<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event report): January 31, 1999
ELECTRONIC TRANSMISSION CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-22135 75-2578619
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5025 Arapaho Road
Suite 501
Dallas, Texas 75248
(Address of principal executive offices) (ZIP Code)
(972) 980-0900
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OF ASSETS
The first sentence of the fourth paragraph of Item 2 of the initial report on
Form 8-K is amended to read as follows:
As part of the transaction, Robert Fortier received 3,538,306 shares of
unregistered Company $.001 par value common stock, which is 42% of the
outstanding common stock of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial statements of Health Plan Initiatives, Inc. were not available at the
time of filing of the initial report on February 16, 1999. The financial
statements were due not later than sixty (60) days after the initial report must
be filed (April 16, 1999). The following financial statements are submitted as
part of this amended report:
Independent Auditors Report
Audited Financial Statements for Health Plan Initiatives, Inc. for the
Years Ended December 31, 1998, and 1997.
Unaudited ProForma Consolidated Financial Statements for Electronic
Transmission Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELECTRONIC TRANSMISSION CORPORATION,
A TEXAS CORPORATION
By: /s/ Brian Schoonmaker
-------------------------------------------
Brian Schoonmaker, Executive Vice
President and Chief Operating Officer
Date: April 14, 1999
-2-
<PAGE> 3
HEALTH PLAN INITIATIVES, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<PAGE> 4
HEALTH PLAN INITIATIVES, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................................................1
Financial Statements:
Balance Sheets....................................................................2
Statements of Operations..........................................................3
Statements of Stockholder's Equity (Deficit)......................................4
Statements of Cash Flows..........................................................5
Notes to Financial Statements..............................................................6
</TABLE>
<PAGE> 5
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Health Plan Initiatives, Inc.
We have audited the accompanying balance sheets of Health Plan Initiatives, Inc.
as of December 31, 1998 and 1997, and the related statements of operations,
Stockholder's equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 Health Plan Initiatives, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Whitley Penn
Fort Worth, Texas
April 5, 1999
<PAGE> 6
HEALTH PLAN INITIATIVES, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,632 $ 77,222
Accounts receivable 407,328 211,711
--------- ---------
Total current assets 411,960 288,933
Investments 26,100 --
Property and equipment:
Computer equipment 164,249 150,228
Office equipment 12,000 12,000
Furniture 22,296 19,707
Less accumulated depreciation (118,982) (59,845)
--------- ---------
Total property and equipment 79,563 122,090
--------- ---------
Other assets (net of accumulated amortization of $0 and $4,189
at December 31, 1998 and 1997, respectively) -- 9,811
--------- ---------
Total assets $ 517,623 $ 420,834
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities -
Bank overdraft $ 4,607 $ --
Accounts payable 395,006 90,782
Line of credit 78,244 --
Current portion of long-term debt 71,857 68,031
--------- ---------
Total current liabilities 549,714 158,813
Long-term debt:
Note payable Healthcorp International (Notes D) 83,869 151,900
Less current portion (71,857) (68,031)
--------- ---------
12,012 83,869
Commitments (Note E)
Stockholder's equity (deficit):
Common stock, $1.00 par value; 1,000,000 shares authorized;
1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 81,215 81,215
Retained earnings/(deficit) (126,318) 95,937
--------- ---------
Total stockholder's equity (deficit) (44,103) 178,152
--------- ---------
Total liabilities and Stockholder's equity (deficit) $ 517,623 $ 420,834
========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 7
HEALTH PLAN INITIATIVES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenue:
Service revenues $ 1,518,492 $ 699,031
Costs and expenses:
Cost of revenues 439,161 104,444
Selling, general and administrative 1,056,705 268,973
Depreciation and amortization 60,546 56,317
----------- -----------
Total expenses 1,556,412 429,734
----------- -----------
Income/(loss) from operations (37,920) 269,297
Other income (expense):
Interest income 1,727 --
Other (8,400) --
----------- -----------
Total other income (expenses) (6,673) --
----------- -----------
Net income/(loss) $ (44,593) $ 269,297
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 8
HEALTH PLAN INITIATIVES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL Retained
COMMON PAID-IN Earnings/
STOCK CAPITAL (Deficit) Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 1,000 $ 81,215 $ 229 $ 82,444
Net income -- -- 269,297 269,297
Stockholder's distributions -- -- (173,589) (173,589)
------------ ------------ ------------ ------------
Balance at December 31, 1997 1,000 81,215 95,937 178,152
Net loss -- -- (44,593) (44,593)
Stockholder's distributions -- -- (177,662) (177,662)
------------ ------------ ------------ ------------
Balance at December 31, 1998 $ 1,000 $ 81,215 $ (126,318) $ (44,103)
============ ============ ============ ============
</TABLE>
See accompanying notes.
6
<PAGE> 9
HEALTH PLAN INITIATIVES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (44,593) $ 269,297
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization 60,546 56,317
Loss on disposal of asset 8,400 --
(Increase) decrease in operating assets:
Accounts receivable (195,617) (158,862)
Investments (26,100) --
Increase (decrease) in operating liabilities:
Bank overdraft 4,607 --
Accounts payable 304,224 88,696
---------- ----------
Net cash provided by operating activities 111,467 255,448
Cash flows from investing activities:
Purchases of property and equipment (16,609) (7,502)
---------- ----------
Net cash used by investing activities (16,609) (7,502)
Cash flows from financing activities:
Advances on line of credit 80,406 --
Repayment on line of credit (2,162) --
Repayments on long-term debt (68,030) (9,131)
Stockholder's distributions (177,662) (173,589)
---------- ----------
Net cash used by financing activities (167,448) (182,720)
---------- ----------
Increase/(decrease) in cash and cash equivalents (72,590) 65,226
Cash and cash equivalents at beginning of year 77,222 11,996
---------- ----------
Cash and cash equivalents at end of year $ 4,632 $ 77,222
========== ==========
Supplemental disclosures:
Cash paid for interest $ 883 $ --
Cash paid for income taxes $ -- $ --
Supplemental schedule of non-cash investing and financing
activities:
Issuance of note payable $ -- $ 161,031
Purchase of property and equipment -- (161,031)
</TABLE>
See accompanying notes.
7
<PAGE> 10
HEALTH PLAN INITIATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A. Nature of Business
Health Plan Initiatives, Inc. (the "Company") was organized and chartered in
March 1995 in the state of Texas as a corporation for the purpose of developing
network contracts between physician groups, health insurance providers and
employer groups. These arrangements are commonly referred to as Preferred
Provider Organizations ("PPO's"). The company also provides back office support
to self-insured companies, third party administrators that pay claims for
self-insured companies and other medical provider networks or cost containment
companies providing services to self-insured companies. The Company's customers
are located throughout the United States. The Company's corporate offices are
located in Hurst, Texas.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows.
BASIS OF ACCOUNTING
The accounts are maintained and the financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted accounting
principles.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
RECOGNITION OF REVENUE
The Company recognizes revenue when services are performed. Expenses are
recognized in the period in which incurred.
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments (certificates of deposits)
purchased with an original maturity of three months or less and money market
funds to be cash equivalents. The Company's cash and cash equivalents at
December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
Money Market Funds $ 4,632 $ -
</TABLE>
8
<PAGE> 11
HEALTH PLAN INITIATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made by
management.
DEPRECIATION
Depreciation of property and equipment is provided on a straight-line basis over
the estimated lives of the assets. Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. The cost of assets sold or abandoned and the related accumulated
depreciation are eliminated from the accounts and the net amount, less proceeds
from disposal, is charged or credited to income.
Estimated useful lives are as follows:
<TABLE>
<CAPTION>
CLASS OF ASSET ESTIMATED LIFE
- -------------------------------- --------------
<S> <C>
Office Equipment 5 years
Computer Equipment 3 years
Furniture 5 years
</TABLE>
INCOME TAXES
The Company has elected to be taxed under the provision of Subchapter S of the
Internal Revenue Code. Under those provisions, the Company does not pay federal
corporate income taxes on its taxable income. Instead, the stockholder is liable
for individual federal income taxes on his respective shares of the corporate
income. Accordingly, no provision has been made for federal income tax in the
accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, receivables and accounts
payable approximates fair value due to the short maturity of these instruments.
C. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
include cash on deposit with one financial institution amounting to
approximately $109,300 at December 31, 1998, which was insured for up to
$100,000 by the U.S. Federal Deposit Insurance Corporation. However, outstanding
checks, which represent transfers of funds to insurance carriers, against these
cash balances at December 31, 1998, totaled approximately $83,100. As these
outstanding checks are cleared through the financial institutions, the Company's
credit risk will be reduced to within insured levels.
9
<PAGE> 12
HEALTH PLAN INITIATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. NOTE PAYABLE HEALTHCORP INTERNATIONAL
The Company has issued an unsecured note payable to Healthcorp International for
the purchase of property equipment. The note is dated October 21, 1996, requires
monthly payments of $5,988 and bears no interest.
E. LINE OF CREDIT
The Company has a $100,000 revolving line of credit with Chase Bank Hurst, Texas
dated February 1998, which expires February 2003 at which time any outstanding
balance is due. The revolving line of credit bears interest at prime plus 1.5%
(prime was 7.75% at December 31, 1998). The interest rate is reviewed quarterly
for changes. The amount outstanding on this line of credit at December 31, 1998
was $78,244.
F. COMMITMENTS AND CONTINGENCIES
The Company leases its offices, automobiles and certain office equipment under
noncancelable operating lease agreements. The term of the office lease is from
May 1997 to May 2000 at a monthly rate of $1,963. The term of auto leases range
from March 1998 to March 2002 at monthly rates that range from $653 to $1,126
per month. The term of the office equipment leases is from October 1996 to
August 2000 at rates that range from $205 to $361 per month.
Future minimum rental commitments at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
<S> <C>
1999 $ 71,800
2000 51,900
2001 47,000
2002 19,200
---------
$ 189,900
=========
</TABLE>
The Company is subject to legal proceedings and claims, which arise, in the
ordinary course of its business. In the opinion of management the ultimate
liability, if any, with respect to these actions will not have a material affect
the operations or financial position of the Company.
10
<PAGE> 13
HEALTH PLAN INITIATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
G. ECONOMIC DEPENDENCY
The Company has one customer that accounted for approximately 68% of the
Company's service revenues. Accounts receivable included $288,273 relating to
this customer at December 31, 1998.
H. SUBSEQUENT EVENTS
Effective January 31, 1999, 100% of the Company's outstanding common stock was
acquired by Electronic Transmission Corporation. As a result, the Company is now
a 100% owned subsidiary of Electronic Transmission Corporation.
11
<PAGE> 14
ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical HPI Adjustments Pro Forma
------------ ------------ ----------- ------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 122,039 $ 26,125 $ -- $ 148,164
Accounts receivable 181,446 407,328 588,774
Current portion, capital lease receivable 2,417 -- 2,417
Prepaid assets 55,797 -- 55,797
Net assets of discontinued operations -- -- --
------------ ------------ ------------ ------------
Total current assets 361,699 433,453 -- 795,152
------------ ------------ ------------ ------------
Property and equipment, net 320,736 79,563 400,299
Other assets 6,749 -- 341,103 347,852
------------ ------------ ------------ ------------
$ 689,184 $ 513,016 $ 341,103 $ 1,543,303
============ ============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 410,954 $ 395,006 $ -- $ 805,960
Notes payable and convertible debentures 280,318 78,244 358,562
Current portion, capital lease obligations 53,963 71,857 125,820
Net liabilities of discontinued operations 141,317 -- 141,317
------------ ------------ ------------ ------------
Total current liabilities 886,552 545,107 -- 1,431,659
Long-term capital lease obligations 126,520 12,012 138,532
------------ ------------ ------------ ------------
Total liabilities 1,013,072 557,119 -- 1,570,191
------------ ------------ ------------ ------------
Commitments and contingencies -- -- -- --
Stockholders' equity (deficit):
Preferred stock, $1 par value, 2,000,000 shares
authorized; no shares issued -- -- -- --
Common stock, .001 par value, 20,000000
shares authorized; 3,996,924 shares
issued and outstanding 4,927 1,000 2,709 8,636
Additional paid-in-capital 7,793,590 81,215 212,076 8,086,881
Accumulated deficit (8,122,405) (126,318) 126,318 (8,122,405)
Accumulated other comprehensive income -- -- -- --
------------ ------------ ------------ ------------
Total stockholders' equity (deficit) (323,888) (44,103) 341,103 (26,888)
------------ ------------ ------------ ------------
$ 689,184 $ 513,016 $ 341,103 $ 1,543,303
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet.
<PAGE> 15
ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical HPI Adjustments Pro Forma
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Service revenues $ 2,467,010 $ 1,518,492 $ -- $ 3,985,502
Costs and expenses:
Costs of revenues 1,300,658 439,161 1,739,819
Selling, general and administrative 1,656,125 1,056,705 34,110 2,746,940
Depreciation and amortization 264,757 60,546 325,303
------------- ------------- ------------- -------------
Total costs and expenses 3,221,540 1,556,412 34,110 4,812,062
------------- ------------- ------------- -------------
Loss from operations (754,530) (37,920) (34,110) (826,560)
Other income (expense):
Interest expense, net (131,301) -- (131,301)
Other income 956 (6,673) (5,717)
------------- ------------- ------------- -------------
Total other income (130,345) (6,673) -- (137,018)
------------- ------------- ------------- -------------
Loss from continuing operations (884,875) (44,593) (34,110) (963,578)
Loss from discontinued operations (158,233) (158,233)
------------- ------------- ------------- -------------
Net loss $ (1,043,108) $ (44,593) $ (34,110) $ (1,121,811)
============= ============= ============= =============
Basic loss per common share:
Loss from continuing operations $ (0.23) $ (0.25)
============= =============
Net loss $ (0.27) $ (0.29)
============= =============
Diluted loss per common share:
Loss from continuing operations $ (0.44) $ (0.53)
============= =============
Net loss $ (0.52) $ (0.61)
============= =============
</TABLE>
See accompanying notes to unaudited pro forma
consolidated statement of operations.
<PAGE> 16
ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
On January 31, 1999, Electronic Transmission Corporation (the "Company")
acquired 100% of the outstanding common stock of Health Plan Initiatives, Inc.
("HPI"). The Company issued 3,538,306 shares of common stock for HPI. This
acquisition has been accounted for using the purchase method of accounting. The
following Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1998
gives effect to the transaction as if it had occurred at that date. The
Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1998 gives effect to the transaction as if it had occurred on
January 1, 1998.
The Unaudited Pro Forma Consolidated Financial Statements are presented for
informational purposes only and are not necessarily indicative of the results of
operations that would have been achieved had the transaction been completed at
January 1, 1998, nor are they indicative of the Company's future results of
operations.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the historical financial statements of the Company and the
related notes thereto.
<PAGE> 17
ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On January 31, 1999, Electronic Transmission Corporation ("The
Company") acquired 100% of the outstanding common stock of Health Plan
Initiatives, Inc. ("HPI"). The Company issued 3,538,306 shares of
common stock for HPI. This acquisition has been accounted for using the
purchase method of accounting. The following Unaudited Pro Forma
Consolidated Balance Sheet as of December 31, 1998 gives effect to the
transaction as if it had occurred at that date. The Unaudited Pro Forma
Consolidated Statement of Operations for the year ended December 31,
1998 gives effect to the transaction as if it had occurred on January
1, 1998.
The Unaudited Pro Forma Consolidated Financial Statements are presented
for informational purposes only and are not necessarily indicative of
the results of operations that would have been achieved had the
transaction been completed on January 1, 1998, nor are they indicative
of the Company's future results of operations.
The Unaudited Pro Forma Consolidated Financial Statements should be
read in conjunction with the historical financial statements of the
Company and the related notes thereto.
A preliminary allocation of the purchase price of HPI has been made to
major categories of assets and liabilities in the accompanying pro
forma financial statements based on available information. The actual
allocation of purchase price and the resulting effect on income from
operations may differ significantly from the amounts included herein.
These pro forma adjustments represent the Company's preliminary
determination of purchase accounting adjustments and are based upon
available information and certain assumptions that the Company believes
to be reasonable. Consequently, the amounts reflected in the forecasted
financial statements are subject to change, and the final amounts may
differ substantially.
2. ALLOCATION OF PURCHASE PRICE
The acquisition of HPI was accounted for by the purchase method of
accounting. Under purchase accounting, the total purchase price was
allocated to the tangible and intangible assets and liabilities of HPI
based upon their respective estimated fair values as of the closing
date based upon valuations and other analyses. The estimated purchase
price and preliminary adjustments to the historical book value of HPI
are as follows:
<PAGE> 18
ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
2. ALLOCATION OF PURCHASE PRICE (CONTINUED)
<TABLE>
<S> <C>
Purchase price, based on value
of common stock issued $ 297,000
Book value of net liabilities acquired 44,000
-----------
Purchase price in excess of net liabilities
acquired $ 341,000
===========
Preliminary allocation of purchase price in excess of net liabilities
acquired:
Goodwill $ 341,000
===========
</TABLE>
3. DEPRECIATION AND AMORTIZATION
Depreciation and amortization was increased by $34,110 for the year
ended December 31, 1998 as a result of the purchase adjustments.
Goodwill is being amortized over its estimated useful life of ten
years.
