U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB


                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                           Commission File No. 221355

                       ELECTRONIC TRANSMISSION CORPORATION

                 (Name of Small Business Issuer in Its Charter)


         Delaware                                        75-2578619
 (State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
  Incorporation or Organization)

                       5025 Arapaho Road, Suite 501 75248
                            Dallas, Texas (Zip Code)
                    (Address of Principal Executive Offices)

         Issuer's Telephone Number, Including Area Code: (972) 980-0900


       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, $.001 par value per share
                                (Title of Class)
                   Preferred Stock, $1.00 par value per share
                                (Title of Class)


     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 of 15(d) of the  Exchange  Act during the past 12 months (or for 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 there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  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. [X]

     The  issuer's  revenues for its fiscal year ended on December 31, 1996 were
$935,449.

     As of March 24, 1997,  10,949,146  shares of the issuer's  Common Stock and
-0- shares of the issuer's Preferred Stock were outstanding, respectively.

                       Documents Incorporated By Reference

     No  documents,  other than  certain  exhibits,  have been  incorporated  by
reference in this report.




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ITEM 1.           DESCRIPTION OF BUSINESS.

Business Information Concerning Electronic Transmission Corporation

     Generally.   Electronic   Transmission   Corporation  ("ETC"),  a  Delaware
corporation, is the survivor of a merger of Electronic Transmission Corporation,
a Texas corporation ("ETC-Texas"),  into ETC Transaction Corporation, a Delaware
corporation  (originally  incorporated  in the  Province  of  Alberta,  Canada),
("ETC-Canada")  in the first quarter of 1997.  ETC-Texas and ETC-Canada  jointly
filed a  Registration  Statement  on Form S-4 with the  Securities  and Exchange
Commission  which was  declared  effective as of January 7, 1997 to register the
shares of stock issuable to the shareholders of ETC-Texas under the terms of the
Merger Agreement,  subject to approval of said merger by the shareholders of the
respective companies.  On January 31, 1997, ETC-Texas  shareholders approved the
merger  as set out in the  S-4.  On  February  11,  1997,  the  shareholders  of
ETC-Canada  approved  the  merger  as  set  out  in  the  S-4.  ETC  Transaction
Corporation, the surviving corporation, then continued into Delaware and changed
its  name to  Electronic  Transmission  Corporation,  with the  shareholders  of
ETC-Texas  receiving  1.25  shares  of ETC for  every  one  share  of  ETC-Texas
outstanding as of the time of the merger.  The business  operations of ETC-Texas
were assumed by ETC following the merger.

     Claims  Automation.  The  primary  business  of ETC is  that  of  providing
automated  processing  services  of  health  care  claims  for (i)  self-insured
companies that administer  their own health care plans and pay their own medical
claims,  (ii) TPAs that administer  health care plans and pay medical claims for
self-insured  companies,  (iii) PPOs, and (iv) other managed care  organizations
that offer  discounts on medical  claims and who reprice those claims to reflect
discounts  offered by providers to payors.  ETC processes  more than one million
claims  per  year  for  clients,  the  majority  of  which  are  generated  by a
self-insured  employer.  Utilizing  its  existing  work flow process and imaging
technology,  ETC  processes  standardized  claim  and plan  enrollment  forms by
scanning  these forms at the  client's  facilities,  with the scanned data being
transmitted to ETC' imaging center.  Once received at ETC' imaging  center,  the
data is  processed  using an optical  character  recognition  process.  ETC then
extracts all available data from the scanned claim form,  manually  reviews each
claim,  and transmits the claim to the  respective  payor for  adjudication  and
payment.

     Contracting for Discounts.  Health care providers may contract with various
managed  care  organizations,  and those  contracts  may limit the  amount  that
providers may charge for a particular service. ETC utilizes provider information
directly  from the medical  claim in order to contact  either the  managed  care
organization  or a provider  directly to secure a discount for medical  services
for the benefit of self-insured clients.

     Repricing.  Many PPOs cannot receive or send medical claims  electronically
despite the fact that  electronic  transmission  is  required  by an  increasing
number of payors.  ETC provides  electronic  processing  and  repricing to these
organizations on a contract basis.

     Growth Strategy.  ETC intends to grow by consolidating  its position in its
existing market by expanding its base of self-insured,  TPA and PPO clients. The
objective of ETC is to become the dominant provider of electronic medical claims
processing  services.  ETC intends to implement  its  strategy in the  following
manner:

     o    Internal  Market  Development.  The majority of ETC's growth is driven
          from its  claims  automation  processing  activities.  ETC's  internal
          growth   initiatives   consist  of  marketing   its  existing   claims
          automation,  contracting  for  discounts  and  repricing  services  to
          self-insured,  TPA and PPO clients.  ETC's relationships with existing
          clients in various  geographic  regions allow it to engage  additional
          clients through referrals generated from its client base. ETC hopes to
          utilize the interrelationships between various self-insured companies,
          TPAs and PPOs for the  purpose  of  enhancing  its  reputation  in the
          marketplace and in turn  increasing its client base through  referrals
          within medical claims payor networks.

     o    Long-Term Customer Contracts. ETC typically enters into 90-day service
          provider  agreements  which are cancelable by either the client or ETC
          at any time. During this 90-day period, ETC evaluates the needs of the
          client,  develops a tailored  claims  processing  system and initiates
          claims  processing   procedures  for  the  client's   analysis.   Upon
          expiration  of the 90-day  period,  ETC will  enter  into a  long-term
          agreement, generally for a term of two years, under the terms of which
          ETC will provide claims automation  processing  services to the client
          on a per-claim processed fee basis.


                                       -2-

<PAGE>



          ETC intends to utilize the 90-day review  process,  which is risk free
          to the client,  as a proving ground for its services  thereby allowing
          it to enter into more  lucrative  long-term  provider  contracts.  ETC
          believes that long-term  contracts provide benefits to both itself and
          its clients.  Clients are able to realize the cost savings  associated
          with the processing of medical  claims  through an electronic  medium,
          while long-term  contracts add stability to ETC's revenue base and may
          deter potential competition.  After the expiration of the initial term
          of a long-term contract,  the term of the contract continues in effect
          until  either  ETC or the client  notifies  the other of its desire to
          terminate.  To date,  ETC has only entered  into a long-term  contract
          with Wal-Mart.

     o    Superior Customer Service.  ETC seeks to differentiate  itself through
          its  attention  to  client  service.  Clients  receive  the  necessary
          training in implementing  the automated claims  processing  system and
          have the ability to consult with an ETC representative via a help line
          which is operational  during normal  business  hours.  ETC responds to
          service  calls  on a  timely  basis  and the  experience  level of its
          personnel aids in the resolution of clients' concerns. Recognizing the
          public  visibility  of  its  clients,   ETC  carefully  maintains  the
          professional image of its employees.

     o    Rapid Installation and Enhanced  Processing  Capability.  ETC installs
          claims processing  equipment,  including computer,  telecommunications
          and scanning  equipment,  for use at the client's  facility.  Once the
          contractual  relationship  is entered into,  it is ETC's  intention to
          initiate claims processing services within 20 days of the date that an
          agreement is reached.  ETC  believes its ability to rapidly  install a
          processing system at a client's location with minimal disruption gives
          it a significant advantage in the marketplace.  ETC intends to enhance
          its  claims  processing  capabilities  by  increasing  its  number  of
          scanners and retaining the services of additional  claims  processors,
          both of which will afford ETC the  capability of increasing the volume
          of claims processed while reducing the time involved in doing so.

     o    Expanded Automated Enrollment. One of the most time-consuming parts of
          initiating  claims  automation  services  for a new  client is that of
          acquiring  "Eligibility Data," which consists of all of the enrollment
          data  gathered at the time the insured  person makes  application  for
          medical  coverage.  ETC has  developed an  enrollment  form which when
          filled out can be scanned and  processed  in much the same way medical
          claim  forms  are  processed  for  the  insurer.  The  result  is that
          enrollment forms can be processed daily as they are received, with the
          data extracted from the forms being used by ETC in claims  processing.
          ETC intends to utilize the  availability of this form of enrollment to
          market its services to potential clients.

     o    Expanded  Repricing or  Discounting  of Medical  Claims for PPOs.  ETC
          developed its own electronic  medical claim repricing  system which is
          now used to do the work of repricing for PPO networks that do not have
          Electronic Data Interchange ("EDI")  capabilities.  With the agreement
          of the PPO  networks  the data used to reprice or discount the medical
          claims is provided to ETC and the repricing or discounting  procedures
          are  completed as a part of the existing  claims  automation  services
          offered by ETC. While PPOs are the main focus of this service, the new
          entities that are forming in the medical community such as independent
          professional  associations ("IPAs"),  physician hospital organizations
          ("PHOs") and even some health maintenance  organizations  ("HMOs") are
          offering  products that  resemble  those offered by PPOs and they have
          the same need to automate the repricing or discounting  procedures and
          are potential clients for this service.

     o    Providing  Repricing or Discounting of Medical Claims for Payors.  ETC
          has developed a value added service to the claims  automation  service
          which  will  allow  ETC to become  actively  involved  with  acquiring
          discounts on medical  claims for its  existing  clients as well as for
          all new  clients.  This new service  offers  discounts on many medical
          claims  which have  heretofore  not been  covered by  traditional  PPO
          arrangements.  Traditionally,  PPOs have offered significant discounts
          on services from their provider members, but fail to provide discounts
          on other claims because patients tend to see their physician of choice
          regardless of whether they are members of the  particular PPO utilized
          by the primary  insurer.  With the  information  on medical  providers
          which PPO networks are  affiliated  with,  ETC has been able to direct
          its payor  clients  where to go for the best source of discounts  from
          medical providers being used by the insured individuals. ETC has


                                       -3-

<PAGE>



          now contracted  with several  networks to lease access to the provider
          members for a fee and this  service is resold to the payor  clients of
          ETC. ETC is paid a percentage of the total discounts  delivered to the
          insurer  which  the  insurer  would  otherwise  not have  been able to
          access.

     o    Workers'  Compensation  Automation Service.  During the development of
          the work flow process by ETC, a common  request by  potential  clients
          was the automation of the process for handling  workers'  compensation
          claims.  The  process  in almost  all cases has  heretofore  been done
          manually.  The  terminology  of this  business  segment is  completely
          different from healthcare as are the procedures for seeking treatment.
          However,  most of the claims (called bills for workers'  compensation)
          are the same claim forms used by medical providers for healthcare.  As
          with healthcare claims, the problems with workers' compensation is the
          use of manual  data entry to process  the  forms.  As ETC had  already
          developed  a  system  for  automated  data  entry,  ETC may  link  the
          automation  work flow  process to an  existing  system for  processing
          workers' compensation claims.

     Clients and  Marketing.  ETC markets its processing  services  primarily to
self-insured  health  plans,  TPAs and PPOs.  ETC  generally  enters into 90-day
service provider agreements, which are cancelable either by the client or ETC at
any time.  During the 90-day  period,  ETC  evaluates  the needs of the  client,
develops a tailored claims  processing  system and initiates  claims  processing
procedures for the client's  analysis.  Following the 90-day  period,  long-term
service contracts are entered into. The long-term agreements are generally for a
period of two years and detail the  services to be  provided  for the benefit of
the client.

     On March 5, 1996, ETC and Wal-Mart entered into an Agreement for Processing
Medical Claims on a Temporary Basis (the "Wal-Mart Agreement") pursuant to which
ETC was retained to evaluate the manner in which Wal-Mart  processed its medical
claims  and to  implement  an  electronic  claims  processing  system for claims
generated from medical services provided to Wal-Mart employees.  Under the terms
of the Wal-Mart Agreement, ETC installed all necessary equipment on-site to scan
all  machine-printed  medical claim forms submitted by health care providers who
rendered  services  for the  benefit  of  Wal-Mart  employees.  ETC has  trained
Wal-Mart  employees  in  scanning  the  machine-printed  medical  claims for the
purpose of transmitting an effective image to ETC for processing. As of December
31, 1996, ETC electronically  processed approximately 611,250 medical claims for
the benefit of Wal-Mart, resulting in revenues to ETC of approximately $596,754.
Revenues  generated from the Wal-Mart Agreement  represent  approximately 64% of
ETC  revenues as of December 31,  1996.  ETC has entered  into an Agreement  for
Processing and Repricing  Medical Claims with Wal-Mart (the "Long-Term  Wal-Mart
Agreement"),  effective  September  1,  1996.  Under the terms of the  Long-Term
Wal-Mart  Agreement,  ETC  has  agreed  to  provide  electronic  medical  claims
processing  and repricing  services for Wal-Mart  under the terms and conditions
set forth  therein  for a term of two years from the  effective  date.  ETC will
receive $1.00 per claim  processed  for the first 50,000  claims  processed in a
given month,  which amount will be reduced by $.10 for every  additional  50,000
claims  processed in that month.  Once 150,000  claims have been  processed in a
given month,  ETC will receive $.75 per additional  claim processed  during said
month.

     ETC utilizes direct marketing efforts to solicit new clients and retain the
business  of  existing  clients.  ETC's  marketing  department  consists  of two
employees who focus on identifying and preparing  presentations  for the benefit
of self-insured  companies,  TPAs and PPOs. The efforts of ETC's marketing staff
are  supplemented by ETC's executive  officers.  Also, ETC relies upon referrals
within the network of medical  claims payors to expand its client base. ETC does
not anticipate  that it will be required to expand its marketing  efforts beyond
the strategies currently in place in order to achieve a client base necessary to
attain profitability.

     Regulatory  Matters.  ETC is not  subject  to any  direct  federal or state
government  regulation  because of the nature of its  business.  There can be no
assurance  that  federal  or state  authorities  will not in the  future  impose
restrictions  on its activities that might  adversely  effect the  Corporation's
business.  The  failure by the  Corporation  to obtain or retain any  applicable
licenses,  certifications  or operational  approvals could adversely  effect its
existing operations and professional performance. There can be no assurance that
in the  future  the  Corporation  will  be  able to  acquire  all the  necessary
licenses,  permits or  approvals,  if any,  necessary to conduct its business or
that the costs associated with complying with laws and regulations affecting its
business will not have a materially adverse effect on the Corporation.



                                       -4-

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     Competition.   The  medical   claims   processing   industry  is  intensely
competitive and is  characterized by providers of electronic  claims  automation
and  paper  claims  processing  services.  There  are also  participants  in the
industry which provide  contracting for discount and repricing  services for the
benefit of participants in the market  currently  served by ETC. ETC competition
in the market for electronic  claims  processing,  contracting  for discount and
repricing  services is primarily  derived from  certain  insurance  companies or
other TPAs and management services  organizations which are substantially larger
than  ETC with  much  greater  financial  and  technical  resources  and  longer
operating histories than ETC. ETC also believes that its processing  methodology
is  easily   duplicated.   However,   management  of  ETC  believes  that  ETC's
competitors,  while each provides only segments of the services  offered by ETC,
do not offer the interconnected  array of services provided by ETC. ETC believes
that it possesses a  competitive  advantage  by offering its claims  automation,
contracting  for  discounts  and  repricing  services in a format that  connects
payors, payees and service providers.  The service methodology of ETC will allow
it to compete against more established companies with much greater financial and
technical  resources.  However,  there is no barrier which would  prohibit ETC's
competitors  from modifying  their current  services to emulate those offered by
ETC. In addition,  ETC may face  substantial  competition from new entrants into
the electronic claims processing industry. ETC's ability to compete successfully
with current and potential  competitors  will depend to a significant  extent on
its ability to continue developing  processing  methodologies which are superior
to its competitors and to adapt to changes in the  marketplace.  ETC believes it
will be  able  to do so by  developing  its  current  clients  and  using  their
recommendations  to engage  additional  clients in order to compete  effectively
despite ETC's current financial condition.

     Leased  Employees.  Since January 1, 1996,  ETC has been a party to a Staff
Leasing Services Agreement with Network Employers Group, Inc.  ("Network").  The
Staff  Leasing  Services  Agreement,  with the consent of Network,  which is not
expected  to be  denied,  will  be  assigned  to and  assumed  by the  Surviving
Corporation upon completion of the Merger.  Under such agreement,  all personnel
working for ETC,  including  its executive  officers  (totaling 67 persons as of
December 31, 1996), are actually  employed by Network and "leased" to ETC. Under
such  contract,  the  "leased"  employees  perform  services for ETC in a manner
substantially  identical to being directly employed by ETC; however,  Network is
their  actual   employer  and  provides  such   employees  with  their  medical,
unemployment,  worker's  compensation  and  liability  insurance  through  group
insurance plans maintained by Network for ETC and other clients of Network. More
specifically,  ETC pays Network's  service fees, for each payroll period,  based
upon  gross  payroll  and a fee rate  percentage.  Pursuant  to the terms of the
contract, the cost of the aforesaid insurance as well as the payroll obligations
for the leased employees is funded by ETC to Network, and Network is required to
then apply such  proceeds to cover the payroll and  administrative  costs of the
employees.  Although  Network is  required  to provide  the  insurance  coverage
outlined above, ETC must keep in force comprehensive general liability insurance
(including  products/completed operations coverage) and comprehensive automobile
liability insurance.

     The  agreement  may be  terminated  by either party by giving 30 days prior
written notice to the non- terminating party. As of December 31, 1996, ETC-Texas
had 56 full-time employees and 11 part-time employees.

ITEM 2.           DESCRIPTION OF PROPERTY.

     Properties. ETC-Texas owns no real property. ETC-Texas' principal executive
office is located in a 12,176  square  foot  office  space  facility  in Dallas,
Texas. The lease (the "Lease") for the ETC-Texas'  offices expires September 30,
2001 and provides for monthly rental payments of $15,662. The Lease, as amended,
has been assumed by the Surviving Corporation.

ITEM 3.           LEGAL PROCEEDINGS.

     Legal Proceedings.  ETC is not currently a party to any litigation.  Should
ETC become a party to any litigation  pursuant to which ETC would be required to
pay damages, the payment of such damage award may have a material adverse effect
upon ETC's financial condition and results of operations.

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

     There were no  matters  submitted  during the fourth  quarter of the fiscal
year covered by this report to a vote of security holders,  through solicitation
of proxies or otherwise.


                                       -5-

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                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     There is no public  trading market at this time for the common or preferred
stock.  The Company is awaiting  approval of its  application to have its common
stock quoted on the  Electronic  Bulletin  Board of the National  Association of
Securities  Dealers,  Inc. There are  approximately 450 holders of record of the
common stock. No cash dividends have been declared and there are no restrictions
that would limit ETC's ability to pay dividends now or in the future.

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS.

ETC Transaction Corporation (The Company)

     The Company was an inactive Canadian based public company previously listed
on the ASE. The Company  received a Going  Concern  audit  opinion for the years
ended  December 31, 1996 and 1995.  The Company  plans to overcome its financial
difficulties through its merger with ETC-Texas. In June 1996, the Company raised
$779,575  through  a private  offering  of its  Common  Stock.  Proceeds  of the
offering were loaned to ETC-Texas. The Company was inactive and had minimal cash
needs.  The major  focus of the  Company  during  the last two years has been to
merge with a commercially  viable private company in exchange for the additional
liquidity and financing  opportunities that are available in the public markets.
As of December 31, 1996, the Company had no assets,  other than its rights under
an unsecured  promissory  note in the principal  amount of $779,575  executed in
favor of the  Company by  ETC-Texas,  and had no  continuing  operations  during
fiscal 1995.  Substantially  all of management's  efforts during fiscal 1995 and
during the first  quarter of fiscal  1996 were  directed  toward  identifying  a
suitable  merger  candidate,  preparing  for such merger and  obtaining  capital
through the issuance of equity securities to pay the legal, accounting and other
expenses  associated with such merger.  As a result of the  contemplated  merger
with ETC-Texas,  the Company  continued out of Canada and domesticated  into the
State of Delaware.

     The Company,  in 1991 and 1992, issued $605,000 in convertible  debentures.
The proceeds of these offerings were used to fund costs and expenses incurred in
identifying   and   negotiating   acquisition   or  merger   transactions   with
privately-held  entities and for working  capital.  The Company did identify and
conduct  preliminary  negotiations  with two entities during 1993 and 1994. As a
result  of the  Company's  inability  to  consummate  an  acquisition  or merger
transaction, the debentures went into default. In April 1996, the Company issued
552,500 shares of Company Common Stock to the debenture  holders in satisfaction
of $552,500 of debt.  Also in April 1996,  the Company  issued 284,928 shares of
Company Common Stock in satisfaction  of loans to the Company  primarily from L.
Cade Havard and certain non-affiliated  parties. Mr. Havard, the Chairman of the
Board and Chief Executive  Officer of the Company and the Chairman of the Board,
President and Chief Executive  Officer of ETC-Texas,  received 201,112 shares of
Company Common Stock as a result of this debt to equity conversion.

     In connection  with the proposed  merger,  the Company,  on March 21, 1996,
changed its name from Solo Petroleums Ltd. to ETC Transaction Corporation. Also,
on March 21,  1996,  the  shareholders  of the Company  approved a  one-for-five
consolidation of capital of the outstanding shares of the Company Common Stock.

     On June 5, 1996,  the  Company  consummated  a private  offering of Company
Common  Stock  pursuant to which the Company  issued  519,717  shares of Company
Common Stock at a per share price of $1.50 for  aggregate  proceeds of $779,575.
The proceeds of this  offering were loaned to ETC-Texas to fund (i) its business
operations,  (ii) costs associated with the Merger,  including legal, accounting
and related proxy  statement  preparation  costs,  and (iii) for general working
capital. As a result of the Merger, the loan has been forgiven.

     Since  the  Company  has no  significant  assets  and has  been  relatively
inactive  during the past two years,  management of the Company does not believe
that a discussion of the Company's financial condition and results of operations
would be relevant.



                                       -6-

<PAGE>



Development Stage Activities

     ETC-Texas,  founded  December  22,  1994,  is  engaged in the  business  of
electronic  collection,  manipulation  and  transmission  of health  care claims
information.  ETC-Texas'  primary  customers  are  self-insured  companies  that
administer and pay their own claims,  TPAs that assist  self-insured  companies,
PPOs  and  certain  managed  care  organizations.  ETC-Texas  has not  generated
sufficient   revenues  during  its  limited   operating  history  to  repay  its
outstanding  indebtedness,  pay its existing  trade accounts or fund its ongoing
operating expenses or service development activities. ETC-Texas received a Going
Concern  audit  opinion for the fiscal  years ended  December 31, 1996 and 1995.
ETC, as the survivor of the merger between  ETC-Canada  and ETC-Texas,  plans to
alleviate its current  financial  problems through private  offerings of debt or
equity securities,  borrowings and increased revenues from operations. ETC-Texas
has  historically  been able to raise  capital  through the private sales of its
common stock. At December 31, 1996,  ETC-Texas had cash and cash  equivalents of
approximately $50,125, and a working capital deficit of approximately  $307,329.
Management  believes that cash,  working capital and available credit facilities
are  sufficient  to fund  operations of ETC through the close of its fiscal year
ending  December 31, 1997.  During the first  quarter of fiscal 1996,  ETC-Texas
completed development of its operating systems.  Significant additional research
and development  expenditures are not anticipated at this time. ETC, through the
assumption of the business  operations of ETC-Texas,  currently  provides  three
specific types of services to its clients:

          Automation services for health care claims for self-insured companies.
          Self-insured  companies typically employ an in-house staff or TPA that
          manually  processes  medical  claim  forms.  ETC assists  companies in
          automating  this process.  Through ETC's systems and processes,  claim
          forms  are  scanned  at the  client's  location,  then  electronically
          captured,  sent  to  any  applicable  managed  care  organization  for
          repricing,  and  returned  to the payor in an  acceptable  format  for
          evaluation and payment. As a result, claims are paid faster, a greater
          degree  of  control  over  data  integrity  is  maintained,   and  the
          customers' in-house claims processing costs are dramatically reduced.

          Locating and contracting for discounts from medical providers.  Health
          care providers may contract with various  managed care  organizations,
          and those contracts may limit the amount that providers may charge for
          a particular service.  ETC utilizes provider  information  directly to
          secure a discount  for medical  services.  The cost  savings  realized
          further reduces costs to ETC self-insured customers.

          Processing  medical  claims on behalf of PPOs that are not  automated.
          Many PPOs cannot receive or send medical claims electronically despite
          the fact that  electronic  transmission  is required by an  increasing
          number  of  payors.  ETC  provides  electronic   processing  to  these
          organizations on a contract basis. This service is currently  provided
          to and paid for entirely by the PPO networks.

     At December 31, 1996,  ETC-Texas had seventeen clients. The market includes
self-insured companies, their TPAs and the managed care organizations that serve
them. ETC-Texas expended considerable effort and resources,  including operating
briefly  as a TPA and  hiring  personnel  with  extensive  experience  in paying
medical claims, to develop its current work flow process.  Additional  resources
were devoted to (i) defining the exact  services  that were needed by the market
segment and (ii) developing, testing and ultimately implementing these services.
While expensive and time consuming, these activities serve as the basis on which
the business of ETC will operate.  As ETC expands its customer base,  additional
computer  equipment and  personnel  will be required.  Additional  personnel and
equipment will be added as needed to service new customers, which may contribute
to increased revenues. Such expansion will be funded by (i) the revenues derived
from operations,  and (ii) ETC's $500,000 line of credit from Ironwood. ETC also
has an agreement with Ironwood, under which Ironwood will fund capital equipment
expenditures.

     ETC believes  that the merger will have a positive  effect on its liquidity
and capital  resources.  The merger provides ETC with greater capital  resources
and  liquidity   through  the  availability  of  public  markets  and  financing
opportunities;  however,  its  results  of  operations  will be only  marginally
improved as the Company had no  significant  operations.  ETC has  continued  to
expand its client base by adding new claims  automation  and repricing  clients,
including a 90-day agreement with Champion International.


                                       -7-

<PAGE>


Results of Operations of ETC-Texas

     For the Twelve Months Ended  December 31, 1995. For the twelve months ended
December  31,  1995,  the results of the  operations  were  significant  in that
ETC-Texas determined the types of clients to pursue and the nature of processing
services to be provided.  The development of the work flow process was virtually
completed  and tested to determine  its ultimate  feasibility.  A  comprehensive
marketing  effort  was  begun in the last  quarter  of fiscal  1995.  Management
secured its first substantial  clients and began the process of implementing its
system  for  commercial  use.  Although  no  revenues  were  generated  from the
electronic  transmission of data, the process of handling claims information was
established.

     Revenues  and Cost of Revenues  -- 1995.  Revenues  earned  during the year
ended  December  31, 1995 were  $66,612,  resulting  primarily  from the sale of
ETC-Texas'   Automated  Medical  Practice  Solution  ("AMPS")  system  and  from
electronic claims processing for military clients. ETC-Texas ceased sales of its
AMPS system on  December  31,  1995 due to the fact that a viable  market  never
developed for the product.  During fiscal 1995,  management activity was focused
on programming, research and development, and staffing.

     The work flow process  methodology  was  completed in the first  quarter of
fiscal 1996,  and the first  clients to use this  service on a commercial  basis
were engaged.  The first  commercial  operation  utilizing the developed  system
began  operation  in  April  1996.  Despite  the  extended  development  period,
ETC-Texas  believed it was important to bring to market a service that was fully
functional. Also, management recognized that much of ETC-Texas' potential market
consisted  of  larger,  more  established   companies,   and  that  success  and
credibility would be largely determined by the reliability of ETC-Texas' systems
and processes. ETC-Texas has not encountered significant technical or procedural
problems in any area of its claims processing  operation since implementation of
its work flow process.

     Direct expenses incurred for services provided during the development stage
in fiscal 1995 were $40,764 or 61% of total revenues for the period. In addition
to  minimal  revenues,  ETC-Texas'  lack  of  operating  history  resulted  in a
reluctance  by vendors to extend any credit to ETC-Texas and any credit that was
offered was on  unfavorable  terms.  With the lack of adequate  trade  credit to
build its  business,  ETC-Texas  relied on its  ability to  generate  additional
capital  through  the  issuance  of debt and/or  equity  securities  to fund the
operating expenses of the business.

For the Year Ended December 31,1996 Compared to the Year Ended December 31, 1995

     During the year ended December 31, 1995,  ETC-Texas was still a development
stage  enterprise.  Revenues  were  $66,612  and net  loss  was  $1,093,329.  As
ETC-Texas  had not  begun its  ongoing  operations,  a  detailed  discussion  of
comparative results of operations is not meaningful.

     Revenues for the year ended  December  31, 1996 were  $935,449 and net loss
was  $2,470,684.  Principal  expenses  were  personnel  costs  of  approximately
$1,254,094, and legal and professional expenses of approximately $693,541. Legal
and professional  expenses are primarily related to expenses incurred in seeking
and  identifying   suitable  merger   candidates,   general  corporate  matters,
preparation of the Merger Agreement and related documents, the audit, accounting
and legal fees for the preparation of this Proxy Statement/Prospectus.

     During March 1996,  ETC-Texas  entered into an agreement to provide medical
claims processing for Wal-Mart.  For the year ended December 31, 1996,  revenues
produced by the agreement were  approximately  $596,754 or approximately  64% of
revenues. ETC-Texas has entered into the Long-Term Wal-Mart Agreement, effective
September  1, 1996,  which  agreement  has been  assigned to and assumed by ETC.
Under the terms of the Long-Term Wal-Mart Agreement, ETC-Texas agreed to provide
electronic  medical claims processing and repricing  services for Wal-Mart under
the terms and  conditions  set forth  therein  for a term of two years  from the
effective  date.  ETC-Texas will receive $1.00 per claim processed for the first
50,000 claims  processed in a given month,  which amount will be reduced by $.10
for every additional  50,000 claims processed in that month. Once 150,000 claims
have been processed in a given month, ETC-Texas will receive $.75 per additional
claim  processed  during said month.  Loss of the Long-Term  Wal-Mart  Agreement
would have a materially  adverse effect on ETC's results of operations,  and may
require ETC to temporarily reduce staff,  curtail operations and delay expansion
plans.



                                       -8-

<PAGE>



Operating Expenses

     Start-up  costs in fiscal 1995  consisted of $424,301 in employee costs and
benefits,  $245,526 in general and administrative expenses, and $37,613, $39,000
and $144,717 in legal,  marketing  and general  consulting  fees,  respectively.
Travel and entertainment  costs were $71,469 and costs incurred in financing the
reorganization  and  restructuring  of the Company  were  $23,281.  Research and
development   expenses  in  fiscal  1995  primarily   consisted  of  $97,171  in
programming  personnel and benefits,  $47,525 in professional  computer fees and
$35,135 from an investment in a TPA.

     Direct  costs in fiscal 1996  consisted  primarily of  $324,366  in data
entry  personnel  costs,  $151,383  in OCR costs and $28,469 in electronic
data line  costs.  Start-up  costs for the year  ended  December  31,  1996 were
comprised of $698,884 in employee costs and benefits,  $845,483 in general
and  administrative  and $614,816 in professional  fees that were incurred in
financing  efforts  and  in  preparation  and  filing  of the  S-4  Registration
Statement.  Research  and  development  expenses  in fiscal  1996  consisted  of
$562,272.00 in programming personnel and benefits and $39,414 in professional
computer  fees.  Management  believes  that  it has  been  able  to  manage  the
relationship between cost and revenues during fiscal 1996 with income increasing
at a  much  faster  rate  than  expenses  given  the  implementation  of  claims
processing services.

Net Loss

     ETC-Texas  incurred a net loss of $1,093,329  and $2,470,684 for the fiscal
years  ended  December  31,  1995 and 1996,  respectively.  ETC expects to incur
losses in future periods until it generates sufficient revenues from an expanded
client base to offset ongoing operating costs and expansion expenses.

Liquidity and Capital Resources

     At  December  31,  1996,   ETC-Texas  had  cash  and  cash  equivalents  of
approximately $50,125, and a working capital deficit of approximately  $307,329.
Additionally,  ETC-Texas has a $500,000 line of credit  available  from Ironwood
under which no borrowings were outstanding at December 31, 1996. Under the terms
of the line of credit arrangement,  ETC-Texas and now ETC may draw from the line
up to 80% of its accounts receivable that are under 65 days due. As security for
borrowings  against the line of credit,  ETC-Texas was required to pledge shares
of ETC-Texas  Common Stock based upon a ratio whereby for every dollar  borrowed
ETC-Texas  would pledge that number of shares of  ETC-Texas  Common Stock having
two  dollars  worth of  value.  Upon  consummation  of the  Merger,  ETC will be
required to pay a loan  origination  fee in an amount equal to 10% of Ironwood's
exposure  under the line of  credit.  Management  believes  that  cash,  working
capital and  available  credit  facilities  are  sufficient  to fund  operations
through the twelve-month  period ending December 31, 1997.  ETC-Texas has funded
its initial capital needs and operations  largely with funds provided by private
debt and  equity  financing.  For the  fiscal  year  ended  December  31,  1995,
ETC-Texas issued an aggregate of $120,000 principal amount of debentures bearing
interest at 12%. At various times throughout fiscal 1995, holders of $120,000 of
debentures  accepted  ETC-Texas' offer to convert such debentures into shares of
ETC-Texas  Common  Stock at a  conversion  rate of one share of common stock for
each $1.25 of principal.  All  debentures  were converted into a total of 96,000
shares of ETC-Texas Common Stock. This conversion  allowed management to operate
ETC-Texas  without debt, which management  believes was essential to the success
of the  venture.  Management's  decision  to  eliminate  debt and to  operate by
increasing  capital was necessary due to the sporadic nature and overall lack of
revenue generated by ETC-Texas.

     During fiscal 1995,  ETC-Texas paid $210,000 and issued 3,965,100 shares of
ETC-Texas  Common  Stock in  exchange  for  certain  assets  related to Sterling
National  Corporation's   ("Sterling")   electronic  medical  claims  processing
business,  which was developed by Sterling as a segment of its overall  business
operations. ETC-Texas acquired from Sterling certain software used in Sterling's
efforts  to file  medical  claims  electronically  for  physicians  and  medical
facilities.  The software  used was  purchased by Sterling  from an  independent
software company. Upon its acquisition by ETC-Texas, the software was materially
altered to the extent that ETC-Texas  effectively designed and developed its own
software program for use in its current operations.  The only similarity between
the two  software  programs is that both are  designed  for the  medical  claims
business.  However, the type of software,  the intended use, the clients served,
the workflow process requirements,  the storage,  archival and retrieval of data
or images and the hardware  required to operate the software  distinguish  ETC's
current software from the software purchased from Sterling.


                                       -9-

<PAGE>



     During 1995,  ETC-Texas  raised  $1,335,098 by issuing  2,077,110 shares of
ETC-Texas Common Stock to private investors.  Also during this period, ETC-Texas
issued an aggregate of 20,000  shares of ETC-Texas  Common Stock for a sum total
of $37,925  representing  payment for services to a former employee of ETC-Texas
valued at $4,000 and furniture and office equipment  valued at $33,925.  For the
year ended  December  31, 1996,  ETC-Texas  raised  $718,989 by issuing  732,766
shares of ETC-Texas Common Stock. An aggregate of 262,625 shares were issued for
a total of $262,625  representing  payment  for  services  rendered.  All of the
offering  proceeds  were  used  to  fund  capital  expenditures,   research  and
development and general start-up costs.

     ETC-Texas  has incurred  losses from  operations  since its  inception.  At
present,  ETC-Texas is able to meet its funding  needs as a result of borrowings
available  under the line of credit and from  revenues  generated  from  current
operations.  The ability of ETC-Texas to fund future costs  associated  with its
operations is dependent  upon its ability to increase  revenues from  operations
and  to  raise  additional   capital  through  private  offerings  of  ETC-Texas
securities. ETC-Texas may require capital principally for the enhancement of its
existing  services and to fund its marketing efforts to existing and prospective
clients.

     The  availability  of future  sources of  external  capital  are not known.
Internal  sources of  capital  are  limited to the line of credit,  successfully
achieving  profitable  operations  in  future  periods,  or  raising  additional
contributions of capital from shareholders and private investors.

     ETC believes it has sufficient operating capital for fiscal 1997 to operate
the business without constraint. However, the capital on hand does not allow for
expenditures deemed necessary for ETC to keep pace with its expansion plans. The
plans for expansion  include adding an additional five clients by the end of the
year and expanding the office facilities to accommodate the growth which will be
encountered with the addition of the new clients.  Other plans are to expand the
scope of services offered and the market segments to which the existing services
are  offered.  ETC will expand its service for  acquiring  discounts  on medical
claims by  entering  into  joint  venture  or revenue  sharing  agreements  with
existing  PPO  networks.  Also,  ETC intends to expand its  services for medical
claims  to the  workers'  compensation  segment  of the  market.  This  will  be
facilitated  by first  automating  its Workers  Compensation  Bill Audit  Review
service and then offering these automated services to ETC's existing client base
which have already expressed an interest in utilizing the new services.  ETC may
also seek to expand its business through acquisitions. The goal of management in
such cases will be to make prudent decisions before embarking on any acquisition
and to negotiate  agreements  which will insure that any  acquisition  candidate
will be financially  self-sufficient  in minimal time so as to not be a drain on
the assets of ETC.  Management  will also evaluate in any such cases the ability
to  develop  a  product,  service  or block of  business  before  attempting  an
acquisition.  ETC has no commitment,  understanding  or agreement with any other
party relating to a proposed  acquisition.  In order to fund expenditures deemed
necessary  for proper  growth and  expansion,  it will be  necessary  to acquire
additional  operating  capital by increasing equity capital and possibly the use
of debt financing, which ETC believes is available.

     ETC has focused its efforts thus far on developing, refining and perfecting
its  medical  claim  work  flow  process  for its  existing  clients.  While the
development  of  these  services  is now  complete  and  working  properly,  the
information  generated  while  performing  these  services  has  given  rise for
additional  service  areas  which ETC intends to develop in order to bolster its
financial condition and results of operations,  including  automated  enrollment
procedures,  repricing or discounting  of medical claims for PPOs,  repricing or
discounting  of medical claims for payors and workers'  compensation  automation
services.

     ETC believes that existing resources, cash flow from operations and current
credit facilities will be sufficient to fund current operations through December
31, 1997. It is anticipated  that over the next twelve months,  ETC will be able
to  increase  its client  base by  offering  new value  added  services  such as
Workers'  Compensation  automation and bill audit review and repricing for PPOs.
These added  services  will first be offered to ETC's  existing  client base and
then to all new  clients.  The process to engage  additional  clients will be to
utilize the interrelationships  between various self-insured companies, TPAs and
PPOs and referrals from existing clients.  ETC is currently in negotiations with
several new clients which will  contribute  materially to revenues in 1997.  ETC
may also seek to raise additional  capital through the private placement of debt
or equity securities during the first quarter of fiscal 1997.

     Subsequent to December 31, 1996, a special  meeting of the  shareholders of
ETC-Texas was held on January 31, 1997, the  shareholders  ratified and approved
the terms and  conditions of the Merger  Agreement and  authorized  the Board of
Directors of ETC-Texas to effect the merger.  ETC-Canada held its annual meeting



                                      -10-

<PAGE>



on February 11,1997, the shareholders ratified and approved both the continuance
into Delaware and the Merger  Agreement and authorized the Board of Directors to
effect the merger.  The merger  became  effective  on  February  11, 1997 as the
applicable  continuance  and merger  documents  were filed with the  appropriate
authorities  in the States of  Delaware  and  Texas.  ETC-Texas  and  ETC-Canada
intended for the merger transaction to be a reorganization within the meaning of
Section  368(a) of the Internal  Revenue Code of 1986,  as amended (the "Code").
ETC-Texas  and ETC- Canada are each parties to the  reorganization  and will not
recognize any gain or loss as a result of the merger.  The Merger is in effect a
reverse  acquisition  and was accounted for as a  recapitalization  of ETC-Texas
with  ETC-Canada as the acquirer.  Effective  February 11, 1997, the name of ETC
Transaction Corporation changed to Electronic Transmission Corporation, with the
Certificate of Incorporation being duly amended to reflect the change of name.

     Research and  development  to be performed over the next twelve months will
be to enhance  the  current  software  programs  used in  automating  clients by
increasing  the speed of  processing  and  developing  value added  services for
clients.  It is not expected that costs  associated with projected  research and
development  efforts will materially effect the financial  condition and results
of operations of ETC for fiscal 1997.

     There are no significant sales or purchases of plant and equipment expected
to occur in fiscal 1997, other than normal,  recurring minor furniture and small
equipment purchases.

     As ETC grows in the number of claims it  processes  the number of employees
will also increase but not significantly.  Personnel that is added to handle the
increase in volume will  typically be added in the data  perfection  and quality
assurance  departments.  These are hourly employees and are readily available in
the marketplace.

ITEM 7.        FINANCIAL STATEMENTS.

     The financial  information required by this Item is found beginning at page
F-1.

ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
               FINANCIAL DISCLOSURE.

     There were no changes in or  disagreements  with  accountants or accounting
and financial disclosure.

                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
                 COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT.

     Directors and Executive Officers of ETC

     The  following  table  sets  forth  the  names  and  ages of the  directors
(including  committee members) and executive officers  (including  positions) of
ETC.

<TABLE>
<CAPTION>
<S>                                                                            <C>
                    Name                     Age                                     Position
                    ----                     ---                                     --------
L. Cade Havard(1)(2)........................ 45      Chairman, President and Chief Executive Officer and Director
Elaine Boze(2).............................. 48      General Counsel and Director
Louann C. Smith............................. 38      Controller, Treasurer, Corporate Secretary
Ann C. McDearmon............................ 46      Executive Vice President-- Director of Marketing
Timothy P. Powell........................... 38      Executive Vice President-- Data Services and Director
Michael Eckstein(1). . . . . . . . . . . .   49      Director
David O. Hannah(1).......................... 72      Director
Rick L. Snyder(2)........................... 45      Director

</TABLE>

(1)  Member of Compensation Committee of ETC.
(2)  Member of Audit Committee of ETC.



                                                            -11-

<PAGE>



     L. Cade  Havard has  served as  Chairman  of the Board and Chief  Executive
Officer of ETC-Canada  since 1992. Mr. Havard has also served as Chairman of the
Board and Chief  Executive  Officer of  ETC-Texas  since  December  1994 and has
served as President of ETC-Texas  since April 1996.  Mr. Havard also is the sole
officer,  director and shareholder of Sterling,  a factoring company.  From 1990
through 1992, Mr. Havard served as an independent  venture capitalist  providing
financing for various companies,  while also serving as Chairman of the Board of
the Regional Missouri Bank, Marceline, Missouri.

     Elaine Boze has served as General Counsel and a Director of ETC-Texas since
July 1995. For the nine years prior to her affiliation with ETC-Texas,  Ms. Boze
was involved in the private practice of law in Dallas, Texas. From 1977 to 1986,
Ms. Boze was employed in the General  Counsel's  office of Sun  Exploration  and
Production   Company  in  Dallas,   Texas.  Ms.  Boze  received  her  Doctor  of
Jurisprudence  degree from Texas Tech  School of Law in 1973.  Ms. Boze is Board
Certified -- Oil, Gas and Mineral Law, Texas Board of Legal Specialization.

     Louann C. Smith has served as Controller, Treasurer and Corporate Secretary
of ETC-Texas  since its inception in 1994.  From March 1994 to the present,  Ms.
Smith has served as Controller,  Treasurer and Corporate  Secretary of Sterling.
Prior to 1994, Ms. Smith worked as an accountant for Jonmar  Services,  attended
the University of Texas at Dallas,  served as Assistant Controller for Remington
Companies and Senior Accounting  Manager for Southmark Public  Syndications.  At
Southmark,   Ms.  Smith  was   responsible  for  SEC  reporting  for  10  public
partnerships.

     Ann C.  McDearmon  has served as Executive  Vice  President and Director of
Marketing of ETC-Texas  since June 1995.  From  November  1989 to May 1995,  Ms.
McDearmon  worked  for Tucker and Clark,  a third  party  administrator,  as the
claims  manager.  Her  responsibilities  included  claims  processing,  employee
management and subrogation. While serving as claims manager, Ms. McDearmon wrote
the claims logic for automated  claims,  created a budget and new filing system,
and wrote plan benefit  designs to comply with ERISA and the ADA. Ms.  McDearmon
has successfully  completed the Health Insurance  Association of America courses
as well as the International Claims  Administration course on Medical and Dental
claims  and LOMA I. Ms.  McDearmon  obtained  a  Bachelor  of Arts  degree  from
Arkansas State in 1973.

     Timothy P. Powell has served as Executive  Vice  President -- Data Services
and as a Director of ETC-Texas  since February 1995. From 1981 to February 1995,
Mr. Powell served as a  self-employed  computer  consultant for  individuals and
corporations  in the  State of  California.  Mr.  Powell  contracted  consulting
projects  with   independent,   governmental   organizations  and  Fortune  1000
companies. He provided services in system design,  implementation,  applications
development and procurement specifications.

     Michael  Eckstein has served as a Director of ETC-Texas since January 1996.
Mr.  Eckstein  is the  President  of EDI For  Healthcare,  a  Pennsylvania-based
technology company specializing in systems,  networking and EDI applications for
health  care  and  insurance  industries.  Mr.  Eckstein's  personal  experience
includes  over 20  years of  designing  and  implementing  data  processing  and
information  management solutions for health care providers and payors. He is an
active member of the ANSI  Standards  Committee for EDI Insurance and Healthcare
Applications,  and  participates  in  numerous  EDI  initiatives  including  the
National  Information  Infrastructure  task  force for health  care and  medical
applications.

     David O. Hannah has served as a Director of ETC-Texas  since February 1995.
For the proceeding five years, Mr. Hannah has managed his personal  investments.
Mr. Hannah has spent most of his professional career in real estate development.
His area of expertise is in the  purchasing  and  development of real estate for
the sole purpose of leasing to commercial entities.

     Rick L. Snyder has served as a Director of ETC-Texas  since  January  1996.
Mr. Snyder is the principal owner of MS3 located in Fairfax, Virginia. MS3 is an
independent  provider of Section 125,  COBRA,  Qualified  Retirement  Plan,  and
Automated Payroll Processing administrative services. From 1985 to October 1996,
Mr.  Snyder served as President of The L.P.  BAIER  Company  located in Fairfax,
Virginia.  The L.P.  BAIER  Company is an  independent  provider of Section 125,
COBRA,   Qualified   Retirement   Plan,   and   Automated   Payroll   Processing
administrative  services. Mr. Snyder also serves as the firm's Senior Consultant
for the Section 125 and COBRA administration  practice. Mr. Snyder also lectures



                                      -12-

<PAGE>


on issues related to Section 125 and COBRA compliance.  His courses are approved
by various State  Insurance  and Certified  Public  Accounting  Departments  for
continuing education credits.

     Each  director  of ETC will hold office  until the next  annual  meeting of
shareholders  and until a successor  has been elected and qualified or until his
earlier resignation or removal.

     None of the  Directors  of ETC is a party  to any  material  pending  legal
proceedings nor have there been any legal proceedings during the last five years
that are  material to an  evaluation  of the ability or  integrity of any of the
Directors or anyone nominated to become a director of the Company.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the  Securities  Exchange  Act, as amended (the  "Exchange
Act"),  requires ETC's  directors,  executive  officers and persons who own more
than  ten  percent  of a  registered  class  of ETC's  equity  securities  ("10%
holders"),  to file with the  Securities  and  Exchange  Commission  (the "SEC")
initial reports of ownership and reports of changes in ownership of common stock
and other  equity  securities  of ETC.  Directors,  officers and 10% holders are
required by SEC  regulation  to furnish  the  Company  with copies of all of the
Section 16(a) reports they file.

     Based  solely  on  a  review  of  reports   furnished  to  ETC  or  written
representatives  from ETC's  directors and executive  officers during the fiscal
year ended December 31, 1996, all Section 16(a) filing  requirements  applicable
to its directors, officers and 10% holders for such year were complied with.

ITEM 10.     EXECUTIVE COMPENSATION.

     The  following  Summary  Compensation  Table  sets  forth,  for  the  years
indicated,  all cash  compensation  paid,  distributed  or accrued for services,
including  salary and bonus  amounts,  rendered in all capacities for ETC-Canada
and ETC-Texas to L. Cade Havard,  Chief Executive Officer of both companies.  No
other  executive  officer of ETC- Canada or ETC-Texas  received salary and bonus
compensation in excess of $100,000 in the referenced fiscal years.

                                              Summary Compensation Table

<TABLE>
<CAPTION>
<S>                                                                            <C>          <C>                <C>
                                                                 Annual Compensation              Long-Term Compensation
                                                                                                          Awards
                                                                                                                 Securities
                                                                             Other Annual      Restricted        Underlying
Name/Title                                      Year       Salary/Bonus      Compensation     Stock Awards      Options/SARs
----------                                      ----       ------------      ------------     ------------      ------------
L. Cade Havard, Chairman of the Board,          1996         $184,000           $ - 0 -           - 0 -             - 0 -
President and Chief Executive Officer           1995         $96,736            $ - 0 -           - 0 -           400,000

</TABLE>

ETC Transaction Corporation paid no compensation to any Directors or Officers in
1996 and 1995.

Stock Options

     Mr. Havard owns options to purchase 300,000 shares of ETC common stock at a
purchase  price of $0.001 per share,  which  options  vest as  follows:  100,000
shares upon the  consummation  of the Merger,  100,000 shares on January 1, 1997
and 100,000 on January 1, 1998. Mr. Havard exercised options to purchase 100,000
shares of ETC-Texas  Common Stock on April 30, 1996. The options expire upon the
termination  of Mr.  Havard's  employment  with ETC. On February 24,  1997,  Mr.
Havard was granted an option to purchase  800,000  shares of ETC Common Stock at
$1.25 per share.

     In addition  to Mr.  Havard's  stock  options,  ETC has granted  options to
purchase an  aggregate  of 366,667  shares of ETC Common  Stock,  at an exercise
price of $0.001 per share, to certain other


                                      -13-

<PAGE>



employees of ETC. The options vest over the period  commencing  October 1996 and
ending August 1999 and expire upon the  termination  of the holder's  employment
with ETC.

     On June 1, 1996,  the Company  issued  options (the  "Company  Options") to
purchase an aggregate of 220,000  shares of common stock at an exercise price of
$1.50  per  share  on or  before  June  15,  1997 to two  affiliated  and  three
unaffiliated parties in consideration for services provided to ETC- Canada. Upon
completion of the merger, the holders of the ETC-Canada Options will continue to
have the right to acquire the  identical  number of shares of common  stock upon
payment of the $1.50 per share exercise price.

               Option/SAR Grants in Last Fiscal Year by ETC-Texas


<TABLE>
<CAPTION>
<S>                                                                                <C>              <C>
                                                              Percent of Total
                                    Number of Securities    Options/SARs Granted     Exercise or
                                     Underlying Options/      to Employees in        Base Price
                                      SARs Granted (#)          Fiscal 1996             ($/Sh)       Expiration Date
                                     ------------------        -------------           --------      ---------------
Name
L. Cade Havard, Chairman of                400,000                   87%                 $0.001         Upon
   the Board, President and                                                                             termination of
   Chief Executive Officer                                                                              employment
                                                                                                        See "Stock
                                                                                                        Options"


</TABLE>
                    Aggregated Fiscal Year-End Option Values
                         (Options Granted by ETC-Texas)

<TABLE>
<CAPTION>
<S>                                                                              <C>             <C>
                                               Number of Securities Underlying
                                                     Unexercised Options                Value of Unexercised
                                                      at Fiscal Year-End           in-the-Money Options-no market
                                                                                         at Fiscal Year-End
Name/Title                                      Exercisable      Unexercisable     Exercisable      Unexercisable
L. Cade Havard, Chairman of the Board,            200,000           100,000           $8,232            $4,116
   President and Chief Executive Officer

</TABLE>


ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

     The following table provides certain  information  based on the outstanding
securities  of ETC as of March 24,  1997,  and gives  effect to the Merger  with
respect  to each  director,  each  beneficial  owner of more than 10% of the ETC
Common Stock and all corporate officers and directors of ETC as a group.



                                      -14-

<PAGE>




                                          Amount of        Percent of
           Name and Address               Beneficial       Outstanding
       of Beneficial Owner(1)(2)          Ownership       Common Stock
-----------------------------------       ----------      ------------
L. Cade Havard(3)(4)(5)                    3,053,082             27.88
Sterling National Corporation(5)             243,868              2.23
Anneal Osbon Havard(6)                       500,000              4.57
Elaine Boze(3)(7)                            165,465              1.51
Louann C. Smith(8)                            32,034                 *
Ann C. McDearmon(9)                           33,334                 *
Timothy P. Powell(3)(10)                     375,000              3.42
David O. Hannah(3)                           944,208              8.62
Michael Eckstein(3)                              -0-               -0-
Rick L. Snyder(3)                                -0-               -0-
Edward Bollinger(11)(12)                      13,000                 *
Katherine L. MacDonald(11)(12)                10,000                 *
All executive officers and directors as a  4,626,123             42.25
  group (ten persons as to the Company)

*    Indicates less than 1%.
(1)      A person is deemed to be the beneficial owner of securities that can be
         acquired  by such  person  within  60 days  following  the date of this
         Current  Report  upon  the  exercise  of  options  or  warrants.   Each
         beneficial owner's percentage  ownership is determined by assuming that
         options or warrants that are held by such person (but not those held by
         any other  person)  and which are  exercisable  within 60 days from the
         date of this  Current  Report  have been  exercised.  Unless  otherwise
         noted, the Registrant believes that all persons named in the table have
         sole  voting and  investment  power with  respect to all common  shares
         beneficially owned by them.
(2)      Unless  otherwise  indicated,  the  address of each  beneficial  owner
         identified is: c/o ETC, 5025 Arapaho Road,  Suite 501,  Dallas,  Texas
         75248.
(3)      Director of ETC.
(4)      Includes (i) options to purchase  100,000  shares of common stock at an
         exercise  price of  $0.001  per  share  upon the  effectiveness  of the
         merger;  (ii) 500,000  shares of Common Stock issued in the name of Mr.
         Havard's minor children over which Mr. Havard exercises sole voting and
         investment  power;  and (iii) 243,868  shares of Common Stock issued in
         the name of Sterling, of which Mr. Havard is the sole shareholder.
(5)      Includes  243,668  shares  of ETC  Common  Stock  issued in the name of
         Sterling,  but  which  are  held  for the  benefit  of  certain  former
         employees  of Sterling  who are  presently  employed by ETC pursuant to
         options (the "Sterling Options") to purchase such shares at an exercise
         price of $0.001 per share over various  vesting  periods.  The Sterling
         Options  have  no  expiration   date,  but  are  cancelable   upon  the
         termination  of the holder as an employee of ETC.  Mr.  Havard has been
         designated  trustee  of the  shares  underlying  the  Sterling  Options
         pursuant to a Voting Trust Agreement,  dated January 26, 1995,  between
         Sterling and the holders of the Sterling  Options and,  therefore,  has
         sole voting and investment  control over said shares until such time as
         the Sterling Options are exercised.  Any shares subject to the Sterling
         Option which are not exercised will revert to Sterling.
(6)      Anneal Havard is the wife of L. Cade Havard. Ms. Havard exercises sole
         voting and  investment  control over the 500,000  shares of ETC Common
         Stock of which she is the record holder.
(7)      Does not include  options to  purchase  83,334  shares of Common  Stock
         under Sterling Options granted to Ms. Boze which vest on March 1, 1998.
(8)      Does not include  options to  purchase  16,667  shares of Common  Stock
         under  Sterling  Options  granted to Ms.  Smith  which vest on March 1,
         1998.
(9)      Does not include  options to  purchase  16,667  shares of Common  Stock
         under Sterling  Options granted to Ms. McDearmon which vest on March 1,
         1998.
(10)     Includes Sterling Options to purchase 375,000 shares of Common Stock at
         $0.001 per share which became  exercisable on March 1, 1996 and May 10,
         1996 and which will become  exercisable  on March 31, 1997; all options
         expire upon Mr.  Powell's  termination  as an employee of ETC. Does not
         include  Sterling  Options to purchase  125,00  shares of Common  Stock
         which vest on March 1, 1998.


                                      -15-

<PAGE>



(11)    Former Directors of ETC-Canada.

(12)   Includes options to purchase 10,000 shares of Company Common Stock at an
       exercise price of $1.50 per share, which options expire on June 15, 1997.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company

     On April 1, 1996, the Company  issued  201,112 shares of ETC-Canada  common
stock to L. Cade Havard,  the Chairman of the Board and Chief Executive  Officer
of  ETC-Canada,  in  satisfaction  of $201,112 of debt owed by ETC-Canada to Mr.
Havard.  Mr. Havard  transferred  121,612 of such shares in satisfaction of debt
obligations owed by Mr. Havard to unaffiliated third parties.

     On June 1, 1996,  ETC-Texas  executed  an  unsecured  promissory  note (the
"Note") in the principal amount of $779,575 in favor of the ETC-Canada. The Note
accrued  interest at the rate of 6% per annum and was due and payable on July 1,
1997.  The  obligation  of  ETC-Texas  under  the  Note  was  forgiven  upon the
consummation of the merger.

ETC-Texas

     In early  1995,  ETC-Texas  purchased  certain of the  assets of  Sterling,
including the claims processing  business  currently  operated by ETC-Texas,  in
exchange for a cash payment of $210,000 and the issuance of 3,965,100  shares of
ETC-Texas  Common  Stock.  Sterling is  currently  in the  business of factoring
accounts  receivable.  L. Cade Havard, the Chairman of the Board,  President and
Chief  Executive  Officer of  ETC-Texas  and the Chairman of the Board and Chief
Executive Officer of the Company, is the sole shareholder of Sterling.  Sterling
is currently the record owner of 745,368  shares of ETC-Texas  Common Stock,  of
which  594,368  shares  are  subject  to  the  Sterling  Options,   representing
approximately  14% of all  issued and  outstanding  shares of  ETC-Texas  Common
Stock.  Sterling  and  ETC-Texas  periodically  advance  and repay  funds to one
another.  Net payables to Sterling as of December 31, 1996 were $339,208,  which
amount is due on demand and without  interest.  It is not  anticipated  that the
Surviving  Corporation will enter into any further  agreements with Sterling for
the purpose of borrowing or lending funds. Sterling may provide certain computer
hardware  equipment to the Surviving  Corporation  at below market prices as the
result of  contractual  arrangements  Sterling  has with third party  suppliers.
Should  such  transactions  be  undertaken,  they will be  effected on terms and
conditions similar to those available to the Surviving Corporation as if dealing
with an independent third party.

     On December 12, 1995,  ETC-Texas  entered into a marketing  agreement  (the
"Marketing  Agreement")  with MS3. Rick Snyder,  the principal  owner of MS3, is
also a director of ETC.  Under the terms of the  Marketing  Agreement,  MS3 will
assist ETC in identifying  and bringing under contract  clients  requiring ETC's
claims processing  services.  As compensation for these marketing services,  MS3
shall  receive an amount  equal to 15% of the "gross  income from  revenue,"  as
defined in the  Agreement,  realized by ETC from accounts  credited to MS3. Also
under the terms of the  Marketing  Agreement,  ETC has  agreed to assist  MS3 in
marketing  its  flexible  benefits  and  COBRA   administrative   services.   In
consideration  for this  marketing  assistance,  MS3 has agreed to pay ETC, on a
monthly basis, an amount equal to 10% of the gross income of revenue realized by
MS3 from the  services  provided to clients  introduced  to MS3 by ETC which are
brought under contract. The Marketing Agreement is for a term ending on November
30, 1997 and shall be extended  automatically  for additional  two-year rollover
periods  unless  either party desires to terminate its rights under same with at
least  60-days  notice  to the  non-terminating  party  prior  to the  scheduled
expiration date.

     On January 18, 1996,  ETC entered into a consulting  agreement with Michael
Eckstein, a director of ETC, pursuant to which Mr. Eckstein agreed to assist ETC
in identifying and placing under contract third party  administrators  ("TPAs"),
preferred provider organizations ("PPOs") and other managed care companies which
may be able to utilize ETC's claims processing services. Under the terms of this
agreement,  Mr. Eckstein was entitled to receive compensation on a monthly basis



                                      -16-

<PAGE>



equal to $3,500 and  commissions  equal to8% of the "gross income from revenue,"
as defined in the  agreement,  realized  by ETC from  clients  generated  by Mr.
Eckstein.  The  obligation to receive  monthly  compensation  of $3,500 has been
voluntarily  terminated by both parties.  The  consulting  agreement  expires on
January 20, 1998, and will automatically  renew for additional  one-year periods
unless  canceled by either ETC or Mr.  Eckstein on 30-days  notice  prior to the
applicable expiration date.

     ETC is a party to an  equipment  lease and stock  option  agreement,  dated
April 23, 1996 (the "Lease  Agreement")  with  Ironwood  Leasing  Ltd.,  a Texas
corporation  ("Ironwood").  Principals of Ironwood are also shareholders of ETC.
Under  the terms of the Lease  Agreement,  ETC  leases  the  scanning  equipment
necessary   to  scan  paper   claims  and  convert   them  into   electronically
transmittable claims data information. The Lease Agreement is for a term of five
years and automatically  renews for consecutive  one-year periods unless a party
thereto  notifies  the other of its intent to terminate  the Lease  Agreement 90
days prior to the end of the renewal term.

     Also under the Lease  Agreement,  ETC has granted to Ironwood the option to
either (i) sell to ETC all the equipment  referenced  in the Lease  Agreement in
exchange for the number of shares of ETC Common Stock,  or an equivalent  number
of shares of an entity with which ETC may merge, equal to the purchase price for
said equipment divided by 1.25 per share or (ii) purchase,  at a per share price
of $1.25,  the number of shares of ETC Common Stock equal to the purchase  price
of the equipment  divided by 1.25 whereby ETC may in turn purchase the equipment
referenced in the Lease Agreement at the expiration of the lease term for $1.00.

     On June 20, 1996,  Ironwood and ETC-Texas  entered into a letter  agreement
whereby Ironwood waived the escrow requirements  imposed upon ETC-Texas pursuant
to the Lease  Agreement  for the period ending June 30, 1996.  Ironwood  further
agreed that ETC-Texas would not have to comply with the escrow provisions of the
Lease  Agreement  until  ETC-Texas  had  received  30-days  written  notice from
Ironwood. Furthermore,  Ironwood acknowledged that any option to purchase shares
of the common capital stock of ETC-Texas  pursuant to the Lease  Agreement would
have an exercise price of $1.25 per share.

     Effective May 1, 1996,  Roy W. Mers ("Mers")  resigned from his position as
President  and  Director of  ETC-Texas.  As a  consequence  to his  resignation,
ETC-Texas and Mers entered into a Settlement and Employment Agreement.  Pursuant
to that agreement,  ETC-Texas has agreed to pay to Mers, as compensation for his
efforts in  assisting  ETC-Texas to obtain  financing  for  ETC-Texas'  business
ventures,  a commission of: (a) 10% of all capital invested by private investors
for which no commission is due to any other  funding  source,  (b) the following
percentages based upon a "Lehman Formula" for additional  capital provided by an
investment  banking or brokerage  group to which a commission  is due, 5% on the
first $1,000,000, 4% on the second $1,000,000, 3% on the third $1,000,000, 2% on
the fourth $1,000,000 and 1% on the capital raised in excess of $5,000,000;  (c)
2% of the loan  amount or maximum  amount  used on any credit line for any loans
generated or credit lines  established  by Mers on behalf of ETC-Texas.  Mers is
also entitled to receive  ETC-Texas  stock at the rate of 100,000 shares for the
first $1,000,000 of capital raised,  75,000 shares for the second  $1,000,000 of
capital  raised,  50,000 shares for the third  $1,000,000 of capital  raised and
25,000  shares for the  fourth  $1,000,000  and each  additional  $1,000,000  in
capital raised. The stock may be earned pro rata beginning at $500,000.  If less
than  $500,000  in  capital  is  provided,   then  no  shares  will  be  earned.
Furthermore,  ETC-Texas shall continue to provide medical  insurance to Mers for
the term of the agreement.  The agreement  terminated on July 31, 1996. However,
ETC-Texas  has agreed to pay Mers'  compensation  and stock  bonuses  should any
financial  institution  that Mers introduces to ETC-Texas  subsequently  provide
financing to ETC-Texas or the Surviving Corporation prior to August 1, 1997.



                                                        -17-

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                            <C>

ITEM 13.          EXHIBITS AND REPORTS ON FORM 10-K.

(a)      Financial Statements and Exhibits                                                                Page

         1.       Financial Statements.  The following financial statements are 
                  submitted as part of this report:

                  ETC - Canada

                  Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-1

                  Balance Sheets - December 31, 1996 and 1995 . . . . . . . . . . . . . .. . . . . . . .   F-2

                  Statements of Operations - Years Ended December 31, 1996 and 
                    1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-3

                  Statements of Stockholders' Equity - Years Ended December 31, 
                    1996  and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-4 .

                  Statement of Cash Flows - Years Ended December 31, 1996 and
                    1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-5

                  Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-6

                  ETC - Texas

                  Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

                  Balance Sheets - December 31, 1996 and 1995 . . . . . . . . . . . . . .. . . . . . . . . F-12

                  Statements of Operations - Years Ended December 31, 1996 and 
                      1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14

                  Statements of Stockholders' Equity - Years Ended December 31, 
                      1996 and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15.

                  Statement of Cash Flows - Years Ended December 31, 1996 and
                      1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-16

                  Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-17

                  ETC-Canada and ETC-Texas Pro-Forma

                  Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-29

                  Balance Sheet - December 31, 1996  . . . . . . . . . . . . . .. . . . . . . . . . .  .   F-30

                  Statement of Operations - Year Ended December 31, 1996 . . . . . . . . . . . . . . . .   F-32

                  Balance Sheet - December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-33

                  Statement of Operations - Year Ended December 31, 1995 . . . . . . . . . . . . . . . . . F-34

                  Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-36
</TABLE>

         2.       Exhibits

                  Exhibit
                  Number                    Description of Exhibits

                    2.1*        Agreement  and Plan of  Merger  dated as of
                                May 1,  1996,  By and among the Registrant
                                and Electronic Transmission Corporation.

                    3.1*        Articles of Incorporation of the Registrant, 
                                dated September 5, 1986.


                                                        -18-

<PAGE>



                    3.2*        Articles of Amendment to the Articles of 
                                Incorporation of The Registrant, dated March 26,
                                1996.

                    3.3*       Bylaws of the Registrant, dated September 5,1986.

                    3.4*        Form of Certificate of Incorporation of the 
                                Registrant, as Continued and domesticated into
                                the State of Delaware.

                    3.5*        Form of Bylaws of the Registrant, as continued
                                and Domesticated into the State of Delaware.

                    4.1*        Specimen of Continued Common Stock Certificate.

                    9.1*        Voting Trust Agreement, dated January 26, 1995,
                                between Sterling National Corporation and 
                                holders of Sterling Options.

                  10.1*         Bill of Sale, dated effective January 1, 1995,
                                by  and  between  Electronic  Transmission 
                                Corporation and Sterling National Corporation

                  10.2*         Agreement for Processing Medical Claims on a 
                                Temporary Basis, dated effective March 5, 1996
                                by and between Electronic Transmission 
                                Corporation and Wal-Mart.

                  10.3*         Equipment Lease and Stock Option Agreement, 
                                effective April 23, 1996, by and between 
                                Electronic Transmission Corporation and
                                Ironwood Leasing Limited.

                  10.4*         Letter Agreement, dated June 20, 1996, between 
                               Electronic Transmission Corporation and Ironwood 
                                Leasing Limited.

                  10.5*         Promissory Note, dated June 1, 1996, in the 
                                principal amount of $779,574.50, executed in
                                favor of the Registrant by Electronic
                                Transmission Corporation.

                  10.6*         Staff Leasing Services Agreement, dated 
                                effective December 15, 1995, by and between 
                                Network Employers Group, Inc. and Electronic
                                Transmission Corporation.

                  10.7*         Employment and Settlement Agreement, dated
                                January 2, 1995, Between Electronic Transmission
                                Corporation and L. Cade Havard.

                  10.8*         Employment and Settlement,dated December 4,1995,
                                between Electronic Transmission Corporation and
                                Elaine Boze.

                  10.9*         Employment and Settlement  Agreement,  dated
                                March   1,    1995,    between    Electronic
                                Transmission Corporation and Timothy P. Powell.

                  10.10*        Employment Agreement, dated May 1, 1996, between
                                Electronic Transmission Corporation and Ann C.
                                McDearmon.

                  10.11*        Employment Agreement, dated April 1, 1996,
                                between Electronic Transmission Corporation and
                                Louann Smith.


                                                        -19-

<PAGE>


                  10.12*        Settlement and Employment Agreement,dated May 1,
                                1996, between Electronic Transmission 
                                Corporation and Roy W. Mers.

                  10.13*        Office Lease, dated January 5, 1995, by and
                                between Natron Limited Partnership and 
                                Electronic Transmission Corporation, including 
                                amendments thereto.

                  10.14*        Agreement  for   Processing   and  Repricing
                                Medical Claims,  effective September 1, 1996
                                by  and  between   Electronic   Transmission
                                Corporation and Wal-Mart.

                  16.1*         Form of Notice of Change of Auditor.

                  16.2*         Letter of Hans P. Cremers, Chartered Accountant,
                                dated June 24, 1996.

                  16.3*         Letter of Simonton, Kutac & Barnidge, L.L.P., 
                                dated June 24, 1996.

                  27.1*         Financial Data Schedule

                  *Previously   filed  as  an  exhibit  to  ETC's   Registration
                  Statement on Form S-4, declared  effective on January 7, 1997,
                  and incorporated herein by reference.

(b)      Reports on Form 8-K.

         No  reports  on Form 8-K were  filed  during  the  three  months  ended
December 31, 1996.



                                                        -20-

<PAGE>

                         INDEPENDENT AUDITORS' REPORT

March 10, 1997

To the Board of Directors
of Electronic Transmission Corporation:

We have  audited the  accompanying  balance  sheets of  Electronic  Transmission
Corporation ("Company"), a Texas corporation,  as of December 31, 1995 and 1996,
and the related  statements of operations,  stockholders'  equity 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 audits 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  Electronic  Transmission
Corporation  as of December 31, 1995 and 1996, and the results of operations and
its cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.

As described in Note 2, the accompanying financial statements have been prepared
assuming  that the Company  will  continue as a going  concern.  The Company has
experienced   accumulated   net  losses  of  $3,564,013   since  its  inception.
Additionally,  the Company's current liabilities  exceeded its current assets by
$307,329 at December 31, 1996. These conditions  raise  substantial  doubt about
the  Company's  ability  to  continue  as a going  concern.  Management's  plans
regarding those matters are also described in Note 2. Unless the Company obtains
an increased  customer base, it will not be able to meet its obligations as they
come due and it will be unable to execute its  long-term  business  plan.  These
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


Simonton, Kutac & Barnidge, L.L.P.
Houston, Texas



<PAGE>

The accompanying notes are an integral part of these financial statements.


                       ELECTRONIC TRANSMISSION CORPORATION

                                 BALANCE SHEETS

                                     ASSETS



                                                    December 31,   December 31,
                                                       1995            1996
                                                -------------     -----------

Current Assets:
    Cash  and cash equivalents                  $     114,885     $    50,125
    Accounts receivable
      Trade                                             7,059         236,356
      Shareholder                                      82,744              --
Employees                                               5,734          28,203
    Current portion, capital lease
      receivable                                           --          25,095
    Prepaid assets                                      9,204          15,286
                                                 ------------      ----------
       Total Current Assets                           219,626         355,065
                                                 ------------      ----------
Property and Equipment, net                           137,348         521,576
                                                 ------------      ----------

Other Assets:
    Capital lease receivable                               --          27,723
    Deposits and other                                     --          14,610
                                                 ------------      ----------
       Total Other Assets                                  --          42,333
                                                 ------------      ----------
Total Assets                                    $     356,974     $   918,974
                                                 ============      ==========



<PAGE>


                           BALANCE SHEETS (CONTINUED)

                       LIABILITIES & STOCKHOLDERS' EQUITY


                                                    December 31,    December 31,
                                                       1995              1996
                                                   -----------      -----------
Current Liabilities:
    Accounts payable                               $    56,340      $   221,315
    Accrued expenses                                       809          128,248
Accrued payroll and taxes                              109,131          189,825
    Accrued interest payable                                --           27,800
    Current portion, capital lease
       obligations                                          --           95,206
                                                    ----------       ----------
          Total Current Liabilities                    166,280          662,394

Note payable                                                --          779,575
Loan payable-shareholder                                    --          339,208
Long-term capital lease obligations                         --          114,106
                                                    ----------       ----------
       Total Liabilities                               166,280        1,895,283
                                                    ----------       ----------

Commitments and Contingencies
Stockholders' equity:
     Preferred stock, no par value,
         2,000,000 shares authorized;
         no shares issued and outstanding                   --               --
     Common stock, no par value,
         8,000,000 shares authorized;
         6,158,210 and 7,153,601
         shares issued and outstanding,
         respectively                                1,494,023        2,475,637
     Additional paid-in-capital - stock options             --          322,067
     Accumulated deficit                            (1,303,329)      (3,774,013)
                                                    ----------       ----------

         Total Stockholders' Equity                    190,694         (976,309)
                                                    ----------       ----------
Total Liabilities & Stockholders' Equity           $   356,974      $   918,974
                                                    ==========       ==========


<PAGE>


                            STATEMENTS OF OPERATIONS


                                                        For the Years
                                                     Ended December 31,
                                                1995                 1996

Service revenues                            $    66,612          $    935,449
                                             ----------           -----------

Costs and Expenses:
    Direct costs                                 40,764               549,422
Start-up costs                                  939,347               395,866
Research and development                        179,830             1,469,858
General and administrative                           --               953,775
                                             ----------           -----------

       Total Costs and Expenses               1,159,941             3,368,921
                                             ----------           -----------

Loss from operations                         (1,093,329)           (2,433,472)

Other Income (Expense):
    Interest Expense                                 --               (37,212)
                                             ----------           -----------

Loss before income tax expense               (1,093,329)           (2,470,684)
Income tax expense                                   --                    --
                                             ----------           -----------

Net loss                                    $(1,093,329)         $ (2,470,684)
                                             ==========           ===========

Loss per common share:
       Primary and fully-diluted            $     (0.32)         $      (0.36)
                                             ==========           ===========

Weighted average common shares outstanding:
       Primary and fully-diluted              3,377,069             6,906,593
                                             ==========           ===========



<PAGE>



                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
<S>                                                                            <C>          <C>               <C>            
                                                                                Add'l.
                                                                                Paid-In
                                                     Common Stock               Capital
                                               ----------------------            Stock            Accumulated
                                               Shares          Amount           Options            Deficit            Total
                                        --------------     -------------    --------------     -------------    --------------

Balance at  December 31, 1994                    1,000    $        1,000   $            --    $           --   $         1,000

Issuance of shares for business              3,965,100            20,751                --                --            20,751
Deemed dividend paid                                --                --                --          (210,000)         (210,000)
Issuance of shares for cash                  1,916,110         1,201,659                --                --         1,201,659
Issuance of shares for cash
   to related party                            160,000           112,688                --                --           112,688
Issuance of shares for services
   to related party                              4,000             4,000                --                --             4,000
Issuance of shares for furniture
   and equipment                                16,000            33,925                --                --            33,925
Issuance of shares on conversion
      of convertible debentures                 96,000           120,000                --                --           120,000
Net loss                                            --                --                          (1,093,329)       (1,093,329)
                                        --------------    --------------   ---------------    --------------   ---------------

Balance at December 31, 1995                 6,158,210         1,494,023                --        (1,303,329)          190,694

Issuance of shares for cash                    732,766           718,989                --                --           718,989
Issuance of shares for services                262,625           262,625                --                --           262,625
Compensation expense                                --                --           322,067                --           322,067
Net loss                                            --                --                 -        (2,470,684)       (2,470,684)
                                        --------------    --------------   ---------------        ----------        ----------

Balance at December 31, 1996                 7,153,601         2,475,637   $       322,067    $   (3,774,013)  $      (976,309)
                                        ==============    ==============   ===============    ==============   ===============

</TABLE>

<PAGE>



                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S>                                                                            <C>                <C>
                                                                                         For the Years
                                                                                        Ended December 31,
                                                                                    1995                  1996
                                                                             --------------------------------------
Cash Flows from Operations:
Net loss                                                                   $      (1,093,329)     $     (2,470,684)
Adjustments to Reconcile Net Loss to
  Net Cash Provided (Used) by Operations:
    Non-cash issuance of common stock for services rendered                            4,000               262,625
    Non-cash compensation from stock options                                              --               322,067
Depreciation and amortization                                                         32,173               111,419
    Increase in accounts receivable-trade                                             (7,059)             (229,297)
Increase in employee advances                                                         (5,734)              (22,469)
(Increase) decrease in advances to shareholders                                      (82,744)              421,949
Increase in prepaid expenses                                                          (9,204)              (11,531)
Increase in deposits and other assets                                                     --               (10,174)
Increase in accounts payable                                                          56,340               172,020
    Increase in accrued expenses                                                         809               120,395
    Increase in accrued payroll and taxes                                            109,131                80,695
    Increase in accrued interest payable                                                  --                27,800
                                                                            ----------------       ---------------

   Net Cash Used in Operations                                                      (995,617)           (1,225,185)
                                                                            ----------------       ---------------

Cash Flows from Investing Activities:
    Payments on capital leases receivable                                                 --                11,642
Purchases of furniture and equipment                                                (114,845)             (312,580)
                                                                            -----------------      ---------------

   Net Cash Used in Investing Activities                                            (114,845)             (300,938)
                                                                            ----------------       ---------------

Cash Flows from Financing Activities:
    Issuance of convertible debentures                                               120,000                    --
Dividend paid                                                                       (210,000)                   --
    Proceeds from note payable                                                            --               779,575
    Payments on capital leases payable                                                    --               (37,202)
       Issuances of common stock for cash                                          1,314,347               718,990
                                                                            ----------------       ---------------

   Net Cash Provided by Financing Activities                                       1,224,347             1,461,363
                                                                            ----------------       ---------------

Net increase (decrease)  in cash                                                     113,885               (64,760)
Cash, beginning of period                                                              1,000               114,885
                                                                            ----------------       ---------------
Cash, end of period                                                        $         114,885      $         50,125
                                                                            ================       ===============
</TABLE>


<PAGE>



                       ELECTRONIC TRANMISSION CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1995 and 1996


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AND BACKGROUND

Electronic Transmission  Corporation ("ETC" or "Company") was in the development
stage until the last quarter of 1996, as it had no significant  revenues. In the
last  quarter,   a  long-term  contract  was  executed  with  a  large  national
self-insured  corporation  and operations  commenced.  ETC's business plan is to
provide electronic  transaction  processing  services to the health care market.
The principal  service is the electronic  capture and transfer of medical claims
for  on-line  eligibility  verification  and  adjudication  between  health care
providers,  self-insured  organizations,  third party  administrators  and other
managed care organizations.

Background -- ETC was  incorporated  in the state of Texas on December 22, 1994.
On April 19, 1995, the Company  entered into an agreement to purchase the rights
to the  technology  and  business of  electronically  editing  and  transmitting
medical claims from providers to payment  organizations (the Purchased Business)
from Sterling  National  Corporation  ("SNC") by issuing 3,965,100 common shares
and a cash payment of $210,000.  SNC is a company wholly-owned and controlled by
ETC's Chairman of the Board,  C.E.O. and majority  shareholder.  The transaction
was accounted for using the purchase method as follows:

                  Assets Acquired:
                     Accounts receivable                      $       5,630
                     Computer hardware                                1,403
                     Computer software                               13,718
                                                               ------------
                         Total tangible assets                       20,751

                  Consideration Paid:
                     Cash                                     $     210,000
                     3,965,100 common shares                         20,751
                                                               ------------
                         Total consideration                        230,751

                  Dividend paid to shareholder                $     210,000
                                                               ============

Treatment of the excess cash  consideration  paid for the  acquired  business is
accounted  for as a  deemed  dividend  in  accordance  with  generally  accepted
accounting  principles.  Goodwill was not recorded  since this  transaction  was
consummated  with a related party and this  treatment  would have  constituted a
step-up in basis.  The  transaction is reflected in the financial  statements on
the date the transaction occurred (April 19, 1995), in accordance with generally
accepted accounting principles.


<PAGE>


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AND BACKGROUND (Continued)

Cash  Equivalents -- For purposes of the  statements of cash flows,  the Company
considers any short-term cash investment with a maturity of three months or less
to be a cash equivalent.

Accounts  receivable -- The Company's trade  receivables arise from sales in the
normal  course  of  business.  ETC uses the  allowance  method  to  account  for
uncollectible  accounts;  in management's  opinion, all accounts are collectible
and no allowance is necessary at December 31, 1995 and December 31, 1996.

Revenue   recognition  -  The  Company  recognizes  revenue  when  services  are
performed.

Office  Furniture  and  Equipment  --  Office  furniture,  computer  and  office
equipment,  software and leasehold  improvements are stated at cost. Maintenance
and repairs are charged to operating expense. Costs of significant  improvements
and  renewals are  capitalized.  Depreciation  is provided on the  straight-line
basis over the following useful lives:
                                                                      Useful
                                                                       Lives
                                                                     -------
                         Office furniture                            5 years
                         Computer and office equipment               3 years
                         Computer software                           3 years
                         Leasehold improvements                      5 years

Periodically,  the Company  evaluates  whether  changes have occurred that would
require  revision of the  remaining  estimated  useful lives of the equipment or
rendered the value of the  equipment  not  recoverable.  The  recoverability  is
evaluated by estimating the future cash flows expected to result from use of the
asset and its eventual  disposition.  Equipment as of December 31, 1996,  is not
considered to be impaired.

Start-Up Costs -- Start-up costs incurred during the period of developing  ETC's
business plan are expensed as incurred in  accordance  with  generally  accepted
accounting principles.

Research and Development -- Research and development costs incurred are expensed
as incurred in accordance with generally accepted accounting principles.


<PAGE>


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AND BACKGROUND (Continued)

Income  Taxes -- ETC  utilizes  the asset and  liability  approach to  financial
accounting  and  reporting  for  income  taxes.  Deferred  income tax assets and
liabilities  are  computed  annually  for  differences   between  the  financial
statement and tax basis of assets and liabilities that will result in taxable or
deductible  amounts in the future based on enacted tax laws and rates applicable
to the periods in which the  differences  are expected to affect taxable income.
Valuation  allowances  are  established  when  necessary to reduce  deferred tax
assets to the amount  expected  to be  realized.  Income tax  expense is the tax
payable or refundable  for the period plus or minus the change during the period
in deferred tax assets and liabilities.

Loss Per Share -- Loss per common share was calculated by dividing the Company's
net  loss by the  weighted  average  common  shares  outstanding.  Common  stock
equivalents  were excluded from the calculation as such inclusion would have had
an  anti-dilutive  effect;  therefore,  fully  diluted  earnings  per  share  is
considered to be the same as primary  earnings per share.  Loss per common share
assuming  full dilution was  calculated  in the same manner as described  above,
except that those shares that were issued in  connection  with debt  conversions
were assumed to be outstanding for the entire period.

Use of Estimates and Assumptions -- Management uses estimates and assumptions in
preparing its financial  statements.  Those estimates and assumptions affect the
reported amounts of assets and liabilities,  the disclosure of contingent assets
and  liabilities,  and the  reported  amounts of revenues and  expenses.  Actual
results could vary from the estimates that were used.

Stock-based  Compensation  -- The  Company  compensated  certain  employees  for
services rendered by issuing shares of common stock to these individuals  during
1995. The measurement date for determining compensation costs is the date of the
grant.  Compensation  cost is the excess,  if any, of the quoted market price of
the stock at grant  date over the amount the  employee  must pay to acquire  the
stock.  Compensation  cost is  recognized  as an  expense  over  the  period  of
employment attributable to the option.

New Accounting  Standards -- In October 1995,  Statement of Financial Accounting
Standards No. 123,  "Accounting  for Stock-based  Compensation"  (SFAS 123), was
issued.  This  statement  requires  the fair  value of stock  options  and other
stock-based   compensation   issued  to  employees  to  either  be  included  as
compensation  expense in the  income  statement  or the pro forma  effect on net
income and  earnings per share of such  compensation  expense to be disclosed in
the  footnotes  to  the  Company's  financial  statements  commencing  with  the
Company's 1996 fiscal year. ETC adopted SFAS 123 on January 1, 1996. The Company
will continue to measure  compensation  costs using the  "intrinsic  value based
method" of accounting for stock issued to employees.


<PAGE>


NOTE 2 - GOING CONCERN AND CONTINUED OPERATIONS

The financial  statements  have been prepared on the assumption that the Company
will continue as a going  concern.  The financial  statements do not include any
adjustments  to  reflect  the  possible  effects  on  the   recoverability   and
classification  of assets or classification of liabilities which may result from
the inability of the Company to continue as a going concern. ETC sustained a net
operating loss of $1,093,329 and $2,470,684  during the years ended December 31,
1995  and  1996,  respectively,  and has  accumulated  losses  of  approximately
$3,564,013 since inception.  Cash used by operating activities and dividends for
the same periods aggregated $995,617 and $1,225,185, respectively. Additionally,
at December 31, 1996, ETC's current  liabilities  exceeded its current assets by
$307,329.  ETC's  continued  existence  depends upon the success of management's
efforts to raise  sufficient  capital and increase its customer  base to execute
its business plan.

Management  plans to mitigate the going concern issues by marketing its services
to large  self-insured  insurance  companies  to develop its  customer  base and
increase  profitability.  Management  believes  that it will  be  successful  in
generating sufficient cash to support its operations.  There can be no degree of
assurance  that the Company will be  successful  in raising  additional  working
capital or executing its business plan to the extent that it will be profitable.

NOTE 3 - OFFICE FURNITURE AND EQUIPMENT

The following is a summary of office furniture and equipment:

                                                 December 31,      December 31,
                                                   1995               1996
                                               -------------     --------------
           Furniture                           $     43,056       $    104,349
           Computer & Office Equipment               68,752            458,178
           Computer Software                         57,713             92,836
           Leasehold Improvements                        --              8,791
                                                -----------        -----------
                                                    169,521            664,154
           Less:  accumulated depreciation          (32,173)          (142,578)
                                                -----------        -----------
                                               $    137,348       $    521,576
                                                ===========        ===========

Depreciation expense was $32,173 and $110,405 for 1995 and 1996,  respectively.


<PAGE>


NOTE 4 - LEASE OBLIGATIONS RECEIVABLE

The  Company,  as lessor,  has entered into a  non-cancelable  lease for service
equipment.  Future minimum lease payments receivable under non-cancelable leases
at December 31, 1996 are as follows:
                
                  For the Years Ending                       Capital
                      December 31,                            Leases

                          1997                             $     29,248
                          1998                                   29,248
                                                            -----------

    Total minimum lease payments                                 58,496
        Less: amount representing interest                       (5,678)
                                                            -----------

    Present value of minimum lease payments                      52,818
        Less: current portion                                   (25,095)
                                                            -----------
    Long-term capital lease obligation                     $     27,723
                                                            ===========

NOTE 5 - CONVERTIBLE DEBENTURES

At various  times  throughout  1995 the Company  issued  convertible  debentures
totalling  $120,000.  These  debentures  bore interest at 12% per annum and were
convertible  into common shares at the option of the holder at a conversion rate
of one common share per $1.25 of debenture being  converted.  As of December 31,
1995,  all  debenture  holders had exercised  their options and converted  their
debentures into a total of 96,000 common shares.

NOTE 6 - LEASE OBLIGATIONS PAYABLE

The  Company,  as lessee,  has entered into  various  non-cancelable  leases for
service equipment,  vehicles, and office facilities.  The cost of assets subject
to capital  leases  included  in office  furniture  and  equipment  amounted  to
$182,053 less accumulated depreciation of $21,044 at December 31, 1996.


<PAGE>


NOTE 6 - LEASE OBLIGATIONS PAYABLE (Continued)

Future minimum lease payments under non-cancelable  leases at December 31, 1996,
are as follows:

                  For the Years Ending            Capital        Operating
                      December 31,                Leases          Leases

                          1997                  $  111,852       $   177,984
                          1998                     102,495           183,680
                          1999                      18,890           189,375
                          2000                          --           195,071
                       Thereafter                       --           149,507
                                                 ---------        ----------
    Total minimum lease payments                   233,237       $   895,617
                                                 =========        ==========
        Less: amount representing interest                           (23,925)
                                                                  ----------

    Present value of minimum lease payments                          209,312
        Less: current portion                                        (95,206)
                                                                  ----------
    Long-term capital lease obligation                           $   114,106
                                                                  ==========

Rent expense during the years ended December 31, 1995 and 1996 for all operating
leases was  $49,988 and  $122,544,  respectively,  and is included in  operating
expenses.

In April 1996, The Company  entered into an equipment  lease agreement and stock
option  agreement with a leasing company which is recorded as a capital lease by
the Company. The agreement is for a term of five years and allows the Company to
lease  certain  equipment  for amounts  specified in the  agreement  with rental
payments  due on the first of each  month.  As of  December  31,  1996,  monthly
payments required under the lease agreement amounted to $9,321 expiring in 1998.

At any time during the term of the agreement,  the leasing company has the right
to 1) sell to ETC any or all of the  equipment  in  exchange  for the  number of
shares of ETC common stock, or stock of any company with which ETC merges,  that
is equal to the  purchase  of the  equipment  divided  by $1.25 per share or, 2)
purchase, at $1.25 per share, the number of shares of ETC stock, or stock of the
merged  company,  equal to the purchase price of the equipment  divided by 1.25,
and give ETC the option to purchase  the  equipment  at the end of the lease for
$1.00;  provided,  that if ETC  issues,  agrees  to issue or grants an option to
purchase  ETC stock to any other  person  for a price less than $1.25 per share,
the price payable to the leasing company will be reduced to such lower price.


<PAGE>


NOTE 6 - LEASE OBLIGATIONS PAYABLE (Continued)


The leasing company agreement contains certain  restrictive  covenants which (i)
require ETC to escrow all  accounts  received  which are derived from the use of
this  equipment,  less third party  costs,  through  March 31, 1996 or until any
class of stock is registered with the SEC are otherwise becomes publicly traded,
or the funds in escrow equal the total purchase price of the equipment, and (ii)
restrict ETC from issuing additional  securities before ETC merges with a public
company.  ETC is in  violation  of each of these  covenants  and has  obtained a
waiver from the leasing  company  which  releases  ETC from any claims under the
escrow requirement and violations relating to the issuance of securities.

NOTE 7 - LINE OF CREDIT

Under  the  agreement  with the  leasing  company  discussed  in Note 6, ETC has
obtained  a  $500,000  line of credit  from the  leasing  company  to be used as
working  capital.  ETC  may  draw  from  this  line  up to 80%  of its  accounts
receivable  that are under 65 days past due. To secure this line of credit,  ETC
will pledge shares of its common stock on a two for one basis (i.e., two dollars
trade  value of its stock for every one dollar  drawn from the line of  credit).
ETC will pay a loan  origination  fee,  beginning  three months after ETC merges
with a  public  company,  in an  amount  equal to 10% of the  leasing  company's
exposure under this agreement  including the amount spent to purchase  equipment
and the amount drawn on the line of credit. This fee will be a cumulative amount
calculated each quarter.  As of December 31, 1996, the Company has made no draws
on this line of credit.

NOTE 8 - INCOME TAXES

ETC has net  operating  loss  carryforwards  approximately  $3,160,000  that are
available to offset its future  income tax  liability.  The net  operating  loss
carryforwards  expire in the year 2010 and 2011. The realization of the benefits
from these net  operating  loss  carryforwards  appears  uncertain  due to going
concern  questions and the possible  effects of the ETC Transaction  Corporation
merger.  Accordingly,  a valuation allowance of $372,000 and $1,115,000 has been
recorded at December 31, 1995 and December 31, 1996,  respectively,  against the
deferred tax asset resulting from the net operating loss carryforward. There are
no  other  significant  temporary  differences  for  financial  and  income  tax
reporting purposes at December 31, 1995 and 1996.


<PAGE>


NOTE 9 - STOCK OPTIONS

The Company has issued  various  stock options to employees of the Company which
are considered compensatory. Stock options were initially granted by the Company
during 1995 and no stock options were vested as of December 31, 1995. Additional
stock options were granted in 1996 with 134,666 vesting as of December 31, 1996.
Vesting varies by employee agreement ranging from 2 to 3 years.

A summary of the status of stock options is set forth below:

<TABLE>
<CAPTION>
<S>                                                                             <C>              <C>

                                                      Year ended                            Year ended
                                                    December 31, 1995                     December 31, 1996
                                          ----------------------------------      -------------------------
                                                               Weighted                               Weighted
                                                                Average                                Average
                                                               Exercise                               Exercise
Fixed Options                                  Shares            Price               Shares             Price
-------------                             --------------     -------------       --------------    ---------------

Outstanding, beginning of period                      --          --                    675,000        $0.001
Granted                                          675,000        $0.001                  260,000        $0.001
Exercised                                             --          --                   (118,333)       $0.001
Forfeited/expired                                     --          --                   (125,000)       $0.001
                                          --------------                          --------------
Outstanding, end of period                       675,000        $0.001                  691,667        $0.001
                                          ==============                          =============

Options exercisable, end of period                    --          --                     18,333        $0.001
                                          ==============                          =============

Weighted average fair value of
    options granted during the year       $         1.25                          $        1.12
                                          ==============                          =============

</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1996:

Range of exercise prices                                 $0.001 per common share
Weighted average remaining contractual life                2.99 years
Weighted average exercise price                          $0.001 per common share


<PAGE>


NOTE 9 - STOCK OPTIONS (Continued)

Compensation  costs  will be  recognized  as an  expense  over  the  periods  of
employment  attributable  to the options at an amount equal to the excess of the
fair market  value of the stock at the date of  measurement  over the amount the
employee  must pay.  The  measurement  date is generally  the grant date.  As of
December  31, 1995,  no  compensation  cost was  recognized  as expense.  Future
compensation  expense to be recorded in  subsequent  periods as of December  31,
1995 and 1996,  was  $474,540  and  $555,897,  respectively.  Compensation  cost
totalling  $322,067 was recognized as expense during the year ended December 31,
1996. Had  compensation  cost for the Company's  stock-based  compensation  been
determined  on the fair value at the grant  dates for awards  with the method of
FASB  Statement  123, the  Company's net loss and loss per share would have been
unchanged.

NOTE 10 - COMMITMENTS

On April 19, 1995, ETC entered into an agreement with Texas Administrators, Inc.
("TAI"),  a third party  administrator for medical claims.  The agreement called
for TAI to assign the rights to third party  administrator  accounts for a total
purchase  price of  $75,000,  representing  1.15  times  one  year's  contracted
revenue. Of the purchase price,  $35,000 was paid to TAI subsequent to year end.
Additionally,  ten (10) monthly payments of $4,000 commencing June 10, 1995, are
payable to TAI under an executed promissory note.

The agreement  called for ETC to enter into  consulting  agreements with each of
the 3 key employees/ sole shareholders of TAI. The consulting  agreements called
for each of the  individuals  to  assist  ETC in  retaining  and  servicing  the
assigned  accounts  and to seek out new third party  administrator  accounts for
which the individuals would be paid commissions.  The consulting agreements were
for a period of one year commencing  April 30, 1995. The Company intended to use
TAI's third  party  administrator  accounts as a basis to test ETC's  electronic
processing work flow system for processing self-insured medical claims.

On June 1, 1995, ETC  terminated the agreement for breach of contract,  claiming
the medical claims  accounts  assigned were not in full force and effect.  As of
December 31, 1995, ETC has received  $26,232 as third party  administrator  fees
from  accounts  assigned  by TAI.  ETC  does  not  expect  to be  successful  in
recovering the $35,000 paid to TAI for the accounts, and accordingly, the amount
has been expensed in 1995 as research and development third party  administrator
fees. During 1996, ETC settled with TAI for the net amount of $5,000.

On April 22,  1995,  ETC also  purchased  office  furniture  from TAI  having an
estimated value of $33,925,  with the issuance of 16,000 common shares of ETC to
TAI. The stock was subsequently returned to ETC as part of the settlement.


<PAGE>


NOTE 10 - COMMITMENTS (Continued)

In December 1995, the Company entered into an agreement with a marketing firm to
assist in obtaining and servicing customers. A member of the marketing firm is a
member of the Board of  Directors.  Compensation  for  services  rendered to the
Company will be paid through  November  1997 on a monthly  basis equal to 15% of
the gross realized  revenue from new accounts  obtained on behalf of the Company
by the firm. In return, the Company has agreed to market the services offered by
the  marketing  representative  and will be paid  monthly  over the same term an
amount equal to 10% of the gross realized revenue from new accounts  obtained on
behalf of the firm by the Company.

In September  1996, the Company made a two-year  agreement with a large national
self-insured company to provide electronic  transaction  processing services for
insurance claims. As of December 31, 1996,  revenues from this customer amounted
to  approximately  64% of total revenues and trade accounts  receivable  include
$76,395 of accounts receivable from this customer.

The Company is engaged in a  marketing  strategy  of  utilizing  a 90-day  trial
period  with other  organizations.  These  agreements  allow for a 90-day  trial
period for  processing  claims and the Company has been  successful in providing
the service at a fee of $1 per claim.

Effective  June 1, 1996,  the Company issued 220,000 stock warrants which expire
on June 15, 1997,  and allow the holder of each warrant to purchase one share of
common stock at a price of $1.50 per share. As of December 31, 1996, no warrants
have been exercised.

NOTE 11 - PROPOSED MERGER

As of December  31,  1996,  ETC is  negotiating  a merger  with ETC  Transaction
Corporation,  formerly known as Solo Petroleum Ltd. ETC Transaction  Corporation
is presently attempting to reorganize its affairs and is primarily inactive. The
merger would be effected by ETC Transaction  Corporation issuing 1.25 shares for
each issued and  outstanding  common share in ETC. At December 31, 1996, ETC has
7,153,601 shares issued and outstanding and accordingly, the merger would result
in the issuance of 10,949,146  shares in ETC Transaction  Corporation for all of
the issued and outstanding common shares of Electronic Transmission Corporation.

The merger is in effect a reverse  acquisition  and will be  accounted  for as a
recapitalization  of  Electronic  Transmission   Corporation,   with  Electronic
Transmission  Corporation  as the  acquirer.  Accordingly,  no goodwill or other
intangible assets will be recorded.


<PAGE>


NOTE 12 - RELATED PARTY TRANSACTIONS

On May 15,  1996,  the  Company  received a cash  advance of  $779,575  from ETC
Transaction  Corporation to be used as working  capital to fund its  post-merger
business plan. The capital for the ETC Transaction  Corporation cash advance was
raised in a private  placement  offering of ETC Transaction  Corporation  common
stock.

The Company  advanced funds for working capital  infusions to SNC during 1995 of
$82,744. As of December 31, 1996, the Company had a payable of $339,207,  to SNC
for working capital loans.

At December 31, 1996, the Company has a trade  receivable due from  Electra-Net,
L.C., a company  wholly-owned and operated by the Chairman of the Board,  C.E.O.
and majority  shareholder of ETC. The receivable  totalling  $103,026 relates to
administrative fees for providing computer processing for medical claims.

The Company has an agreement to purchase  equipment  from SNC. The  relationship
exists through SNC's purchase contract with an equipment wholesaler which allows
SNC to purchase equipment at a significant  discount.  Since the Company is able
to purchase the equipment from SNC at the discounted  price, the Company intends
to utilize this relationship for capital expenditures as deemed necessary in the
future. The Company will record the equipment purchases at SNC's cost.

NOTE 13 - CASH FLOW SUPPLEMENTAL INFORMATION

The following is a schedule of required supplemental cash flow information:

                                              1995                  1996
                                         -----------------    ----------------

                  Interest paid            $    6,424           $    9,021
                                            =========            =========

                  Income taxes paid        $       --           $       --
                                            =========            =========

              Non-cash investing and financing activities include the following:

The  Company   purchased   assets  valued  at  $246,513  through  capital  lease
obligations  during the year ended  December 31, 1996.  The Company  disposed of
assets  with a carrying  value of  $64,460  through a capital  lease  receivable
during the year ended December 31, 1996.

During the year ended  December  31, 1995 and 1996,  the Company  issued  common
stock shares for services rendered at $1 per share in the total amount of $4,000
and $262,625, respectively.


<PAGE>


NOTE 14-SUBSEQUENT EVENTS

Merger - A special  meeting of the  shareholders  of ETC was held on January 31,
1997,  the  shareholders  ratified and approved the terms and  conditions of the
Merger  Agreement  and  authorized  the Board of  Directors of ETC to effect the
merger.  ETC  Transaction  Corporation  held its annual  meeting on February 11,
1997,  the  shareholders  ratified  and  approved  both the  Continuance  of ETC
Transaction  Corporation into the State of Delaware and the Merger Agreement and
authorized  the Board of  Directors  to effect the  Merger.  The  Merger  became
effective  on  February  11,  1997  as the  applicable  Continuance  and  Merger
documents were filed with the appropriate  authorities in the States of Delaware
and Texas. ETC and ETC Transaction Corporation intend for the merger transaction
to be a  reorganization  within the  meaning of Section  368(a) of the  Internal
Revenue  Code of  1986,  as  amended  (the  "Code").  ETC  and  ETC  Transaction
Corporation  are each parties to the  reorganization  and will not recognize any
gain or loss as a result  of the  Merger.  The  Merger  is in  effect a  reverse
acquisition and will be accounted for as a  recapitalization  of ETC with ETC as
the  acquirer.  Effective  February  11,  1997,  the  name  of  ETC  Transaction
Corporation  was  changed  to  Electronic  Transmission  Corporation,  with  the
Certificate of Incorporation being duly amended to reflect the change of name.




<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT

March 23, 1997

To the  Board of  Directors  and  Shareholders  of ETC  Transaction  Corporation
(formerly known as "Solo Petroleums Ltd.")

We have audited the balance sheets of ETC Transaction Corporation as of December
31, 1995 and 1996, and the statements of operations and accumulated  deficit and
statement of 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 audit.

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
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 ETC Transaction  Corporation as
of December 31, 1995 and 1996 and the results of its  operations  and cash flows
for the years  then  ended in  accordance  with  generally  accepted  accounting
principles.

As described in Note 6, the accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has been
inactive  since 1992 and has  accumulated  a deficit of  $1,050,938 as well as a
working capital deficiency of $125,944. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
regarding those matters are also described in Note 6. Unless the Company obtains
additional  financing,  it will not be able to meet its obligations as they come
due. The financial  statements do not include any adjustments  that might result
from the outcome of this uncertainty.


Simonton, Kutac & Barnidge, L.L.P.


<PAGE>



                           ETC TRANSACTION CORPORATION


The accompanying notes are an integral part of these financial statements.


                                 BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
<S>                                                                             <C>          <C>
                                                                                         December 31,
                                                                                   1995                1996

Current assets:
   Cash         $                                                           $             143   $           142
   Accrued interest receivable                                                             --            27,800
                                                                             ----------------   ---------------

       Total current assets                                                               143            27,942

Note receivable                                                                            --           779,575
                                                                             ----------------   ---------------

Total Assets                                                                 $            143   $       807,517
                                                                             ================   ===============


                                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                          $        110,845   $        26,991
   Due to shareholder                                                                 201,111                --
   Loan payable                                                                        23,647            23,425
   Accrued debenture interest payable                                                  40,470            50,970
   Short term debentures                                                              605,000            52,500
                                                                             ----------------   ---------------

       Total current liabilities                                                      981,073           153,886
                                                                             ----------------   ---------------

Stockholders' equity:
   Preferred stock, no par value, unlimited shares
      authorized; no shares issued and outstanding                                         --                --
   Common stock, no par value, unlimited shares
      authorized; 3,250,000 and 2,007,144 shares
      issued and outstanding, respectively                                             87,567         1,704,569
   Accumulated deficit                                                             (1,068,497)       (1,050,938)
                                                                             ----------------   ---------------

       Total Stockholders' Equity                                                    (980,930)          653,631
                                                                             ----------------   ---------------

Total Liabilities and Stockholders' Equity                                   $            143   $       807,517
                                                                             ================   ===============
</TABLE>


<PAGE>



                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
<S>                                                                         <C>               <C>

                                                                                      For the Years Ended
                                                                                         December 31,
                                                                                   1995                1996
Income:
   Interest income                                                           $             --   $        27,800

Expenses:
   Interest on debentures                                                    $         93,375   $        10,500
   Other expense (income)                                                                 807              (259)
                                                                             ----------------   ---------------

       Total expenses                                                                  94,182            10,241
                                                                             ----------------   ---------------

Income (loss) before extraordinary items                                              (94,182)           17,559

Extraordinary item:
   Gain on forgiveness of interest                                                    392,573                --
                                                                             ----------------   ---------------

Net income                                                                  $          298,391  $        17,559
                                                                             =================   ===============

Earnings per share:
   Primary                                                                  $             0.09  $          0.01
                                                                             =================   ==============
   Fully diluted                                                            $             0.06  $          0.01
                                                                             =================   ==============

Weighted average number of shares outstanding:
   Primary                                                                           3,250,000        2,087,337
                                                                             =================   ===============    
   Fully diluted                                                                     4,821,784         2,303,694
                                                                            ==================   ===============     

</TABLE>


<PAGE>



                                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
<S>                                                                              <C>                 <C>
                                                           Common Stock           Accumulated
                                                        Shares        Amount         Deficit           Total

Balance at  December 31, 1994                          3,250,000  $       87,567  $   (1,366,888)      $(1,279,321)

Net income                                                    --             --          298,391           298,391
                                                      ----------   -------------    ------------        -----------

Balance at December 31, 1995                           3,250,000          87,567      (1,068,497)         (980,930)

Reverse Stock Split (5-for-1)                         (2,600,000)             --               --                --

Conversion of indebtedness
   to common shares                                      837,427         837,427               --           837,427

Issuance of common stock                                 519,717         779,575               --           779,575

Net income                                                    --             --              17,559          17,559
                                                   -------------  --------------  --------------  -----------------

Balance at December 31, 1996                           2,007,144  $    1,704,569  $   (1,050,938) $         653,631
                                                   =============  ==============  ==============  =================

</TABLE>



<PAGE>



                                            STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
<S>                                                                         <C>              <C>


                                                                                      For the Years Ended
                                                                                         December 31,
                                                                                   1995                1996

Cash Flows from Operating Activities:
       Net income                                                            $        298,391   $        17,559
Adjustments to reconcile net income to
  net cash used in operating activities:
       Non-cash change in working capital                                            (298,388)           17,560
                                                                             ----------------   ---------------

   Net cash provided (used) by operating activities                                         3                (1)

Cash Flows from Investing Activities:
       Proceeds from note receivable                                                       --           779,575
                                                                             ----------------   ---------------

   Net cash used by investment activities                                                  --           779,575
                                                                             ----------------   ---------------

Cash Flows from Financing Activities:
       Issuance of common stock                                                            --          (779,575)
                                                                             ----------------   ---------------

   Net cash provided by financing activities                                               --          (779,575)
                                                                             ----------------   ---------------

Net increase (decrease) in cash                                                             3                (1)

Cash, beginning of year                                                                   140               143
                                                                             ----------------   ---------------

Cash, end of year                                                            $            143   $           142
                                                                             ================   ===============
</TABLE>


<PAGE>


                           ETC TRANSACTION CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1995 and 1996





NOTE 1 -  HISTORY

History -- The Company was  incorporated in September 1986, in Alberta,  Canada.
The  Company  was  substantially  inactive  from  1992 to 1996 at which  time it
reorganized its affairs.

NOTE 2 -  SIGNIFICANT ACCOUNTING POLICIES

Earnings  (Loss)  Per Share -- Primary  earnings  (loss) per share data is based
upon the weighted average number of common shares  outstanding  during the year.
Fully diluted  earnings  (loss) per share is calculated on the weighted  average
number of shares that would have been outstanding  during the year had the trade
creditor debt and short-term  debentures  outstanding been converted into common
shares at the beginning of the period.

NOTE 3 -  PROPOSED MERGER

On May 1 1996,  the Company  entered into an  agreement  and plan of Merger with
Electronic  Transmission  Corporation   ("ETC-Texas"),   a  Texas-based  private
company,  whereby ETC-Texas would be merged with and into the Company,  with the
Company  being the  surviving  company.  The merger  provides that each share of
issued  and  outstanding  common  stock of  ETC-Texas,  no par  value,  shall be
converted into the right to receive one and  one-fourth  shares of common stock,
$0.001 par value, of the surviving Company. As of December 31, 1996, the Company
had 2,007,145 shares of common stock issued and outstanding, while ETC-Texas had
7,153,601  shares issued and outstanding of ETC-Texas  common stock. As a result
of the merger,  the shareholders of ETC-Texas would receive  8,942,001 shares of
common stock in exchange  for all of the shares  issued and  outstanding  of the
Company.  Upon  completion  of the merger and exchange of shares,  the surviving
company would have 10,949,146 shares of common stock issued and outstanding.

The merger is in effect a reverse  acquisition  and will be  accounted  for as a
recapitalization of ETC-Texas, with ETC-Texas as the acquirer.  Accordingly,  no
goodwill  or other  intangible  assets  will be  recorded.  ETC-Texas  is in the
business of providing an electronic  medical  claims-flow  process whereby paper
medical claims are  electronically  scanned and transposed into images formatted
for the claims payer to utilize for adjudication and payment.


<PAGE>


NOTE 4 -  REORGANIZATION

At December 31, 1995, the Company was subject to a "Cease Trade Order" issued by
the Alberta Securities Commission,  the "ASC" for failing to file annual audited
financial statements for the year ended December 31, 1991, and the first quarter
interim  unaudited  statements  for the period  ended March 31, 1992 and further
that ETC  Transaction  Corporation  failed to  concurrently  send the  foregoing
financial  statements  to  each  holder  of its  securities.  Pursuant  to  this
violation,  the  Company's  common  shares were  automatically  removed from the
Alberta  Stock  Exchange  ("ASE") on  January  12,  1993,  due to trading in its
securities being suspended for six months. The Company has no intention to apply
to relist on the ASC. The following is a summary of the Company's  activities in
connection with the reorganization of its affairs which occurred during 1996:

(i)  Consolidated common share capital on a 1-for-5 basis on March 21, 1996;
(ii) Changed its name to "ETC Transaction Corporation" on March 26, 1996; 
(iii)Settled  $552,500 of convertible  debenture debt by the issuance of 552,500
     shares of common stock (see Note 7) on April 1, 1996;
(iv) Settled $83,816 of trade creditor debt and $201,111 of shareholder  debt by
     the issuance of 284,927 shares of common stock on April 1, 1996;

On January 8, 1996 ETC Transaction  Corporation  filed with the ASC and sent its
shareholders  annual audited  financial  statements for each of the years ending
December  31,  1991  to 1994  and  its  interim  unaudited  quarterly  financial
statements  for the periods  ending March 31, 1995,  June 30, 1995 and September
30, 1995.

On March 12, 1996, in  accordance  with an order from the Court of Queen's Bench
of Alberta  allowing ETC  Transaction  Corporation to hold its 1990 through 1994
annual meetings in 1996, ETC Transaction  Corporation  held a special and annual
meeting of its  shareholders  at which time items (i), (iii) and (iv) were voted
and approved.


<PAGE>


NOTE 4 -  REORGANIZATION, continued

On March 21,  1996,  the ASC varied  its Cease  Trade  Order for the  purpose of
completing the proposed merger of ETC Transaction Corporation and ETC-Texas. The
ASC also  ordered that its Cease Trade Order would be revoked  forty-eight  (48)
hours after the ASC received:

     (i)  verification that the United States Securities and Exchange Commission
          ("SEC") had declared effective the Registration Statement on S-4;
 
     (ii) confirmation by ETC Transaction Corporation of the issuance of a press
          release  setting out the material  terms of the merger with  ETC-Texas
          and the continuance of ETC Transaction Corporation out of the Province
          of Alberta into the State of Delaware.

NOTE 5 - COMMON STOCK OFFERING

On May 15, 1996, the Company sold 519,717 shares in a private placement offering
of common stock to raise working capital to fund its post-merger  business plan.
The  private  placement  issued  common  stock at a price of $1.50 per share and
raised  $779,575 in capital.  Upon  completion of the offering,  the capital was
advanced to ETC-Texas for use as a working  capital loan with interest  accruing
at 6% per annum.

NOTE 6 - GOING CONCERN AND CONTINUED OPERATIONS

These  financial  statements  have been  prepared in accordance  with  generally
accepted accounting principles applicable to a going concern.  Accordingly, they
do not reflect  adjustments that would be necessary should the Company be unable
to continue as a going  concern and  therefore be required to realize its assets
and liquidate its liabilities and commitments in other than the normal course of
business.  Because of the working capital  deficiency of $125,944 as of December
31, 1996, the Company's ability to continue as a going concern is dependent upon
its ability to obtain adequate financing and/or complete its proposed merger. It
is not possible to predict  whether  financing  efforts will be successful or if
the Company will attain profitable levels of operation.

Management  plans to mitigate the going  concern  issues by  completing a merger
with ETC-Texas as described in Note 3. Upon completion of the merger, management
believes that it will be successful in generating sufficient cash to support its
operations.  There  can be no  degree  of  assurance  that the  Company  will be
successful in raising  additional working capital or executing its business plan
after the merger to the extent that it will be profitable.


<PAGE>


NOTE 7 - CONVERTIBLE SHORT-TERM DEBENTURES

During 1991 and 1992,  the Company issued  $500,000 and $105,000,  respectively,
for a total of $605,000 in short-term convertible debentures. These were due 180
days from issuance bearing an interest rate of 20%. The debentures  provided for
the holder to receive ten common shares of common stock for each one U.S. dollar
of debenture.

During 1995,  debenture  holders formally agreed to forgive all accrued interest
on the  debentures  and convert the  debentures  into 552,500  post-consolidated
shares of common stock in  settlement of all  obligations  under the $552,500 of
outstanding  debt.  The  accrued  interest  was  charged to income in 1995 as an
extraordinary  item for early  extinguishment  of debt.  On April 1,  1996,  the
Company  issued  552,500  post-consolidated  common  shares  in the  Company  to
Debenture Holders representing  $552,500 of debt in full and final settlement of
all  obligations  under  the  debentures.  At  December  31,  1996,  outstanding
debentures amounted to $52,500.

NOTE 8 - RELATED PARTY TRANSACTIONS

Included in accounts  payable at December 31, 1995 and 1996, is accounts payable
to  previous  officers  totaling  $26,500 and $0,  respectively.  Amounts due to
shareholders are for prior services rendered and working capital infusions.

NOTE 9 - INCOME TAXES

The Company has  Canadian  net  operating  loss  carryforwards  for Canadian tax
purposes  totaling  Cdn$214,000 that are available to offset its future Canadian
income tax liability. The Canadian loss carryforwards expire in 1997.

The Company has U.S.  net  operating  loss  carryforwards  for U.S. tax purposes
totaling  approximately  $789,000  that are  available to offset its future U.S.
income  tax  liability.  The net U.S.  operating  loss  carryforwards  expire as
follows:
<TABLE>
<CAPTION>
<S>                                                                            <C>
                        2006                                                 $        170,000
                        2007                                                          362,000
                        2008                                                          117,000
                        2009                                                          120,000
                        2010                                                           10,000
                        2011                                                           10,000
                                                                             ----------------

                        Total                                                $        789,000
                                                                             ================

</TABLE>

<PAGE>


NOTE 9 - INCOME TAXES (Continued)

Realization  of the benefit of these net operating  loss  carryforwards  appears
uncertain,  accordingly, a valuation allowance of $127,500 and $403,000 has been
recorded  against the deferred tax asset  resulting  from the net operating loss
carryforwards as of December 31, 1995 and 1996, respectively. There are no other
significant  temporary  differences  for  financial  and  income  tax  reporting
purposes at December 31, 1995 or 1996.

NOTE 10 - CASH FLOW SUPPLEMENTAL INFORMATION

The following is a schedule of required supplemental cash flow information:
<TABLE>
<CAPTION>
<S>                                                                            <C>               <C>
                                                                                      1995             1996
                                                                                ---------------   -------------

                  Interest paid                                                 $            --   $           --
                                                                                ===============   ==============

                  Income taxes paid                                             $            --   $           --
                                                                                ===============   ==============
</TABLE>

NOTE 11 - SUBSEQUENT EVENT

ETC Transaction  Corporation and ETC-Texas filed with the SEC a S-4 Registration
Statement  for the  purpose of  registering  the Common  Shares to be issued and
outstanding in ETC-Transaction  Corporation,  after giving effect to the merger.
The registration statement was declared effective on January 7, 1997.

The  shareholders  of  ETC-Texas  held a special  meeting  on January  31,  1997
approving  the terms and  conditions  of the  merger.  The  shareholders  of ETC
Transaction  Corporation  held a special  meeting on February  10, 1997 and also
approved the merger.

On February  11,  1997,  the  following  occurred in relation to the merger with
ETC-Texas:

   (i)    Completed the merger with  ETC-Texas.  The merger became  effective in
          consideration of ETC Transaction  Corporation issuing 1.25 post merger
          shares of common stock for each issued and outstanding share of common
          stock in ETC-Texas.
     (ii) Continued out of the Province of Alberta, Canada and into the State of
          Delaware;   
     (iii)ETC Transaction Corporation (formerly known as "Solo Petroleums Ltd.")
          changed its name to "Electronic Transmission Corporation".

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


March 23, 1997

To the  Board of  Directors  and  Shareholders  of ETC  Transaction  Corporation
(formerly known as "Solo Petroleums Ltd."):

We  have  audited  the   special-purpose   balance  sheets  of  ETC  Transaction
Corporation  ("Company")  and  Electronic  Transmission   Corporation  (a  Texas
corporation)  as of December  31, 1995 and 1996 and the related  special-purpose
statements of operations 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 audit.

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
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.

The  accompanying  special-purpose  financial  statements  were prepared for the
purpose of presenting the pro-forma effect of the merger  (consummated  February
11,  1997)  between ETC  Transaction  Corporation  and  Electronic  Transmission
Corporation.

In our  opinion,  the  special-purpose  financial  statements  referred to above
present fairly, in all material  respects,  the pro-forma  financial position of
ETC Transaction  Corporation as of December 31, 1995 and 1996 and the results of
its pro-forma  operations for the years then ended in accordance  with generally
accepted accounting principles.

As described in Note 3, the accompanying  special-purpose  financial  statements
have been prepared  assuming that the Company will continue as a going  concern.
The Company had been substantially  inactive from 1992 through 1996. The Company
has an accumulated deficit of $4,824,951 as well as a working capital deficiency
of $433,273 at December 31, 1996. These conditions raise substantial doubt about
the  Company's  ability  to  continue  as a going  concern.  Management's  plans
regarding these matters are also described in Note 3. Unless the Company obtains
additional  financing,  it will not be able to meet its obligations as they come
due and it will  be  unable  to  execute  its  long-term  business  plan.  These
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


/s/Simonton, Kutac & Barnidge, L.L.P.

<PAGE>

                                             PRO-FORMA BALANCE SHEET

                                                December 31, 1996


                                                     ASSETS
<TABLE>
<CAPTION>
<S>                                                                             <C>                 <C>

                                                          ETC                         Electronic       Pro Forma             
                                                         Transaction                  Transmission    Adjustments 
                                                         Corporation    Combined       Corporation                          

Current Assets:
   Cash and cash equivalents                     $       142            $ 50,125      $        --      $  50,267
   Accounts receivable
       Trade                                             --              236,356               --        236,356
       Employees                                         --               28,203               --         28,203
   Accrued interest receivable                        27,800                  --          (27,800)            --
   Current portion, capital lease
       receivable                                         --              25,095               --         25,095
   Prepaid assets                                         --              15,286               --         15,286

       Total Current Assets                           27,942             355,065          (27,800)       355,207

Property and Equipment, net                               --             521,576               --        521,576

Other Assets:
   Note receivable                                   779,575                  --         (779,575)            --
   Current portion, capital lease
       receivable                                         --              27,723               --         27,723
   Deposits and other                                     --              14,610               --         14,610

       Total Other Assets                            779,575              42,333         (779,574)         2,333

Total Assets                                     $   807,517          $  918,974        $ (80,379)       919,116

</TABLE>

<PAGE>


                       PRO-FORMA BALANCE SHEET, CONTINUED

                                December 31, 1996

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S>                                                                            <C>           <C>
                                                     ETC                        Electronic
                                                    Transaction                Transmission
                                                    Corporation   Combined       Corporation     Pro Forma
                                                         
Adjustments                                                      
Current Liabilities:
   Accounts payable                              $    26,991       $221,315      $       --     $  248,306
   Accrued expenses                                   50,970        128,248              --        179,218
   Accrued payroll and taxes                              --        189,825              --        189,825
   Accrued interest payable                               --         27,800         (27,800)            --
   Current lease obligations                              --         95,206              --         95,206
   Loan payable                                       23,425             --              --         23,425
   Short term debentures                              52,500             --              --         52,500
           Total Current Liabilities                 153,886        662,394         (27,800)       788,480

Note payable                                              --        779,575        (779,575)            --
Note payable-shareholder                                  --        339,208              --        339,208
Long-term capital leases                                  --        114,106              --        114,106

       Total Liabilities                             153,886      1,895,283        (807,375)     1,241,794

Stockholders' equity:
   Preferred stock, $1 par value,
      2,000,000 shares authorized;
      no shares issued and outstanding                    --             --              --             --
   Common stock, $0.001 par value,
      15,000,000 shares authorized;
      10,949,146 shares issued
      and outstanding                              1,704,569      2,475,637      (4,169,257)         10,949
   Additional paid-in capital                                    
                                                   4,169,257             --              --       4,169,257
   Additional paid-in capital -
      stock options                                       --        322,067              --         322,067
   Accumulated deficit                            (1,050,938)    (3,774,013)             --      (4,824,951)

       Total Stockholders' Equity                    653,631       (976,309)             --        (322,678)

   Total Liabilities and
       Stockholders' Equity                      $   807,517       $918,974       $(807,375)     $  919,116


</TABLE>
<PAGE>

                        PRO-FORMA STATEMENT OF OPERATIONS

                      For the Year Ended December 31, 1996

<TABLE>
<CAPTION>
<S>                                                                            <C>             <C>

                                                     ETC                        Electronic
                                                  Transaction                   Transmission
                                                  Corporation      Combined     Corporation      Pro Forma
Adjustments                                                       

Service revenues                                 $         --      $ 935,449     $        --     $  935,449

Costs and Expenses:
   Direct costs                                            --        549,422              --        549,422
   Start up costs                                          --        395,866              --        395,866
   Research and development                                --      1,469,858              --      1,469,858
   General and administrative                              --        953,775              --        953,775

      Total Costs and Expenses                             --      3,368,921              --      3,368,921

Loss from operations                                       --     (2,433,472)             --     (2,433,472)

Other Income (Expense):
   Other income                                           259             --              --            259
   Interest income                                     27,800             --         (27,800)            --
   Interest expense                                   (10,500)       (37,212)         27,800        (19,912)

       Total Other Income (Expense)                    17,559        (37,212)             --        (19,653)

Loss before income tax expense                         17,559     (2,470,684)             --     (2,453,125)

Income tax expense                                         --             --              --             --
Net income (loss)                                $     17,559     (2,470,684)     $       --   $ (2,453,125)

Loss per common share:
       Primary and fully-diluted                                                               $      (0.24)
Weighted average common shares outstanding:
       Primary and fully-diluted                                                                 10,237,578

</TABLE>

<PAGE>


                                             PRO-FORMA BALANCE SHEET

                                                December 31, 1995


                                                     ASSETS

<TABLE>
<CAPTION>
<C>                                                                            <C>             <C>
                                                       ETC                      Electronic
                                                     Transaction                Transmission
                                                     Corporation     Combined   Corporation     Pro Forma
Adjustments                                                   

Current Assets:
   Cash and cash equivalents                         $      143     $ 114,885    $       --     $  115,028
   Accounts receivable
       Trade                                                 --         7,059            --          7,059
       Shareholder                                           --        82,744            --         82,744
       Employees                                             --         5,734            --          5,734
   Prepaid assets                                            --         9,204            --          9,204
       Total Current Assets                                 143       219,626            --        219,769

Property and Equipment, net                                  --       137,348            --        137,348

Total Assets                                        $       143     $ 356,974     $      --     $  357,117


</TABLE>

<PAGE>


                                       PRO-FORMA BALANCE SHEET, CONTINUED

                                                December 31, 1995

                                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
<S>                                                                             <C>           <C>
                                                          ETC                    Electronic
                                                          Transaction            Transmission    Pro Forma
                                                          Corporation   Combined Corporation     Adjustments  
                                                     

Current Liabilities:
   Accounts payable                                       $  110,845   $  56,340  $        --    $  167,185
   Accrued expenses                                           40,470         809           --        41,279
   Due to shareholder                                        201,111          --           --       201,111
   Accrued payroll and taxes                                      --     109,131           --       109,131
   Loan payable                                               23,647          --           --        23,647
   Short term debentures                                     605,000          --           --       605,000

       Total Current Liabilities                             981,073     166,280           --     1,147,353

Stockholders' equity:
   Preferred stock, $1 par value,
      2,000,000 shares authorized;
      no shares issued and outstanding                            --          --            --           --
   Common stock, $0.001 par value,
      unlimited shares authorized;
      8,302,751 shares issued
      and outstanding                                         87,567  1,494,023    (1,573,287)       8,303
   Additional paid-in-capital                                     --          --     1,573,287    1,573,287
   Accumulated deficit                                    (1,068,497)(1,303,329)            --   (2,371,826)

       Total Stockholders' Equity                           (980,930)   190,694             --     (790,236)

   Total Liabilities and
       Stockholders' Equity                              $       143  $ 356,974   $         --   $  357,117


</TABLE>
<PAGE>

                                        PRO-FORMA STATEMENT OF OPERATIONS

                                      For the Year Ended December 31, 1995

<TABLE>
<CAPTION>
<S>                                                                            <C>            <C>


                                                      ETC                       Electronic
                                                   Transaction                  Transmission    Pro Forma
                                                    Corporation     Combined    Corporation     Adjustments
                                                      

Service revenues earned during
   development stage                                $        --    $     66,612  $        --    $     66,612

Costs and Expenses:
   Direct costs incurred during
      development stage                                      --          40,764           --          40,764
   Start up costs                                            --         939,347           --         939,347
   Research and development                                  --         179,830           --         179,830

      Total Costs and Expenses                               --       1,159,941           --       1,159,941

Loss from operations                                         --      (1,093,329)          --      (1,093,329)

Other Income (Expense):
   Other income                                            (807)             --           --            (807)
   Interest expense                                     (93,375)             --           --         (93,375)

       Total Other Income (Expense)                     (94,182)             --           --         (94,182)

Loss before income tax expense                          (94,182)     (1,093,329)          --      (1,187,511)

Income tax expense                                           --              --           --              --
Net loss                                           $    (94,182)   $ (1,093,329) $        --   $  (1,187,511)

Loss per common share:
       Primary and fully-diluted                                                               $       (0.21)

Weighted average common shares outstanding:
       Primary and fully-diluted                                                                   5,708,763
</TABLE>
<PAGE>


NOTE 1 - BASIS OF PRESENTATION

On February 12, 1997, Electronic  Transmission  Corporation merged with and into
ETC Transaction Corporation.

The balance sheets show pro-forma  adjustments  reflect the effects of a related
intercompany  loan which was eliminated  when the two entities were combined and
the adjustment to reflect common stock at par value of the merged entities.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BACKGROUND

ETC Transaction  Corporation  ("Company") was incorporated in September 1986, in
Alberta,  Canada.  The Company was  substantially  inactive from 1992 to 1996 at
which time it reorganized its affairs.

Electronic Transmission Corporation  ("ETC-Texas") was incorporated in the state
of Texas on December 22, 1994.  ETC-Texas was in the development stage until the
last quarter of 1996, as it had no significant  revenues. In the last quarter, a
long-term contract was executed with a large national  self-insured  corporation
and operations  commenced.  ETC-Texas's  business plan is to provide  electronic
transaction processing services to the health care market. The principal service
is the electronic capture and transfer of medical claims for on-line eligibility
verification  and  adjudication  between  health  care  providers,  self-insured
organizations, third party administrators and other managed care organizations.

Background -- On April 19, 1995, ETC-Texas entered into an agreement to purchase
the  rights  to the  technology  and  business  of  electronically  editing  and
transmitting  medical  claims  from  providers  to  payment  organizations  (the
Purchased  Business)  from  Sterling  National  Corporation  ("SNC")  by issuing
3,965,100  common  shares  and a cash  payment  of  $210,000.  SNC is a  company
wholly-owned and controlled by ETC's Chairman of the Board, C.E.O.
and majority shareholder.

The transaction was accounted for using the purchase method as follows:

                  Assets Acquired:
                     Accounts receivable                     $          5,630
                     Computer hardware                                  1,403
                     Computer software                                 13,718
                         Total tangible assets                         20,751

                  Consideration Paid:
                     Cash                                    $        210,000
                     3,965,100 common shares                           20,751
                         Total consideration                          230,751

                  Dividend paid to shareholder               $        210,000
<PAGE>

Treatment of the excess cash  consideration  paid for the  acquired  business is
accounted  for as a  deemed  dividend  in  accordance  with  generally  accepted
accounting  principles.  Goodwill was not recorded  since this  transaction  was
consummated  with a related party and this  treatment  would have  constituted a
step-up in basis.  The  transaction is reflected in the financial  statements on
the date the transaction occurred (April 19, 1995), in accordance with generally
accepted accounting principles.

Cash  Equivalents -- For purposes of the  statements of cash flows,  the Company
considers any short-term cash investment with a maturity of three months or less
to be a cash equivalent.

Accounts  receivable -- The Company's trade  receivables arise from sales in the
normal course of business.  The Company uses the allowance method to account for
uncollectible  accounts;  in management's  opinion, all accounts are collectible
and no allowance is necessary at December 31, 1995 and December 31, 1996.

Revenue recognition -The Company recognizes revenue when services are performed.

Office  Furniture  and  Equipment  --  Office  furniture,  computer  and  office
equipment,  software and leasehold  improvements are stated at cost. Maintenance
and repairs are charged to operating expense. Costs of significant  improvements
and  renewals are  capitalized.  Depreciation  is provided on the  straight-line
basis over the following useful lives:
                                                                        Useful
                                                                        Lives
                         Office furniture                               5 years
                         Computer and office equipment                  3 years
                         Computer software                              3 years
                         Leasehold improvements                         5 years

Periodically,  the Company  evaluates  whether  changes have occurred that would
require  revision of the  remaining  estimated  useful lives of the equipment or
rendered the value of the  equipment  not  recoverable.  The  recoverability  is
evaluated by estimating the future cash flows expected to result from use of the
asset and its eventual  disposition.  Equipment as of December 31, 1996,  is not
considered to be impaired.

Start-Up  Costs --  Start-up  costs  incurred  during the  period of  developing
ETC-Texas'  business plan are expensed as incurred in accordance  with generally
accepted accounting principles.

Research and Development -- Research and development costs incurred are expensed
as incurred in accordance with generally accepted accounting principles.

Income  Taxes -- The  Company  utilizes  the asset  and  liability  approach  to
financial accounting and reporting for income taxes.  Deferred income tax assets
and  liabilities  are computed  annually for  differences  between the financial
statement and tax basis of assets and liabilities that will result in taxable or
deductible  amounts in the future based on enacted tax laws and rates applicable
to the periods in which the  differences  are expected to affect taxable income.
Valuation  allowances  are  established  when  necessary to reduce  deferred tax
assets to the amount  expected  to be  realized.  Income tax  expense is the tax
payable or refundable  for the period plus or minus the change during the period
in deferred tax assets and liabilities.
<PAGE>

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BACKGROUND (Continued)

Loss Per Share -- Loss per common share was calculated by dividing the Company's
net  loss by the  weighted  average  common  shares  outstanding.  Common  stock
equivalents  were excluded from the calculation as such inclusion would have had
an  anti-dilutive  effect;  therefore,  fully  diluted  earnings  per  share  is
considered to be the same as primary  earnings per share.  Loss per common share
assuming  full dilution was  calculated  in the same manner as described  above,
except that those shares that were issued in  connection  with debt  conversions
were assumed to be outstanding for the entire period.

Use of Estimates and Assumptions -- Management uses estimates and assumptions in
preparing its financial  statements.  Those estimates and assumptions affect the
reported amounts of assets and liabilities,  the disclosure of contingent assets
and  liabilities,  and the  reported  amounts of revenues and  expenses.  Actual
results could vary from the estimates that were used.

Stock-based Compensation -- ETC-Texas compensated certain employees for services
rendered by issuing shares of common stock to these individuals during 1995. The
measurement  date for determining  compensation  costs is the date of the grant.
Compensation cost is the excess, if any, of the quoted market price of the stock
at grant  date over the  amount  the  employee  must pay to  acquire  the stock.
Compensation  cost is  recognized  as an expense  over the period of  employment
attributable to the option.

New Accounting  Standards -- In October 1995,  Statement of Financial Accounting
Standards No. 123,  "Accounting  for Stock-based  Compensation"  (SFAS 123), was
issued.  This  statement  requires  the fair  value of stock  options  and other
stock-based   compensation   issued  to  employees  to  either  be  included  as
compensation  expense in the  income  statement  or the pro forma  effect on net
income and  earnings per share of such  compensation  expense to be disclosed in
the  footnotes  to  the  Company's  financial  statements  commencing  with  the
Company's 1996 fiscal year.  ETC-Texas  adopted SFAS 123 on January 1, 1996. The
Company will continue to measure  compensation  costs using the "intrinsic value
based method" of accounting for stock issued to employees.

NOTE 3 - GOING CONCERN AND CONTINUED OPERATIONS

The financial  statements  have been prepared on the assumption that the Company
will continue as a going  concern.  The financial  statements do not include any
adjustments  to  reflect  the  possible  effects  on  the   recoverability   and
classification  of assets or classification of liabilities which may result from
the  inability  of the  Company to  continue as a going  concern.  The  combined
entities  sustained a net operating loss of $1,187,511 and $2,453,125 during the
years ended December 31, 1995 and 1996, respectively.  Additionally, at December
31, 1996, ETC's current liabilities exceeded its current assets by $433,273. The
Company's continued  existence depends upon the success of management's  efforts
to raise  sufficient  capital  and  increase  its  customer  base to execute its
business plan.
<PAGE>

Management  plans to mitigate the going concern issues by marketing its services
to large  self-insured  insurance  companies  to develop its  customer  base and
increase  profitability.  Management  believes  that it will  be  successful  in
generating sufficient cash to support its operations.  There can be no degree of
assurance  that the Company will be  successful  in raising  additional  working
capital or executing its business plan to the extent that it will be profitable.

NOTE 4 - OFFICE FURNITURE AND EQUIPMENT

The following is a summary of office furniture and equipment:

                                                              December 31,

                                                         1995            1996

                  Furniture                           $  43,056      $  104,349
                  Computer & Office Equipment            68,752         458,178
                  Computer Software                      57,713          92,836
                  Leasehold Improvements                     --           8,791
                                                        169,521         664,154
                  Less:  accumulated depreciation       (32,173)       (142,578)
                                                      $ 137,348      $  521,576

Depreciation expense was $32,173 and $110,405 for 1995 and 1996,  respectively.

NOTE 5 - LEASE OBLIGATIONS RECEIVABLE

The  Company,  as lessor,  has entered into a  non-cancelable  lease for service
equipment.  Future minimum lease payments receivable under non-cancelable leases
at December 31, 1996 are as follows:
                            For the Years Ending                 Capital
                            December 31,                         Leases

                            1997                             $    29,248
                            1998                                  29,248

    Total minimum lease payments                                  58,496
        Less: amount representing interest                        (5,678)

    Present value of minimum lease payments                       52,818
        Less: current portion                                    (25,095)
    Long-term capital lease obligation                       $    27,723
<PAGE>

NOTE 6 - CONVERTIBLE DEBENTURES

At various times  throughout 1995 the ETC-Texas  issued  convertible  debentures
totalling  $120,000.  These  debentures  bore interest at 12% per annum and were
convertible  into common shares at the option of the holder at a conversion rate
of one common share per $1.25 of debenture being  converted.  As of December 31,
1995,  all  debenture  holders had exercised  their options and converted  their
debentures into a total of 96,000 common shares.

During 1991 and 1992,  the Company issued  $500,000 and $105,000,  respectively,
for a total of $605,000 in short-term convertible debentures. These were due 180
days from issuance bearing an interest rate of 20%. The debentures  provided for
the holder to receive ten common shares of common stock for each one U.S. dollar
of debenture.

During 1995,  the Company's  debenture  holders  formally  agreed to forgive all
accrued  interest on the  debentures  and convert the  debentures  into  552,500
post-consolidated  shares of common stock in settlement of all obligations under
the $552,500 of outstanding  debt. The accrued interest was charged to income in
1995 as an  extraordinary  item for early  extinguishment  of debt.  On April 1,
1996, the Company issued 552,500  post-consolidated common shares in the Company
to Debenture Holders representing  $552,500 of debt in full and final settlement
of all obligations under the debentures. 

NOTE 7 - LEASE OBLIGATIONS PAYABLE

ETC-Texas, as lessee, has entered into various non-cancelable leases for service
equipment,  vehicles,  and  office  facilities.  The cost of assets  subject  to
capital leases included in office  furniture and equipment  amounted to $182,053
less accumulated depreciation of $21,044 at December 31, 1996.
<PAGE>

Future minimum lease payments under non-cancelable  leases at December 31, 1996,
are as follows:

                            For the Years Ending                     
                                                     Capital          Operating
                            December 31,             Leases            Leases

                            1997                 $   111,852       $   177,984
                            1998                     102,495           183,680
                            1999                      18,890           189,375
                            2000                          --           195,071
                            Thereafter                    --           149,507

    Total minimum lease payments                     233,237       $   895,617
        Less: amount representing interest           (23,925)  

    Present value of minimum lease payments          209,312
        Less: current portion                        (95,206)

    Long-term capital lease obligation           $   114,106

Rent expense during the years ended December 31, 1995 and 1996 for all operating
leases was  $49,988 and  $122,544,  respectively,  and is included in  operating
expenses.

In April 1996,  ETC-Texas  entered into an equipment  lease  agreement and stock
option  agreement with a leasing company which is recorded as a capital lease by
ETC-Texas.  The  agreement  is for a term of five years and allows  ETC-Texas to
lease  certain  equipment  for amounts  specified in the  agreement  with rental
payments  due on the first of each  month.  As of  December  31,  1996,  monthly
payments required under the lease agreement amounted to $9,321 expiring in 1998.

At any time during the term of the agreement,  the leasing company has the right
to 1) sell to ETC-Texas  any or all of the  equipment in exchange for the number
of  shares  of  ETC-Texas  common  stock,  or stock of any  company  with  which
ETC-Texas  merges,  that is equal to the  purchase of the  equipment  divided by
$1.25 per share or, 2) purchase, at $1.25 per share, the number of shares of ETC
stock,  or stock of the  merged  company,  equal  to the  purchase  price of the
equipment  divided  by 1.25,  and give  ETC-Texas  the  option to  purchase  the
equipment at the end of the lease for $1.00; provided, that if ETC-Texas issues,
agrees to issue or grants an  option to  purchase  ETC-Texas  stock to any other
person for a price less than $1.25 per share,  the price  payable to the leasing
company will be reduced to such lower price.
<PAGE>

The leasing company agreement contains certain  restrictive  covenants which (i)
require ETC-Texas to escrow all accounts received which are derived from the use
of this equipment,  less third party costs,  through March 31, 1996 or until any
class of stock is registered with the SEC are otherwise becomes publicly traded,
or the funds in escrow equal the total purchase price of the equipment, and (ii)
restrict  ETC-Texas from issuing  additional  securities before ETC-Texas merges
with a public company.  ETC-Texas is in violation of each of these covenants and
has obtained a waiver from the leasing company which releases ETC-Texas from any
claims under the escrow  requirement and violations  relating to the issuance of
securities.

NOTE 8 - LINE OF CREDIT

Under the agreement with the leasing company  discussed in Note 7, ETC-Texas has
obtained  a  $500,000  line of credit  from the  leasing  company  to be used as
working  capital.  ETC-Texas  may draw from this line up to 80% of its  accounts
receivable  that are  under 65 days past due.  To  secure  this line of  credit,
ETC-Texas  will pledge  shares of its common stock on a two for one basis (i.e.,
two dollars trade value of its stock for every one dollar drawn from the line of
credit). ETC-Texas will pay a loan origination fee, beginning three months after
ETC-Texas merges with a public company, in an amount equal to 10% of the leasing
company's  exposure under this agreement  including the amount spent to purchase
equipment  and the  amount  drawn  on the  line of  credit.  This  fee will be a
cumulative amount calculated each quarter.  As of December 31, 1996, the Company
has made no draws on this line of credit. NOTE 9 - INCOME TAXES

The Company has  Canadian  net  operating  loss  carryforwards  for Canadian tax
purposes  totaling Cdn $214,000 that are available to offset its future Canadian
income tax liability. The Canadian loss carryforwards expire in 1997.

The Company and ETC- Texas have net operating  loss  carryforwards  for U.S. tax
purposes  totaling  approximately  $3,949,000  that are  available to offset its
future U.S.  income tax liability.  The net U.S.  operating  loss  carryforwards
expire as follows:

                          2006                       $               170,000
                          2007                                       362,000
                          2008                                       117,000
                          2009                                       120,000
                          2010                                     1,103,000
                          2011                                     2,077,000

                          Total                      $             3,949,000
<PAGE>

The  realization  of the benefits  from these net operating  loss  carryforwards
appears uncertain due to going concern questions and the possible effects of the
merger.  Accordingly,  a valuation allowance of $499,500 and $1,518,000 has been
recorded  against the deferred tax asset  resulting  from the net operating loss
carryforwards as of December 31, 1995 and 1996, respectively. There are no other
significant  temporary  differences  for  financial  and  income  tax  reporting
purposes at December 31, 1995 or 1996.

NOTE 10 - STOCK OPTIONS

ETC-Texas has issued  various stock  options to employees  which are  considered
compensatory.  Stock options were  initially  granted by the Company during 1995
and no stock  options  were vested as of December  31,  1995.  Additional  stock
options  were  granted in 1996 with  134,666  vesting as of December  31,  1996.
Vesting varies by employee  agreement ranging from 2 to 3 years. 

A summary of the status of stock options is set forth below:
<TABLE>
<CAPTION>
<S>                                                                               <C>            <C>
                                                          Year ended                         Year ended
                                                        December 31, 1995                December 31, 1996
                                                                  
                                                                  Weighted                          Weighted
                                                                   Average                           Average
                                                                   Exercise                         Exercise
Fixed Options                                      Shares           Price            Shares            Price

Outstanding, beginning of period                        --             --           675,000           $0.001
Granted                                            675,000         $0.001           260,000           $0.001
Exercised                                               --             --          (118,333)          $0.001
Forfeited/expired                                       --             --          (125,000)          $0.001
Outstanding, end of period                         675,000         $0.001           691,667           $0.001

Options exercisable, end of period                      --             --            18,333           $0.001

Weighted average fair value of
    options granted during the year           $       1.25                           $ 1.12
</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1996:

Range of exercise prices                                 $0.001 per common share
Weighted average remaining contractual life               2.99 years
Weighted average exercise price                          $0.001 per common share
<PAGE>

Compensation  costs  will be  recognized  as an  expense  over  the  periods  of
employment  attributable  to the options at an amount equal to the excess of the
fair market  value of the stock at the date of  measurement  over the amount the
employee  must pay.  The  measurement  date is generally  the grant date.  As of
December  31, 1995,  no  compensation  cost was  recognized  as expense.  Future
compensation  expense to be recorded in  subsequent  periods as of December  31,
1995 and 1996,  was  $474,540  and  $555,897,  respectively.  Compensation  cost
totalling  $322,067 was recognized as expense during the year ended December 31,
1996. Had  compensation  cost for the Company's  stock-based  compensation  been
determined  on the fair value at the grant  dates for awards  with the method of
FASB  Statement  123,  ETC-Texas'  net loss and loss per share  would  have been
unchanged.

NOTE 11 - COMMITMENTS

On  April  19,  1995,   ETC-Texas   entered   into  an   agreement   with  Texas
Administrators,  Inc. ("TAI"),  a third party  administrator for medical claims.
The agreement  called for TAI to assign the rights to third party  administrator
accounts  for a total  purchase  price of $75,000,  representing  1.15 times one
year's  contracted  revenue.  Of the  purchase  price,  $35,000  was paid to TAI
subsequent  to year  end.  Additionally,  ten (10)  monthly  payments  of $4,000
commencing June 10, 1995, are payable to TAI under an executed promissory note.

The agreement  called for ETC to enter into  consulting  agreements with each of
the 3 key employees/ sole shareholders of TAI. The consulting  agreements called
for each of the  individuals to assist  ETC-Texas in retaining and servicing the
assigned  accounts  and to seek out new third party  administrator  accounts for
which the individuals would be paid commissions.  The consulting agreements were
for a period of one year commencing  April 30, 1995. The Company intended to use
TAI's  third  party  administrator  accounts  as  a  basis  to  test  ETC-Texas'
electronic  processing  work flow  system for  processing  self-insured  medical
claims.

On June 1, 1995,  ETC-Texas  terminated  the  agreement  for breach of contract,
claiming the medical claims accounts assigned were not in full force and effect.
As of  December  31,  1995,  ETC-Texas  has  received  $26,232  as  third  party
administrator  fees from accounts assigned by TAI.  ETC-Texas does not expect to
be  successful  in  recovering  the $35,000  paid to TAI for the  accounts,  and
accordingly,  the amount has been  expensed in 1995 as research and  development
third party  administrator  fees.  During 1996, ETC settled with TAI for the net
amount of $5,000.

On April 22, 1995,  ETC-Texas also purchased office furniture from TAI having an
estimated  value of  $33,925,  with the  issuance  of  16,000  common  shares of
ETC-Texas  to TAI.  The stock was  subsequently  returned  to ETC as part of the
settlement.
<PAGE>

In December 1995,  ETC-Texas  entered into an agreement with a marketing firm to
assist in obtaining and servicing customers. A member of the marketing firm is a
member  of the  Board  of  Directors.  Compensation  for  services  rendered  to
ETC-Texas will be paid through  November 1997 on a monthly basis equal to 15% of
the gross realized revenue from new accounts  obtained on behalf of ETC-Texas by
the firm. In return,  ETC-Texas has agreed to market the services offered by the
marketing  representative  and will be paid monthly over the same term an amount
equal to 10% of the gross realized revenue from new accounts  obtained on behalf
of the firm by ETC-Texas.

In September  1996,  ETC-Texas  made a two-year  agreement with a large national
self-insured company to provide electronic  transaction  processing services for
insurance claims. As of December 31, 1996,  revenues from this customer amounted
to  approximately  64% of total revenues and trade accounts  receivable  include
$76,395 of accounts receivable from this customer.

ETC-Texas is engaged in a marketing  strategy of utilizing a 90-day trial period
with other  organizations.  These agreements allow for a 90-day trial period for
processing  claims and ETC-Texas has been successful in providing the service at
a fee of $1 per claim.

Effective June 1, 1996,  ETC-Texas issued 220,000 stock warrants which expire on
June 15,  1997,  and allow the holder of each  warrant to purchase  one share of
common stock at a price of $1.50 per share. As of December 31, 1996, no warrants
have been exercised.

NOTE 12 - PROPOSED MERGER

On May 1 1996,  the Company  entered into an  agreement  and plan of Merger with
ETC-Texas whereby ETC-Texas would be merged with and into the Company,  with the
Company  being the  surviving  company.  The merger  provides that each share of
issued  and  outstanding  common  stock of  ETC-Texas,  no par  value,  shall be
converted into the right to receive one and  one-fourth  shares of common stock,
$0.001 par value, of the surviving Company. As of December 31, 1996, the Company
had 2,007,145 shares of common stock issued and outstanding, while ETC-Texas had
7,153,601  shares issued and outstanding of ETC-Texas  common stock. As a result
of the merger,  the shareholders of ETC-Texas would receive  8,942,001 shares of
common stock in exchange  for all of the shares  issued and  outstanding  of the
Company.  Upon  completion  of the merger and exchange of shares,  the surviving
company would have 10,949,146 shares of common stock issued and outstanding.

The merger is in effect a reverse  acquisition  and will be  accounted  for as a
recapitalization of ETC-Texas, with ETC-Texas as the acquirer.  Accordingly,  no
goodwill  or other  intangible  assets  will be  recorded.  ETC-Texas  is in the
business of providing an electronic  medical  claims-flow  process whereby paper
medical claims are  electronically  scanned and transposed into images formatted
for the claims payer to utilize for adjudication  and payment.  
<PAGE>

NOTE 13 - COMMON STOCK OFFERING

On May 15, 1996, the Company sold 519,717 shares in a private placement offering
of common stock to raise working capital to fund its post-merger  business plan.
The  private  placement  issued  common  stock at a price of $1.50 per share and
raised  $779,575 in capital.  Upon  completion of the offering,  the capital was
advanced to ETC-Texas for use as working capital.

NOTE 14 - RELATED PARTY TRANSACTIONS

On May 15,  1996,  ETC-Texas  received  a cash  advance  of  $779,575  from  ETC
Transaction  Corporation to be used as working  capital to fund its  post-merger
business plan. The capital for the ETC Transaction  Corporation cash advance was
raised in the private placement offering described in Note 13.

ETC-Texas  advanced  funds for working  capital  infusions to SNC during 1995 of
$82,744.  As of December 31, 1996,  ETC-Texas had a payable of $339,207,  to SNC
for working capital loans.

At December 31, 1996,  ETC-Texas has a trade  receivable  due from  Electra-Net,
L.C., a company  wholly-owned and operated by the Chairman of the Board,  C.E.O.
and majority  shareholder of ETC. The receivable  totalling  $103,026 relates to
administrative fees for providing computer processing for medical claims.

ETC-Texas  has an agreement  to purchase  equipment  from SNC. The  relationship
exists through SNC's purchase contract with an equipment wholesaler which allows
SNC to purchase equipment at a significant discount.  Since ETC-Texas is able to
purchase the equipment from SNC at the discounted  price,  ETC-Texas  intends to
utilize this  relationship  for capital  expenditures as deemed necessary in the
future. ETC-Texas will record the equipment purchases at SNC's cost.

Included in accounts  payable at December 31, 1995 and 1996, is accounts payable
to  previous  officers  totaling  $26,500 and $0,  respectively.  Amounts due to
shareholders are for prior services rendered and working capital infusions.
<PAGE>

NOTE 15 - CASH FLOW SUPPLEMENTAL INFORMATION

The following is a schedule of required supplemental cash flow information:

                                                 1995                  1996

                  Interest paid              $     6,424         $     9,021

                  Income taxes paid          $        --         $        --

Non-cash investing and financing activities include the following:

ETC-Texas  purchased assets valued at $246,513 through capital lease obligations
during the year ended  December  31, 1996.  ETC-Texas  disposed of assets with a
carrying  value of $64,460  through a capital lease  receivable  during the year
ended December 31, 1996.

During the year ended  December  31, 1995 and 1996,  the Company  issued  common
stock shares for services rendered at $1 per share in the total amount of $4,000
and $262,625, respectively.

NOTE 16-SUBSEQUENT EVENTS

Merger - A special meeting of the  shareholders of ETC-Texas was held on January
31, 1997, the shareholders ratified and approved the terms and conditions of the
Merger  Agreement and  authorized  the Board of Directors of ETC-Texas to effect
the merger. ETC Transaction  Corporation held its annual meeting on February 11,
1997,  the  shareholders  ratified  and  approved  both the  Continuance  of ETC
Transaction  Corporation into the State of Delaware and the Merger Agreement and
authorized  the Board of  Directors  to effect the  Merger.  The  Merger  became
effective  on  February  11,  1997  as the  applicable  Continuance  and  Merger
documents were filed with the appropriate  authorities in the States of Delaware
and Texas. ETC and ETC Transaction Corporation intend for the merger transaction
to be a  reorganization  within the  meaning of Section  368(a) of the  Internal
Revenue  Code of  1986,  as  amended  (the  "Code").  ETC  and  ETC  Transaction
Corporation  are each parties to the  reorganization  and will not recognize any
gain or loss as a result of the Merger.

Effective February 11, 1997, the name of ETC Transaction Corporation was changed
to Electronic  Transmission  Corporation,  with the Certificate of Incorporation
being duly amended to reflect the change of name.
<PAGE>

                                SIGNATURES

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

                                           ELECTRONIC TRANSMISSION CORPORATION

                                        By               /s/ L. CADE HAVARD
                                           --------------------------------
                                                           L. Cade Havard
                                                             Chairman, CEO

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

                 Signature              Title                          Date


     /s/   L. CADE HAVARD            Chairman, Chief Executive    March 31, 1997
-----------------------------
            L. Cade Havard              Officer, President and
                                        Director (Principal
                                        Executive Officer)



     /s/  LOUANN C. SMITH               Controller (Principal     March 31, 1997
-----------------------------
           Louann C. Smith              Accounting Officer)



          /s/ ELAINE BOZE               Director                  March 31, 1997
             Elaine Boze



     /s/ TIMOTHY P. POWELL              Director                  March 31, 1997
-----------------------------
          Timothy P. Powell



       /s/ DAVID O. HANNAH              Director                   March 31,1997
       -------------------              --------                   -------------
            David O. Hannah



      /s/ MICHAEL ECKSTEIN              Director                  March 31, 1997
--------------------------
            Michael Eckstein


            /s/ RICK SNYDER             Director                  March 31, 1997
--------------------------
                Rick Snyder