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                     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, 2000

                            Commission File No. 22135

                       ELECTRONIC TRANSMISSION CORPORATION
                 (Name of Small Business Issuer in Its Charter)

Delaware (State or other jurisdiction incorporation)

75-2578619 (IRS Employer Identification No.)

15301 Spectrum Drive, Suite 501, Addison Texas (ZIP Code) 75001

                                 (972) 980-0900
                           (Issuer's telephone number)

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         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)

                                    ---------

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. [X] Yes [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrants 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]

     State the issuer's revenues for its most recent fiscal year ended on
     December 31, 2000: $2,685,113

     State the number of shares outstanding of the issuers common equity as of
     March 29, 2000: 11,349,678

     State the aggregate market value of the voting common and non-voting common
     equity held by non-affiliates of the issuer, computed by reference to the
     average bid and asked prices of such common stock on March 29, 2001, was
     $0.150 and $0.375 respectively. The aggregate bid price was $1,702,451. The
     aggregate ask price was $4,256,130.

     Documents Incorporated By Reference - None

     TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT - NO

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Forward-Looking Statements.

     Electronic Transmission Corporation (the "Company"). Certain statements in
this Form 10-KSB are "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve a number of risk and uncertainties. All
statements regarding the Company's expected future financial position, results
of operations, cash flows, liquidity, financing plans, business strategy,
budgets, projected costs and capital expenditures, competitive position, growth
opportunities, plans and objectives of management for future operations and
words such as "anticipate," "believe," "plan," "estimate," "expect," "intend,"
"may," and other similar expressions are forward-looking statements. Such
forward-looking statement are inherently uncertain, and stockholders must
recognize that actual results may differ materially from the Company's
expectations as a result of a variety of factors, including without limitation,
those discussed below.

     Factors which may cause the Company's actual results in future periods to
differ materially from forecast results include, but are not limited to:

          The Company's inability to access capital markets given the Company's
size and current financial condition.

          The Company's senior management may be required to dedicate an
excessive amount of time and effort dealing with the Company's financial
condition and litigation with less time focusing directly on the operations
of its business.

          Liabilities and other claims asserted against the Company.

          The loss of any significant customer, including but not limited to the
Wal-Mart contract.

          The Company's ability to generate sufficient cash from operations to
meet its obligations.

     The Company is generally not required to, and does not undertake to, update
or revise its forward-looking statements.

ITEM 1. DESCRIPTION OF BUSINESS.

Organization

     Electronic Transmission Corporation, a Delaware corporation (the
"Company")is the surviving entity of the merger (the "Merger") of Electronic
Transmission Corporation, a Texas corporation ("ETC-Texas") into ETC Transaction
Corporation, a Canadian corporation ("ETC-Canada") as continued into the state
of Delaware, during the first quarter of 1997. ETC-Texas was organized in
December 1994. ETC-Canada was originally incorporated as Solo Petroleum Ltd.
("Solo") in September 1986. ETC-Canada was inactive from 1992 until late 1995
when it reorganized its affairs in preparation of the Merger. In March 1996,
Solo changed its name to ETC-Canada and effected a one-for-five consolidation of
capital of the outstanding shares of common stock to facilitate the
effectiveness of the Merger.

     ETC-Texas and ETC-Canada jointly filed a registration statement with the
SEC to register the shares of stock issuable to the stockholders of ETC-Texas
under the terms of the Merger, subject to approval of the Merger by the
stockholders of the respective companies. The Merger was approved by
stockholders of ETC-Texas and ETC-Canada on January 31, 1997 and February 11,
1997, respectively. ETC-Canada, the surviving corporation, then continued into
Delaware and changed its name to Electronic Transmission Corporation, with the
stockholders of ETC-Texas receiving 1.25 shares of ETC-Canada common stock for
every one share of ETC-Texas common stock outstanding as of the time of the
Merger. The business operations of ETC-Texas were assumed by the survivor
following the Merger.

     All references to the Company in this Annual Report on Form 10-KSB include
the Company's predecessors, ETC-Texas and ETC-Canada, unless otherwise
indicated.

General

The Company is in the business of providing process and systems solutions to the
non-provider sector of the health care industry. Process solutions are automated
through a broad range of application and data base information systems.
Information systems include


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software solutions developed by the Company and are proprietary in nature. The
Company believes that its software and process solutions provide
state-of-the-art methodology and technology to its customers. In order to
provide the process solutions, the Company contracts with health care payors,
self-insured companies and other payors, such as third party administrators
("TPAs"), for automation and electronic data interchange ("EDI") services. The
Company also contracts with various managed care organizations and PPO's to act
as database manager and to perform repricing services.

     The Company's revenues are generated by different methods.. The Company is
paid a set price for scanning and automating each health care provider claim.
Additionally, the Company is paid a fee for its database management and
repricing services offered to PPO's.

Acquisition & Divestiture

     In September, 1998, the Company entered into a letter of intent with Health
Plan Initiatives, Inc. ("HPI"), a Texas corporation, for the Company to acquire
HPI. The letter of intent was supplemented with an amendment dated October 5,
1998. The acquisition was closed effective January 31, 1999, by the Company
issuing 3,538,306 shares of unregistered common stock in exchange for all of the
outstanding shares of HPI. The acquisition was accomplished through the merger
of the Company's wholly owned subsidiary ETC Acquisition Corporation with and
into HPI. Upon consummation of the merger with ETC Acquisition Corporation, HPI
became a wholly-owned subsidiary of the Company.

     HPI offered services similar to the Company. The primary business of HPI
was managed care access and health provider contracting with medical claims
repricing capabilities and other services related to the managed care sector of
health care delivery. Customers of HPI included health care payors, self-insured
companies, third party administrators, preferred provider organizations, and
health maintenance organizations.

     HPI was wholly-owned by Robert Fortier, who served as President of HPI
until the acquisition. Upon the signing of the October 5, 1998, amendment to the
letter of intent, Mr. Fortier also served as President and Chairman of the Board
of the Company until August 25, 2000 when Mr. Fortier was removed as Chairman
and on September 7, 2000 Mr. Fortier was removed as CEO. As part of the HPI
transaction, Mr. Fortier received 3,538,306 shares of unregistered Company
common stock, which was 42% of the outstanding common stock of the Company. The
relative value of HPI and number of shares as reflected in the October 5, 1998
amendment to the letter of intent was determined by negotiations between the
Company board of directors and Robert Fortier.

     Mr. Fortier received certain registration rights associated with the
Company shares and he received an employment contract. Mr. Fortier's employment
contract was terminated for cause on September 7, 2000.

     In August of 1999 the Company sold HPI to A&G Financial Services which was
the largest client of HPI. The sale was for $394,000 in cash and the assumption
of $575,000 of debt. The Company believed at the time, that the cash and
assumption of debt by the purchaser was more important to the future success of
operations than the continuing operation of HPI. The Company made the decision
to focus its resources on recovering and returning to the core business of the
Company which is automation processing. The sale price was a result of arms
length negotiations between the Company and A&G.

Company Business

The Company's principal business areas in 2000 included (i) claims automation,
(ii) managed care repricing, (iii) EDI services and (iv) automated reimbursement
indexing.

     Claims Automation Services. The Company provides automation services of
healthcare claims for (i) self-insured companies that administer their own
healthcare plans and pay their own medical claims, and (ii) TPAs that administer
healthcare plans and pay medical claims for self-insured companies. The
automation process reduces or eliminates the need for front end data entry of
claims detail for those entities who must pay claims from paper bills. In
addition, in this process paper is eliminated and the detail necessary to
adjudicate and pay the claim flows directly to the claim payment system without
human intervention. In 1998, several billion paper based medical claims were
processed in the United States. Prior to the payment of a claim, each paper
based claim passed through a minimum of two persons, resulting in more
transactions. The Company's proprietary systems and applications eliminate
duplication of some of the transactions. Through its scanning, optical character
recognition ("OCR") and data management technology, the Company eliminates the
multiple handling of paper and information associated with normal claims
processing. The Company's customers reduce data entry, data management and
warehousing costs by using the Company's products and thereby increase
productivity.


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     Managed Care Repricing. The Company provides this service in two distinct
formats, In the first case, managed care repricing is a functionality contained
in the automation process for the payment of claims. While the claim detail is
passing through the ETC system during the conversion from paper to electronic
media electronic repricing to the appropriate managed care fee schedule occurs.
In the second instance, the Company provides a "back office" repricing function
for managed care organizations (PPO's & HMO's) this allows the managed care
organization to lower its administrative costs, reduce personnel and enhance the
savings it offers to its clients. There are over 1800 preferred provider
organizations (PPO) and other managed care organizations in the United States.
Claims payors utilize multiple PPO's in the course of their daily activities.
The Company, through its repricing systems allow for application of multiple fee
schedules in either the single user or multiple user environment. The Company
has, either resident in its system or via electronic link, the fee schedules of
over 40 managed care organizations. Customers access the fee scheduled through
various methods, including the Internet, modem, scanner, or compact disk. The
Company's proprietary software identifies the patient, payor and provider and
then applies the appropriate fee schedule based upon integrated data contained
within its repricing system. The result of this application is a seamless
submission and transmittal of medical claim transactions. The technology that
allows the repricing system to deliver automated repricing to the payor
community is equally effective in providing automation to the managed care
organizations that use the fee schedules to provide and deliver the discounted
claims to the payors. These organizations, the majority of which are PPO's, have
found the same administrative difficulties in repricing claims as the payors
have had in paying claims. The use of the repricing system for PPO's has
introduced a whole new market to the Company.

     EDI Services: the Company provides for the capture of electronic claim data
from clearinghouses and providers directly for claim payors and managed care
organizations. Currently, less than 30% of medical claims are transmitted or
delivered electronically and with the advent of the data security standards that
will be required by the Health Insurance Portability and Accountability Act
(HIPAA), the Company sees a significant opportunity because of its experience in
the area of data encryption and movement.

     Automated Reimbursement Index. Taking advantage of the vast data base of
charges, reimbursements and utilized fee schedules the Company has accumulated
and developed over the years, a procedure based and geographically sensitive
index of "reimbursements". This index is electronically applied to out of
network physician claims for clients who use the Company automation process.
Charges are compared to the index and reduced to match the indicated acceptable
reimbursement level for that service in that geographical area based upon actual
billing and reimbursement data complied by the Company.

Business Strategies

     General. The Company's current business strategy is to (i) continue to
increase cash flows by extensively marketing its products and services to the
non-provider sector of the health care industry, (ii) enhance existing client
relationships by offering a broader range of services, and (iii) become a
leading edge provider of EDI services and take advantage of the Internet
capabilities of the Company.

     Enhanced Marketing Effort. Although the Company has utilized direct
marketing efforts to solicit customers in the past, new customers have been
generated through referrals from a small number of existing clients. Since the
Company's areas of service have grown and been enhanced, the Company will
supplement its direct sales force in the future. The sales force will be
comprised of employees of the Company and outside sales personnel with whom the
Company will have entered into specific marketing agreements. The Company
believes that to be successful in the future, it will have to expand the range
of existing services, its distribution channels and its sales force. The Company
also intends to pursue strategic alliances with other health care claims systems
vendors.

     Professional Services. The Company currently provides system and process
review and design, installation and integration services to its customers. The
Company does not currently charge the customer for these services. As the
Company's services become more customized and are expanded, the Company believes
that it will be able to generate a revenue stream from this activity.

     Vendors. The Company has become a value added reseller ("VAR") for the
components of the imaging system.

System and Work Flow Enhancements

     The Company continually evaluates new imaging components including imaging
software capabilities. Additionally, the Company


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is continually enhancing its proprietary software used in the provision of the
services to its customers. The Company seeks to make enhancements to existing
service components in response to recommendations made by its customers.

Sales and Marketing

     The Company actively markets is services to PPO's, group health insurance
companies, worker's compensation insurance companies, TPA's and self-insured
employers through the Company's direct and outside sales force. The Company
creates interest and demand for its products and services primarily through
telemarketing efforts, direct contact with potential customers and follow-up
marketing literature and information delivered through the Internet and designed
to specifically address customer needs. The Company also participates in managed
healthcare conventions and trade shows.

Customers

     The Company markets its processing services primarily to self-insured
companies, TPAs and other provider networks or other cost containment companies.

Competition

     The non-provider sector of the health care industry is intensely
competitive and is characterized by companies that provide both electronic
automation and paper processing solutions. There are participants in the
industry that provide discount and repricing services in the market currently
served by the Company. The Company's competition in the market for electronic
claims processing, discount and repricing services is primarily concentrated in
Internet enabled business to business companies and certain software and
hardware manufactures through strategic alliances with sales and consulting
groups which have greater financial and technical resources and longer operating
histories than the Company.

     The Company competes on the basis of its specialized knowledge and
expertise in the managed healthcare services industry and on its ability to
deliver effective services to the customer with a high level of customer
satisfaction through a seamless single source at an affordable price. The
managed healthcare industry has experienced significant changes in recent years,
primarily as a result of rising healthcare costs and consolidations and mergers.
The Company will be required to respond to various competitive factors affecting
the healthcare industry, including new technologies that may be introduced;
general trends relating to demand for healthcare services; and potential
regulatory, economic and political factors.

     Management of the Company believes that the Company's competitors, while
each providing segments of the services offered by the Company, do not offer the
interconnected array of services provided by the Company. The Company believes
that it possesses a competitive advantage by offering its claims automation, and
repricing services in a format that connects payors, payees and service
providers. There can be no assurance that the Company will be able to compete
successfully in the future.

Intellectual Property, Proprietary Rights, and Licenses

     The Company regards certain features of its products and services as
proprietary and relies on a combination of contract, copyright, trade secret
laws and other measures to protect its proprietary information. As part of its
confidentiality procedures, the Company generally obtains nondisclosure
agreements from its employees and clients and limits access to and distribution
of its software, documentation, and other proprietary information. The Company
believes that trade secret and copyright protection are less significant than
factors such as the knowledge, ability, and experience of the Company's
employees and the timeliness and quality of the services they provide. The
Company has aggressively pursued suspected infringement of its proprietary
rights.

Regulatory Matters

     The Company 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 Company's business. The Company
believes that no impending regulations such as those that will be promulgated
under HIPAA will adversely effect operations or the ability to serve customers
in the future.


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Employees

     As of March 15, 2001, the Company had 30 full-time employees and 18
part-time employees. None of the Company's employees is represented by a labor
union or subject to a collective bargaining agreement. The Company has never
experienced a work stoppage and believes that its employee relations are good.

ITEM 2. DESCRIPTION OF PROPERTY.

     The Company owns no real property. The Company's principal executive office
is located in a 5200 square foot office facility in Addison, Texas. The lease
for the Company's offices expires September 30, 2001 and provides for monthly
rental payments of $9,929. The Company has engaged a consultant to search and
negotiate for future office space. In addition, in 1999 HPI leased 1800 square
feet in Hurst, Texas with a monthly rental payment of $2,100 which ended in
December of 1999.

ITEM 3. LEGAL PROCEEDINGS.

     On September 11, 2000 the Company filed suit in the 96th Judicial District
Court of Tarrant County, Texas (Civil File No. 96-184499-00) against Mr. Fortier
alleging among other things, that Mr. Fortier made misrepresentations regarding
the financial condition and business prospects of Health Plan Initiatives
("HPI"), a company he owned, when the Registrant acquired that company effective
January 31, 1999. The Company is seeking a return of the approximate 3.7 million
shares issued to Mr. Fortier as consideration in that transaction and the
recovery of compensation paid to Mr. Fortier.

     On September 11, 2000 Robert Fortier filed a suit against Scott Stewart,
and Tim Powell, Ken Andrew and the Company as nominal defendants, in the 95th
District Court, Dallas County, Texas, Cause No. 00-7127. The suit seeks to
prevent alleged actions by the Defendants in impairing Mr. Fortier's rights as a
shareholder, not conducting business in accordance with the Company's bylaws and
damages against Mr. Stewart for interfering with the Company's obligations under
the agreement to purchase HPI. On October 18, 2000 this suit was abated and Mr.
Fortier filed, as a counter claim, his same allegations in the Tarrant County
suit brought by the Company.

     On October 26, 2000 an Agreed Order Granting Temporary Injunctions was
entered in the case pending in Tarrant County which prohibited Mr. Fortier from
selling his approximately 3.7 million shares of Company stock and the Company,
Stewart and Powell from (i) taking any action to cancel Mr. Fortier's stock,
(ii) preventing performing his duties as a director of the Company, and (iii)
diverting his mail. All parties are prohibited from attempting to remove any
director except by a proper shareholders' meeting, destroying or falsifying
records, and communicating with one side to the other, except in Board meetings
or through counsel.

     The Company has settled the suit filed in the 101st Judicial District Court
for Dallas County in July 1999 (Cause No. 99-05248-E) by W. Mack Goforth, a
former officer of the Company. The settlement calls for the Company to pay Mr.
Goforth $132,000 over approximately two years. Under certain circumstances such
as the failure of the Company to make the payments or if a bankruptcy proceeding
is filed and Mr. Goforth is required to return any of the payments, then the
Company's obligation is to repay a $600,000 promissory note.


    Should the Company be required to pay damages as a result of any litigation,
the payment of such damage award may have a material adverse effect upon its
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.

                                     PART II

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

     The Company's Common Stock began trading on The OTC Bulletin Board on April
4, 1997 under the symbol "ETSM". The


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following table sets forth the high and low bid information, obtained daily from
PCQuote.com, for the Common Stock as reported on The OTC Bulletin Board. The
table reflects inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                   HIGH         LOW
                                                 -------      -------
<S>                                              <C>          <C>
           January 1 - March 31, 1999            $  0.68      $  0.18
           April 1 - June 30, 1999               $  0.63      $  0.32
           July 1 - September 30, 1999           $  0.63      $  0.31
           October 1 - December 31, 1999         $  0.56      $  0.31
           January 1 - March 31, 2000            $  0.81      $  0.34
           April 1 - June 30, 2000               $  0.53      $  0.31
           July 1 - September 30, 2000           $  0.44      $  0.15
           October 1 - December 31, 2000         $  0.30      $  0.13
           January 1 - March 29, 2001            $  0.25      $  0.10
</TABLE>


Holders: As of March 26, 2001, there were approximately 383 holders of record
for the Common Stock.

Recent Financings

     In March, 1999, Special Situations Private Equity Fund, L.P. was issued an
additional 438,713 shares of common stock and Special Situations Cayman Fund,
L.P. was issued an additional 213,038 shares of common stock in exchange for a
forbearance agreement and the termination of purchase rights for additional
shares owed under a Purchase Agreement dated December 12. 1997.

In June 1998, the Company issued 440,000 shares of its common stock (adjusted to
110,000 post-split shares) for a consideration of $110,000 in cash.
Additionally, the Company sold convertible debentures totaling $170,000 with
maturates from December 31, 1998 to January 7, 1999. One share of pre-split
Common Stock was issued for each dollar of accrued interest. The debenture
holders converted this debt into 480,000 shares of Common Stock.

     In December, 1998, the Company arranged a $500,000 line of credit through
Compass Bank. The line of credit was obtained through the use of letters of
credit and a guarantee provided by two individuals. The Company, on January 6,
1999, issued 250,000 shares of common stock to the two individuals as
consideration for their guarantees. The line of credit was paid off and closed
in 1999.

     In January of 1999 the Company issued 3,538,306 shares of Common Stock as
part of the merger with Health plan Initiatives, Inc.

     In October of 1999 the Company offered and sold 1,620,000 shares of Common
Stock to six accredited individuals for $660,000.

     In January of 2000 the Company issued 120,000 shares of Common Stock to Mr.
Scott Stewart in consideration of services rendered as President of the Company.

     In each instance described above the Company relied on exemption from the
Securities Act of 1933 as provided by Regulation D, Rule 506 and Section 4(2).
No public solicitation of investors was made and the Company believes that all
purchasers are either accredited investors or sophisticated investors.

Dividend Policy

     The Company has not previously paid any cash dividends on its Common Stock
and does not anticipate or contemplate paying dividends on the Common Stock in
the foreseeable future. It is the present intention of management to utilize all
available funds for the development of the Company's business. In addition, the
Company may not pay any dividends on common equity unless and until all dividend
rights on outstanding preferred stock, if any, have been satisfied. The only
other restrictions that limit the ability to pay dividends on common equity or
that are likely to do so in the future, are those restrictions imposed by law or
by certain credit agreements.

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

The following discussion should be read in conjunction with the Company's
Financial Statements and Notes thereto, included elsewhere herein. The
information below should not be construed to imply that the results discussed
herein will necessarily continue


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into the future or that any conclusion reached herein will necessarily be
indicative of actual operating results in the future. Such discussion represents
only the best present assessment of management of the Company. Because of the
Company's recent acquisitions and divestitures the results of operations from
period to period are not necessarily comparative.

Overview

     The Company's revenues are generated from medical claims automation,
managed care repricing, EDI services and automated reimbursement indexing.

Results of Operations of the Company

Year Ended December 31, 2000 Compared to December 31, 1999

     Revenues. Revenues from automation services totaled $2,291,706 and
$1,483,855 for the fiscal years ended December 31, 2000 and 1999, respectively.
Revenues from repricing services totaled $393,407 for the fiscal year ended
December 31, 2000 compared to $1,104,775 for 1999. The increase in revenues is
due to additional clients and increased activity of existing clients.

     For the fiscal year ended December 31, 2000, fees paid by Wal-Mart for
automation services were approximately 54% of total revenues. In fiscal 1999,
Wal-Mart accounted for 62% of total revenues, which demonstrated the
diversification and growth of the Company's client base during the period.

     Cost of Revenues. Cost of revenues totaled $750,010 and $911,379 for the
fiscal years ended December 31, 2000 and 1999, respectively. The decrease in
cost of revenues is primarily due to continued efficiencies and monitoring of
production cost.

     Gross Profit. Gross profit for fiscal 2000 was $1,935,103 as compared to $
1,677,251 for fiscal 1999. The gross profit margin for fiscal 2000 was 72.1%
verses 64.8% for fiscal 1999. Gross profit increased significantly because of
efficiency in operations.

     Other Expenses. Sales, general and administrative costs decreased to
$2,050,561 for the fiscal year ended December 31, 2000, compared to $ 2,801,344
for the fiscal year ended December 31, 1999. Decrease in sales, general and
administrative cost for the period ended December 31, 200 is due to the sale of
Health Plan Initiatives, Inc. and management's continued monitoring and
streamlining of operations. The Company has issued stock options to
non-employees which are considered compensatory. Compensation costs totaling
$-0- and $138,760 was recognized as expense during the fiscal years ended
December 31, 2000 and 1999, respectively. During the fiscal years ended December
31, 2000 and 1999, the Company issued -0- shares of Common Stock for services
for a total expense of $-0- and 377,500 shares of Common Stock for services for
a total expense of $99,663, respectively.

     Sales, general and administrative expenses consisted primarily of personnel
costs and benefits, rent, insurance, and professional fees. For the fiscal year
ended December 31, 2000 total personnel costs and benefit were $1,362,248, rent
cost was $132,398, insurance costs were $108,992 and professional fees $157,629.
For the fiscal year ended December 31, 1999 total personnel costs and benefits
were $1,633,364, rents were $157,546, insurance costs were $100,244 and
professional fees were $217,110. Professional fees were incurred due to year-end
audit, legal matters and computer consulting. Personal costs decreased due to
changes and reduction in executive officers and other personnel. Rents decreased
as the result of the divestiture of HPI. The reduction in professional fees is
due to a decrease in legal and audit fees.

     Net interest expense decreased to $3,437 for the fiscal year ended December
31, 2000 compared to $27,252 for the fiscal year ended December 31, 1999. This
was because the Company expanded efforts to pay off or renegotiate in exchange
for equity as much debt as possible.

     Net Loss. The Company reported a net loss of $326,310 for the fiscal year
ended December 31, 2000 as compared to a net loss of $1,111,517 for the fiscal
year ended December 31, 1999 or ($.03) and ($.11) basic earnings per share for
fiscal 2000 and fiscal 1999, respectively. The significant improvement in
reducing the net loss is the result of management's continued improvement in
operating efficiency and controlling cost. For the fiscal years ended December
31, 2000 and 1999, the Company incurred non-cash employee stock compensation
expense and stock for consulting services expense totaling $-0- and $238,423,
respectively, as discussed above. Such compensation expenses increased the
Company's net loss for the referenced periods.


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Liquidity and Capital Resources.

     Since inception, the Company has financed its operations, working capital
needs and capital expenditures principally through private placements of equity
securities. Cash and cash equivalents at December 31, 2000 were $87,987.

     At March 30, 2001, the Company had 20 clients including self-insured
companies and medical provider networks. The Company expended considerable
effort and resources 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 the Company will operate. As the Company
expands its customer base, additional computer equipment and personnel will be
required and added. Such expansion will be funded by the revenues derived from
operations and other funding sources that the Company may find from time to
time.

     In December 1998, the Company arranged a $500,000 line of credit through
Compass Bank. The line of credit was obtained through the use of letters of
credit and guarantee provided by two individuals. The Company issued 250,000
shares of common stock to the two individuals as consideration for their
guarantees. In November of 1999, $300,000 of the proceeds raised from the stock
offering was used to pay off this line.

     The Company is currently reviewing its cost structure and accessing a
possible reduction in the fixed cost portion of its infrastructure. The Company
intends to increase revenues by expanding its customer base and increasing
profitability. Additionally, the Company continues to enhance its productivity
through software improvements. The Company plans no material working capital
expenditures over the next 12-month period. The Company believes that the net
proceeds from, the existing liquidity sources and the anticipated working
capital provided from improved operations, will satisfy its cash requirements
for the next 12 months.

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.

     On November 22, 1999, the Board of Directors accepted the resignation of
Simonton, Kutac & Barnidge, LLP and appointed the firm of Jackson & Rhodes PC as
its independent accountants. During the prior two years, Simonton Kutac &
Barnidge did not have any dispute regarding any matter of accounting principles
or practices, financial statement disclosure or audit scope or procedures. This
change in accountants was reported on Form 8-K dated November 22, 1999.

                                    PART III

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

Directors and Executive Officers

     The following table sets forth the names and ages of the directors and
executive officers of the Company on December 31, 2000:


<TABLE>
<CAPTION>
                          NAME            AGE         POSITION
                          ----            ---         --------
<S>                                       <C>  <C>
                    Timothy P. Powell     42   President - Director

                    Ken Andrew            49   Director

                    Scott Stewart         42   Director

                    John J. Bassett       42   Director
</TABLE>


                                       9
<PAGE>   10

     Timothy P. Powell was appointed President in August 1999 and had served as
Executive Vice President--Data Services and as a director of the Company since
February 1995. From 1981 to February 1995, Mr. Powell served as a self-employed
computer consultant for individuals and corporations. Mr. Powell contracted
consulting projects with independent, governmental organizations and Fortune
1000 companies, and provided services in system design, implementation,
applications development and procurement specifications.

     Scott Stewart has served as Director since May of 1999. Mr. Stewart has
served as interim President of the Company from June through August of 1999 and
as the Company legal counsel. Mr. Stewart has been a partner in the law firm of
Horsley and Stewart for twenty years and is graduate of the Southern Methodist
University Law School.

     Ken Andrew has served on the Board since August of 1999 and since 1998 has
provided investment banking counseling to the Company. Mr. Andrew has been an
independent stockbroker in Fort Worth, Texas since 1978.

     John J. Bassett has served on the Board since September 27, 2000. Mr.
Bassett graduated from the University of South Alabama at Mobile, Alabama in
1980, with a BS degree in Marketing and Logistics. Mr. Bassett began his career
with Bay City Minerals, Inc. as a landman in 1979, working on a contract basis
for Shell, Texaco and Midroc Oil Company until 1983. From 1984-1988, as Vice
President of Bay City Minerals, Inc., Mr. Bassett supervised the leasing
activity of 30 landmen throughout Alabama and Mississippi. From May 1989 until
1999, Mr. Bassett held the position of Chairman, Chief Executive Officer and
President of Bay City Minerals, Inc. In May 1989, Mr. Bassett formed Bay City
Consolidated Partners, LP through the consolidation of seven partnerships
originally formed by Bay City Minerals, Inc. Mr. Bassett was the Chairman, Chief
Executive Officer and President of Bay City Consolidated Partners, LP until the
formation of Middle Bay Oil Company, Inc. in May 1989. He then became the
Chairman, Chief Executive Officer and President of Middle Bay Oil Company, Inc.
in May 1989 until the formation of Renaissance Petroleum in October, 1999 in
which Mr. Bassett is Owner/Chief Executive Officer.

Director Compensation Meetings and Committees of the Board of Directors

     The Company does not presently compensate employees who are also directors
for serving in such a capacity. Directors are not compensated for serving as
directors or attending either Board or Committee meetings; however out of pocket
expenses are reimbursed by the Company. Each director currently holds office
until the next annual meeting of stockholders and until a successor has been
elected and qualified or until his earlier resignation or removal.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act, as amended (the "Exchange
Act"), requires directors, executive officers and persons who own more than ten
percent of a registered class of the Company'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 the Company. 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 the Company or written
representations from directors and executive officers during the fiscal year
ended December 31, 2000, all Section 16(a) filing requirements applicable to its
directors, officers and 10% holders for such year were complied with and filed
on a timely basis.

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 to the listed
current and former executive officers of the Company. No other executive officer
of the Company, or any predecessor entity, received salary and bonus
compensation in excess of $100,000 in the referenced fiscal years, nor did any
executive officer receive perquisites or other personal benefits exceeding
either $50,000 of 10% of their total annual salary for the referenced periods.


                                       10
<PAGE>   11

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                     ANNUAL      RESTRICTED   SECURITIES
     NAME/TITLE          YEAR     COMPENSATION     STOCK     UNDERLYING      OTHER
                                  SALARY/BONUS     AWARDS    OPTIONS/SARS
<S>                      <C>      <C>            <C>         <C>            <C>
Timothy P. Powell,
President(1)             2000       $120,000        -0-         -0-           -0-
                         1999       $120,000        -0-         -0-           -0-

Robert Fortier,          2000       $156,409        -0-         -0-           -0-
Former Chairman of the   1999       $325,000        -0-         -0-           -0-
Board, and Chief
Executive officer(2)
</TABLE>



(1) Mr. Powell has deferred $9,500 of salary in 1999. (2) Mr. Fortier has
    deferred the $50,000 compensation due at the signing of the employment
    agreement as well as $23,500 of salary in 1999.

Employment Agreements and Related Matters

     The Company and Mr. Fortier entered into an Employment Agreement effective
February 1, 1999 (the "Fortier Employment Agreement"). The Fortier Employment
Agreement was for a term of one year ending January 31, 2000, with automatic
renewals for two additional one year terms beginning February 1, 2000, and
February 1, 2001, respectively. As part of the Agreement, the Company paid Mr.
Fortier $50,000 upon signing as compensation for services rendered from October
5, 1998, to January 31, 1999. In addition, Mr. Fortier was to receive annual
compensation of $300,000, payable in monthly increments of $25,000. Mr. Fortier
was also eligible for bonuses and benefits payable under compensation and bonus
arrangements, as developed by the board of directors. Mr. Fortier was also
entitled to severance and certain fringe benefits as provided in the Fortier
Employment Agreement. Mr. Fortier's employment contract was terminated for cause
on September 7, 2000.

     In August of 2000, Richard Hershey and Duncan McDonald resigned as Board
Members.

     In September of 2000, John J. Bassett was elected to the Board.

     In February of 2001, Robert Fortier resigned as a Board Member.

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                NUMBER OF SECURITIES      PERCENT OF TOTAL
                 UNDERLYING OPTIONS/    OPTIONS/SARS GRANTED TO     EXERCISE OF BASE     EXPIRATION
   NAME/TITLE      SARS GRANTED         EMPLOYEES IN FISCAL 1999       PRICE ($/SH)         DATE
<S>             <C>                     <C>                         <C>                  <C>
     None              None                      None                      None              None
</TABLE>


                    AGGREGATED FISCAL YEAR-END OPTION VALUES
                         NUMBER OF SECURITIES UNDERLYING

<TABLE>
<CAPTION>
                                                     NUMBER OF
                                                     SECURITIES       VALUE OF
                                                     UNDERLYING      UNEXERCISED
                         SHARES                      UNEXERCISED     IN-THE-MONEY
                       ACQUIRED ON      VALUE      OPTIONS/SARS AT  OPTIONS/SARS AT
   NAME/TITLE          EXERCISE (#)    REALIZED    FISCAL YEAR-END  FISCAL YEAR-END
                                                        (#)               ($)
                                                    EXERCISABLE/     EXERCISABLE/
                                                    UNEXERCISABLE    UNEXERCISABLE
<S>                    <C>             <C>         <C>               <C>
Timothy Powell,
President                  -0-            -0-        286,667/-0-             -0-
</TABLE>


                                       11
<PAGE>   12


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

     The following table provides certain information based on the outstanding
securities of the Company as of March 16, 2000 with respect to each director,
each beneficial owner of more than 5% of the Company Common Stock and all
corporate officers and directors of the Company as a group.

<TABLE>
<CAPTION>
   NAME AND ADDRESS                  AMOUNT OF          PERCENT OUTSTANDING
OF BENEFICIAL OWNER(1)(2)       BENEFICIAL OWNERSHIP        COMMON STOCK
-------------------------       --------------------    -------------------
<S>                             <C>                     <C>
Timothy P. Powell(1)(2)                 336,667                 3.0
15301 Spectrum Dr, Suite 501
Addison, Texas 75001

Scott Stewart(1)                        340,010                 3.0
4555 W. Lovers Lane
Dallas, Texas 75209

Ken Andrew(1)(3)                        658,430                 5.8
6124 Trail Lake
Fort Worth, Texas 76133

John J. Bassett(1)                       22,862                  *
1010 Lamar, Suite 1110
Houston, Texas 77002

Robert Fortier                        3,463,306                30.5
6800 Fallbrook Court
Colleyville, Texas 76034

Dave Hannah                           1,862,579                16.4
2079 W. Grayson Rd.
Modesto, California 95358

All executive officers and            1,342,607                11.8
 Directors as a group
(4 persons as to the Company)
</TABLE>

---------

* Indicates less than 1%.

(1) Director of the Company. (2) Represents options to purchase 116,667 shares
with an exercise price of $.04 per share, 125,000 shares with an exercise price
of $.50 per share, and 50,000 shares with an exercise price of $1.00 per share.
(3) Includes options to purchase 300,000 shares with an exercise price of $.4375
per share.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company is a party to an equipment lease and stock option agreement (the
"Lease Agreement"), dated October 1,1998, with Ironwood Leasing Ltd., a Texas
corporation ("Ironwood") Principals of Ironwood, including Dennis Barnes, a
former director of the Company (during 1996, 1997, & 1998), are also
stockholders of the Company. Under the terms of the Lease Agreement, the Company
leases certain scanning equipment necessary to scan paper claims and convert
them into electronically transmittable claims data information. Under the Lease
Agreement, the Company also granted to Ironwood the option to purchase 200,000
shares of Common Stock of the Company at an exercise price of $1.00 per share.
In a letter dated January 12, 2000, Ironwood Leasing Ltd. (Ironwood) made demand
for unpaid lease payments, which at the time amounted to $15,000 in connection
with the Lease. The lease calls for payments of $5000 per month and terminates
on September 30, 2001. The Company believes the lease to be usurious and is
presently negotiating with Ironwood to resolve the matter. If the negotiations
fail, the Company intends to defend any claims under the lease and pursue a
counterclaim for usury. No suit has been filed, therefore, management is not in
a position to quantify the Company's exposure beyond the lease terms.



                                       12
<PAGE>   13


In January of 1999 the Company entered into a fee arrangement ($48,000) with the
law firm of Horsley and Stewart for the purpose of providing legal services to
the Company for the 1999 calendar year. Mr. Scott Stewart, a partner in the firm
and former board member subsequently was named interim President and appointed
to the Board. Mr. Stewart received 120,000 shares of common stock from the
Company and 60,000 shares of stock from Mr. Fortier's account in consideration
of services rendered as President.

In October 1999 the Company entered into a Memorandum of Understanding with a
group made up of former and current Board members Dennis Barnes, Scott Stewart
and Ken Andrew which will pay the members a commission on certain enumerated
business for the period September 1, 1999 through August 31, 2002. As of March
29, 2001 $6,797 in commission has been paid.

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:


<TABLE>
<S>                                                                          <C>
Independent Auditor's Report...............................................  F-2
Consolidated Balance Sheets--December 31, 2000, and 1999...................  F-3
Consolidated Statements of Operations--Years Ended
  December 31, 2000 and 1999...............................................  F-4
Consolidated Statements of Stockholders' Deficit--Years Ended
  December 31, 2000 and 1999................................................ F-5
Consolidated Statements of Cash Flows--Years Ended
  December 31, 2000 and 1999................................................ F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>

     2. Exhibits

     Exhibit Number              Description of Exhibits

         2.1*     Agreement on Plan of reorganization, dated January 31, 1999
                  (incorporated by reference from Exhibit 2 to the Company's
                  Form 8-K, dated February 10, 1997).

         2.2*     Disposition of Asset - Purchase Agreement, dated August 12,
                  1999 (incorporated by reference from Exhibit 2 to the
                  Company's Form 8-K, dated August 27, 1999).

         2.3*     Disposition of Asset - Security Agreement, dated August 12,
                  1999 (incorporated by reference from Exhibit 2.1 to the
                  Company's Form 8-K, dated August 27, 1999).

         2.4*     Disposition of Asset - Guaranty Agreement, dated August 12,
                  1999 (incorporated by reference from Exhibit 2.2 to the
                  Company's Form 8-K, dated August 27, 1999).

         3.1*     Articles of Incorporation of the Company, dated September 5,
                  1986 (incorporated by reference from an Exhibit to the
                  Company's Registration Statement on Form S-4, dated January 7,
                  1997).

         3.2*     Amendment to the Articles of Incorporation of the Company,
                  dated March 26, 1996 (incorporated by reference from an
                  exhibit to the Company's Registration Statement on Form S-4,
                  dated January 7, 1997).

         3.3*     Bylaws of the Company, dated September 5, 1986 (incorporated
                  by reference from an Exhibit to the Company's Registration
                  Statement on For S-4, dated January 7, 1997).

         10.      Employment Agreement, dated February 1, 1999 between
                  Electronic Transmission Corporation and Robert Fortier
                  (incorporated by reference from Exhibit 10 to the Company's
                  Form 8-K, dated February 10, 1999).

         21.      Subsidiary of Registrant - ETC Administrative Services, Inc.,
                  a Texas Corporation.

    *  Previously Filed


                                       13
<PAGE>   14

(b) Reports on Form 8-K.

     On August 25, 2000 the Company filed a Form 8-K report under item number 5
- Other Events.

     On February 20, 2001 the Company filed a Form 8-K report under item number
6 - Resignation of Registrants Directors.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or Section 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 on March 30, 2001.

    ELECTRONIC TRANSMISSION CORPORATION

    By: /s/ Timothy P. Powell
        -------------------------------
        Timothy P. Powell, President,
        Chief Financial  Officer, and
        Corporate Secretary

     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.

/s/ Timothy P. Powell
-------------------------------
Timothy P. Powell, President,
Chief Financial Officer,
Corporate Secretary and Director
Date: March 30, 2001

/s/ Scott Stewart
-------------------------------
Scott Stewart, Director
Date: March 30, 2001

/s/ Ken Andrew
-------------------------------
Ken Andrew, Director
Date: March 30, 2001

/s/ John Bassett
-------------------------------
John Bassett, Director
Date: March 30, 2001


                                       14
<PAGE>   15
                       ELECTRONIC TRANSMISSION CORPORATION
                                 AND SUBSIDIARY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                    Page
<S>                                                                 <C>
Independent Auditors' Report........................................ F-2

Consolidated Balance Sheets at December 31, 2000 and 1999........... F-3

Consolidated Statements of Operations For the Years Ended
         December 31, 2000 and 1999................................. F-4

Consolidated Statements of Stockholders' Deficit For the
         Years Ended December 31, 2000 and 1999..................... F-5

Consolidated Statements of Cash Flows For the Years Ended
         December 31, 2000 and 1999................................. F-6

Notes to Consolidated Financial Statements.......................... F-7
</TABLE>


                                      F-1
<PAGE>   16



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
of Electronic Transmission Corporation and Subsidiary:

We have audited the accompanying consolidated balance sheets of Electronic
Transmission Corporation and Subsidiary, a Delaware corporation, as of December
31, 2000 and 1999, and the related consolidated statements of operations,
stockholders' deficit and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Electronic Transmission Corporation and Subsidiary as of December 31, 2000 and
1999, and the results of operations and its cash flows for the years then ended
in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's significant operating losses and its working
capital deficit and stockholders' deficit raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                                Jackson & Rhodes P.C.

Dallas, Texas
February 15, 2001


                                      F-2
<PAGE>   17

               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                   2000           1999
                                                               -----------    -----------
<S>                                                            <C>            <C>
                                     ASSETS

Current assets:
     Cash and cash equivalents                                 $    87,987    $   150,065
     Accounts receivable, net of allowance for doubtful
         accounts of $8,388 and $16,087, respectively              261,010        274,038
     Prepaid expenses                                               54,955         45,376
     Current portion, note receivable (Note 3)                          --        106,439
                                                               -----------    -----------
         Total current assets                                      403,952        575,918
                                                               -----------    -----------

Property and equipment, net                                        138,819        221,019

Other assets:
     Deposits                                                        6,749          6,749
     Note receivable, net of allowance for doubtful notes
         receivable of $113,745 at December 31, 2000 (Note 3)           --         77,081
                                                               -----------    -----------
                                                               $   549,520    $   880,767
                                                               ===========    ===========

                       LIABILITIES & STOCKHOLDERS' DEFICIT

Current liabilities:
     Accounts payable and accrued liabilities (Note 6)         $   382,036    $   468,181
     Notes payable and convertible debentures (Note 7)              43,402         55,718
     Current portion, capital lease obligations (Note 8)           124,315         61,544
     Net liabilities of discontinued operations (Note 4)           254,635        236,735
                                                               -----------    -----------
         Total current liabilities                                 804,388        822,178

Long-term capital lease obligations                                 21,764         65,671
Notes payable                                                       52,859             --
                                                               -----------    -----------
         Total liabilities                                         879,011        887,849
                                                               -----------    -----------

Commitments and contingencies (Note 12)                                 --             --

Stockholders' deficit:
     Preferred stock, $1 par value, 2,000,000 shares
         authorized; no shares issued and outstanding                   --             --
     Common stock, $.001 par value, 20,000,000
         shares authorized; 11,349,678 and 11,336,178 shares
          issued and outstanding, respectively                      11,351         11,337
     Additional paid-in-capital                                  9,219,390      9,215,503
     Accumulated deficit                                        (9,560,232)    (9,233,922)
     Accumulated other comprehensive income                             --             --
                                                               -----------    -----------
         Total stockholders' deficit                              (329,491)        (7,082)
                                                               -----------    -----------
                                                               $   549,520    $   880,767
                                                               ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>   18


               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                 2000           1999
                                             -----------    -----------
<S>                                          <C>            <C>
Service revenues                             $ 2,685,113    $ 2,588,630

Costs and expenses:
    Costs of revenues                            750,010        911,379
    Selling, general and administrative        2,050,561      2,801,344
    Depreciation and amortization                122,037        226,052
                                             -----------    -----------
        Total costs and expenses               2,922,608      3,938,775
                                             -----------    -----------

Loss from operations                            (237,495)    (1,350,145)

Other income (expense):
    Interest expense, net                         (3,437)       (27,252)
    Other income                                  32,901        235,074
    Legal settlement (Note 7)                   (118,279)            --
    Gain on sale of subsidiary (Note 3)               --         17,097
                                             -----------    -----------
        Total other income                       (88,815)       224,919
                                             -----------    -----------
Loss from continuing operations                 (326,310)    (1,125,226)
Income (loss) from discontinued operations            --         13,709
                                             -----------    -----------

Net loss                                     $  (326,310)   $(1,111,517)
                                             ===========    ===========

Basic loss per common share:

        Loss from continuing operations      $     (0.03)   $     (0.11)
                                             ===========    ===========
        Net loss                             $     (0.03)   $     (0.11)
                                             ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4


<PAGE>   19


               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>
                                             Common Stock           Additional
                                      -------------------------       Paid-In     Accumulated
                                        Shares         Amount         Capital       Deficit          Total
                                      -----------    -----------    -----------   -----------    -----------
<S>                                   <C>            <C>            <C>           <C>            <C>
Balance at December 31, 1998            4,926,024    $     4,927    $ 7,793,590   $(8,122,405)   $  (323,888)
Issuance of shares for cash             1,725,000          1,725        671,400            --        673,125
Conversion of debt                        580,097            580        164,448            --        165,028
Issuance of shares for services           377,500            378         99,285            --         99,663
Issuance of shares for HPI              4,190,057          4,190        347,557            --        351,747
Cancellation of shares                   (462,500)          (463)           463            --             --
Issuance of options to nonemployees            --             --        138,760            --        138,760
Net loss                                       --             --             --    (1,111,517)    (1,111,517)
                                      -----------    -----------    -----------   -----------    -----------

Balance at December 31, 1999           11,336,178         11,337      9,215,503    (9,233,922)        (7,082)
Issuance of shares for cash                13,500             14          3,887            --          3,901
Net loss                                       --             --             --      (326,310)      (326,310)
                                      -----------    -----------    -----------   -----------    -----------

Balance at December 31, 2000           11,349,678    $    11,351    $ 9,219,390   $(9,560,232)   $  (329,491)
                                      ===========    ===========    ===========   ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>   20




               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                             2000           1999
                                                                         -----------    -----------
<S>                                                                      <C>            <C>
Cash flows from operating activities:
Net loss                                                                 $  (326,310)   $(1,111,517)
Adjustments to reconcile net loss to
  net cash used in operating activities:
         Issuance of common stock for services rendered                           --         99,663
         Gain on sale of subsidiary                                               --        (17,097)
         Change in net assets of discontinued operations                      17,900        103,622
         Non-cash compensation from stock options                                           138,760
         Depreciation and amortization                                       122,037        250,579
         Increase in allowance for notes receivable                          113,745             --
         Legal settlement                                                    118,279             --
         Changes in operating assets and liabilities:
              Accounts receivable-trade                                       13,031       (423,217)
              Prepaid expenses                                                (9,579)        10,421
              Accounts payable and accrued expenses                          (86,144)       313,914
                                                                         -----------    -----------
                   Net cash used in operating activities                     (37,041)      (634,872)
                                                                         -----------    -----------
Cash flows from investing activities:
         Payments on capital lease receivable                                     --          2,417
         Purchases of furniture and equipment                                 (9,965)       (62,243)
         Receipts on note receivable                                          69,775        123,592
                                                                         -----------    -----------
                   Net cash provided by investing activities                  59,810         63,766
                                                                         -----------    -----------

Cash flows from financing activities:
         Notes payable                                                       (77,737)       (20,725)
         Payments on capital leases                                          (11,011)       (53,268)
         Issuance of common stock for cash                                     3,901        673,125
                                                                         -----------    -----------
                   Net cash provided by (used in) financing activities       (84,847)       599,132
                                                                         -----------    -----------
Net increase (decrease) in cash                                              (62,078)        28,026
Cash and equivalents, beginning of period                                    150,065        122,039
                                                                         -----------    -----------
Cash and equivalents, end of period                                      $    87,987    $   150,065
                                                                         ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-6

<PAGE>   21
               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999


1.       SIGNIFICANT ACCOUNTING POLICIES

         Description of the Business

         Electronic Transmission Corporation ("ETC" or "Company"), a Delaware
         corporation, provides services to self-insured companies, third party
         administrators that pay claims for self-insured companies and other
         medical provider networks or cost containment companies providing
         services to self-insured companies. The Company's automation
         capabilities encompass the entire workflow process involved in
         processing and paying healthcare claims. Revenues are derived primarily
         from commerce within the United States.

         Consolidation

         The financial statements include the accounts of the Company and ETC
         Administrative Services, Inc., a Texas corporation and wholly owned
         subsidiary (see Note 4). All intercompany accounts and transactions
         have been eliminated.

         Revenue and Expense Recognition

         The Company recognizes revenue when services are performed. Expenses
         are recognized in the period in which incurred.

         Cash and Cash Equivalents

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

         Loss Per Share

         Basic loss per common share was calculated by dividing the Company's
         net loss by the weighted average common shares outstanding. Dilutive
         loss per common share is no presented since common stock equivalents
         would have had an anti-dilutive effect.


                                      F-7
<PAGE>   22


               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Office Furniture, Equipment and Leasehold Improvements (Continued)

         Certain claims processing and imaging equipment are furnished to
         customers for off-site use at the customer's facility. This equipment
         is recorded at adjusted cost basis as computer and office equipment on
         the Company's financial statement. Maintenance, other repairs and
         significant improvements are accounted for in accordance with the
         aforementioned policies.

         Whenever events or changes in circumstances indicate that the carrying
         amount of an asset may not be recoverable, the Company evaluates
         whether changes have occurred that would require revision of the
         remaining estimated useful lives of the equipment or render 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. Future cash flows are the future
         cash inflows expected to be generated by an asset less the future cash
         outflows expected to be necessary to obtain those inflows. If an
         impairment loss is recognized, it is measured as the amount by which
         the carrying amount of the asset exceeds the fair value of the asset.
         The fair value of an asset is the amount at which the asset could be
         bought or sold in a current transaction between willing parties, that
         is, other than in a forced or liquidation sale. See Note 4 regarding
         the write-off of certain software of the Company's discontinued
         operations.

         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.


                                      F-8
<PAGE>   23

               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Fair Value of Financial Instruments

         The carrying value of cash, receivables and accounts payable
         approximates fair value due to the short maturity of these instruments.
         The carrying value of short and long-term debt approximates fair value
         based on discounting the projected cash flows using market rates
         available for similar maturities. None of the financial instruments are
         held for trading purposes.

         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 has issued incentive stock options. Compensation costs
         arising from such options will be recorded as an expense. 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 date of grant over the amount the employee must
         pay to acquire the stock. Compensation cost is recognized as an expense
         over the vesting period of the option. The Company measures
         compensation costs using the intrinsic value based method of accounting
         for stock issued to employees.

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
         $326,310 and $1,111,517 during the years ended December 31, 2000 and
         1999, respectively. Cash used by operating activities for the same
         periods aggregated $37,041 and $634,872, respectively. Additionally, at
         December 31, 2000 and 1999, ETC's current liabilities exceeded its
         current assets by $400,436 and $246,260, respectively. ETC's continued
         existence depends upon the success of management's efforts to raise
         sufficient new capital and increase its customer base.


                                      F-9
<PAGE>   24
               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.       GOING CONCERN AND CONTINUED OPERATIONS (CONTINUED)

         Management plans to mitigate the going concern issues by increasing and
         enhancing its current marketing efforts, which include (i) claims
         processors, TPAs, insurance companies, self-insured and
         self-administered employers; (ii) PPO's; (iii) HMO's and practice
         management groups with entry into Internet enabled repricing activities
         and electronic claims transaction movement. To this end the Company has
         form a subsidiary known as PPOREPRICER.com to address and take
         advantage of Internet applications in its repricing endeavors. Internet
         and EDI transactions are not resource intensive and provide margins
         that will generate additional cash flows without accompanying expenses.

3.       ACQUISITION AND SALE OF HPI

         Effective January 31, 1999, the Company acquired 100% of the
         outstanding common shares of Health Plan Initiative, Inc. ("HPI"), a
         company which had been wholly owned by the Company's President, Robert
         Fortier. HPI offers services similar to the Company.

         As a result of the transaction, Mr. Fortier received 3,538,306 shares
         of Company common stock, which was 42% of the outstanding stock of the
         Company. Mr. Fortier received certain registration rights associated
         with the Company shares and entered into a one-year employment contract
         which automatically renews for two one-year terms if not otherwise
         terminated pursuant to the terms of the agreement. An additional
         651,751 shares valued at $54,747 were also issued related to the
         acquisition. The transaction was accounted for as a purchase.
         Accordingly, the Company's financial statements in 1999 include the
         operations of HPI from the date of acquisition. Under purchase
         accounting, the total purchase price was allocated to the tangible and
         intangible assets and liabilities of HPI based upon their respective
         estimated fair values as of the closing date based upon valuations and
         other analyses. The estimated purchase price and preliminary
         adjustments to the historical book value of HPI are as follows:

<TABLE>

<S>                                                         <C>
Purchase price, based on value of common stock issued       $    352,000
Fair value of net liabilities acquired                            44,000
                                                            ------------
Purchase price in excess of net liabilities acquired        $    396,000
                                                            ============
Goodwill                                                    $    396,000
                                                            ============
</TABLE>

                                      F-10
<PAGE>   25
               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.       ACQUISITION AND SALE OF HPI (CONTINUED)

         The Company sold the stock of HPI, effective June 30, 1999, for a note
         receivable of $323,582. The non-interest-bearing note has been
         discounted at 10% and is receivable in monthly instalments of $10,000.
         The unamortized discount at December 31, 2000 and 1999 is $6,255 and
         $16,480, respectively. The note receivable is in default and an
         allowance for notes receivable of $113,745 was established at December
         31, 2000.

4.       DISCONTINUED OPERATIONS

         Effective December 31, 1998, the Company discontinued the operations of
         ETC Administrative Services, Inc. ("Administrative"). Administrative
         was created in 1998 to offer third party administrative services. The
         Company has accounted for the operations of Administrative as a
         discontinued operation in the accompanying statement of operations.

5.       OFFICE FURNITURE AND EQUIPMENT

         The following is a summary of office furniture and equipment:

<TABLE>
<CAPTION>

                                               DECEMBER 31,
                                      -------------------------------
                                          2000               1999
                                      ------------       ------------
<S>                                   <C>                <C>
Furniture                             $    117,260       $    128,407
Computer and office equipment              819,205            788,044
Computer software                          172,356            163,678
Leasehold improvements                      16,564             16,564
   Less accumulated depreciation          (986,566)          (875,674)
                                      ------------       ------------
                                      $    138,819       $    221,019
                                      ============       ============
</TABLE>

Depreciation expense was $112,037 and $211,631 for 2000 and 1999, respectively.

                                      F-11
<PAGE>   26

               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6.       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

         The following is a summary of accounts payable and accrued liabilities:

<TABLE>
<CAPTION>

                                       DECEMBER 31,
                               ------------------------------
                                   2000              1999
                               ------------      ------------
<S>                            <C>               <C>
Accounts payable               $    241,682      $    297,782
Accrued other                        26,260            46,900
Accrued payroll and taxes           110,917           118,392
Accrued interest payable              3,177             5,107
                               ------------      ------------
                               $    382,036      $    468,181
                               ============      ============
</TABLE>


7.       NOTES PAYABLE AND CONVERTIBLE DEBENTURES

         The following is a summary of notes payable:
<TABLE>
<CAPTION>

                                                                       DECEMBER 31,
                                                              -------------------------------
                                                                 2000                1999
                                                              ------------       ------------
<S>                                                           <C>                <C>
Subordinated convertible denture payable to
corporation, interest at 12.0% payable semi-annually,
principal due upon maturity at May 21, 1998, convertible
at $5.00 per common share including principal and
accrued interest; paid during 2000                            $         --       $     55,718

Note payable to individual, discounted at 10%, payable
monthly of $8,787, unamortized discount of $10,739                  96,261                 --
                                                              ------------       ------------
                                                                    96,261             55,718
Less current maturities                                            (43,402)           (55,718)
                                                              ------------       ------------
                                                              $     52,859       $         --
                                                              ============       ============
</TABLE>



                                      F-12
<PAGE>   27

               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.       NOTES PAYABLE AND CONVERTIBLE DEBENTURES (CONTINUED)

         On October 14, 2000, the Company settled a lawsuit filed by the
         Company's former President. The settlement calls for the Company to pay
         the former President an aggregate of $132,000 in varying payments
         through February 2003. The Company has accrued the present value of
         these payments, amounting to $118,279 and has reflected that amount as
         other expense in the accompanying statement of operations for the year
         ended December 31, 2000. As part of the settlement agreement, the
         Company has executed a Promissory Note payable to the former President
         in the amount of $600,000. This note shall be reduced pro rata as the
         Company makes the payments on the note above (for example, the Company
         receives $113,637 credit against the $600,000 note if it makes a
         $25,000 payment). The remaining balance of the Promissory Note shall
         become due and payable in full should the Company default upon its
         obligations on the note above.

8.       LEASE OBLIGATIONS PAYABLE

         The Company, as lessee, has entered into various non-cancelable leases
         for service equipment, vehicles, and office facilities. Future minimum
         lease payments under non-cancelable leases at December 31, 2000 are as
         follows:

<TABLE>
<CAPTION>

                                               CAPITAL             OPERATING
        FOR THE YEARS ENDING DECEMBER 31,       LEASES               LEASES
        ---------------------------------    ------------      -----------------
<S>                                          <C>               <C>
                    2001                          128,177             88,475
                    2002                           21,469                 --
                    2003                            4,044                 --
Total minimum lease payments                      153,690       $     88,475
                                                                ============
   Less amount representing interest               (7,611)
                                             ------------
Present value of minimum lease payments           146,079
   Less current portion                          (124,315)
                                             ------------
Long-term capital lease obligation           $     21,764
                                             ============
</TABLE>


                                      F-13
<PAGE>   28


               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.       LEASE OBLIGATIONS PAYABLE (CONTINUED)

         Rent expense during the years ended December 31, 2000 and 1999 for
         operating leases was $132,398 and $145,572, respectively, and is
         included in operating expenses.

         The cost of assets subject to capital leases included in office
         furniture and equipment is as follows:

<TABLE>
<CAPTION>

                                               DECEMBER 31,
                                      -------------------------------
                                         2000                1999
                                      ------------       ------------
<S>                                   <C>                <C>
Computer and office equipment         $    260,032       $    233,155
   Less accumulated depreciation          (228,208)          (198,219)
                                      ------------       ------------
                                      $     31,824       $     34,936
                                      ============       ============
</TABLE>

         Effective October 1, 1998, the Company executed a thirty-six (36) month
         equipment lease ("Lease Agreement") that consolidated all existing
         lease obligations with Ironwood Leasing, Ltd. ("Ironwood"). The stated
         terms of the Lease Agreement call for payments of $5,000 per month. The
         equipment lease relates to high speed scanning equipment used in the
         Company's business. Also on October 1, 1998 the Company amended a stock
         option agreement with Ironwood which, as amended, grants Ironwood the
         right to purchase 200,000 shares of Common Stock at $1.00 per share for
         5 years. Dennis Barnes, a principal of Ironwood, was a director of the
         Company from 1996 until 1998. On January 12, 2000 Ironwood demanded
         payment for unpaid lease payments, which at the time amounted to
         $15,000. The Company believes the terms of the Lease Agreement to be
         usurious and is presently negotiating to resolve the matter.

9.       INCOME TAXES

         ETC has net operating loss carryforwards of approximately $6,476,000
         that are available to offset any future income tax liability. The net
         operating loss carryforwards expire as follows:

<TABLE>
<CAPTION>

FOR THE YEARS ENDING
     DECEMBER 31,                   EXPIRING
--------------------               ----------
<S>                                <C>
         2010                      $  880,000
         2011                       2,006,000
         2012                       1,396,000
         2013                       1,114,000
         2014                       1,080,000
         2015                         200,000
                                   ----------
         Total                     $6,676,000
                                   ==========
</TABLE>


                                      F-14
<PAGE>   29


               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.       INCOME TAXES (CONTINUED)

         Deferred income taxes result from the book versus tax accounting
         difference for net operating loss carryforwards, accrued payroll and
         stock option-based compensation. The Company has deferred tax assets
         amounting to approximately $2,200,000 at December 31, 2000 and 1999.
         The realization of the benefits from these deferred tax assets appears
         uncertain due to going concern questions. Accordingly, a valuation
         allowance has been recorded which offsets the deferred tax assets at
         December 31, 2000 and 1999.

10.      STOCK OPTIONS

         The Company has issued various stock options to employees and
         non-employees which are considered compensatory. Vesting varies by
         agreement ranging from 2 to 7 years. The contractual life of
         outstanding employee stock options at December 31, 2000 is the term of
         employment of the holder.

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


<TABLE>
<CAPTION>

                                                  YEAR ENDED                          YEAR ENDED
                                               DECEMBER 31, 2000                  DECEMBER 31, 1999
                                        -------------------------------      ------------------------------
                                                             WEIGHTED                            WEIGHTED
                                                             AVERAGE                              AVERAGE
                                                             EXERCISE                            EXERCISE
STOCK OPTIONS                               SHARES            PRICE             SHARES            PRICE
-------------                           ------------       ------------      ------------      ------------
<S>                                     <C>                <C>               <C>               <C>
Outstanding, beginning or period           1,382,500       $      0.640           982,500      $      0.720
Granted                                           --                              400,000      $      0.454
Exercised                                         --                                   --      $         --
Forfeited/expired                           (112,500)      $      0.917                --      $         --
                                           ---------                         ------------      ------------
Outstanding, end of period                 1,270,000       $      0.615         1,382,500      $      0.640
                                           =========                         ============      ============
Options exercisable, end of period         1,270,000       $      0.615         1,382,500      $      0.640
                                           =========                         ============      ============
</TABLE>



                                      F-15
<PAGE>   30


               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.      STOCK OPTIONS (CONTINUED)

         The following table summarizes information about stock options
         outstanding at December 31, 2000 and 1999:

<TABLE>
<CAPTION>

                          OPTIONS            WEIGHTED AVERAGE             WEIGHTED              OPTIONS            WEIGHTED
                        OUTSTANDING              REMAINING                AVERAGE             EXERCISABLE          AVERAGE
EXERCISE PRICES          AT 12/31/00          CONTRACTUAL LIFE         EXERCISE PRICE         AT 12/31/00       EXERCISE PRICE
----------------        ------------          ----------------         --------------        -----------        --------------
<S>                     <C>                  <C>                       <C>                    <C>               <C>
    $0.438                  300,000               May 1, 1006              $0.438               300,000             $0.438
    $0.500                   50,000             Various to 2001            $0.500                50,000             $0.500
$.0190 to $.52              595,000             Term of Employ             $0.505               595,000             $0.505
    $1.000                  200,000             October 1, 2003            $1.000               200,000             $1.000
    $1.000                  125,000             Term of Employ             $1.000               125,000             $1.000
                          ---------                                                           ---------
                          1,270,000                                                           1,270,000
                          =========                                                           =========
</TABLE>

<TABLE>
<CAPTION>

                         OPTIONS            WEIGHTED AVERAGE           WEIGHTED               OPTIONS           WEIGHTED
                       OUTSTANDING             REMAINING               AVERAGE              EXERCISABLE          AVERAGE
EXERCISE PRICES         AT 12/31/99        CONTRACTUAL LIFE         EXERCISE PRICE          AT 12/31/99      EXERCISE PRICE
---------------         -----------        ----------------         --------------          -----------      --------------
<S>                    <C>                 <C>                      <C>                     <C>              <C>
    $0.438               300,000             May 1, 1006                $0.438                300,000            $0.438
    $0.500               100,000            Various to 2001             $0.500                100,000            $0.500
$.0190 to $.52           595,000            Term of Employ              $0.505                595,000            $0.505
    $1.000               200,000            October 1, 2003             $1.000                200,000            $1.000
    $1.000               125,000            Term of Employ              $1.000                125,000            $1.000
    $1.250                62,500           December 31, 2000            $1.250                 62,500            $1.250
                       ---------                                                            ---------
                       1,382,500                                                            1,382,500
                       =========                                                            =========
</TABLE>

         Fair values for the stock underlying stock options and stock warrants
         subsequent to becoming publicly traded consisted of quoted market
         prices as listed in stock-trading business journals. These fair values
         were used to determine the compensatory components of the stock options
         and stock warrants granted during the years ended December 31, 2000 and
         1999. The Company's common stock became publicly traded in April 1997.


                                      F-16
<PAGE>   31



               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.      STOCK OPTIONS (CONTINUED)

         Compensation costs will be recognized as an expense over the vesting
         period of 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. There is no future compensation expense to be recorded in
         subsequent periods as of December 31, 1999.

         Using the fair value method, the fair value of each option grant is
         estimated on the date of grant using the Black-Scholes option pricing
         model with the following weighted-average assumptions used for grants
         in 1999: dividend yield of 0.0 percent; expected volatility of 382
         percent; risk free interest rates of 4.5 percent; expected lives of two
         years. There were no options issued to employees during 2000 and 1999.

         The Company recognized $138,760 in expense in 1999 for the issuance of
         nonemployee stock options under FASB Statement 123.

11.      CUSTOMER CONCENTRATION

         For the years ended December 31, 2000 and 1999, revenues from one
         customer amounted to approximately 54% and 62% and of total revenues,
         respectively.

         Trade accounts receivable included $115,699 and $184,412 relating to
         these customers at December 31, 2000 and 1999, respectively.

12.      COMMITMENTS AND CONTINGENCIES

         Concentration of Credit Risk

         The Company invests its cash and certificates of deposit primarily in
         deposits with major banks. Certain deposits, at times, are in excess of
         federally insured limits. The Company has not incurred losses related
         to its cash.


                                      F-17
<PAGE>   32

               ELECTRONIC TRANSMISSION CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Litigation

         The Company is in certain lawsuits arising in the ordinary course of
         business. The Company is vigorously defending all allegations against
         it. While the Company's legal counsel and management do not expect any
         adverse judgments, should the Company be required to pay damages as a
         result of any litigation, the payment of such damage award may have a
         material adverse effect on its financial condition and results of
         operations.

         Settlement Agreement

         See Note 7 regarding the Company's contingent amount payable to its
         former President in connection with a settlement agreement.

         EMPLOYMENT AGREEMENT

         As described in Note 3, in January 1999, the Company entered into a
         three-year employment agreement with its CEO. The agreement has been
         modified in March 2000 whereby the CEO voluntarily reduced his salary
         through 2000 to $14,500 per month and agreed to receive seven per cent
         of retained revenues, as defined, in excess of $100,000 per month,
         unless such payment causes a loss in that month.

13.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

         During the years ended December 31, 2000 and 1999, the Company paid
         $20,863 and $29,127 for interest, respectively. During the years ended
         December 31, 2000 and 1999, the Company made no payments for income
         taxes.

         Non-cash investing and financing activities include the following:

         The Company acquired assets valued at $29,875 and $37,066 through
         capital lease obligations during the year ended December 31, 2000 and
         1999.

         During 1999, the Company acquired HPI through the issuance of 3,538,306
         shares valued at $297,000. An additional 651,751 shares valued at
         $54,747 were also issued related to the acquisition. The Company then
         sold HPI for a note receivable of $323,582 less the discount of
         $23,325.


                                      F-18
<PAGE>   33

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER                   DESCRIPTION
        ------                   -----------
<S>               <C>
         2.1*     Agreement on Plan of reorganization, dated January 31, 1999
                  (incorporated by reference from Exhibit 2 to the Company's
                  Form 8-K, dated February 10, 1997).

         2.2*     Disposition of Asset - Purchase Agreement, dated August 12,
                  1999 (incorporated by reference from Exhibit 2 to the
                  Company's Form 8-K, dated August 27, 1999).

         2.3*     Disposition of Asset - Security Agreement, dated August 12,
                  1999 (incorporated by reference from Exhibit 2.1 to the
                  Company's Form 8-K, dated August 27, 1999).

         2.4*     Disposition of Asset - Guaranty Agreement, dated August 12,
                  1999 (incorporated by reference from Exhibit 2.2 to the
                  Company's Form 8-K, dated August 27, 1999).

         3.1*     Articles of Incorporation of the Company, dated September 5,
                  1986 (incorporated by reference from an Exhibit to the
                  Company's Registration Statement on Form S-4, dated January 7,
                  1997).

         3.2*     Amendment to the Articles of Incorporation of the Company,
                  dated March 26, 1996 (incorporated by reference from an
                  exhibit to the Company's Registration Statement on Form S-4,
                  dated January 7, 1997).

         3.3*     Bylaws of the Company, dated September 5, 1986 (incorporated
                  by reference from an Exhibit to the Company's Registration
                  Statement on For S-4, dated January 7, 1997).

         10.      Employment Agreement, dated February 1, 1999 between
                  Electronic Transmission Corporation and Robert Fortier
                  (incorporated by reference from Exhibit 10 to the Company's
                  Form 8-K, dated February 10, 1999).

         21.      Subsidiary of Registrant - ETC Administrative Services, Inc.,
                  a Texas Corporation.
</TABLE>

    *  Previously Filed