses and will, in addition, assist in the
development of Business Partner relationships for the marketing of the HES
product. Management's acquisition strategy is to grow the business by adding
independent business units which will project a positive cash-flow within the
first year following acquisition.  See "Business - Company Strategy."


                                      -17-
<PAGE>   19

LIQUIDITY AND CAPITAL RESOURCES

         During fiscal 1996, operating activities used $1,998,807 in cash,
primarily due to a net loss of $1,989,696 for the year. The net loss stemmed
primarily from the development expenses associated with the HES product
($687,948 of which were charged to expense and $160,995 of which were 
capitalized), the revenue decline at AHS and HSI discussed in "- Results of 
Operations" and costs associated with the merger with AHS, ASI and HSI in 
November 1996.

         During fiscal 1996, investing activities provided $1,157,514, primarily
from advances from the Company to AHS, ASI and HSI prior to November 1996 and
the Company's cash on hand at the time of closing the AHS, ASI and HSI
acquisitions. The source of this cash was the proceeds of $1,506,000 in
convertible promissory notes issued in 1996. See discussion below.

         Financing activities during fiscal 1996 provided $1,431,631, primarily
the result of $1,398,819 in proceeds from the issuance of stock in the fourth
quarter of 1996.

         In September 1996, the Company completed an offering of $1,506,000 of
7.0% Convertible Promissory Notes due January 15, 1998 (the "Notes"). Interest
on the Notes is payable quarterly by the Company and the principal thereof (plus
any accrued interest) may, at the option of the holder, be converted into shares
of Common Stock at a conversion price of $1.00 per share. Any such conversion
must be made on or before January 15, 1998. Approximately $1,165,007 of the
proceeds of this offering were advanced to AHS, ASI and HSI to support their
operations (which advances were accounted for as notes receivable from
affiliates), while the balance of the proceeds from the sale of the Notes were
utilized to expand the Company's sales and marketing capabilities. The advances
to AHS, ASI and HSI were converted to equity upon the acquisition of these
companies in November 1996.

         In January 1997, the Company completed a private placement of 1,684,975
shares of Common Stock and 730,156 Warrants, resulting in net proceeds to the
Company of approximately $1.8 million. The net proceeds of the offering were
utilized by the Company to expand its sales and marketing efforts, enhance its
software products, support the growth of its administrative infrastructure, to
fund expenses related to the acquisition of selected healthcare software, 
service and system integration companies and for general corporate purposes.

         Until such time as the Company's healthcare software is accepted in the
marketplace and generates revenues sufficient to support the operations of the
Company, operations will be financed, in part, from outside sources. The Company
has engaged Attkisson, Carter & Akers Incorporated, a licensed broker-dealer
(the "Placement Agent"), to offer and sell, on a best-efforts basis, up to
2,000,000 shares of Common Stock at a price of $1.50 per share. For each three
(3) shares of Common Stock sold in the offering, the Company will also issue a
warrant to purchase one share of Common Stock (up to a maximum of 666,667
warrants), exercisable at a price of $1.75 per share. Proceeds from the offering
will be utilized by the Company to expand the Company's sales and marketing
efforts, expand the Company's services infrastructure, fund expenses related to
the acquisition of selected healthcare software, service and systems 
integration companies and for general corporate purposes. As of April 11, 1997, 
the Company had issued 600,000 shares of Common Stock and 260,001 Warrants in 
the offering (including 60,000 Warrants issued to the Placement Agent), 
resulting in net proceeds to the Company of approximately $810,000.


                                      -18-
<PAGE>   20

         The Company will likely require additional capital or other financing
after the completion of this offering to finance its operations and continued
growth, particularly if less than all of the shares offered thereby are sold.
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.

         The Company is in negotiations with a former employee of HSI with
respect to the amount of severence owed by HSI pursuant to the employee's
employment contract.  The parties have reached a preliminary agreement on a
settlement of $138,000 (which amount had been accrued by the Company at
December 31, 1996), with $50,000 payable in installments through July 1997 and
a lump sum payment of $88,000 due August 1, 1997.  The lump sum amount may,
under certain conditions, be paid in stock of the Company.  There can be no
assurrance, however, that a settlement of this matter will be obtained or, if
obtained, will be on the terms described above.

         No provision has been made in the financial statements for any
settlements or judgments relating to either of the matters discussed in "Item 3.
Legal Proceedings." 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. Additionally, all agreements to date for the HES product have
been for pilot sites and have contingencies. In the event that the pilot testing
identifies substantive modifications to the product which are mandatory for
marketplace feasibility, additional development costs and/or delays in launching
the product could have a material adverse effect on liquidity.

INFLATION

         The Company is affected by inflation through increased personnel costs
and other selling, general and administrative expenses. Hardware costs have
generally declined, and this trend is expected to continue.

ITEM 7. FINANCIAL STATEMENTS.

The following financial statements and reports thereon are filed with this
report:

         Report of Independent Certified Public Accountants

         Consolidated Balance Sheet - December 31, 1996

         Consolidated Statement of Operations for the year ended December 31, 
          1996 and Combined Statement of Operations of the Predecessor for the 
          year ended December 31, 1995

         Consolidated Statement of Stockholders' Deficit for the year ended
          December 31, 1996 and Combined Statement of Stockholders' Deficit of
          the Predecessor for the year ended December 31, 1995


         Consolidated Statement of Cash Flows for the year ended December 31, 
          1996 and Combined Statement of Cash Flows of the Predecessor for the
          year ended December 31, 1995

         Notes to Consolidated and Combined Financial Statements


                                      -19-
<PAGE>   21

                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
   of HALIS, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of HALIS, Inc. and
Subsidiaries as of December 31, 1996, and the related consolidated statements of
operations, stockholders' deficit and cash flows for the year ended December 31,
1996. We have also audited the combined statements of operations, stockholders'
deficit and cash flows of AUBIS Hospitality Systems, Inc. and Subsidiaries,
AUBIS Systems Integration, Inc., HALIS Software, Inc., and ProHealth Solutions,
Inc., [collectively, the Predecessor], for the year ended December 31, 1995.
These consolidated financial statements and combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and combined financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements and 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 consolidated financial statements and 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 audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HALIS, Inc. and Subsidiaries as
of December 31, 1996 and the Predecessor as of December 31, 1995 and the results
of their operations and their cash flows for the years ended December 31, 1996
and 1995 in conformity with generally accepted accounting principles.

As discussed in Note A to the consolidated financial statements, HALIS, Inc. was
involved in a business combination with the Predecessor that has been accounted
for as a reverse acquisition in which the Predecessor is treated as the acquirer
for accounting purposes; accordingly, the financial statements for periods prior
to November 19, 1996 are the combined financial statements of the Predecessor.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note C to the
consolidated financial statements, the Company has had recurring losses, a
working capital deficit and a capital deficit. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note C. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

                                             /s/ Habif, Arogeti & Wynne, P.C.

Atlanta, Georgia

March 7, 1997, except for Notes C and J, as to which the date is March 31, 1997


                                     -20-
<PAGE>   22
                          HALIS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1996



                                     ASSETS


<TABLE>
<S>                                                                   <C>       
Current assets
--------------
     Cash                                                             $  719,989
     Receivables, less allowance for possible losses
         of $39,027                                                       45,003
     Current portion of receivables - related party                       13,285
     Inventories                                                          10,178
     Other current assets                                                  9,886
                                                                      ----------

         Total current assets                                            798,341
                                                                      ----------

Property and equipment, at cost
----------------------
     Computer equipment                                                  101,777
     Office furniture and fixtures                                        45,349
                                                                      ----------
                                                                         147,126
     Less accumulated depreciation                                       (86,972)
                                                                      ----------

                                                                          60,154
                                                                      ----------


Other assets
------------
     Deposits                                                             16,434
     Receivables - related party, net of current portion                  48,458
     Deferred merger costs                                                32,659
     Loan origination fees, net of accumulated
         amortization of $18,000                                          18,000
     Capitalized software development costs, net of
         accumulated amortization of $-0-                                160,995
     Other intangible assets, net of accumulated amortization
         of $2,059                                                         3,088
                                                                      ----------
                                                                         279,634
                                                                      ----------

                                                                      $1,138,129
                                                                      ==========
</TABLE>



                   See auditors' report and accompanying notes


                                     -21-
<PAGE>   23
                          HALIS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1996



                      LIABILITIES AND STOCKHOLDERS' DEFICIT



<TABLE>
<S>                                                                <C>         
Current liabilities
-------------------
     Accounts payable and accrued expenses                         $    908,660
     Accounts payable and accrued expenses - related party               75,784
     Deferred revenue and customer deposits                              19,106
     Notes payable                                                      210,000
     Notes payable - related party                                      144,000
     Payroll and sales tax payable                                      366,405
                                                                   ------------

         Total current liabilities                                    1,723,955
                                                                   ------------



Long-term debt, net of current portion
--------------------------------------
     Convertible notes payable                                        1,506,000
                                                                   ------------



Commitments and contingencies (Note G)
--------------------------------------

Stockholders' deficit
---------------------
     Common stock $.01 par value, 100,000,000
         authorized; 23,972,621 issued and outstanding                  239,726
     Additional paid-in capital                                      10,881,151
     Stock subscription receivable                                     (240,000)
     Accumulated deficit                                            (12,965,953)
     Treasury stock                                                      (6,750)
                                                                   ------------

                                                                     (2,091,826)
                                                                   ------------

                                                                   $  1,138,129
                                                                   ============
</TABLE>



                   See auditors' report and accompanying notes


                                     -22-
<PAGE>   24
                          HALIS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE YEAR ENDED DECEMBER 31, 1996 AND
                        COMBINED STATEMENTS OF OPERATIONS
                               OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995




<TABLE>
<CAPTION>
                                                                   [Predecessor]
                                                      1996             1995
                                                  ------------     ------------
<S>                                               <C>              <C>         
Systems sales and services                        $  1,925,412     $  3,582,896
                                                  ------------     ------------


Costs and expenses
------------------
     Cost of goods sold                              1,656,113        2,613,259
     Selling, general, and administrative            1,441,572        1,249,790
     Research and development                          400,699              -0-
                                                  ------------     ------------

                                                     3,498,384        3,863,049
                                                  ------------     ------------


Operating loss                                      (1,572,972)        (280,153)
--------------                                    ------------     ------------


Other income (expense)
----------------------
     Gain (loss) on asset disposal                      (8,228)           6,385
     Rental income                                      27,600           21,350
     Interest expense                                  (67,613)         (22,798)
     Interest income                                       546            1,394
     Other income                                        9,559              315
     Merger costs                                     (378,588)             -0-
     Loss from misappropriation                            -0-          (97,123)
                                                  ------------     ------------
                                                      (416,724)         (90,477)
                                                  ------------     ------------

       Loss before income taxes                     (1,989,696)        (370,630)


Income taxes                                               -0-            2,308
------------                                      ------------     ------------

Net loss                                          $ (1,989,696)    $   (372,938)
                                                  ============     ============

Net loss per common share                         $      (0.12)              --
                                                  ============
Weighted average shares outstanding                 15,956,824               --
                                                  ============
</TABLE>



                  See auditors' report and accompanying notes


                                     -23-
<PAGE>   25
                          HALIS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                    FOR THE YEAR ENDED DECEMBER 31, 1996 AND
                  COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
                               OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995



<TABLE>
<CAPTION>
                                                 Common Stock                       Stock                                 Total
                                                 ------------        Paid-in     Subscription  Accumulated  Treasury  Stockholders'
      Predecessor Company                     Shares     Amount      Capital      Receivable     Deficit      Stock      Deficit
--------------------------------            ----------  --------   -----------   ------------ ------------  --------  -------------
<S>                                         <C>         <C>        <C>            <C>         <C>            <C>       <C>         
Balances, December 31, 1994                        -0-  $    -0-   $   375,787    $     -0-   $ (1,048,842)  $   -0-   $  (673,055)

Additional capital contribution                    -0-       -0-       210,500          -0-            -0-       -0-       210,500

Net loss                                           -0-       -0-           -0-          -0-       (372,938)      -0-      (372,938)
                                            ----------  --------   -----------    ---------   ------------   -------   ----------- 

Balances, December 31, 1995                        -0-       -0-       586,287          -0-     (1,421,780)      -0-      (835,493)

           HALIS, Inc.
--------------------------------

Net loss                                           -0-       -0-           -0-          -0-     (1,989,696)      -0-    (1,989,696)

Additional capital contributed                     -0-       -0-       199,678          -0-            -0-       -0-       199,678

Assumed purchase of net assets
     of Fisher at Predecessor cost           7,455,646    74,556     8,621,537          -0-     (9,554,477)   (6,750)     (865,134)

Issuance of shares in reverse acquisition
     of Fisher by HALIS, Inc.               15,000,000   150,000      (150,000)         -0-            -0-       -0-           -0-

Issuance of common stock                     1,516,975    15,170     1,623,649     (240,000)           -0-       -0-     1,398,819
                                            ----------  --------   -----------    ---------   ------------   -------   ----------- 

Balances, December 31, 1996                 23,972,621  $239,726   $10,881,151    $(240,000)  $(12,965,953)  $(6,750)  $(2,091,826)
                                            ==========  ========   ===========    =========   ============   =======   =========== 
</TABLE>


                   See auditors' report and accompanying notes


                                     -24-
<PAGE>   26
                          HALIS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                    FOR THE YEAR ENDED DECEMBER 31, 1996 AND
                        COMBINED STATEMENT OF CASH FLOWS
                               OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


<TABLE>
<CAPTION>
                                                                                                 [Predecessor]
                                                                                1996                  1995
                                                                            -----------            ---------
<S>                                                                         <C>                    <C>      
Cash flow from operating activities
-----------------------------------
     Net loss                                                               $(1,989,696)           $(372,938)
                                                                            -----------            ---------
     Adjustments to reconcile net loss to
         net cash used by operating activities
              Depreciation                                                       15,100               18,896
              Amortization                                                        3,279                1,030
              Assumption of expenses by parent                                   32,000                  -0-
              Allowance for loss on account receivable                          (40,000)              18,000
              Loss (Gain) on disposal of assets                                   8,228               (6,385)
              Changes in assets and liabilities
                 Decrease (Increase) in accounts receivable                     140,031               22,841
                 Decrease (Increase) in receivables - related party              21,813               (8,048)
                 Decrease (Increase) in inventories                              45,669               (6,196)
                 Decrease (Increase) in other current assets                         71               (5,716)
                 Increase in intangible assets                                      -0-               (5,147)
                 Increase in deposits                                            (4,230)              (8,609)
                 Increase (Decrease) in accounts payable
                    and accrued expenses                                       (255,061)             162,902
                 Increase in accounts payable and                                                    
                    accrued expenses - related party                             37,599               88,468
                 Increase (Decrease) in income tax payable                       (6,908)               6,908
                 Increase (Decrease) in deferred revenue
                    and customer deposits                                       (96,219)              48,266
                 Increase in payroll and sales taxes payable                     90,517              150,569
                                                                            -----------            ---------
                    Total adjustments                                            (8,111)             477,779
                                                                            -----------            ---------
                           Net cash provided [used] by
                               operating activities                          (1,997,807)             104,841
                                                                            -----------            ---------

Cash flows from investing activities
------------------------------------
     Purchase of property equipment                                             (16,424)             (52,498)
     Increase in software development costs                                    (160,995)                 -0-
     Net decrease (increase) in deferred merger costs                           137,049             (169,708)
     Net proceeds from sale of property and equipment                            10,651                  -0-
     Advances from Fisher and cash received in acquisition                    1,187,233                  -0-
     Insurance recovery from equipment loss                                         -0-               30,677
                                                                            -----------            ---------
         Net cash provided [used] by investing activities                     1,157,514             (191,529)
                                                                            -----------            ---------

Cash flows from financing activities
------------------------------------
     Proceeds from issuance of common stock                                   1,398,819                  -0-
     Proceeds from additional capital contributions                                 -0-              210,000
     Net payments on note payable and line-of-credit                            (16,088)             (17,912)
     Proceeds from issuance of notes payable - related party                    100,000               11,020
     Repayments on notes payable - related party                                (51,100)                 -0-
                                                                            -----------            ---------
         Net cash provided by financing activities                            1,431,631              203,108
                                                                            -----------            ---------

              Net increase in cash                                              591,338              116,420

Cash, beginning of year                                                         128,651               12,231
                                                                            -----------            ---------

         Cash, end of year                                                  $   719,989            $ 128,651
                                                                            ===========            =========
</TABLE>



                  See auditors' report and accompanying notes




                                     -25-
<PAGE>   27

                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Description of the Company and Basis of Presentation:

         HALIS, Inc. (HALIS) and Subsidiaries (collectively, the Company) is a
         developer and supplier of healthcare software systems to managed
         healthcare markets and to medical practices and related point of
         service markets. The Company also provides value added computer
         services, network solutions, and connectivity solutions and systems
         integration principally to Atlanta area businesses. Additionally, the
         Company provides services support, including onsite hardware
         maintenance, as well as network support programs.

         On November 19, 1996, HALIS, Inc. (f/k/a Fisher Business Systems, Inc.)
         issued 15,000,000 shares (66.8%) of its common stock in exchange for 
         100% of the capital stock of AUBIS Hospitality Systems, Inc. and
         Subsidiaries (AHS), AUBIS Systems Integration, Inc. (ASI), and HALIS 
         Software, Inc. (HSI), which included ProHealth Solutions, Inc. (see 
         Note B).

         The acquisitions set out in the preceding paragraph are being accounted
         for as the reverse acquisition of HALIS, Inc. by an "accounting entity"
         consisting of AHS, ASI, and HSI (collectively, the Predecessor) because
         following the transaction, the former shareholders of AHS, ASI, and HSI
         are in control of the Company. Accordingly, the financial statements of
         the Company are the financial statements of the "accounting entity"
         adjusted for the assumed acquisition of the net assets of HALIS, Inc.
         in exchange for the issuance of HALIS, Inc. common stock outstanding
         before the transaction. The net assets of the Predecessor are accounted
         for at their historical cost.

         In accordance with purchase accounting principles pursuant to
         Accounting Principles Board Statement No. 16, Business Combinations
         (APB 16), the Company accounted for the net assets of HALIS, Inc.
         acquired at the fair value of such net assets as of November 19, 1996.

         Because of the transactions noted above, the Company's results of
         operations for the year ended December 31, 1996 consists of the
         operations of AHS, ASI, and HSI for the entire year and the operations
         of HALIS, Inc. from November 19, 1996 to December 31, 1996.

         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.

         The combined financial statements of the Predecessor include the
         accounts of AUBIS Hospitality Systems, Inc. and Subsidiaries, AUBIS
         Systems Integration, Inc., HALIS Software, Inc. and ProHealth
         Solutions, Inc. All significant intercompany accounts and transactions
         have been eliminated.


                                     -26-
<PAGE>   28
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995



A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]

         Revenue Recognition:

         Revenue consists primarily of licensing fees, sales of related computer
         hardware, and post contract customer support. The Company accounts for
         such revenue in accordance with the American Institute of Certified
         Public Accountants' (AICPA) Statement of Position 91-1, Software
         Revenue Recognition, as follows:

         License Revenue                       -  Revenue from the sales of
                                                  software licenses is
                                                  recognized after shipment of
                                                  the product and fulfillment of
                                                  acceptance terms, provided no
                                                  significant obligations remain
                                                  and collection of resulting
                                                  receivable is deemed probable.

         Support contract                      -  Ratably over the life of the
                                                  contract from the effective
                                                  date

         Installation, training and education  -  When the services are provided

         Hardware                              -  Upon shipment of computer
                                                  equipment to the customer,
                                                  provided no significant
                                                  obligations remain and
                                                  collection of resulting
                                                  receivable is deemed probable.

         Inventory:

         Inventory is recorded on the first-in, first-out method at the
         lower-of-cost or market.

         Property and Equipment:

         Property and equipment is carried at cost. Depreciation is computed
         using the straight-line method based on estimated useful lives of the
         assets, generally three to seven years. For income tax purposes,
         depreciation is calculated on accelerated methods.

         Software Development Costs:

         In accordance with Statement of Financial Accounting Standards No. 86,
         Accounting for the Costs of Computer Software to be Sold, Leased, or
         Otherwise Marketed, research and development costs incurred prior to
         the attainment of technological and marketing feasibility of products
         are charged to operations. Thereafter, the Company capitalizes the
         direct costs and associated allocated overhead incurred in the
         development of products, until the point of market release of such
         products, wherein costs incurred are again charged to operations.



                                     -27-
<PAGE>   29
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]

         Software Development Costs: [Continued]

         Capitalized costs are amortized over a period of five years on a
         straight-line basis, and amortization commences when the product is
         available for market release. Unamortized costs are carried at the
         lower of book value or net realizable value.

         Deferred Merger Costs:

         Deferred merger costs will be capitalized as part of the merger
         agreements subsequently commenced. (Note M). Deferred merger costs
         associated with mergers which were consummated during 1996 (Note B)
         were charged to operations in 1996 because the assets balances of
         HALIS, Inc. were considered to be at fair value.

         Income Taxes:

         Income taxes are based on loss for financial reporting purposes and
         reflect a current liability (asset) for the estimated taxes payable
         (recoverable) in the current year tax return and changes in deferred
         taxes. Deferred tax liabilities and assets are recognized for the
         estimated tax effects of temporary differences between financial
         reporting and taxable income (loss) for the loss carryforwards based on
         enacted tax laws and rates. A valuation allowance is used to reduce
         deferred tax assets to the amount that is more likely than not to be
         realized.

         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 certain assets,
         liabilities, and disclosures including the allowance for doubtful
         accounts, inventory reserve, useful lives and recoverability of
         long-term assets such as capitalized software development costs. Actual
         amounts could differ from those estimates. Any adjustments applied to
         estimated amounts are recognized in the year in which such adjustments
         are determined.

         Reclassifications:

         Certain 1995 amounts have been reclassified to conform to 1996
         presentation.

B.       MERGER AND REORGANIZATION:

         On March 7, 1996, ProHealth Solutions, Inc. merged with and into HSI.
         HSI continued as the surviving corporation and ProHealth Solutions,
         Inc. was the nonsurviving corporation.


                                     -28-
<PAGE>   30
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995

B.       MERGER AND REORGANIZATION: [Continued]

         On November 19, 1996, HALIS, Inc., consummated the acquisition of AHS
         and ASI, pursuant to the Amended and Restated Agreement and Plan of
         Merger and Reorganization, dated December 13, 1995 and amended and
         restated as of March 29, 1996, and as further amended on September 27,
         1996. On November 19, 1996, AHS and ASI were merged into two
         wholly-owned subsidiaries of HALIS, Inc. In connection therewith,
         AUBIS, L.L.C., the parent company of AHS and ASI, received 10,000,000
         shares of HALIS, Inc. common stock.

         On November 19, 1996, HALIS, Inc., consummated the acquisition of HSI
         pursuant to the Amended and Restated Agreement and Plan of Merger and
         Reorganization, as of March 29, 1996 and amended on September 27, 1996.
         On November 19, 1996, HSI was merged into a wholly-owned subsidiary of
         HALIS, Inc. In connection therewith, HALIS, L.L.C., the parent company
         of HSI, received 5,000,000 shares of HALIS, Inc. common stock.

         Following consummation of the AUBIS and HALIS transactions, the
         Company's corporate name was changed from Fisher Business Systems, Inc.
         to HALIS, Inc.

C.       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. However, the Company
         has sustained losses from operations since inception and such losses
         are expected to continue through the coming period. Additionally, the
         Company has used, rather than provided, cash in its operating
         activities during the current period. The Company had a working capital
         and capital deficiency as of December 31, 1996.

         In view of the matters described in the preceding paragraph,
         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 which
         provides for up to $3,000,000 of capital infusion. Management believes
         that the net proceeds contemplated by this offering will be sufficient
         to fund both the Company's operations and acquisitions over the next
         twelve months. To date, the Company has raised net proceeds of $681,122
         in this offering (Note J).



                                     -29-
<PAGE>   31
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995





C.       REALIZATION OF ASSETS: [Continued]

         As discussed in Note M to these financial statements, the Company
         completed three acquisitions in January 1997 which it believes
         substantially strengthen the Company's operations and complement the
         existing business units. These acquisitions were effected through the
         issuance of an aggregate of 5,297,000 shares of the Company's common
         stock and an aggregate of 1,535,000 of common stock options rather than
         utilizing working capital. The Company contemplates future acquisitions
         will be effected in a similar manner, in order to preserve working
         capital for operations.

         Additionally, the Company expects to increase sales volumes of existing
         products as a result of increased marketing and advertising efforts.
         During 1996, the Company's development of its software product entered
         the "pilot" stage, and the Company commenced selling pilot systems in
         1997. Management represents that sales to date under such pilot
         contracts have been promising, and expects the trend to continue during
         the coming period. Additionally, the Company will implement certain 
         cost containment measures which should benefit future operations.

         Management plans to seek sources of financing in order to continue as a
         going concern.

D.       SOFTWARE DEVELOPMENT COSTS:

<TABLE>
<CAPTION>
         Years ended December 31,                               1996        1995
                                                              --------     -----
         <S>                                                  <C>          <C>
         Balances, beginning of year                             $ -0-     $ -0-
              Amounts capitalized                              160,995       -0-
              Amortization                                         -0-       -0-
                                                              --------     -----

         Balances end of year                                 $160,995     $ -0-
                                                              ========     ===== 

         Research and development costs incurred              $561,694     $ -0-
         Less amounts capitalized                              160,995       -0-
                                                              --------     -----

         Research and development charged to expense          $400,699     $ -0-
                                                              ========     ===== 
</TABLE>

         No amortization of capitalized software development costs was
         recognized during 1996 as market release had not occurred for the 
         product.


                                     -30-
<PAGE>   32
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995



E.       NOTES PAYABLE:

         The Companies have the following notes payables as of December 31,
         1996:

<TABLE>
         <S>                                                            <C>
         Bank-note payable, interest of 8.25% per annum,
             payable at maturity, due January 10, 1997.
             Secured by shareholders' certificate of deposit.           $105,000

         Bank-note payable, interest of 8.25% per annum,
             payable at maturity, due January 29, 1997.
             Secured by shareholders' certificate of deposit.            105,000
                                                                        --------

                                                                        $210,000
                                                                        ========
</TABLE>

         Both of the $105,000 notes were subsequently renewed on their maturity
         dates, mature on April 14, 1997 and April 29, 1997, and are now secured
         by a certificates of deposit owned by HALIS, Inc. Both certificates of
         deposit are in the amount of $105,000 and mature on April 14, 1997 and
         April 29, 1997, respectively.

         Convertible Notes Payable - 7% convertible promissory notes were issued
         in a private placement by the acquired company, HALIS, Inc., in early
         1996 and mature January 15, 1998. The notes are convertible into common
         stock of the Company at any time until their maturity date at $1 per
         share. Forty-three notes were issued by the Company in amounts ranging
         from $10,000 to $80,000 generating $1,470,000 in proceeds.
         Additionally, $36,000 of notes were issued in consideration for
         services rendered to HALIS, Inc. $455,000 of these notes were issued to
         related parties at terms identical to the terms of notes issued to
         third parties. Interest expense on these notes recognized from November
         19 through December 31, 1996 (period of inclusion) totaled $14,334.

F.       NOTES PAYABLE - RELATED PARTIES:

         The Companies have the following unsecured notes payable to shareholder
         directors as of December 31, 1996:

<TABLE>
         <S>                                                                  <C>
         Shareholder/Director - note payable with interest of 8.75%
             payable on demand; due on demand.  This note is unsecured        $ 70,000

         Shareholder/Director - note payable with interest payable 
             of 12% per annum; due on demand.  This note is unsecured           65,000

         Shareholder/Director - note payable non-interest
             bearing; due on demand.  This note is unsecured                     9,000
                                                                              --------

                                                                              $144,000
                                                                              ========
</TABLE>


                                     -31-
<PAGE>   33
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995

G.       COMMITMENTS AND CONTINGENCIES:

         Concentrations of Credit Risk:

         The Companies do not have a secured interest in their accounts
         receivable; however, they do have legal recourse for defaulted amounts.

         The Company maintains the majority of its cash deposits at one
         financial depository institution. The amount of the accounting loss due
         to credit risk the Company would incur if the financial depository
         institution failed would be the cash deposits in excess of the $100,000
         amount per depositor that is federally insured. The amount at risk
         totaled approximately $585,000 at December 31, 1996.

         Payroll and Sales Taxes:

         The Company is delinquent in paying certain federal and state payroll
         taxes and sales taxes. The Internal Revenue Service has written the
         Companies indicating that it may file a Notice of Federal Tax Lien or
         levy the Companies' assets if past due payroll taxes are not paid. The
         Company made a payment of $27,446 related to this liability to the
         Internal Revenue Service in January 1997.

         Operating Leases:

         The Companies lease office space and equipment under several operating
         lease agreements. Rent expense for the office space and equipment
         totaled $156,553 and $95,714 for the years ended December 31, 1996 and
         1995, respectively.

         At December 31, 1996, future minimum lease payments under
         non-cancelable leases having remaining terms in excess of one year are
         as follows:

<TABLE>
<CAPTION>
               December 31,                                             Amount
               ------------                                             ------
                  <S>                                                  <C>
                  1997                                                 $153,613
                  1998                                                  104,432
                  1999                                                   86,160
                  2000                                                   83,972
                  2001                                                   59,535
                                                                       --------

                     Totals                                            $487,712
                                                                       ========
</TABLE>

         Employee Benefit Plan:

         The Company sponsors a 401(k) retirement savings plan for all employees
         who meet certain eligibility requirements. Employees may contribute to
         the plan up to 20% of their salary or the maximum allowed by the IRS.
         The Company may elect to make matching and/or discretionary
         contributions. Employee contributions are immediately 100% vested while
         Company contributions are subject to a six-year vesting schedule. The
         Company made no contributions to the plan during any of the previous
         two fiscal years.

         Significant Customers:

         For the year ended December 31, 1996, sales to two customers, Atlanta
         Jewish Federation and Canada Life, totaled approximately $852,000, and
         accounted for 44% of the Company's sales.



                                     -32-
<PAGE>   34
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


G.       COMMITMENTS AND CONTINGENCIES: [Continued]

         Economic Dependency:

         For the year ended December 31, 1996, purchases from one vendor,
         Merisal, totaled approximately $589,000 and accounted for 49% of the
         Company's purchases from suppliers. Unpaid invoices included in
         accounts payable at December 31, 1996 totaled $73,519.

         During 1995, AHS purchased a significant portion of its products from 
         Sulcus, also know as Sulcus Hospitality Group, Sulcus Computer 
         Corporation, and Squirrel Companies, Inc. (Sulcus). Sales generated
         from Sulcus products and services were approximately $1,750,000.
         Effective January 1, 1996, AHS was no longer an authorized Sulcus 
         dealer.

         Employment Agreements:

         The Company has entered into an employment agreement with Paul W.
         Harrison which expires December 31, 1999. The agreement provides for a
         annual base salary of $200,000 (to be increased upon the attainment of
         certain annual revenue targets) plus certain incentive bonus payments
         and certain qualified and non-qualified stock options to purchase
         shares of common stock of the Company at the discretion of the Board of
         Directors.

         The Company also entered into an employment agreement with Larry Fisher
         which expires December 31, 1999. The agreement provides for an annual
         salary of $175,000 (to be increased upon the attainment of certain
         annual revenue targets) plus incentive bonus payments. In addition, the
         employment agreement provides for certain qualified and non-qualified
         options to purchase shares of common stock of the Company at the
         discretion of the Board of Directors.

         In connection with mergers which occurred subsequent to year end, the
         Company entered into employment agreements with certain members of
         management (Note M).

         Litigation:

         The Company and its directors have been named as defendants in a claim
         relating to an acquisition target which was aborted. The plaintiff,
         Advanced Customer Computer Solutions, Inc. (ACCS), alleges breach of
         contract in connection with the termination by the Company of its
         merger agreement. 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; the
         Company has a convertible note payable to one of the plaintiffs in the
         amount of $60,000. The complaint seeks damages in the amount of at
         least $2 million plus damages. The Company intends to deny the
         allegations of liability in the complaint and to vigorously contest and
         defend against the lawsuit. Additionally, the Company has filed a
         counterclaim against certain parties related to ACCS alleging that
         those parties made intentional misrepresentations and concealed
         material facts for the purpose of inducing the Company to pursue a
         merger with ACCS. Additionally, the HSI subsidiary filed a counterclaim
         against ACCS alleging that ACCS breached the terms of its marketing and
         licensing agreement with HSI. Due to uncertainties in the settlement
         process, management and its legal counsel do not express an opinion
         with respect to the likelihood of an unfavorable outcome in this
         matter.



                                     -33-
<PAGE>   35
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995

G.       COMMITMENTS AND CONTINGENCIES: [Continued]

         Litigation: [Continued]

         The Company entered into a finder's fee agreement with Penny Sellers in
         which the Company agreed to pay a 10% commission up to $500,000 on
         investments made by investors introduced by Ms. Sellers. Ms. Sellers
         introduced HALIS, Inc. (then Fisher) to the principals of AUBIS L.L.C.
         and contends that all money raised by the Company could not have been
         possible if not for her introduction. She has made a claim for 10% of
         private placements of approximately $3,470,000 and 10% of the value of
         ASI, AHS, and HSI. Management believes that these claims are outside
         the scope of the finder's fee agreement and intends to contest them
         vigorously. Management and legal counsel express no opinion as to the
         likely outcome of this matter.

         No provision has been made in these financial statements regarding
         these two items due to the uncertainty of their ultimate resolution.

H.       INCOME TAXES:

         The sources of temporary differences and their effect on the net
         deferred taxes are as follows:

<TABLE>
             <S>                                                    <C>
             Deferred tax asset resulting from
                  net operating loss carryforwards                  $ 3,800,000
             Other temporary differences                                 17,632
             Less valuation allowances                               (3,817,632)
                                                                    -----------
                                                                    $       -0-
                                                                    ===========
</TABLE>

         The valuation allowance fully reserves the net deferred tax asset which
         arose from the tax loss carryforwards and temporary differences
         generated.

         At December 31, 1996, the Company had available for carryforward a net
         operating loss of approximately $10,000,000. On November 19, 1996, the
         Company had a significant change in ownership (Note A). As a result of
         the ownership change, and in accordance with Section 382 of the
         Internal Revenue Code, the Company's net operating loss is limited in
         total and each year. The net operating loss available for the year
         ending December 31, 1996 is $840,997. For each year thereafter, the net
         operating loss will be limited to approximately $840,997 plus any
         unused loss from the prior year (1996 and forward). In addition to the
         limitation from Section 382 of the Internal Revenue Code, the losses
         are limited to a fifteen-year carryforward, with losses from 1984
         beginning to expire in the year 1999.

I.       STOCK OPTION PLAN:

         During 1996, the Company adopted the 1996 Stock Option Plan which
         provides for the issuance of both qualified and nonqualified stock
         options to employees and non-employee directors pursuant to Section 422
         of the Internal Revenue Code. The number of shares reserved for the
         plan are 3,000,000. Additional non-qualified options may be granted
         outside of the plan with approval of the board of directors.



                                     -34-
<PAGE>   36
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


I.       STOCK OPTION PLAN: [Continued]

         Options issued to participants are granted with an exercise price of
         the mean between the high "bid" and low "ask" price (average market
         price) as of the close of business on the date of grant, and are
         exercisable up to ten years from date of grant. Incentive stock options
         issued to persons who directly or indirectly own more than ten percent
         of the outstanding stock of the Company shall have an exercise price of
         110 percent of the average market price on the date of grant and are
         exercisable up to five years from date of grant. The aggregate fair
         market value of the shares with respect to which incentive stock
         options are exercisable for the first time by a holder during any
         calendar year under all plans shall not exceed $100,000.

         The Company's previous incentive stock option plan, the 1986 incentive
         Stock Option Plan, expired on January 29, 1996. The 1988 Non-qualified
         Stock Option Plan was terminated by the Company on April 24, 1996.
         Activity related to these plans is as follows:

<TABLE>
<CAPTION>
                                        1986 and
                                       1988 Plans      Weighted Avg      1996 Plan     Weighted Avg
                                        Number of        Exercise        Number of       Exercise
                                         Options           Price          Options          Price
                                       ----------      ------------      ---------     ------------
             <S>                         <C>             <C>             <C>              <C>
             Outstanding,
             December 31, 1994           120,340         $ .7279                --             --
                  Awarded                753,200           .3682                --             --
                  Expired                 (3,200)          .7279                --             --
                                         -------         -------
             Outstanding,
             December 31, 1995           870,340          0.4166                --             --
                  Awarded                     --              --         1,760,000        $1.5926
                  Exercised               (5,600)         0.5000                --             --
                                         -------         -------         ---------        -------
             Outstanding,
             December 31, 1996           864,740         $0.4160         1,760,000        $1.5926
                                         =======         =======         =========        =======

             Vested Options              864,740                         1,260,000
                                         =======                         =========
</TABLE>

         There were 6,200,000 options granted during 1996 outside of the 1996
         Plan, of which 4,800,000 were terminated subsequent to year end. The 
         remaining 1,400,000 options were vested at year end, have an exercise 
         price of $1.125 per share and a remaining life of 9.5 years.

         Exercise prices for options outstanding as of December 31, 1996 under
         the 1986 and 1988 Plan ranged from $.25 to $20.00 per share. The
         weighted average remaining life of these options was approximately 5
         years.


                                     -35-
<PAGE>   37
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


I.       STOCK OPTION PLAN: (Continued)

         Exercise prices for options outstanding as of December 31, 1996 granted
         under the 1996 Plan ranged from $1.125 to $2.00 per share. The weighted
         average remaining life of these options was approximately 10 years.

         The Company has elected to follow Accounting Principles Board Opinion
         No. 25, Accounting for Stock Issued to Employees (APB 25) and related
         interpretations in accounting for its employee stock options because,
         as discussed below, the alternative fair value accounting provided for
         under Financial Accounting Standards Board Statement No. 123,
         Accounting for Stock-Based Compensation, (FAS 123) requires use of
         option valuation models that were not developed for use in valuing
         employee stock options. Under APB 25, if the exercise price of the
         underlying stock equals fair market value on the date of grant, no
         compensation expense is recognized.

         Pro forma information regarding net income and earnings per share is
         required by Statement 123, and has been determined as if the Company
         had accounted for its employee stock options under the fair value
         method of that Statement. The fair value for these options was
         estimated at the date of grant using a Black-Scholes option pricing
         model with the following weighted-average assumptions for 1996
         respectively: risk-free interest rates of 6.1%, no dividend yield,
         volatility factors of the expected market price of the Company's common
         stock of .30 and a weighted-average expected life of the option of 3
         years.

         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's employee stock
         options have characteristics significantly different from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options.

         For purposes of pro forma disclosures, the estimated fair value of the
         options is amortized to expense over the options' vesting period. The
         Company's pro forma net loss if compensation expense had been
         recognized for the options issued would have been $2,944,622. Loss per
         share on a primary basis would have been $.18.

         No information as to the compensation expense, effect upon operations,
         and net loss per share as computed under the guidelines of FAS 123 is
         provided for periods prior to 1996 as the financial information
         included in this report for prior periods is for the Predecessor
         whereas options issued in prior periods relate to the acquired company
         (Note B). Applying compensation expense as determined under FAS 123 to
         options of the acquired company to the historical operations of the
         Predecessor would be misleading.


                                     -36-
<PAGE>   38
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEARS ENDED DECEMBER 31, 1995





J.       PRIVATE PLACEMENT OF COMMON STOCK:

         During 1996, the Company effected a private placement of shares of
         common stock in accordance with Regulation D of the Securities and
         Exchange Commission. The shares were sold at $1.20 per share. For every
         three shares of stock sold, one common stock warrant was issued to the
         purchaser, which represents the right to purchase an additional share
         at $1.75 per share. In aggregate, 1,516,975 shares of common stock and
         657,356 warrants were issued, which included an additional 151,698
         warrants issued to the placement agent. All warrants expire December
         31, 1999. The Company raised $1,638,818 in capital after payment of
         issuance costs and related fees as of December 31, 1996. An additional
         $183,000 was raised by the Company in this offering in January 1997.

         Subsequent to year end, the Company initiated an additional private
         placement of common stock which provides for the issuance of up to
         2,000,000 shares of stock at a price of $1.50 per share. For every
         three shares of stock sold, one common stock warrant was issued to the
         purchaser, which represents the right to purchase an additional share
         at $1.75 per share. As of March 28, 1997, the Company had issued
         500,000 shares of common stock and 216,667 common stock purchase
         warrants (including 50,000 warrants issued to the placement agent) for
         proceeds of $681,122, which are net of certain placement costs of
         $68,878.

K.       RELATED PARTY TRANSACTIONS:

         HSI has software development and license agreements with OneTree
         Corporation, which is controlled by the majority shareholder of the
         Company. The agreement is dated September 15, 1996 and shall terminate
         when development services are completed. The development fee is $30,000
         per month plus out of pocket costs, payable bi-weekly. Included in
         capitalized or expensed research and development costs for the year
         ended December 31, 1996 is $244,915 of these fees. Included in related
         party accounts payable is $15,750 which had not been paid to OneTree as
         of December 31, 1996.

         HSI has also entered into a software development and license agreement
         with MERAD Corporation, which is controlled by the majority shareholder
         of the Company. The agreement is dated August 15, 1996 and shall
         terminate after the enhancements to the HALIS software are delivered
         and accepted by the Company. The development fee is $15,000 per month,
         payable bi-weekly. Included in capitalized or expensed research and
         development are $90,000 which was paid to MERAD Corporation. Accounts
         receivable of $13,285 were due from MERAD for reimbursement of the
         purchase of certain equipment.



                                     -37-
<PAGE>   39
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


K.       RELATED PARTY TRANSACTIONS: [Continued]

         HSI has entered into an agreement with Paul Harrison Enterprises, Inc.
         (PHE), which is controlled by the majority shareholder of the Company.
         The agreement was entered into on July 1, 1996. HSI shall pay PHE
         $15,000 upon completion of the software according to specifications. On
         November 18, 1996, the Company entered into a license to a proprietary
         technology asset (PHE Technology) from PHE. The Company is obligated to
         pay a license fee of 10% of the gross revenues generated from the PHE
         Technology and any derivations thereof by the Company or any of its
         affiliates. Included in selling, general and administrative expenses is
         $7,259 in royalties which were paid to PHE which represent the 10%
         royalty on sales of this software.

         The Company paid management fees to AUBIS L.L.C. in the amount of
         $85,100 and $76,979, for the years ended December 31, 1996 and 1995,
         respectively. Included in related party accounts payable are $39,247 of
         these fees which were not paid as of December 31, 1996.

         Interest expense to related parties for the years ended December 31,
         1996 and 1995 were $16,155 and $21,332, respectively. Included in
         related party accrued expenses are $20,787 of those expenses which were
         not paid as of December 31, 1996.

         Additionally, in 1996, a 10% commission of $7,259 on sales of software
         was paid to Paul Harrison, the majority shareholder, and is included in
         selling, general and administrative expenses.

L.       SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

         Supplemental information required by Statement of Financial Accounting
         Standards No. 95, relative to the statement of cash flows, is as
         follows:

<TABLE>
<CAPTION>
                                           1996              1995
                                          ------            ------
             <S>                          <C>               <C>
             Taxes paid                   $6,908            $  -0-
             Interest paid                 6,585             6,145
</TABLE>

         The following non-cash transaction occurred for the year ended December
         31, 1996:

         AUBIS L.L.C. contributed capital by satisfying a note payable - related
         party of $150,000 and related accrued interest of $17,678.

         Common stock and additional paid-in capital totaling $240,000 was
         issued by issuing a stock subscription receivable.

         The following non-cash transactions occurred for the year ended
         December 31, 1995:

         Employee advances were increased by transferring fixed assets valued at
         $11,500 to those employees.

         Capital was contributed to HSI by issuing a receivable from the parent
         in the amount of $500.



                                     -38-
<PAGE>   40
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995


M.       SUBSEQUENT EVENTS:

         Merger Agreements:

         During January 1997, the Company effected three merger agreements with
         companies that will be accounted for as purchases under APB 16 by the
         Company. It is the opinion of management and legal counsel that these
         transactions qualify as tax-free reorganizations within the meaning of
         Section 368(a) of the Internal Revenue Code of 1986. Management of all
         companies represent they have no plans or intentions which would
         adversely affect the operations of any of the companies.

         The Compass Group, Inc. (Compass) was purchased for 350,000 shares of
         the Company's common stock in exchange for all outstanding shares of
         Compass. The agreement also provides for contingent merger
         consideration, paid in the form of the Company's common stock, based
         upon certain, specified operating results of the year ended December
         31, 1997.

         In addition, the Compass merger agreement provided for an employment
         agreement with the managing director of Compass which expires in
         January 1999 and provides for a base salary of $120,000 which may be
         increased after twelve months at the discretion of the board of
         directors. The Company also awarded to the managing director options to
         purchase 85,000 shares of the Company's common stock at $2.00 per
         share, exercisable for ten years from the closing date.

         The Software Manufacturing Group, Inc. (SMG) was purchased for
         3,072,000 shares of common stock of the Company in consideration for
         all outstanding shares of SMG. The agreement also provides for
         contingent merger consideration, paid in the form of the Company's
         common stock based upon certain, specified operating results of the
         period ended December 31, 1997.

         In addition, the SMG merger agreement included an employment agreement
         with the president of SMG which expires in January 1999 and provides
         for a base salary of $192,000 plus certain variable incentive
         compensation. Options to purchase a total of 100,000 shares of HALIS
         common stock at $2.00 per share were granted to three employees of SMG.

         American Benefit Administrative Services, Inc. and Third Party
         Administrators, Inc., (ABAS/TPA) were purchased for 1,875,000 shares of
         the Company's common stock in consideration for all outstanding shares
         of ABAS/TPA. Additionally, the merger agreement included noncompetition
         agreements between the Company and the president and vice-president of
         ABAS/TPA.

         The purchase agreement also provides that the president of ABAS/TPA may
         repay a loan from ABAS/TPA, which had a balance of $558,500 at October
         31, 1996, in the form of the Company's common stock commencing at the
         end of 1997, if certain specified conditions are met.



                                     -39-


<PAGE>   41
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995



M.       SUBSEQUENT EVENTS: [Continued]

         Merger Agreements: [Continued]

         In addition, the ABAS/TPA merger agreement provided for an employment
         agreement with the president which expires in January, 2000 and
         provides for a base salary of $200,000 plus certain variable incentive
         compensation, a $100,000 signing bonus payable in two $50,000
         installments: one installment upon signing the employment agreement and
         one installment on or before July 1, 1997. The merger agreement also
         provides for an employment agreement with the vice-president which
         provides for a base salary of $77,000. Both employment agreements
         provide for incentive compensation and guaranteed payments in the event
         of termination or in the event of change in control of the ABAS/TPA
         subsidiary. Additionally, the Company executed agreements with both of
         these parties which provide for the issuance of an aggregate of
         1,350,000 fully-vested common stock options of the Company's stock,
         exercisable at $2.00 per share for a period of ten years from the date
         of the agreement.

N.       UNAUDITED PRO FORMA INFORMATION:

         The following unaudited pro forma consolidated statement of operations
         of HALIS, Inc. gives retroactive effect to the following transactions
         as if they had occurred on January 1, 1995.

         The unaudited pro forma consolidated statement of operations was
         prepared by HALIS, Inc.'s management based on, and should be read in
         conjunction with, the historical statement of operations appearing
         elsewhere herein. This statement may not be indicative of the results
         of operations that would actually have been achieved had the
         transactions taken place at the date indicated and should not be
         construed as indicative of HALIS, Inc.'s results of operations for any
         future period.

<TABLE>
<CAPTION>
                                                                  Year ended December 31, 1996
                                                         As reported        Adjustments         Pro Forma
                                                         -----------        -----------         ---------
         <S>                                             <C>                  <C>              <C>
         Systems sales and services                      $ 1,925,412          $ 333,855        $ 2,259,267
                                                         ===========          =========        ===========

         Net loss                                        $(1,989,696)         $(564,256)       $(2,553,952)
                                                         ===========          =========        =========== 

         Net loss per common share                             (0.12)                                (0.12)
                                                         ===========                           =========== 

         Weighted average shares outstanding              15,956,824                            22,194,634
                                                         ===========                           =========== 
</TABLE>



                                     -40-
<PAGE>   42
                          HALIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996 AND THE
                COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
                      FOR THE YEAR ENDED DECEMBER 31, 1995



N.       UNAUDITED PRO FORMA INFORMATION: [Continued]

<TABLE>
<CAPTION>
                                                             Year ended December 31, 1995
                                                    As reported       Adjustments        Pro Forma
                                                    -----------       -----------        ---------
         <S>                                        <C>                <C>              <C>
         System sales and services                  $ 3,582,896        $ 732,549        $  4,315,445
                                                    ===========        =========        ============

         Net loss                                      (372,938)        (408,037)           (780,975)
                                                    ===========        =========        ============

         Net loss per common share                  $        --        $      --        $       (.03)
                                                    ===========        =========        ============

         Weighted average shares outstanding                 --               --          21,849,254
                                                    ===========        =========        ============
</TABLE>



                                     -41-

<PAGE>   43
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND FINANCIAL
         DISCLOSURE.

         There has been no occurrence requiring a response to this Item.



                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME                       AGE                        OFFICE
----                       ---                        ------
<S>                        <C>               <C>
Paul W. Harrison           42                Chairman of the Board and
                                                Chief Executive Officer

Larry  Fisher              53                President, Chief Operating
                                                Officer, Secretary, Treasurer
                                                and Director

Nathan Lipson              69                Director
</TABLE>

         In addition, three additional directors will be appointed by the Board
of Directors of the Company, one nominee to be selected by Mr. Harrison and two
nominees to be mutually agreed upon by Messrs. Fisher and Harrison.

         Paul W. Harrison has served as Chairman of the Board and Chief
Executive Officer of the Company since November 1996. In addition, Mr. Harrison
has been the managing member of AUBIS since February 1995, Chief Executive
Officer and a director of AHS since June 1994 and Chief Executive Officer and a
director of ASI since January 1995. Mr. Harrison has over 20 years of
professional experience in the United States and internationally in investments,
management consulting, and information technology. Mr. Harrison has created and
sold various software technology companies over his career that specialized in
the healthcare and information technology markets. In 1994, he acquired Wiporwil
Systems and Peripheral Design to form AUBIS, L.L.C. Prior to founding AUBIS,
L.L.C. Mr. Harrison started and later sold Biven Software Incorporated, a
technology company, to HBO & Company. Mr. Harrison served as an executive of and
advisor to HBO & Company through the end of 1994. Prior to Biven Software
Incorporated, Mr. Harrison owned and operated several technology development
companies. Mr. Harrison is also active in private investment funds and is a well
known supporter of health related charities.

         Larry Fisher has served as President, Chief Operating Officer,
Secretary and Treasurer of the Company since November 1996. The founder of the
Company, Mr. Fisher, has served as a director since its organization in 1979, as
President, Chief Executive officer, and Treasurer from 1979 to 1992 and, from
December 1992 to November 1996, as Chairman of the Board. He led the development
of the first generation of the Company's products for the hospitality
marketplace and is a recognized leader in the industry. Under his management,
the Company developed the first integrated point-of-sale and


                                     -42-


<PAGE>   44
back office system for the food service industry. He directed the Company's
efforts in the development of its second generation touch screen system. Prior
to 1979, Mr. Fisher was employed by IBM for 11 years in several executive sales
and marketing positions. In his last such position, Mr. Fisher was responsible
for creating, implementing and monitoring national marketing programs for the
retail and hospitality industries.

         Nathan Lipson has served as a director of the Company since November
1996. Mr. Lipson is a member of AUBIS and has served as a director of AHS and
ASI since December 1995. Mr. Lipson is currently a private investor, and has had
various ownership and management interests in companies doing business in the
hospitality and carpet industries.

         There are no family relationships between any director or executive
officer or any other director or executive officer of the Company.

         COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during the fiscal year
ended December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with, except
as follows: Paul W. Harrison (failed to file on a timely basis one report
relating to a total of two transactions); Larry Fisher (failed to file on a
timely basis two reports relating to a total of eight transactions); and 
Jeffrey C. Brenner, James F. Lyon and James Whitmire, former directors of the
Company (each failed to file on a timely basis one report relating to a total 
of one transaction).

         Although it is not the Company's obligation to make filings pursuant to
Section 16 of the Securities Exchange Act of 1934, the Company has recently
adopted a policy requiring all Section 16 reporting persons to report monthly to
the Vice President - Finance of the Company as to whether any transactions in
the Company's Common Stock occurred during the previous month.


                                      -43-
<PAGE>   45

ITEM 10. EXECUTIVE COMPENSATION.

         The following table sets forth certain summary information concerning
compensation paid, accrued or deferred by the Company for the fiscal year ended
December 31, 1996 and for the fiscal years ended January 31, 1996 and 1995 to or
on behalf of the Company's Chief Executive Officer and the other executive
officer of the Company whose total annual salary and bonus exceeded $100,000
during the fiscal year ended December 31, 1996 (hereinafter referred to as the
"Named Executive Officers").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                      LONG-TERM
                                                   ANNUAL COMPENSATION               COMPENSATION
                                                   -------------------               ------------
                                                                    OTHER
NAME AND                       FISCAL                               ANNUAL              STOCK
PRINCIPAL POSITION              YEAR       SALARY      BONUS     COMPENSATION           OPTIONS
------------------              ----       ------      -----     ------------           -------
<S>                            <C>        <C>         <C>        <C>                  <C>
Paul W. Harrison.............  1996(1)    $ 33,000    $ 8,000         (5)             4,750,000(2)                              
   Chairman of the                                                                             
   Board and Chief
   Executive Officer
Larry Fisher.................  1996(3)    $182,882    $ 5,000         (5)             2,650,000(4)   
   President and               1996        150,000     18,000         (5)               650,000
   Chief Operating             1995        150,000         --         (5)                    --
   Officer                                                                                     
</TABLE>


---------------------------

(1)      Mr. Harrison joined the Company on November 19, 1996 upon consummation
         of the acquisitions of AHS, ASI and HSI. Accordingly, cash compensation
         is for the period from November 19, 1996 to December 31, 1996.
(2)      Of this amount, options to purchase 3,000,000 shares of Common Stock
         were subsequently terminated without being exercised. This amount also
         includes options to purchase 1,400,000 shares of Common Stock granted 
         to Mr. Harrison prior to his employment with the Company. See "- Stock
         Options."
(3)      Represents compensation for the twelve month period ended 
         December 31, 1996.
(4)      Of this amount, options to purchase 1,800,000 shares of Common Stock
         were subsequently terminated without being exercised.
(5)      The Company pays for an automobile allowance for Messrs. Harrison and 
         Fisher, as well as certain other perquisites. The aggregate amounts of 
         these benefits do not exceed the lesser of $50,000 or 10% of the total 
         annual salary and bonus during the past fiscal year for the Named 
         Executive Officers.

DIRECTOR'S FEES

         The Company does not presently pay any fees to directors but does
reimburse directors for reasonable out-of-pocket expenses incurred in connection
with attendance of meetings of the Board of Directors. The Company has granted
certain non-qualified stock options to its non-employee directors


                                     -44-
<PAGE>   46
and in April 1996, the Board of Directors of the Company adopted a 1996 Stock
Option Plan pursuant to which each of the Company's outside directors will
receive an automatic annual grant of options to purchase 10,000 shares of 
Common Stock on the second Tuesday in June of each year during the term of the
Plan. The 1996 Stock Option Plan was approved by the shareholders of the Company
on November 18, 1996.

EMPLOYMENT AGREEMENTS

         Effective November 18, 1996, the Company entered into an Employment
Agreement with Paul W. Harrison, pursuant to which Mr. Harrison serves as
Chairman of the Board and Chief Executive Officer of the Company. The Employment
Agreement is for a term of three years, expiring on December 31, 1999, and
provides for an annual base salary of $200,000 (to be increased upon the
attainment of certain annual revenue targets) plus incentive bonus payments. In
addition, the Employment Agreement provides for Mr. Harrison to receive options
to purchase shares of Common Stock of the Company in the discretion of the Board
of Directors. The Employment Agreement provides for certain severance payments
to be paid to Mr. Harrison in the event of a change in control of the Company or
a significant change in Mr. Harrison's operational duties. In the event of a
change in control, Mr. Harrison will be entitled to terminate his employment
with the Company and to receive three times the sum of his annual base salary
and the cost for one year of all additional benefits provided to Mr. Harrison
under the Employment Agreement. In addition, in the event Mr. Harrison
terminates his employment under certain stated conditions or is terminated by
the Company without cause, he will receive the greater of one year's annual base
salary or an amount equal to the base salary which would otherwise be payable to
Mr. Harrison for the remaining term of his Employment Agreement. Any such
severance payment may, at the option of the Company, be paid to Mr. Harrison in
equal monthly installments or in a lump sum at a discounted present value. The
Employment Agreement contains non-compete and non-solicitation provisions,
effective through the actual date of termination of the Employment Agreement and
for a period of two years thereafter.

         Effective November 18, 1996, the Company also entered into an
Employment Agreement with Larry Fisher, pursuant to which Mr. Fisher serves as
President and Chief Operating Officer of the Company. The Employment Agreement
is for a term of three years, expiring on December 31, 1999, and provides for an
annual base salary of $175,000 (to be increased upon the attainment of certain
annual revenue targets) plus incentive bonus payments. In addition, the
Employment Agreement provides for Mr. Fisher to receive options to purchase
shares of Common Stock of the Company in the discretion of the Board of
Directors. The Employment Agreement provides for certain severance payments to
be paid to Mr. Fisher in the event of a change in control of the Company or a
significant change in Mr. Fisher's operational duties. In the event of a change
in control, Mr. Fisher will be entitled to terminate his employment with the
Company and to receive two times his annual base salary plus twice the cost for
one year of all additional benefits provided to Mr. Fisher under the Employment
Agreement. In addition, in the event Mr. Fisher terminates his employment under
certain stated conditions or is terminated by the Company without cause, he will
receive the greater of one year's annual base salary or an amount equal to the
base salary which would otherwise be payable to Mr. Fisher for the remaining
term of his Employment Agreement. Any such severance payments may, at the option
of the Company, be paid to Mr. Fisher in equal monthly installments or in a lump
sum at a discounted present value. The Employment Agreement contains non-compete
and non-solicitation provisions, effective through the actual date of
termination of the Employment Agreement and for a period of two years
thereafter.


                                     -45-
<PAGE>   47
STOCK OPTIONS

         On November 18, 1996, the Company's shareholders adopted the 1996 Stock
Option Plan (the "Plan") for employees who are contributing significantly to the
business of the Company or its subsidiaries as determined by the Company's Board
of Directors or the committee administering the Plan. The Plan currently
provides for the grant of incentive and non-qualified stock options to purchase
up to 3,000,000 shares of Common Stock at the discretion of the Board of
Directors of the Company or a committee designated by the Board of Directors to
administer the Plan. The option exercise price of incentive stock options must
be at least 100.0% (110.0% in the case of a holder of 10.0% or more of the
Common Stock) of the fair market value of the stock on the date the option is
granted and the options are exercisable by the holder thereof in full at any
time prior to their expiration in accordance with the terms of the Plan.
Incentive stock options granted pursuant to the Plan will expire on or before
(1) the date which is the tenth anniversary of the date the option is granted,
or (2) the date which is the fifth anniversary of the date the option is granted
in the event that the option is granted to a key employee who owns more than 10%
of the total combined voting power of all classes of stock of the Company or any
subsidiary of the Company. Options granted under the Plan typically vest over a
period of four to five years.

         In consideration of services rendered by Paul Harrison to the Company
in anticipation of the consummation of the mergers with AHS, ASI and HSI, the
Company on June 7, 1996 granted to Mr. Harrison an option to purchase 1,400,000
shares of Common Stock, which options became exercisable upon consummation of
the HSI merger. The option terminates on June 7, 2006 and is exercisable
at a price of $1.125 per share (which represents the fair market value of the
Common Stock on the date of grant).

         On December 6, 1996, the Company granted options to purchase up to
3,350,000 shares of Common Stock to Mr. Harrison, and options to purchase up to
1,850,000 shares of Common Stock to Mr. Fisher, exercisable at a price of $2.00
per share. Of this amount, options to purchase 3,000,000 shares of Common Stock
granted to Mr. Harrison and options to purchase 1,800,000 shares of Common Stock
granted to Mr. Fisher were subsequently terminated without being exercised. The
remaining stock options granted to Messrs. Harrison and Fisher are exercisable
immediately.

         As of April 10, 1997, options to purchase 5.5 million shares of Common
Stock of the Company were outstanding.


                                      -46-
<PAGE>   48
         The following table provides certain information concerning individual
grants of stock options made during the fiscal year ended December 31, 1996 to
the Named Executive Officers:


<TABLE>
<CAPTION>
                                                                 OPTION GRANTS IN LAST FISCAL YEAR
                                                                         INDIVIDUAL GRANTS
                                                                -----------------------------------
                                                              % OF TOTAL OPTIONS
                                             OPTIONS              GRANTED TO            EXERCISE OR
                                             GRANTED         EMPLOYEES IN FISCAL         BASE PRICE        EXPIRATION
                  NAME                         (#)                   YEAR               ($PER SHARE)          DATE
                  ----                       -------         -------------------        ------------       ----------
<S>                                       <C>                        <C>                   <C>             <C>
Paul W. Harrison........................  1,400,000(1)               24.4%                 $1.125          06/07/2006
                                            350,000(2)                6.1%                 $ 2.00          12/06/2006
                                          3,000,000(3)               52.4%                 $ 2.00                 N/A

Larry Fisher............................    800,000(2)               14.0%                 $1.125          06/07/2006
                                             50,000(2)                0.9%                 $ 2.00          12/06/2006
                                          1,800,000(3)               31.4%                 $ 2.00                 N/A
</TABLE>

-------------------------

(1)      Options were granted to Mr. Harrison in consideration of his providing
         of services in anticipation of the acquisition by the Company of HSI.
         Options became fully exercisable from the acquisition of HSI by the
         Company in November 1996.

(2)      Options are fully exercisable.

(3)      Options were terminated by mutual agreement of the parties in March
         1997 without any such options being exercised.

         The following table provides certain information concerning the value
of unexercised options held by the Named Executive Officers as of December 31,
1996. No stock options were exercised by the Named Executive Officers during
fiscal 1996.

             AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                        FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                            NUMBER OF                   VALUE OF UNEXERCISED
                                                           UNEXERCISED                  IN-THE-MONEY OPTIONS
                                                       OPTIONS AT YEAR-END                   AT YEAR-END
         NAME                                       EXERCISABLE/UNEXERCISABLE       EXERCISABLE/UNEXERCISABLE(1)
         ----                                       -------------------------       ----------------------------
         <S>                                               <C>                             <C>
         Paul W. Harrison(2).....................          1,750,000/0                     $  875,000/$0
         Larry Fisher(2).........................          1,600,000/0                     $1,600,000/$0
</TABLE>

-----------------------------

(1)      Dollar values calculated by determining the difference between the fair
         market value of the Company's Common Stock at December 31, 1996 ($1.75)
         and the exercise price of such options.

(2)      Excludes options to purchase 3,000,000 shares of Common Stock granted
         to Mr. Harrison and options to purchase 1,800,000 shares of Common
         Stock granted to Mr. Fisher during fiscal 1996, which options were
         subsequently terminated.


                                      -48-
<PAGE>   49
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth information regarding the beneficial
ownership of the Company Common Stock of the Company, as of April 10, 1997, by
(i) those persons or entities known by management of the Company to own
beneficially more than 5% of the Company Common Stock, (ii) each of the
directors of the Company, and (iii) all directors and executive officers of the
Company as a group. Unless otherwise indicated in the footnotes to the table,
the persons or entities listed below have sole voting and investment power with
respect to the shares of the Company Common Stock shown as beneficially owned by
them.

<TABLE>
<CAPTION>
                                                      SHARES OF
                                                    COMMON STOCK
     NAME OF                                         BENEFICIALLY         PERCENT
BENEFICIAL OWNER                                       OWNED (1)         OF CLASS
----------------                                       ---------         --------
<S>                                                   <C>                  <C>
Paul W. Harrison ...............................      16,840,000(2)        53.0%

Larry Fisher ...................................       2,250,500(3)         7.1%

Nathan Lipson ..................................         100,000(4)           *

Charles Cone, Jr.(5) ...........................       1,509,300            5.0%

Philip E. Spicer ...............................       1,875,000(6)         6.0%

AUBIS, L.L.C (7) ...............................      10,000,000           33.4%

Healthcare Technology
  Investments, L.L.C (7) .......................       5,000,000           16.7%

Jeffrey C. Brenner .............................       1,935,800(8)         6.4%

Directors and executive officers
  as a group (3 persons) .......................      19,190,500           57.1%
</TABLE>

* Less than 1% of outstanding shares.

------------------------------

(1)      "Beneficial Ownership" includes shares for which an individual,
         directly or indirectly, has or shares voting or investment power or
         both and also includes options which are exercisable within sixty days
         of the date of this Memorandum. All of the listed persons have sole
         voting and investment power over the shares listed opposite their names
         unless otherwise indicated in the notes below. Beneficial ownership as
         reported in the above table has been determined in accordance with Rule
         13d-3 of the Securities Exchange Act of 1934. The percentages are based
         upon 29,943,021 shares outstanding, except for certain parties who hold
         presently exercisable options and convertible securities to purchase
         shares. The percentages for those parties who hold


                                     -49-
<PAGE>   50
         presently exercisable options or convertible securities are based upon
         the sum of 29,943,021 shares plus the number of shares subject to
         presently exercisable options or convertible securities held by them,
         as indicated in the following notes.

(2)      Includes 1,750,000 shares of Common Stock subject to presently
         exercisable stock options, 50,000 shares of Common Stock issuable upon
         the conversion of outstanding convertible promissory notes held by Mr.
         Harrison individually and 40,000 shares of Common Stock issuable upon
         the conversion of outstanding convertible promissory notes held by a
         corporation controlled by Mr. Harrison. Also includes 10,000,000 shares
         owned by AUBIS, L.L.C. and 5,000,000 shares owned by Healthcare
         Technology Investments, L.L.C., which Mr. Harrison has the power to
         vote by virtue of his position as the President and managing member of
         these two entities. Mr. Harrison's business address is 9040 Roswell
         Road, Suite 470, Atlanta, Georgia 30350.

(3)      Includes 1,600,000 shares of Common Stock subject to presently
         exercisable stock options and 50,000 shares of Common Stock issuable
         upon the conversion of outstanding convertible promissory notes. Mr.
         Fisher's business address is 9040 Roswell Road, Suite 470, Atlanta,
         Georgia 30350.

(4)      Includes 10,000 shares of Common Stock subject to presently exercisable
         stock options and 90,000 shares of Common Stock issuable upon the
         conversion of outstanding convertible promissory notes.

(5)      Mr. Cone's business address is 7840 Roswell Road, Suite 304, Atlanta,
         Georgia 30350.

(6)      Includes 1,250,000 shares of Common Stock subject to presently
         exercisable stock options. Mr. Spicer's business address is 1733 Park
         Street, Suite 300, Naperville, Illinois 60544.

(7)      The business address of AUBIS, L.L.C. and Healthcare Technology
         Investments, L.L.C. is 3390 Peachtree Road, N.E., Suite 1000, Lenox
         Towers, Atlanta, Georgia 30326.

(8)      Includes 110,800 shares subject to presently exercisable stock options.
         Mr. Brenner's address is 3581 Sarasota Golf Club Boulevard, Sarasota,
         Florida 34240.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In connection with the acquisition of ASI, AHS and HSI on November 19,
1996, the Company issued 10,000,000 shares of Common Stock to AUBIS, L.L.C. and
5,000,000 shares of Common Stock to Healthcare Technology Investments, L.L.C.
(formerly HALIS, L.L.C.). Paul W. Harrison, a director of the Company, serves as
the managing member of both AUBIS, L.L.C. and Healthcare Technology Investments,
L.L.C. and beneficially owns approximately 25% and 54% respectively, of these
two companies.

         On November 18, 1996, the Company entered into a license to a
proprietary technology asset ("MERAD") from Paul Harrison Enterprises, Inc.
("PHE"). The Company is obligated to pay a license fee 10% of the gross revenues
generated from MERAD and any derivations thereof by the Company or any of its
affiliates. Mr. Harrison serves as the President of PHE and beneficially owns
53.3% of this company. PHE acquired MERAD from Paul Harrison in July 1995. The
Company paid $7,259 to PHE in 1996 pursuant to this license agreement.


                                      -50-
<PAGE>   51
         When PHE acquired rights in MERAD from Mr. Harrison, Mr. Harrison
retained a perpetual royalty free license to MERAD and any enhancements and
derivatives thereof (excluding any application software developed utilizing
MERAD). On October 1, 1995, PHE licensed MERAD, in its then partially completed
state, to HALIS, L.L.C. (who, in turn, licensed MERAD to HSI, which was acquired
by the Company in November 1996) in order for HSI to develop proprietary
healthcare software (the "License"). As part of the License, HSI agreed to
continue developing MERAD and to be a beta site to test MERAD's capabilities and
functionality. HSI agreed that any enhancements and modifications to MERAD
become the sole and exclusive proprietary property of PHE, subject to HSI's
rights to use the same under its License. With the exception of certain licenses
to use MERAD, PHE has exclusive ownership rights to MERAD. HSI has agreed to pay
an additional $15,000 upon completion of the software according to
specifications. In addition, HSI paid sales commissions of $7,259 to Mr.
Harrison in 1996.

         As a result of its acquisition of HSI in November 1996, the Company
assumed software development and license agreements with OneTree Corporation and
MERAD Corporation, both of which are controlled by Paul W. Harrison. Mr.
Harrison serves as a director and is an 80% shareholder of OneTree Corporation,
and serves as President and is a 21% shareholder of MERAD Corporation. During
1996, $244,915 was paid to OneTree Corporation and $90,000 was paid to MERAD
Corporation under these license agreements. The agreement with OneTree
Corporation was terminated in January 1997. The development fee payable to MERAD
Corporation is $15,000 per month. The MERAD agreement will terminate after the
enhancements to the HALIS software are completed, which is expected to occur in
1997.

         In February 1996, the Company entered into a Management Agreement with
AUBIS, L.L.C. pursuant to which Mr. Harrison provided management services to the
Company in an effort to begin the process of effecting an orderly transition of
ASI and AHS to the Company. The Management Agreement was terminated on June 1,
1996. Management fees totaling $50,000 were paid by the Company to AUBIS, L.L.C.
pursuant to this agreement. Separately, AHS, ASI and HSI paid management fees to
AUBIS, L.L.C. of $85,100 and $76,979 in 1996 and 1995, respectively.

         In February 1996, the Company entered into a Marketing Agreement with
AHS pursuant to which AHS distributed the Fisher Restaurant Management
System(TM). Pursuant to this agreement, the Company advanced AHS $80,000, which
indebtedness was cancelled upon the acquisition of AHS by the Company in
November 1996. AHS was previously a wholly-owned subsidiary of AUBIS, L.L.C. 
which is controlled by Mr. Harrison.

         In 1996, the Company conducted a private placement of 7.0% Convertible
Promissory Notes due January 15, 1998 (the "Notes"), some of which were
purchased by directors of the Company as follows: Paul W. Harrison and affiliate
- $90,000, Larry Fisher - $50,000; and Nathan Lipson - $90,000. Interest paid on
these Notes for 1996 totalled $3,938, $2,747 and $3,631 to Messrs. Harrison,
Fisher and Lipson, respectively.

        In addition, as of December 31, 1996, the Company owed $135,000 to
Nathan Lipson, a director of the Company. These notes bear interest at rates
ranging from 8.75% to 12.0% per year and are due on demand. During 1995 and
1996, $3,222 and $1,200 of interest was paid to Mr. Lipson on these notes. As
of December 31, 1996 accrued and unpaid interest on these notes totalled
$20,787.


                                     -50-
<PAGE>   52
                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits.

         The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
either (i) a Registration Statement on Form S-18 under the Securities Act of
1933 for the Registrant, Registration No. 33-14114-A, initially filed with the
Securities and Exchange Commission on May 7, 1987, as amended ("S-18"); (ii) the
Annual Report on Form 10-K for the year ended January 31, 1991 ("1991 10-K");
(iii) the Annual Report on Form 10-K for the year ended January 31, 1993 ("1993
10-K"); (iv) the Annual Report on Form 10-K for the year ended January 31, 1995
("1995 10- K"); (v) the Annual Report on Form 10-KSB for the year ended January
31, 1996 ("1996 10-KSB"); or (vi) the Current Report on Form 8-K dated November
19, 1996 ("8-K").


<TABLE>
<CAPTION>

EXHIBIT NO.                      DESCRIPTION OF EXHIBIT
-----------                      ----------------------
 <S>              <C>
 * 2.2            Amended and Restated Agreement and Plan of Merger and
                  Reorganization, dated as of December 13, 1995 and amended and
                  restated as of March 29, 1996, and as further amended on
                  September 27, 1996, among Fisher Business Systems, Inc.,
                  AUBIS, L.L.C., AUBIS Hospitality Systems, Inc., AUBIS Systems
                  Integration, Inc. and certain persons and affiliates of AUBIS,
                  L.L.C. (8-K, Exhibit 2.1)

 * 3.1.1          Articles of Incorporation, as amended (S-18, Exhibit 3.1)

 * 3.1.2          Articles of Amendment filed December 1, 1992 (1993 10-K,
                  Exhibit 3.1.2)

 * 3.1.3          Articles of Amendment filed June 30, 1995 (1995 10-K)

   3.1.4          Articles of Amendment filed November 18, 1996

   3.1.5          Articles of Amendment filed November 26, 1996

 * 3.2            By-laws, as amended (S-18, Exhibit 3.2)

 * 4.1            Form of Common Stock Certificate (S-18, Exhibit 4.1)

  10.1            Employment Agreement dated November 18, 1996, as amended on
                  January 3, 1997, by and between the Registrant HALIS and Paul
                  W. Harrison

  10.2            Employment Agreement dated November 18, 1996, as amended on
                  January 3, 1997, by and between the Registrant and Larry
                  Fisher

  10.3            Sublease dated January 10, 1997 by and between VeriFone, Inc.
                  and the Registrant for lease of office space in Atlanta,
                  Georgia
</TABLE>


                                      -52-
<PAGE>   53

<TABLE>
<S>               <C>
  10.4            Warrant Agreement, dated November 19, 1996, by and between the
                  Registrant and SunTrust Bank, Atlanta

 *10.5            Form of Employee Trade Secret Agreement (S-18, Exhibit 10.19)

  10.6            License Agreement, dated November 18, 1996, by and between
                  Paul Harrison Enterprises, Inc. and the Registrant

*10.14            401(k) Plan of Registrant adopted January 1, 1991 (1991 10-K,
                  Exhibit 10.16)

*10.19            Stock Purchase Agreement, dated as of March 29, 1996 and
                  amended as of September 27, 1996, between Fisher Business
                  Systems, Inc., HALIS, L.L.C., Paul W. Harrison and James
                  Askew. (8-K, Exhibit 2.2)

*10.20            1996 Stock Option Plan of the Company (1996 10-KSB)

  21.1            Subsidiaries of the Registrant

  23.1            Consent of Habif, Arogeti & Wynne, P.C.

  27.1            Financial Data Schedule
</TABLE>


         (b) Reports on Form 8-K.

         The following report on Form 8-K was filed during the fourth quarter of
the fiscal year ended December 31, 1996: Current Report on Form 8-K dated
November 19, 1996.


                                      -53-
<PAGE>   54
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                    HALIS, INC.


Date:  April 11, 1997               By: /s/ Larry Fisher
                                       -----------------------------------------
                                       Larry Fisher, President and
                                       Chief Operating Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
           Signature                                                         Date
           ---------                                                         ----
<S>                                                                     <C>
 /s/ Paul W. Harrison                                                   April 11, 1997
------------------------------
Paul W. Harrison
Chairman of the Board and Chief
Executive Officer (Principal Executive and Financial Officer)


 /s/ Larry Fisher                                                       April 11, 1997
------------------------------
Larry Fisher
President and Chief Operating
Officer


 /s/ Philip Hinson                                                      April 11, 1997
------------------------------
Philip Hinson
Vice President - Finance (Principal
Accounting Officer)


 /s/ Nate Lipson                                                        April 11, 1997
------------------------------
Nate Lipson
Director
</TABLE>



<PAGE>   55
                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit                                                                             Sequential
Number                              Description                                     Page Number
-------           -------------------------------------------------                 -----------
<S>               <C>                                                                    <C>
3.1.4             Articles of Amendment filed November 18, 1996

3.1.5             Articles of Amendment filed November 26, 1996

10.1              Employment Agreement dated November 18, 1996, as amended on
                  January 3, 1997, by and between the Registrant HALIS and Paul
                  W. Harrison

10.2              Employment Agreement dated November 18, 1996, as amended on
                  January 3, 1997, by and between the Registrant and Larry
                  Fisher

10.3              Sublease dated January 10, 1997 by and between VeriFone, Inc.
                  and the Registrant for lease of office space in Atlanta,
                  Georgia

10.4              Agreement, dated November 19, 1996, by and between the
                  Registrant and SunTrust Bank, Atlanta

10.6              License Agreement, dated November 18, 1996, by and between
                  Paul Harrison Enterprises, Inc. and the Registrant

21.1              Subsidiaries of the Registrant

23.1              Consent of Habif, Arogeti & Wynne, P.C.

27.1              Financial Data Schedule
</TABLE>