-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BTVnb1hZ+V7xrp+qRFZ+BpERvj19CosD8x4MsQHgNLoeZXrI5j//xjgOHSdH6ITE nwIge5rCjg1L9nXJPfzuQA== 0000721773-00-000006.txt : 20000314 0000721773-00-000006.hdr.sgml : 20000314 ACCESSION NUMBER: 0000721773-00-000006 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000104 ITEM INFORMATION: FILED AS OF DATE: 20000313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRONIC CLEARING HOUSE INC CENTRAL INDEX KEY: 0000721773 STANDARD INDUSTRIAL CLASSIFICATION: FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC [6099] IRS NUMBER: 930946274 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-15245 FILM NUMBER: 567077 BUSINESS ADDRESS: STREET 1: 28001 DOROTHY DR CITY: AGOURA HILLS STATE: CA ZIP: 91301-2697 BUSINESS PHONE: 8187068999 MAIL ADDRESS: STREET 1: 28001 DOROTHY DRIVE CITY: AGOURA HILLS STATE: CA ZIP: 91301 FORMER COMPANY: FORMER CONFORMED NAME: BIO RECOVERY TECHNOLOGY INC DATE OF NAME CHANGE: 19860122 8-K/A 1 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:
SHARES $ VALUES 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
(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 ROCKY MOUNTAIN RETAIL SYSTEMS, INC. Balance Sheet December 31, 1999
ASSETS 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
ROCKY MOUNTAIN RETAIL SYSTEMS, INC. Income Statement For the Year Ended December 31, 1999 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
ROCKY MOUNTAIN RETAIL SYSTEMS, INC. Statement of Shareholders' Equity For the Year Ended December 31, 1999
Additional Par Paid-In Retained Value Capital Earnings Total 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
ROCKY MOUNTAIN RETAIL SYSTEMS, INC. Statement of Cash Flows For the Year Ending December 31, 1999 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
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. PRO FORMA COMBINED BALANCE SHEET December 31, 1999 (Unaudited)
HISTORICAL PRO FORMA ECHO RMRS ADJUSTMENT COMBINED (NOTE 1) 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.
ELECTRONIC CLEARING HOUSE, INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1999 (Unaudited)
HISTORICAL PRO FORMA ECHO RMRS ADJUSTMENT COMBINED (NOTE 2) (NOTE 2) 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.
ELECTRONIC CLEARING HOUSE, INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
HISTORICAL PRO FORMA ECHO RMRS ADJUSTMENT COMBINED (NOTE 2) (NOTE 2) 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.
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 -----END PRIVACY-ENHANCED MESSAGE-----