SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 4, 2000
ELECTRONIC CLEARING HOUSE, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-15245 93-0946274
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
28001 Dorothy Drive, Agoura Hills, California 91301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 706-8999
The undersigned registrant, in order to provide the financial statements
required to be included in the Current Report on Form 8-K dated January 19,
2000 in connection with the acquisition of Rocky Mountain Retail Systems,
Inc., hereby amends the following item or other portions of such Current
Report on form 8-K set forth in the pages attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The financial statements and information in the following table of
contents and attached hereto are hereby filed with the Commission in
accordance with the above-referenced item.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The following financial statements of the Rocky Mountain Retail Systems
("RMRS") are submitted herewith on the indicated pages:
PAGE NO.
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . .5
Balance Sheet -
December 31, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Income Statement -
For the year ended December 31, 1999 . . . . . . . . . . . . . . . . . . . .8
Statement of Shareholders' Equity -
For the year ended December 31, 1999 . . . . . . . . . . . . . . . . . . . .9
Statement of Cash Flows -
For the year ended December 31, 1999 . . . . . . . . . . . . . . . . . . . 10
Notes to Financial Statements -
For the year ended December 31, 1999 . . . . . . . . . . . . . . . . . . . 11
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma combined financial information of
Electronic Clearing House, Inc. ("ECHO" and/or the "Registrant") and RMRS
are submitted herewith on the indicated pages.
PAGE NO.
Pro Forma Combined Balance Sheet at December 31, 1999 (unaudited). . . . . . 15
Pro Forma Combined Statements of Operations:
For the year ended September 30, 1999 (unaudited). . . . . . . . . . . . . 16
For the three months ended December 31, 1999 (unaudited) . . . . . . . . . 17
Notes to Pro Forma Combined Financial Data (unaudited) . . . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
The unaudited pro forma combined balance sheet of the Registrant as of
December 31, 1999 reflects the financial position of the Registrant after
giving effect to the acquisition of RMRS discussed in Item 2 and assumes the
acquisition took place on December 31, 1999 and was accounted for as a
purchase. The unaudited pro forma combined statements of operations for the
fiscal year ended September 30, 1999 assume that the acquisition occurred on
October 1, 1998, and are based on the operations of Registrant for the year
ended September 30, 1999 and for the year ended December 31, 1999 of RMRS.
The unaudited pro forma combined statements of operations for the three months
ended December 31, 1999 are based on the operations of Registrant for the
three month period ended December 31, 1999 and based on the operations of RMRS
for the three month period ended December 31, 1999.
The unaudited pro forma combined financial statements have been prepared by
Registrant based on historical information, preliminary estimates and
assumptions management deems appropriate. The unaudited pro forma combined
financial statements presented herein are shown for illustrative purposes only
and are not necessarily indicative of the future financial position or future
results of operations of Registrant, or of the financial position or results
of operations of Registrant that would have actually occurred had the
transaction been in effect as of the date or for the periods presented.
The unaudited pro forma combined financial statements should be read in
conjunction with the Registrant's 1999 Annual Report on Form 10-K and the
historical RMRS financial statements included in Item 7(a) in this Current
Report on Form 8-K/A.
The acquisition of RMRS was facilitated by the issuance (or potential
issuance) of shares of ECHO common stock as follows:
<TABLE>
<CAPTION>
SHARES $ VALUES
<S> <C> <C>
Total ECHO shares/purchase value
exchange for all of the outstanding
capital stock of RMRS 1,000,000 $3,080,000
Reserved for contingent issuance
against satisfaction of future
Company performance 1,500,000
Approximate cost of acquisition 30,000
$3,110,000
</TABLE>
(c) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
*2.1 Merger Agreement and Plan of Reorganization, dated January 4, 2000,
by and among Electronic Clearing House, Inc., Electronic Acquisition
Corporation and Rocky Mountain Retail Systems, Inc.
23.2 Consent of Johnson, Cahill & O'Kelly, P.C.
*99.1 Press Release dated January 6, 2000.
- -----------------------------------------
* Incorporated by reference to the same numbered exhibit to the Company's
current report on Form 8-K dated January 4, 2000, filed with the Securities
and Exchange Commission on January 19, 2000.
ROCKY MOUNTAIN RETAIL SYSTEMS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999
C O N T E N T S
ACCOUNTANTS' REPORT Page 1
BALANCE SHEET Page 2
INCOME STATEMENT Page 3
STATEMENT OF SHAREHOLDERS' EQUITY Page 4
STATEMENT OF CASH FLOWS Page 5
NOTES TO FINANCIAL STATEMENTS Page 6-9
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Rocky Mountain Retail Systems, Inc.
Boulder, Colorado
We have audited the accompanying balance sheet of Rocky Mountain Retail
Systems, Inc. (a Colorado corporation) as of December 31, 1999, and the
related statements of income, retained earnings, and cash flows for the year
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 audit.
We conducted our audit 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 audit provides 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 Rocky Mountain Retail
Systems, Inc. as of December 31, 1999, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
JOHNSON, CAHILL & O KELLY, P.C.
Boulder, Colorado
January 31, 2000
<PAGE>
ROCKY MOUNTAIN RETAIL SYSTEMS, INC.
<TABLE>
Balance Sheet
December 31, 1999
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 76,128
Accounts Receivable 113,505
Prepaid Commissions 14,410
Other 2,823
Total Current Assets 206,866
EQUIPMENT, Net of Accumulated Depreciation of $59,346 48,123
OTHER ASSETS
Deposits 2,340
Trademark, Net of Accumulated Amortization of $585 2,341
Total Current Assets 4,681
TOTAL ASSETS $259,670
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 13,837
Retirement Contributions Payable 48,363
Accrued Vacation Pay 5,162
Payroll Tax Liabilities 59,988
Accrued Commissions 13,430
Accrued Officer Compensation 11,717
Total Current Liabilities 152,497
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par Value, 10,000 Shares
Issued and Outstanding 11
Additional Paid-In-Capital 34,139
Retained Earnings 73,023
Total Shareholders' Equity 107,173
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $259,670
See Notes to Financial Statements
</TABLE>
ROCKY MOUNTAIN RETAIL SYSTEMS, INC.
<TABLE>
Income Statement
For the Year Ended December 31, 1999
<S> <C>
REVENUES $1,018,122
EXPENSES
Personnel
Salaries 281,750
Payroll Tax Expense 24,344
Employee Benefits 30,927
Retirement Plan Contributions 48,363
Employee Moving Expense 6,545
391,929
Selling and Marketing
Advertising and Marketing 18,369
Bad Debt Expense 3,924
Commissions and Royalties 121,355
Contract Support 47,655
Depreciation and Amortization 12,802
Expendable Equipment, Software and Small Parts 12,212
Supplies 38,381
Telephone 174,666
Travel 19,369
448,733
General and Administrative
Dues, Subscriptions, Books and Manuals 4,051
Insurance 1,318
Legal and Professional 9,604
Office Expense 11,253
Other 1,554
Postage and Shipping 2,254
Rent 18,063
Travel, Meals and Entertainment 3,008
Utilities 2,367
53,472
Total Expenses 894,134
NET INCOME FROM OPERATIONS 123,988
OTHER INCOME
Interest 200
NET INCOME $124,188
See Notes to Financial Statements
</TABLE>
ROCKY MOUNTAIN RETAIL SYSTEMS, INC.
<TABLE>
Statement of Shareholders' Equity
For the Year Ended December 31, 1999
<CAPTION>
Additional
Par Paid-In Retained
Value Capital Earnings Total
<S> <C> <C> <C> <C>
Balance, January 1, 1999 $ 10 $ 25,990 $ (51,165) $
(25,165)
Stock Issued in Lieu of
Commissions 1 8,149 - 8,150
Net Income 124,188 124,188
Balance, December 31, 1999 $ 11 $ 34,139 $ 73,023 $107,173
See Notes to Financial Statements
</TABLE>
ROCKY MOUNTAIN RETAIL SYSTEMS, INC.
<TABLE>
Statement of Cash Flows
For the Year Ending December 31, 1999
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Collected from Customers $1,007,933
Cash Paid for Services, Supplies and Payroll Taxes (427,318)
Cash Paid for Officers' Salaries (292,000)
Cash Paid for Employees' Salaries (120,588)
Commissions Paid (126,655)
Interest Received 200
Interest Paid -
NET NET CASH PROVIDED BY OPERATING ACTIVITIES 41,572
NET CASH USED IN INVESTING ACTIVITIES
Expenditures for Property and Equipment (37,010)
NET CASH PROVIDED BY FINANCING ACTIVITIES
Repayment of Shareholder Advance 7,715
NET INCREASE IN CASH 12,277
CASH AND CASH EQUIVALENTS
Beginning of Year 63,853
End of Year $76,130
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $124,188
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 12,802
(Increase) Decrease in Operating Assets:
Accounts Receivable (6,265)
Prepaid Commissions (6,260)
Other Assets (2,005)
Deposits (1,000)
Increase (Decrease) in Operating Liabilities:
Accounts Payable 7,421
Retirement Contributions Payable 11,615
Accrued Vacation Pay 5,162
Payroll Tax Liabilities 30,954
Accrued Commissions 960
Accrued Officer Compensation (136,000)
NET CASH PROVIDED BY OPERATING ACTIVITIES $41,572
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Stock Issued in Lieu of Compensation $8,150
See Notes to Financial Statements
</TABLE>
ROCKY MOUNTAIN RETAIL SYSTEMS, INC.
Notes to Financial Statements
December 31, 1999
NOTE 1 - NATURE OF OPERATIONS
Rocky Mountain Retail Systems, Inc. (RMRS, or the Company ) began its
operations in November, 1991 in Boulder, Colorado. The Company has grown
steadily since its inception and is recognized as a leader in national
check verification systems. RMRS develops advanced software for check
verification systems for collection agencies and retail chains. While
maintaining its customer base of collection and guarantee agencies, it has
recently added emphasis on serving large retailers directly. RMRS services
over 150 computer sites and provides services to more than 75,000 merchants
in 50 states. Total transactions average 650,000 per day in the total
network.
Major products include VelocityPLUS, an initial product designed for in-
store computers in supermarkets; National Check Information Service (NCIS),
a national database with high-volume capabilities; Enterprise System, an
in-store check verification program designed for large retailers; Recovery
PLUS, a simplified, Windows-based check collection program; and Total Check
Management, designed to provide optimal loss prevention through detailed
analysis and reporting, in addition to check verification. The Company
also offers software rental, software maintenance, customer support,
training, and other miscellaneous services to facilitate the customers use
of its products.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include money
market funds which approximate cash.
Accounts Receivable
No allowance has been provided on accounts receivable because management
believes all amounts are collectible. All known doubtful accounts have
been written off as of December 31, 1999.
Equipment
Computer, electronics and office equipment are carried at cost.
Depreciation is computed using the straight-line method over estimated
useful lives of five to seven years.
Trademarks
The Company obtained approval from the U.S. Patent and Trademark Office to
use VelocityPLUS as a trademark. Costs associated with obtaining this
trademark amounting to $2,926 are being amortized using the straight-line
basis over an estimated period of benefit of fifteen years. Accumulated
amortization amounted to $585 as of December 31, 1999.
Revenue Recognition
The Company requires a one-time membership fee for all new customers which
is recognized upon inception of a contract agreement. Revenue generated
from check verification transaction processing is recognized as earned.
Software sales are generally recognized according to contract terms or
stipulated milestones. Revenue from software rental, software maintenance,
customer support, training, and other miscellaneous services are recognized
in the period in which the services are performed.
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.
Advertising
The Company expenses advertising costs as they are incurred. Advertising
costs for 1999 amounted to $7,810 and were primarily attributable to
advertisements placed in one monthly trade journal.
Research and Development Costs and Royalties Expense
Research and development costs are expenses as incurred. Although not
separately identified by the Company in the accompanying income statement,
approximately $60,000 of salaries expense is estimated to be attributable
to research and development for computer software marketed and sold by
RMRS.
According to the terms of an employment agreement, a certain employee
receives royalties in connection with particular software sold by the
Company which the employee developed. Royalties paid for 1999 amounted to
$3,600.
Income Tax
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S corporation. In lieu of corporation
income taxes, the shareholders are taxed individually on their
proportionate share of the Company s taxable income. Therefore, no
provision or liability for federal or state income taxes has been included
in the accompanying financial statements.
Fair Value of Financial Instruments
All financial instruments are carried at their approximate estimated fair
value.
NOTE 3 - CONCENTRATIONS OF CREDIT RISK
The Company maintains cash balances in one financial institution located in
Boulder, Colorado. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000. Account balances may
at times exceed federally insured limits. However, the Company has not
experienced losses with respect to its cash.
Accounts receivable as of December 31, 1999 include approximately 50% due
from one major customer. This major customer also accounted for an
estimated 25% of sales during 1999. Concentrations with respect to the
remaining 50% of accounts receivables are limited due to the large number
of customers and their dispersion across a wide geographic area. The
Company generally does not require collateral on its accounts receivables.
The Company relies upon its relationships with various telephone and
telecommunications suppliers in order to conduct its numerous daily
transactions with customers.
NOTE 4 - RELATED PARTY TRANSACTIONS
Two shareholders/officers are employees of the Company and receive salaries
commensurate with their full-time responsibilities toward the daily affairs
of the operations. Accrued salaries of $11,717 in the accompanying balance
sheet represent officer compensation accrued in a prior year which remains
unpaid as of December 31, 1999. Of the $276,588 of salaries expense in the
accompanying income statement, $160,000 represents salaries for officers
and their spouses during 1999. Retirement contributions payable include
$43,897 payable for officers.
A shareholder advance made during a prior year in the amount of $7,715 was
repaid in December, 1999.
From time-to-time, in conducting business affairs, RMRS may provide travel
advances or reimburse officers and staff for employee business expenses
incurred on behalf of the Company.
NOTE 5 - OPERATING LEASE COMMITMENTS
The Company leases office space under an operating lease agreement with an
unrelated party. The former lease was recently renewed December 15, 1999
and expires December 14, 2002. Base rental payments of $1,402 plus a pro-
rata share (21%) of the landlord s base operating expenses are due monthly.
The annual base rent will be increased each year by the percentage price
increase in the Consumer Price Index.
The Company will also be leasing additional office space in a building
adjacent to the primary office space described above for the period January
15, 2000 through February 1, 2003. Monthly rental payments amount to $900
per month through May 1, 2000, increasing to $1,000 per month through
February 1, 2001. Subsequent to February 1, 2001, the rent will increase
by annual percentage price increases in the Consumer Price Index.
Minimum payments required under the above-described leases, excluding
additional rent for operating expenses and cost of living increases, are as
follows for the years ending December 31:
2000 $27,974
2001 28,824
2002 27,422
2003 1,000
$85,220
Security deposits of $2,340 are held in connection with the above
leases. Rent expense for 1999 amounted to $18,063.
NOTE 6 - EMPLOYEE RETIREMENT PLAN
The Company sponsors a Simplified Employee Pension Plan (SEP IRA)
and makes discretionary employer contributions of up to 15% of
employees' compensation. The plan covers all eligible employees.
All employees who have attained the age of twenty-one years of age,
have been employed for at least three of the immediately preceding
five years, and earn at least $300 during any one year are eligible
to participate in the plan and make elective deferrals of a
specified percent of compensation up to the allowable Internal
Revenue Code limits. The employer contribution for the year ended
December 31, 1999 was $48,363.
NOTE 7 - NONCASH STOCK COMPENSATION
A grant of 53 shares of common stock was made to an independent
contractor/salesman effective January 1, 1999, resulting in 5%
ownership of the Company. The stock grant was intended as incentive
compensation. Accordingly, the Company recognized $8,150 of
commission expense in the accompanying financial statements based
upon measurable values with available information as of January 1,
1999. The Company does not maintain a specific stock ownership
plan.
NOTE 8 - SUBSEQUENT EVENT - MERGER AND PLAN OF REORGANIZATION
Effective January 4, 2000, Rocky Mountain Retail Systems, Inc.
(RMRS) merged with and became a wholly-owned subsidiary of
Electronic Clearing House, Inc. (ECHO), a Nevada corporation. RMRS
articles of incorporation, bylaws, corporate name, existence, and
all its purposes and objectives will continue unaffected and
unimpaired by this merger. The primary officers and directors of
RMRS became employees of ECHO, and remained the primary officers and
directors of the Company. All 1,053 shares of RMRS common stock
issued and outstanding were converted into 1,000,000 ECHO shares as
provided in the merger agreement.
An additional maximum 1,500,000 ECHO shares are eligible for
issuance to the former shareholders of RMRS, subject to attainment
of certain performance goals stipulated in the merger agreement.
The number of performance shares to be issued is based upon the
achievement of minimum annual net income thresholds in each of three
performance periods covering the fiscal years ending 2000 through
2002. The ECHO shares have not been registered under applicable
federal and state securities acts, and therefore, cannot be resold
unless registered under applicable federal and state securities laws
and regulations.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL DATA
ELECTRONIC CLEARING HOUSE, INC.
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
December 31, 1999
(Unaudited)
<CAPTION>
HISTORICAL PRO FORMA
ECHO RMRS ADJUSTMENT COMBINED
(NOTE 1)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,770,000 $ 76,000 $ $1,846,000
Restricted cash 710,000 710,000
Accounts receivable less
allowance 1,368,000 114,000 1,482,000
Inventory less allowance 607,000 607,000
Prepaid expenses and other
assets 146,000 146,000
Other receivable 1,404,000 1,404,000
Prepaid commissions -0- 14,000 14,000
Other -0- 3,000 3,000
Total current assets 6,005,000 207,000 - 6,212,000
Noncurrent assets:
Other receivables 19,000 19,000
Property and equipment, net 2,238,000 48,000 2,286,000
Real estate held for
investment, net 252,000 252,000
Deferred tax asset 1,385,000 1,385,000
Goodwill 1,885,000 (d)2,973,000 4,858,000
Other assets, net 1,424,000 2,000 (c)30,000 1,456,000
Trademark, net -0- 3,000 3,000
Total assets $13,208,000 $ 260,000 $3,003,000 $16,471,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 149,000 $ $149,000
Accounts payable 267,000 14,000 281,000
Accrued expenses 757,000 139,000 (c)30,000 926,000
Deferred income 62,000 62,000
Total current liabilities 1,235,000 153,000 30,000 1,418,000
Long-term debt 575,000 575,000
Total liabilities 1,810,000 153,000 30,000 1,993,000
Stockholders' equity:
Common stock 203,000 (a)10,000 213,000
Additional paid-in capital 17,189,000 34,000(a)3,070,000 20,259,000
(b)(34,000)
(Accumulated deficit)
Retained Earnings (5,854,000) 73,000 (b(73,000)
(5,854,000)
Less treasury stock (140,000)
(140,000)
Total stockholders' equity 11,398,000 107,000 2,973,000 14,478,000
Total liabilities and
stockholders' equity $13,208,000 $ 260,000 $3,003,000 $16,471,000
See accompanying notes to unaudited pro forma combined financial statements.
</TABLE>
ELECTRONIC CLEARING HOUSE, INC.
<TABLE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(Unaudited)
<CAPTION>
HISTORICAL PRO FORMA
ECHO RMRS ADJUSTMENT COMBINED
(NOTE 2) (NOTE 2)
<S> <C> <C> <C> <C>
Revenues:
Bankcard processing
revenue $13,222,000 $ $ $13,222,000
Bankcard transaction fees 8,101,000 8,101,000
Terminal sales and
lease revenue 2,106,000 2,106,000
Other revenue 399,000 1,018,000 1,417,000
23,828,000 1,018,000 - 24,846,000
Costs and expenses:
Bankcard processing and
transaction expense 14,778,000 14,778,000
Cost of terminals sold
and leased 1,166,000 1,166,000
Other operating costs 2,424,000 392,000 2,816,000
Selling, general
and administrative 4,176,000 502,000 4,678,000
Amortization expense 92,000 (a)205,000 297,000
22,636,000 894,000 205,000 23,735,000
Income from operations 1,192,000 124,000 (205,000) 1,111,000
Interest income 180,000 180,000
Interest expense (85,000) (85,000)
Income before income
tax benefit 1,287,000 124,000 (205,000) 1,206,000
Benefit for income taxes 1,331,000 1,331,000
Net income $ 2,618,000 $ 124,000 $ (205,000) $ 2,537,000
Earnings per share -
basic $ 0.14 $ 0.13
Shares used in computing
earnings per share -
basic 18,143,000 1,000,000 19,143,000
Earnings per share -
diluted $ 0.11 $ 0.10
Shares used in computing
earnings per share -
diluted 23,299,000 1,000,000 24,299,000
See accompanying notes to pro forma combined financial statements.
</TABLE>
ELECTRONIC CLEARING HOUSE, INC.
<TABLE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
<CAPTION>
HISTORICAL PRO FORMA
ECHO RMRS ADJUSTMENT COMBINED
(NOTE 2) (NOTE 2)
<S> <C> <C> <C> <C>
Revenues:
Bankcard processing
revenue $ 3,635,000 $ $ $ 3,635,000
Transaction revenue 2,462,000 2,462,000
Terminal sales and
lease revenue 108,000 108,000
Other revenue -0- 308,000 308,000
6,205,000 308,000 - 6,513,000
Costs and expenses:
Processing and
transaction expense 4,361,000 4,361,000
Cost of terminals sold
and leased 95,000 95,000
Other operating costs 731,000 119,000 850,000
Selling, general and
administrative 1,022,000 169,000 1,191,000
Amortization expense 52,000 (a51,000 103,000
6,261,000 288,000 51,000 6,600,000
(Loss) income from
operations (56,000) 20,000 (51,000) (87,000)
Interest income 71,000 71,000
Interest expense (19,000) (19,000)
(Loss) income before
provision for income tax (4,000) 20,000 (51,000) (35,000)
Provision for income taxes (15,000) -0- -0- (15,000)
Net (loss) income $ (19,000) $ 20,000 $ (51,000) $ (50,000)
Earnings per share -
basic $ -0- $ -0-
Shares used in
computing earnings per
share - basic $19,970,000 $1,000,000 20,970,000
See accompanying notes to pro forma combined financial statements.
</TABLE>
<PAGE>
ELECTRONIC CLEARING HOUSE, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL DATA
(Unaudited)
Note 1 - Pro Forma Combined Balance Sheet Adjustments
The unaudited pro forma combined balance sheet adjustments have been prepared
to reflect the acquisition by Electronic Clearing House, Inc. ("ECHO") of
Rocky Mountain Retail Systems, Inc. ("RMRS") for an aggregate purchase price
of approximately $3,080,000 in unregistered common stock and approximately
$30,000 of estimated direct transaction costs, as if it occurred on December
31, 1999.
(a) Represents purchase price consideration paid in the form of 1,000,000
shares of unregistered ECHO common stock valued at $3.08 per share,
representing a six-day average closing price for the period January 3,
2000 through January 10, 2000.
(b) Represents the elimination of RMRS's historical stockholders' equity.
(c) Represents estimated direct transaction costs for legal, accounting and
various acquisitions expenses.
(d) Represents estimated allocation of purchase price; assumes that the book
value of RMRS's historical tangible assets and liabilities at December 31,
1999 reflect the fair market value of such tangible assets and
liabilities. The difference between the purchase price and the book value
of the net assets acquired is recorded as goodwill and to be amortized
over fifteen years.
Note 2 - Pro Forma Combined Statement of Operations Adjustments
The unaudited pro forma combined statements of operations for the fiscal year
ended September 30, 1999 assume that the acquisition occurred on October 1,
1998, and are based on the operations of Registrant for the year ended
September 30, 1999 and for the year ended December 31, 1999 of RMRS. The
unaudited pro forma combined statements of operations for the three months
ended December 31, 1999 are based on the operations of Registrant for the
three month period ended December 31, 1999 and based on the operations of RMRS
for the three month period ended December 31, 1999.
(e) Represents adjustment to reflect the amortization of goodwill as a result
of the RMRS acquisition based on a fifteen-year life.
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 CLEARING HOUSE, INC.
(Registrant)
By \s\ Alice L. Cheung
Alice L. Cheung, Treasurer &
Chief Financial Officer
Dated: March 10, 2000
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
To: The Board of Directors
We have audited the financial statements of Rocky Mountain Retail Systems,
Inc. for the year ended December 31, 1999, and have issued our report thereon
dated January 31, 2000.
We consent to the inclusion of our report dated January 31, 2000 on the
balance sheet of Rocky Mountain Retail Systems, Inc. as of December 31, 1999,
and the related statements of income, shareholders' equit, and cash flows for
the year then ended in the Form 8-K/A of Rocky Mountain Retail Systems, Inc.,
to be filed March 10, 2000.
JOHNSON, CAHILL & O'KELLY, P.C.
Boulder, Colorado
March 9, 2000
