Ariel Helwani said on the Fuel TV broadcast that one source close to the situation said that Hallman was 7 pounds overweight. They made a deal with Tavares to get down to only 3 pounds overweight. Hallman wasn't able to make it to that point and met with Dana White. Helwani said the meeting was "cordial" and they just agreed that the fight should be scrapped.
Hallman missed weight in his last bout as well, coming in at 158.5 for his lightweight bout with John Makdessi at UFC 140.
While Ariel said that the meeting between Hallman and White was cordial, I have my doubts about Hallman's future at this point. He's shown a real lack of professionalism here and the UFC doesn't treat that kindly.
It was also confirmed that Tavares will receive his show money.
UPDATE: Hallman took to Twitter to counter Ariel's story:
@arielhelwani get your facts straight, I was three over at time of weigh ins and still had two hours. I am out of fight for personal reasons— Dennis Hallman (@DennisHallman) October 4, 2012