S E C U R I T I E S   A N D   E X C H A N G E   C O M M I S S I O N
                             Washington, D.C.  20549
                                              
                                    FORM 10K
                                             
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended Sept. 30, 1996Commission File Number 0-15245

                         ELECTRONIC CLEARING HOUSE, INC.
             (Exact name of registrant as specified in its charter)

                   Nevada                         93-0946274
      (State or other jurisdiction of           (IRS Employer 
       incorporation or organization)         Identification No.)

 28001 Dorothy Dr., Agoura Hills, California      91301-2697
  (Address of principal executive offices)        (Zip Code)

        Registrant's telephone no., including area code:  (818) 706-8999
                                                      
           Securities registered pursuant to Section 12(b) of the Act:

         Title of each class    Name of each exchange on which registered
                None                              None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, par value $.01
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes X  No  

The aggregate market value of the voting stock on December 20, 1996, held 
by non-affiliates* of the Registrant, based upon the last price reported 
by NASDAQ on such date, was $15,717,483.

The number of shares outstanding of the Registrant's Common Stock at the 
close of business of December 20, 1996, was 11,998,079.

*  Without acknowledging that any individual director of Registrant is an
   affiliate, all directors have been included as   affiliates with respect to
   shares owned by them.


Number of sequentially numbered pages: 55     
Exhibit Index begins on sequentially numbered page: 30     



                       DOCUMENTS INCORPORATED BY REFERENCE
                           September 30, 1996 Form 8K

                                        
                         ELECTRONIC CLEARING HOUSE, INC.
                          1996 FORM 10-K ANNUAL REPORT


                                TABLE OF CONTENTS


PART I.                                                         Page

Item 1.          Business. . . . . . . . . . . . . . . . . . . . . 3
Item 2.          Properties. . . . . . . . . . . . . . . . . . . .15
Item 3.          Legal Proceedings . . . . . . . . . . . . . . . .15
Item 4.          Submission of Matters to a Vote of Security 
                 Holders . . . . . . . . . . . . . . . . . . . . .15


PART II

Item 5.          Market for Registrant's Common Equity and 
                 Related Stockholder Security Matters. . . . . . .16
Item 6.          Selected Consolidated Financial Data. . . . . . .17
Item 7.          Management's Discussion and Analysis of 
                 Financial Condition and Results of Operations . .18
Item 8.          Financial Statements and Supplementary Data . . .21
Item 9.          Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosures. . . . . . .21

PART III

Item 10.         Directors and Executive Officers of the 
                 Registrant. . . . . . . . . . . . . . . . . . . .22
Item 11.         Executive Compensation. . . . . . . . . . . . . .24
Item 12.         Security Ownership of Certain Beneficial Owners
                 and Management. . . . . . . . . . . . . . . . . .27
Item 13.         Certain Relationships and Related Transactions. .29

PART IV

Item 14.         Exhibits, Financial Statement Schedules, and
                 Reports on Form 8-K . . . . . . . . . . . . . . .30




<PAGE>
                                     PART I

ITEM 1.     Business

General
                 
Electronic Clearing House, Inc., ("ECHO") is a provider of hardware and network
services to customers on a national scale, specializing in merchant credit card
processing and equipment rental inventory management. ECHO has expertise in:

                 1)  Point-Of-Sale ("POS") hardware and software design; 
                 2)  communication networks and;
                 3)  data center management services. 

The most common application of the Company's expertise is seen in its credit 
card processing activities wherein the Company 1) sells or leases a POS 
terminal to a merchant that operates using software provided by the Company; 
2) moves credit card data from the merchant site to the ECHO data center over 
one of several communication networks managed by the Company, and 3)
electronically authorizes and deposits funds into the merchant's bank 
account utilizing the data center and electronic funds transfer 
capabilities developed by the Company. 

The Company has expanded the use of its expertise to the application of 
inventory tracking services for U-Haul International. Under this program, 
the Company 1) sells a terminal designed and manufactured by the Company 
that utilizes software written by the Company to track dealer inventory, 
generate reports as desired by the dealer and calculate both dealer and 
U-Haul compensation; 2) manages the transmission of dealer data to the 
Company's data center over several communication networks, and 
3) evaluates the data and distributes it to the appropriate location 
in the U.S., thereby allowing rental reservations to be taken by other 
dealers in advance of the physical equipment arriving at the new location.    

The Company operates four active subsidiaries, all wholly-owned by the Company,
to coordinate its business activities.

          National Credit Card Reserve Corporation ("NCCR") provides all 
          data center and customer service activities relating to 
          transaction processing services which include electronic 
          credit card authorizations, Electronic Fund Transfers ("EFT"), 
          inventorytracking for U-Haul and electronic deposits utilizing the 
          Automated Clearing House ("ACH"), for merchants, banks and 
          other customers.

          ECHO Payment Services, Inc. ("EPS") leases, rents and sells POS 
          terminals and related equipment.

          Computer Based Controls, Inc. ("CBC") designs, manufactures and 
          sells POS terminals and related equipment.

          XpressCheX, Inc. provides check guarantee services to California-
          based merchants.

The Company's current growth and profitability is being generated primarily from
its credit card processing, U-Haul inventory tracking activities, and equipment
leasing services (see CREDIT CARD PROCESSING, U-HAUL and LEASING). The Company's
equipment design and manufacturing activities have been innovative and have
provided added versatility in meeting customer's needs. In the U-Haul
relationship, providing the equipment that processes through ECHO's data center
contributed to the profitability now being seen in the processing activities of
the Company (see CBC). The Company's check guarantee services are restricted to
only California merchants (see XPRESSCHEX).

History of Company

The Company was incorporated in Nevada in 1981 under the name Bio Recovery
Technology, Inc.  In January 1986, the Company changed its name to Electronic
Clearing House, Inc. and acquired Electronic Financial Systems, Inc., which was
then engaged in credit card processing. The Company initially provided only 
credit card authorizations to retail merchants. In 1982, ECHO developed the 
capability to electronically transmit credit card transaction data from a 
merchant location to ECHO's data center, thereby eliminating the need for the 
merchant to deliver paper drafts to a local bank for processing.  This 
electronic transmission capability made it possible for processors and banks 
to process credit card transactions for merchants located outside of their 
immediate geographic areas. In 1986, ECHO developed the capability, utilizing 
the Federal Reserve System's Automated Clearing House (ACH) to deposit funds 
into any U.S. bank of the merchant's choice.  These two developments make it 
possible for remote banks and processors to provide the same processing 
services previously available only through the merchant's local bank.   

Although positioned well in 1986 to take advantage of its new ACH service on a
national scale, the Company was hampered until 1994 by several unstable bank
relationships that prevented the Company from fully marketing its capabilities
over the ensuing years. Due primarily to bank problems (not associated with the
Company), the Company had to move its base of merchants four times over a five
year period  to new sponsoring banks, each time losing a part of the merchant
base. The Company now has established several banks through which it can 
build its base of merchants, allowing it to focus on growth (see LEGAL and 
BANK RELATIONSHIPS). The Company served over 6,500 merchants at year end and
approximately 3,800 U-Haul dealers.     

Since 1985, the Company has written and maintained software to assure that 
common extant POS terminals sold in the marketplace could process over the 
ECHO network. In developing the ability to generate the terminal software, 
the Company in 1985 purchased CBC, a company that had expertise in computer 
control systems. CBC subsequently developed a high performance terminal and 
a secure printer that have been used primarily in the money order dispensing 
market by American Express and are presently being evaluated for use by the 
United States Postal Service under a pilot program awarded to the Company in 
November, 1995 (see CBC and USPS). Two patent applications involved with the 
Company's printer methodology have been filed. One patent has been approved 
and one is pending (see PATENTS). 

In 1995, a system utilizing CBC's terminal, ECHO's data center, and customer
support services was developed and deployed to 2,000 U-Haul dealers for the 
real-time management of rental equipment for U-Haul International. The number
of active dealers under the system grew to 3,800 in 1996 and an order for 
2,300 additional systems has been received in early fiscal 1997 (see U-HAUL).  

The marketing of the Company's services has been accomplished in four primary
ways: 1) direct sales utilizing Electronic Merchant Services ("EMS"), an
independent sales organization, 2) an Agent Bank program that allows small banks
to offer full merchant processing services under the sponsorship of ECHO and its
primary banks, 3) a referral program and 4) Internet Home Page promotion. For
fiscal 1996, approximately 70% of new merchant relationships came through the
efforts of EMS and the balance was equally divided between the referral and
Internet programs. The Agent Bank program was put on hold temporarily in early
fiscal 1996 while one of ECHO's primary banks recapitalized. It is expected that
the Agent Bank program will become a contributor to the source of new merchant
relationships in fiscal 1997 (see MARKETING and INTERNET).   

In early 1996, the Company purchased a business with specialties in
communications, Windows NT programming and the Internet, the world-wide
communications network. Through this acquisition, the Company has been able to
expand its scope of acceptable transaction input devices beyond the traditional
POS terminal to include transactions submitted over a common telephone and
transactions submitted over the Internet (see TELEMERCHANT and INTERNET). 
Through the expertise of the programming and management personnel resulting 
from this acquisition, the Company also expanded the tools it makes available
to specific industries to utilize its services. These tools include ECHOBoX, 
ECHOCash, ECHOTrans, and ECHOBatch (see SPECIFIC INDUSTRY TOOLS).

The Company continues to put a high priority on research and development 
("R & D") of both equipment and transaction processing solutions to problems 
faced by general merchants and/or specific industries in the market place 
(see RESEARCH). The investment made in R & D exceeded the operating loss in 
fiscal 1996. As profitability of the processing activities grows, the Company
intends to dedicate between 3% and 5% of its revenues to such endeavors.   

General Summary

The Company is technically oriented and has expertise in point-of-sale equipment
programming, design and manufacture, communication networks, and data center
transaction processing and management. The Company recognizes that development 
and maintenance of these in-house capabilities through the years and continuing
research activities based upon this expertise has increased the costs of
operation, as compared to the Company's competition who have chosen to out-
source these services, and has contributed to continued years of losses as a 
Company. However, upon reaching profitable operations, significant increases 
in revenues result without significant increases in expenses. Strategically, 
having reached the point of profitability in operations, it is believed that 
this in-house expertise makes the Company more capable and viable in the long
term and allows the Company to promote, develop and provide full solutions 
from both a transaction and equipment viewpoint at lower costs to the market 
place in a shorter period of time than is normally the case. The Company 
intends to focus on providing innovative processing solutions that combine 
banking and credit card information, efficient and fast network 
communications, a full scope of data center services, real-time customer 
support services via 800 access and, as needed, advanced POS products for 
select financial markets and/or national clients. 

Credit Card Processing

The Company is a registered Independent Service Organization and Merchant 
Service Provider with Visa and MasterCard, respectively. To engage in Visa 
and MasterCard processing, a cooperative relationship is required with a bank 
which provides necessary sponsorship of Visa and MasterCard transactions. The
Company has two primary processing bank relationships, First Charter Bank, 
N.A. and Imperial Bank, both located in California. The Company has signed 
letters of intent with two additional banks to become primary members of Visa
and Mastercard in order to sponsor merchants on behalf of the Company.

In 1996, the Company's credit card dollar volume increased 44% with much of the
growth occurring near the end of the fiscal year. As an example, a comparison of
September 1995 to September 1996 volume indicates a 55% increase in processing
activity. For the year ended September 30, 1996, National Credit Card Reserve
("NCCR") earned eighty-three percent (83%) of the Company's revenues.  NCCR
presently provides services to over 10,000 users, including 6,500 merchants and
3,800 U-Haul dealers across the nation. These services include 24-hour daily
credit card processing capability, "800" number access to customer service
personnel and, as needed, various field support services.

Functioning like an electronic utility, NCCR earns a steady stream of 
transaction and processing fees while the multiple computers in its 
processing center communicate continuously with merchant terminals, and the 
databases of Visa, MasterCard, American Express, Diner's Club, Carte Blanche 
and Discover. The merchants' POS terminals dial the Company's host computers 
and receive credit card authorizations which have been electronically 
verified for credit validation and other security considerations.  

Electronic files are then transmitted daily by NCCR to the major credit card
organizations which subsequently transfer funds from the card issuing banks into
one of NCCR's processing banks.  At NCCR's direction, funds are then
electronically moved from NCCR's processing banks and deposited into the bank of
the merchant's choice.  On a typical day, NCCR will make deposits to 450 banks
across the nation on behalf of its merchant base.  

In addition to electronic authorizations and deposits into the merchant's bank 
of choice, the Company's software programs utilize the POS terminal's electronic
memory to capture transactions, retain data and enable merchants to review,
reconcile and edit (i.e., "correct") transactions from their business location. 
NCCR has been successful in providing various services which include a terminal
loaner program to minimize downtime, frequent sales reports and information
containing reconciliations of a merchant's business activity and sophisticated
security services utilizing the merchant's terminal, the Company's host 
computers and field activity.  NCCR utilizes several advanced telecommunications
capabilities involving manageable network design, robust communications 
protocols, circuit troubleshooting, and packet switching, in order to provide
consistent and reliable services to its merchants.

NCCR's compensation for credit card processing is derived from two primary
sources, the merchant's discount rate and the merchant's transaction fee. The
discount rate is expressed as a percentage and is the fee charged to the 
merchant for the Company's services. Once set, this percentage is deducted 
from the amount of each transaction submitted by the merchant and the net 
amount is deposited into the merchant's bank account. Discount rates range 
between 1.59% and 3.86% and, overall, the Company's average discount rate is 
2.10%. 

The transaction fee is charged for each transaction processed and the Company's
average transaction revenue is $0.17 per transaction. The Company maintains a
range up to $0.20 per transaction. 

Over the past two years, industry consolidation has been occurring as evidenced
by the merger of the number one and number three processors in 1995. Impressive
growth in 1995 and 1996 in the credit card processing market has occurred by 
firms through portfolio acquisitions. Such a strategy raises special 
challenges that involve supporting and integrating numerous processing 
methodologies, initiating quality customer support and field support services
and, probably most difficult, maintaining merchant relationships. Merchant 
portfolios can be purchased but the merchants who are processing thereunder 
are under no obligation to continue to utilize the services of the new owner.
This lack of contractual obligation leads to a persistency problem. The long-
term profitability of such a strategy will center on the ability of the new 
owner to bring innovative services to its merchants and its ability to 
consistently provide timely quality service. 

The growing profitability of NCCR operations opens the possibility of the 
Company considering portfolio acquisitions in the future. The broad technical
expertise of the Company, as described earlier, diminishes some of the 
inherent problems faced in pursuing such a growth strategy.  The Company's 
data center reliability and the costs associated with communication 
activities of NCCR are presently favorable but no assurance or guarantee can 
be made that such conditions will continue.  Material changes in these areas 
could reduce or eliminate the profitability expected to be seen from NCCR 
operations.

Bank Relationships

The Company has two primary bank relationships through which it processes credit
card merchant activity. One processing agreement is with First Charter Bank, 
N.A. and the other agreement is with Imperial Bank. Both banks are located in
the greater Los Angeles area. The Company has entered into tentative 
agreements with Heritage Bank, located in Reno, Nevada and American 
Independent Bank, located in Gardena, California, to become primary banks for 
the Company. All agreements are non-exclusive. Although the Company enjoys 
good relations with its primary banks, market and/or management changes at 
the banks can have a negative effect on the Company's business.  The Company 
does not anticipate such changes but can not assure such changes will not occur.

U-Haul International
 
The U-Haul program began in 1995 after almost a year of development of special
software by the Company. The software operates on CBC's EB920 terminal and keeps
track of available inventory at the dealer's site. The system also prepares the
rental contract between the dealer and the customer and reports the activity
electronically to the home office, thereby eliminating the need for a U-Haul
dealer to manually prepare weekly summary reports of rental activity. The system
tracks all financial data and forwards both rental and financial data daily to
ECHO's data center. ECHO distributes the rental data on an hourly basis around 
the nation to the points of destination. This allows a receiving dealer to 
accept reservations for rental of the specific equipment prior to the 
equipment's actual arrival.   

The Company has capitalized part of its development costs associated with the
development of the system and amortizes such costs over three years. Revenues 
are derived from equipment sales to U-Haul and income resulting from daily 
transaction processing services provided to dealers and U-Haul Corporate. 
U-Haul transaction activity and equipment purchases constitute a significant 
portion of the Company's growing profitability.  The Company and U-Haul have 
begun discussions regarding the possibility of U-Haul gradually assuming the 
management responsibilities inherent in the overall service the Company 
offers to U-Haul. If an agreement is realized in this regard, it could limit 
the long-term potential of the transaction processing revenues. The Company 
is confident that, should mutual agreement be reached in this regard, the 
Company would recover its capital investment and a return thereon but such a 
possibility is not assured.  It is also felt that such a strategy of 
assisting a key customer to become self-sufficient would potentially generate
additional opportunities to assist other similar companies in the automation 
of their reporting systems.

Telemerchant Program
 
Historically, the Company has utilized a point-of-sale terminal located at the
merchant's place of business, the industry standard method of data entry. The
purchase of an electronic terminal is sometimes not economically feasible to a
merchant with low monthly credit card volume or to a business that performs
services at their customer's site (e.g., appliance repair, etc.).  To address 
the needs of these retail business segments and provide access to electronic
authorization and deposit services without the obligation to purchase equipment,
the Company developed and deployed "Telemerchant", a program permitting a 
merchant to submit point-of-sale transactions via any touch-tone telephone. 
This service utilizes Interactive Voice Response (IVR) and synthesized voice 
technology to prompt such merchants through the point-of-sale process, 
providing them with immediate results.

The Company intends to exploit its IVR technology to address and automate 
specific merchant needs such as ordering supplies and accessing bank account 
information on demand. The Company has chosen to market its Telemerchant and 
IVR services through a third party.  In addition to the possibility that such
party might not be as effective as the Company desires, the possibility also 
exists that the present format of the program may not meet market 
expectations.  Although not expected, if such becomes the case, the Company 
intends to make the necessary modifications in both the product design and 
marketing strategy to most closely match market expectations but success can 
not be assured.   

Internet ("Net")

One of the most talked about marketing mediums in publications today is the
Internet, the worldwide network of computers that allows businesses to advertise
their products on an international scale. Customers "browse" or "Surf the Net",
read the advertisement and, if they wish, purchase those products from their
businesses or homes, by use of their computers.

Security of credit card numbers transmitted over the Net has been a recurring
question.  Serious concern exists in the banking industry about unscrupulous
access to a customer's credit card number when it is presented over the Net. The
Company agrees with many of these concerns but finds that the primary issue that
must be solved in order to confidently accept transactions over the Net is
assurance that the merchant subsequently ships the product to the customer. 

In 1996, Visa, MasterCard and major software development corporations 
established a methodology standard for moving transactions over the Net, 
called Secure Electronic Transactions ("SET"). SET involves the integration 
of several technologies and parties, including the purchaser, the seller, the
bank, the processor and the network service provider. Each segment of the 
solution is under development and several fully integrated systems are 
expected by mid-1997. In preparation for the confluence of the diverse 
disciplines, the Company intends to develop an interface for the processor 
portion of the system that is compatible with systems that become available 
on the Net. The SET development notwithstanding, secure mechanisms already 
exist on the Net that assure confidentiality of data. The Company has been 
developing programs that rely on such existing technologies in order to begin
acceptance of transactions in the immediate future.

     Secure Internet Web Services: In the fourth quarter of 1996, the Company
     deployed a secure Internet World Wide Web ("WWW") server in anticipation of
     utilizing common commercial WWW browsers and the Internet as an additional
     point-of-sale transaction delivery mechanism. In fiscal year 1997, it is
     anticipated that development and deployment of the back-end technology will
     realize the Internet as a production point-of-sale capture and transaction-
     transport vehicle.  The Company's technology will rely on a combination of
     40 and 128-bit message encryption and digital signature standards, as well
     as proprietary back-end technology that will offer additional protection to
     the cardholder and merchant.  Management believes this combination of
     technologies offers superior confidentiality protection as well as
     substantial cost advantages compared to alternative, generic WWW-based
     transaction technologies. The Company's service based on these technologies
     is called ECHOnline, providing a total, "turn-key" solution to merchants
     desiring to accept and process credit card transactions over the Internet.
     ECHO entered into an agreement with Mallpark, one of the nation's largest
     electronic malls with over 42,000 Internet merchants in order to assure the
     Company has a consistent and on-going marketing effort for its new 
     ECHOnline services.  

     Internet Merchant Applications: In order to streamline the process for a
     prospective merchant to apply for a merchant account, the Company will 
     deploy a WWW application form in the first quarter of 1997 to provide this
     functionality. Client/server technology will be used to help Company
     personnel quickly review these applications and move them through the
     approval process. Automating the process using this back-end technology 
     will help keep Company personnel highly productive as the volume of new 
     merchant applications increases.

     Intranet and Management Reporting:  Tools commonly used over the Internet 
     may be invoked to construct an Intranet system that is available for use
     only by the Company's employees. Beginning in the first quarter of 1997,
     the Company plans to use Intranet technology for certain management 
     reporting.  It is anticipated that as a result, crucial information will
     be immediately available to top management and operations personnel 
     regarding significant factors affecting the operations of the Company.

The Company has highly trained and knowledgeable people who are designing and
managing its Net activities.  Although not expected, if for any reason certain 
key people were no longer available to the Company, the Company would have to
look to outside sources for similar capabilities since it does not have 
additional technical personnel of similar level.  No assurance can be made 
that such expertise would be found and, if found, available to assist the 
Company. Additionally, the Net products being developed and introduced are 
intended to augment the Company's present processing activities and are 
intended to be offered for low entry and low on-going processing costs when 
compared to other similar services.  This strategy is intended to draw retail
business relationships presently processing with other providers to the 
Company, but there is no assurance such a strategy will be effective or will 
be a sustainable pricing strategy in the long-term.  The Company intends to 
review this strategy regularly, as a result, and make changes in pricing, if 
necessary, based upon actual experience.

Specific Industry Tools 

One of the Company's core beliefs is that the Company must accommodate as many
different "point-of-interaction" entry methods as possible in order to build the
credit card processing services business, while concentrating on those methods 
and techniques that will provide the most leverage for the Company. To these 
ends, the Company has focused a significant percentage of its fiscal 1996 R&D
funds in the following areas:

     Enabling Vertical Market Third Party Applications: Many industries (e.g.
     restaurants, hotels) rely on third-party-developed applications running on
     PC-compatibles and other equipment to support their point-of-interaction
     needs.  To support these clients, the Company formalized point-of-sale
     interface specifications to its host computers, developed a conformance
     certification service/process, and widely encouraged third-party developers
     to use this free certification service and associated materials to build 
     the Company's point-of-interaction interfaces into the third-party 
     products.

     ECHOBoX: ECHOBoX is a method of bulk transaction submission to an ECHO
     bulletin board system that automatically moves data into an electronic 
     check withdrawal procedure, a credit card authorization process or 
     credit card deposit for a merchant. 

     ECHOBatch: To accommodate generic high-volume business opportunities, in
     fiscal year 1996, the Company constructed and successfully beta-tested
     "ECHOBatch", a fulfillment-house-based complement to its popular ECHOBoX
     processing service.  ECHOBatch runs on standard PC's, resides at the
     fulfillment house, and permits the fulfillment houses to submit multiple
     merchants' data in a highly controlled, secure manner to the Company's
     ECHOBox service interface.

     ECHOTrans: To accommodate the growing popularity of PC's as point-of-sale
     devices, in 1996, the Company developed "ECHOTrans", a PC-compatible based
     program for both general merchants and specific high volume magnetic card-
     swipe situations.  This program, in conjunction with a mag-swipe card 
     reader, modem, and printer can be used on both standard and portable 
     (lap-top) PC's as a point-of-sale device.  This program uniquely 
     satisfies certain common high-volume sales environments as a result of 
     its ability to be customized for ease of use in specific point-of-sale 
     situations and to asynchronously handle the tasks of card-swipe, 
     processing, and receipt printing.

The Company believes that certain industries hold greater processing potential
than others and has designed products pointed toward those industries.  The
Company has been primarily focused on the development of the tools these
industries need and has not, as of yet, developed a marketing plan to actively
promote these products to those who would be most likely to use them.  The
effectiveness of the products and, once created, of the marketing program, can 
not be assured.

Computer Based Controls ("CBC")

Through the years, the Company has developed software which enables the 
Company's host computer to interface with terminals of several manufacturers, 
the largest of which, Verifone International, is estimated to have a 77% 
share of the POS terminal market.  This capability enables the Company to 
provide credit card and check guarantee services not only to merchants who 
buy or lease the Company's terminals, but also to merchants who use terminals
sold and leased by other hardware competitors of the Company.  

In the early 1980's, the Company's customers used leased terminals from AT&T.  
In the mid-1980's, the Company purchased Microfone terminals from General 
Telephone and Electric (GTE) and offered them to merchants by sale or lease
from various financial service companies.  As merchants' processing 
requirements outgrew the capabilities of these terminals, the Company 
developed and installed proprietary modifications in them to meet customer 
needs.  When technical requirements continued to grow, the Company acquired 
Computer Based Controls, Inc. (CBC), a designer and manufacturer of 
commercial electronic systems, to meet its merchants' needs.

Prior to acquisition in 1985, CBC's experience was in the design, development, 
and manufacture of computerized products for the aerospace industry, and 
automated control systems for welding machines and other industrial 
processes.  CBC determined that the Company's product objectives could best 
be achieved by applying aerospace technology to telecommunication equipment. 
CBC has concentrated its efforts to develop cost-effective equipment which 
meets the broadest range of existing industry standards. 

Individual products developed by CBC to meet the Company's needs include:

Description<PAGE>
ModelCommentsElectronic
Banker 910<PAGE>
EB9101987 - Replaced the Microfone II POS
terminal and provided greater
flexibility at a competitive price.<PAGE>
Electronic
Banker 920<PAGE>
EB9201991 - Replaced the EB910 POS
terminal.  Provided significantly
more memory capacity, ElectroStatic
Discharge (ESD) immunity, and a
faster modem.  Later upgrades
included direct support for
attachment of a PS/2 keyboard.<PAGE>
Electronic
Banker 921<PAGE>
EB9211996 - A modified EB920 POS terminal
intended for the US Postal Service
Electronic Money Order Dispenser
(EMOD) project.  Included additional
ESD provisions and a redesigned
operating system.<PAGE>
Roll Printer
100<PAGE>
RP1001991 - A patented, high security, 40
column printer originally designed to
meet the needs of the Automated Money
Order Dispenser (AMOD) project.  Also
used in cash advance and gift
certificate applications.  Recent
enhancements allow for the use of
either tractor or friction forms up
to 8.5 inches in length.<PAGE>
Roll Printer
120<PAGE>
RP1201994 - A modified RP100 which
includes the patent pending
Symbology code reading technology
at a competitive price.  This system
automatically senses the printed
document's serial number.<PAGE>
Roll Printer
121<PAGE>
RP1211996 - A modified RP120 for the US
Postal Service Electronic Money Order
Dispenser (EMOD) project. Included
significant improvements in print
quality and incorporated Symbology.
Additionally, two products have undergone extensive design work and are at
different stages in the development process. The Electronic Banker 100 
("EB100"), a small, low cost POS terminal, is designed to compete effectively
in environments not requiring the additional features of the EB920. This 
terminal is being considered for final tooling and release in the next two 
years.

The Electronic Banker 10 ("EB10") utilizes a touch screen for graphical POS
applications. This system is not being scheduled for release and, if 
revitalized, would require significant design revision that is not presently 
planned.

Through these various products, CBC created various system solutions to meet
customer needs.  The most significant systems include:

Descripti
on<PAGE>
ModelsCommentsAMODEB910 + RP100
EB920 + RP100<PAGE>
The AMOD system was purchased by
American Express from 1991 to 1995 to
provide a means to electronically
issue and print fully-negotiable
money orders.  The system holds blank
forms in a security enclosure and
prints them as directed by the agent.
CBC has shipped more than 18,000 AMOD
systems from 1991 to 1995.<PAGE>
Cash
Advance<PAGE>
EB910
EB920<PAGE>
The Cash Advance terminal is used
primarily in the gaming industry. 
The system relies on remote credit
authorization. CBC has shipped more
than 2,000 Cash Advance systems from
1992 to 1996.<PAGE>
Cash
Advance<PAGE>
RP100The Cash Advance printer is used
primarily in the gaming industry. 
This system securely prints checks
used within the gaming establishment.
CBC has shipped more than 2,000 Cash
Advance systems from 1992 to 1996.
<PAGE>
U-HaulEB920 + SK100
EB920 + PS/2<PAGE>
The U-Haul system provided a means to
track inventory of rental equipment
nationwide on a daily basis.  In
addition, the system allows credit
card payment for rentals through
remote credit card authorization. CBC
has shipped more than 3,800 U-Haul
systems from 1994 to 1996.<PAGE>
EMODEB921 + RP121The EMOD system provides a means 
to electronically issue and print fully-
negotiable  money orders.  Security
is enhanced by the ability of the
system to electronically sense the
money order serial number directly
from the form itself. The system
holds blank forms in an enhanced
security enclosure. Money orders may
be issued directly from the EB921
keypad or remotely via a PC interface
program. 
CBC has made significant changes in its product design over the years and, as a
result, faces continuing development and support costs that would not be 
incurred if such changes were not being made.  This activity is expected to 
continue, believing that the changing needs of the market demand a flexible 
product design.  Additionally, CBC has focused on niche markets that, once 
saturated, do not offer continued revenues from additional equipment sales.  
This strategy has been successful when reviewed over a multiple year period 
but no assurance can be given that such a strategy will continue to be 
effective.

United States Postal Service Pilot Program ("USPS")

In November, 1995, CBC was awarded a contract to design and build 575 Electronic
Money Order Dispensers (EMOD) for the USPS. The First Article Test of the CBC 
beta system was done in September 1996 and passed approximately 85% of the 
necessary criteria. A re-testing is scheduled for the first quarter, fiscal 
1997, and, if successful, it is anticipated that a phased deployment of the 
systems will occur in the Dallas, Texas area beginning in the first quarter 
of calendar year 1997.

The USPS has advised the Company that they are having difficulty in securing a
printing company that is able to economically produce the desired EMOD form 
stock with the necessary security components.  This may delay decisions 
regarding further deployment after the pilot program begins and/or may 
generate the need for a redesign of the existing systems to accommodate a 
modified paper stock. Such events are not certain but possible.  
 
Patents

The Company has filed for two patents with regard to its printer technology used
in printing financial documents. One patent has been issued that deals with the
use of icons rather than graphics-mode printing in order to increase the print
speed of the document issued. The other patent is pending and deals with the
Company's method of reading serial numbers, referred to as "Symbology", a low 
cost alternative to conventional methods presently being used. Patent 
protection can be a valuable advantage in a technical market but there can be
no assurance the patents, either secured or being secured by the Company, 
will result in such advantage to the Company.
 
Research

Research and development is funded and performed primarily by NCCR and by CBC. 
Research by NCCR is focused primarily towards non-hardware specific solutions to
customer requirements.   CBC research is focused on specific hardware and 
software solutions as directed by the Company' needs.

NCCR Research

A number of NCCR projects require interaction between POS terminals and 
mainframe host computers.  A good conceptual understanding of the problems 
unique to both worlds is essential in order for the Company to provide 
effective solutions to the targeted market segment.  The Company has expended
significant effort developing in-house software development expertise for 
state-of-the-art POS and mainframe applications to meet these needs.  NCCR 
focused research and development include the following:

Under Development<PAGE>
Planned DevelopmentCustomer Service Call
Tracking and Reporting<PAGE>
Business Office Supply System
(BOSS) allows  merchants to order
business supplies via the POS
terminal.<PAGE>
Data Center UpgradeDebit Card ProcessingSales Tracking Systems
On-line Inquiry Services to
merchants
Direct Settlement Software

NCCR's development activities can be redirected quickly, based upon any one of
several factors, i.e., market changes, financial capabilities, etc.  Neither the
effectiveness nor even the completion of the items shown are assured due to such
uncertainties that exist.

CBC Research

Most CBC projects deal with product development issues requiring an 
understanding of low-level hardware and software, national and international 
standards, and agency approval requirements.  CBC has expended significant 
effort updating the RP100/EB920 core design to create the RP121/EB921 for the
EMOD project. For CBC, it is essential to maximize the potential for new 
concept development to flow back into the commercial product line.  CBC 
focused research and development include the following:

Under Development
Planned Development
Multi-tasking operating
system software
Debit Processing
Software development kit for
outside (non-Company)
programmers
U.S. Manufacturing
Enhancements to EB100
Smart Card Technology
Enhancements to RP100 to
enable horizontal form
presentation
Cashiers Check  Management
CBC's development activities can be redirected quickly, based upon any one of
several factors, i.e., market changes, financial capabilities, etc.  Neither the
effectiveness nor even the completion of the items shown are assured due to such
uncertainties that exist.

Leasing

The Company sells and leases terminals and printers to retail merchants through
its subsidiary, ECHO Payment Services, Inc. ("EPS"). EPS cultivates 
relationships with independent sales organizations, agent banks, and trade 
associations and has formed strategic alliances with other marketing groups 
to increase equipment sales and leases. 
EPS normally leases equipment at an annual return of 24%, bundles leases in
various sized packages and sells them at a discounted rate to banks and 
individual investors.  Servicing and collection of leases sold is performed 
by the Company. 

XpressCheX

In 1987, the Company initiated its check guarantee services to merchants located
in California so a merchant could accept a customer's check with impunity. To
support merchants in other states, the Company supports alternative check
guarantee services to operate concurrently with the Company's credit card 
software in the merchant's terminal.

There are two basic types of electronic check processing services available in 
the market today, check verification and check guarantee.

     Check Verification: The merchant pays a fixed fee for each transaction. 
     For this fee, the provider searches its proprietary data base of bad-check
     writers attempting to match a specific piece of information (driver's 
     license number, MICR number, etc.) provided by the merchant.  A match 
     identifies the check writer as an individual (or business) known to the 
     provider to have current, delinquent check-related debts.  Upon 
     notification of this match (via a coded response from the provider) the 
     merchant decides whether to accept at his own risk or decline the check.
     The provider offers no guarantee that the check will be honored by the 
     check writer's bank and makes no promise of reimbursement if the check 
     is dishonored by the bank.

     Check Guarantee: The merchant pays a fee based on the amount of the check 
     for each transaction.  For this fee, the provider searches its data base
     for the piece of identifying information provided by the merchant.  If the
     identifying information is matched, the provider issues a coded response
     instructing the merchant to refuse to accept the check.  If the identifying
     information is not matched, a coded response advises the merchant that the
     provider has guaranteed payment on that item.  If that check is 
     subsequently dishonored by the check writer's bank, the merchant is 
     reimbursed by the provider.

Currently XpressCheX, Inc. offers only the check guarantee type of service to
merchants located within the state of California.  Due to resources being 
directed to other divisions of the Company and due to the lack of a national 
data base from which to offer national check guarantee, the Company has not 
actively promoted its check guarantee services. As a result, XpressCheX's 
performance has progressively declined over the years.  

Analysis is currently underway to determine if the XpressCheX should be retained
as a product line and, if retained, what its total product line should include 
and how it can be effectively marketed outside of the state of California.

Real Estate

The Company presently owns undeveloped land in seven western states.  The 
Company has entered into an agreement with a party to seek to sell all of its
real estate holdings. The Company has held all of its land properties for 
over ten years and does not have current appraisals nor title insurance on 
its real estate holdings. Some of the properties are held pursuant to quit 
claim deeds.  

Marketing

In 1992, the Company entered into an agreement with Electronic Merchant Services
("EMS"), a sales organization with primary offices in Cleveland, Ohio. EMS has
offices in fourteen (14) states and, from time to time, between 250 and 300
salespersons in the field representing the processing services of the Company.
During 1996, the EMS relationship generated approximately 70% of new merchant
relationships for the Company. In the coming year, the number of new merchant
relationships from EMS is expected to rise but the overall percentage of new
merchant relationships generated by EMS sales is expected to decrease as a 
result of increased merchant relationships being secured utilizing the 
Internet, the Telemerchant program and other direct sales programs being 
actively promoted by the Company. 
 
Management believes the Company is unique in providing high quality POS 
hardware, specialized software, a variety of processing services and full 
customer support through one vertically integrated source. In most instances,
such services are performed by different parties and, as a consequence, 
merchants become very frustrated trying to solve a problem, not knowing which
party to call.  

NCCR's marketing strategy is twofold:

1)  to build its credit card transaction volume by focusing on the small to
medium-sized merchant segment, defined as merchants processing $25,000 or less 
per month in credit card activity, who tend to be overlooked by other 
processors in favor of larger volume accounts. The strategy relies primarily 
on third-party relationships that contact and direct such merchants to the 
Company;

2)  to maximize its non-credit card transaction volume by developing 
applications for niche markets and national customers.

As part of the tactical implementation of the POS dual marketing strategy,
agreements have been reached with third-party sales organizations which bring
additional processing relationships to the Company.  The Company has signed an
agreement in the first quarter of 1997 with a third party marketing and sales
organization that focuses on acquiring high volumes of smaller merchants that 
are interested in securely utilizing the Internet as an order-taking and 
transaction-delivery system.  

CBC intends to market its electronic products to its existing customers and to
develop similar relationships with customers who have similar needs on a 
national basis, focusing primarily on the USPS and banking markets. CBC will 
rely on NCCR and EPS to actively promote its low-end terminal, once released.

The Company has several active marketing programs either underway or in
development and its processing volume continues to grow.  Markets, however, can
change for numerous reasons, e.g., new technology, economic factors, regulatory
requirements, etc., that are not within the control of the Company so it can not
be assured that the marketing efforts of the Company will continue to be 
effective or that the Company will continue to see increasing processing 
volume in the future.

Competition

The business of the Company is highly competitive and most of the Company's
competitors are substantially larger and have significantly greater resources
than the Company.  In the check guarantee industry, several national guarantee
companies have a much larger market presence than the Company.  In addition, the
Company may, in the future, encounter increased competition from the debit card
as it gains acceptance.  The Company's terminal leasing program competes with
banks and other leasing concerns.  The POS terminal manufacturing industry has
four primary competitors, several of whom are currently larger than the Company.

The negative competitive factors faced by the Company include the following: (1)
it is not a bank and does not generally attract new merchants by virtue of such
community recognition; (2) it has less capital and resources than numerous
competitors; and (3) bank participation for access to Visa and MasterCard is
required.     

The positive competitive factors of the Company include: (1) "merchant
orientation" rather than "bank orientation" in its marketing; (2) technological
abilities regarding several services to the merchant market; (3) integrated
customer support services, including trouble shooting, seven-day "hot line"
support and terminal loaner and repair; (4) technologically competitive 
terminals, software and communications facilities; (5) capability to respond 
quickly to developing market requirements with new hardware and software; and
(6) ability to provide complete turnkey systems for special markets.

Employees

The Company employed 62 persons at September 30, 1996, none of whom are
represented by a labor union.  The employees are based in Agoura Hills,
California.  Management believes that its employee relations are good at the
present time.

Forward Looking Statements

When used in the Business section (Item 1.) or elsewhere in this document, the
words "believes", "anticipates", "contemplates", and similar expressions are
intended to identify forward-looking statements.  Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected.  Those risks and uncertainties included changes
in economic conditions locally and nationally, and changes in laws and 
regulations affecting the Company's primary lines of business. The Company 
undertakes no obligation to publicly release the results of any revisions to 
those forward-looking statements which may be made to reflect events or 
circumstances after the date hereof or to reflect the occurrence of 
unanticipated events.


ITEM 2.      Properties

In October 1994, the Company purchased for $880,000 the three-story, 13,500 
square foot building it currently occupies, making a down payment of $320,000
and borrowing $560,000, with a monthly debt service of approximately $4,000. 
This building houses the Company's headquarters and computer facilities.

As of September 30, 1996, the Company's book value of its raw land real estate
holdings was $528,000. A $276,000 reserve allowance was set up to reflect the
$252,000 net book estimated fair market value of the properties. The Company 
owns several pieces of raw land for investment consisting of four 
noncontiguous parcels in Missouri totaling approximately five acres, two 
noncontiguous parcels in Texas totaling approximately forty-four acres, one 
acre in Castilla County, Colorado, one-third acre in Eureka County, Nevada, a
single lot in Arrowhead County, Washington, a single lot in Ventura County, 
California, three acres in Independence County, Arkansas, and 498 acres in 
San Bernardino County, California. The Company has entered into an agreement 
with a party to represent and sell its properties.


ITEM 3.     Legal Proceedings

As is the case with many businesses that serve thousands of customers, the 
Company routinely encounters legal actions that may or may not have substance.  

The Company is currently involved in lawsuits against sixteen merchants for 
losses incurred from chargebacks that the Company has paid on behalf of those
merchants.  These lawsuits aggregate to more than $530,000.

The Company encounters other legal actions routinely in the course of doing
business but none are considered significant and none are known at the date of
filing other than those discussed above.


ITEM 4.     Submission of Matters to a Vote of Security Holders

One matter was submitted to a vote of Security Holders during the fiscal year
ended September 30, 1996 at the annual shareholders' meeting held on February 
21, 1996.  A majority of shareholders' votes approved one issue: (1) 
ratification and approval of auditors.    
                                     PART II

ITEM 5.     Market for Registrant's Common Equity and Related Stockholder 
Security Matters 

Since January 17, 1986, the Company has been trading on the over-the-counter
market under the name Electronic Clearing House, Inc.  On October 2, 1989, the
Company was accepted for listing on the National Association of Securities 
Dealers Automated Quotation System ("NASDAQ") and trades under the symbol of 
"ECHO".  The following table sets forth the range of high and low prices for 
the Common Stock during the fiscal periods indicated.  The prices set forth 
below represent quotations between dealers and do not include retail markups,
markdowns or commissions and may not represent actual transactions.  
Moreover, due to the lack of an established trading market for the Common 
Stock, such quotations may bear no relationship to the fair market value of 
the Common Stock and may not indicate prices at which the Common Stock would 
trade in an established public trading market.

<TABLE>
<CAPTION>
                 FISCAL YEAR ENDED        High         Low      
                    SEPTEMBER 30,    

                           1996         
                    <S>                <C>          <C>   
                    First Quarter       $0.84        $0.31
                    Second Quarter      $0.96        $0.34
                    Third Quarter       $1.53        $0.66
                    Fourth Quarter      $1.16        $0.72
<CAPTION>
                           1995         
                    <S>                <C>          <C>
                    First Quarter       $0.56        $0.34
                    Second Quarter      $0.94        $0.41
                    Third Quarter       $0.53        $0.41
                    Fourth Quarter      $0.66        $0.25
<CAPTION>
                           1994         
                    <S>                <C>          <C>
                    First Quarter       $1.31        $0.75
                    Second Quarter      $0.84        $0.44
                    Third Quarter       $0.87        $0.47
                    Fourth Quarter      $0.78        $0.44

</TABLE>

The prices set forth above are not necessarily indicative of liquidity of the
trading market.  Trading in the Common Stock is limited and sporadic, as 
indicated by the average monthly trading volume of 863,392 shares for the 
period from October 1995 to September 1996.  The above prices represent 
quotations between NASDAQ dealers, which do not reflect retail markups, 
markdowns or commissions, and may not represent actual transactions.  On 
December 20, 1996, the closing representative price per share of the Common 
Stock, as reported through NASDAQ in the over-the-counter market, was $1.31.

Holders of Common Stock

As of September 30, 1996, there were 992 record holders of the Company's Common
Stock, with 11,571,804  shares outstanding.

Dividend Policy

The Company has not paid any dividends in the past and has no current plan.  The
Company intends to devote all funds to the operation of its businesses.


ITEM 6.     Selected Consolidated Financial Data

The following table sets forth certain selected consolidated financial data, 
which should be read in conjunction with the Consolidated Financial 
Statements and Management's Discussion and Analysis of Financial Condition 
and Results of Operations included at items 7 and 8 below.  The following 
data, insofar as they relate to each of the five years ended September 30, 
have been derived from annual financial statements, including the 
consolidated balance sheet at September 30, 1996 and 1995 and the related 
consolidated statement of operations and of cash flows for the three years 
ended September 30, 1996, and notes thereto appearing elsewhere herein. 

<TABLE>
<CAPTION>
                               Year Ended September 30                
                                    1996     1995    1994      1993     1992
                                 (Amounts in thousands, except per share) 
Statement of Operations Data:
<S>      . . . . . . . . . . .     <C>     <C>      <C>     <C>      <C>    
Revenues . . . . . . . . . . .     $14,342 $14,101  $9,585  $15,867  $11,962
Costs and Expenses . . . . . .      14,526  14,238  10,466   16,495   12,583
Loss from operations . . . . .       (184)   (137)   (881)    (628)    (621)
Interest expense, net. . . . .       (228)   (169)    (45)    (210)    (244)  
Other income (expense), net. .       (182)    135                            
Loss before income tax 
 (provision) benefit and 
 extraordinary items . . . . .       (594)   (171)   (926)    (838)    (865)
Income tax (provision) benefit         (5)     (5)      (5)     (5)      (5)    
        
Net loss . . . . . . . . . . .   ($   599)($  176)($  931) ($  843) ($  870)

Net loss per share . . . . . .     ($.053) ($.016) ($.117)  ($.127)  ($.133)

Weighted Average Number of 
 Common Shares and Equivalents 
 Outstanding . . . . . . . . .      11,297  11,039   7,969    6,645    6,556

Balance Sheet Data:
Working Capital surplus (deficit)     $238  ($119)      $6     $625      $84
Current assets . . . . . . . .       2,254   1,721   4,215    2,563    2,382
Total assets . . . . . . . . .       4,682   4,063   5,963    4,129    5,208
Current liabilities. . . . . .       2,016   1,840   4,209    1,938    2,298
Long-term debt, and payable to 
 stockholders and related parties, 
 less current portion. . . . .         597     724      79      428      666
Total stockholders' equity . .      $2,069  $1,499  $1,675   $1,701   $2,025




</TABLE>
<PAGE>
ITEM 7.     Management's Discussion and Analysis of Financial Condition and
Results of Operations

Results of Operations

Fiscal years 1996 and 1995
Electronic Clearing House, Inc. recorded a net loss of $599,000 for the fiscal
year ended September 30, 1996, compared with a net loss of $176,000 for the 
fiscal year ended September 30, 1995.  The increase in net loss for fiscal 
year 1996 was mainly attributable to a $97,000 increase in research and 
development expenses primarily related to a pilot program for the United 
States Postal Service ("USPS"), the $327,000 of non-recurring lawsuit 
settlement income recorded in fiscal year 1995, and a $70,000 increase in 
interest expense during fiscal 1996. The Company showed a loss of $184,000 
from operations which can be attributed to its equipment subsidiary, Computer
Based Controls, Inc. ("CBC") and expenses related to the USPS pilot and other
direct and indirect costs associated with CBC.

Profitable operations of the Company's processing activities was attained in the
latter part of fiscal 1995 and gradually increased through fiscal 1996.  The
Company is expected to be able to continue to increase its profitability from
its bankcard processing operations for fiscal 1997 due to the anticipated 
increase in its merchant base from its existing marketing programs, increased
transaction activity from its association with a national rental 
organization, and from the newly developed Telemerchant and Internet 
processing programs initiated during the first quarter of 1997.

Bankcard processing revenue, bankcard transactions fees, and check guarantee 
fees for fiscal year 1996 increased 43% to $12,053,000 from $8,447,000 for 
fiscal year 1995.  Revenues derived from the electronic processing of 
transactions are recognized at the time the transactions are processed by the
merchant.  The increase in bankcard processing revenues resulted primarily 
from the increase in the number of active merchant accounts from 4,886 as of 
September 30, 1995 to 6,595, a 35% increase.  The Company's expanding 
merchant base and profitability is primarily attributable to the following 
programs.  The first factor is the effective sales efforts of an independent 
processing-related sales organization that is presently accounting for 
approximately 70% of the Company's new merchant relationships.  Secondly, 
referral from the Company's existing merchant base and the direct response to
the Company's Internet Home Page account for approximately 20% of the 
Company's merchant growth.  Third, the Company's new agent bank program, 
actively promoted in the first quarter of fiscal 1996, is resulting in 
increased merchant relationships and increased processing volume as a result of
the acquisition of the existing merchants already processing with the agent 
banks.  Fourth, inventory transactions revenue for a national rental 
organization increased 92% from fiscal 1995.  Additionally, during fiscal 
year 1996, the Company targeted merchant industry types which generally have 
higher discount rates and processing volume as compared to the typical retail
merchant.       
A primary contingency related to processing profitability is the consistency and
multiplicity of the Company's primary bank relationships.  Primary bank
relationships are necessary to assure access to the major credit card issuing
organizations and, presently, the Company has two primary bank relationships. 
Additional primary bank relationships diminish the potential for disruptions in
processing operations that might occur due to changes in management or ownership
of one of the Company's primary banks.  The Company has signed letters of intent
with two additional banks as primary banks.  The Company is making the necessary
software enhancements to allow the new primary banks to become active by the
second quarter of fiscal 1997. 

Bankcard processing expenses have generally remained constant as a percentage of
processing revenue.  A majority of the Company's bankcard processing expenses
are fixed as a percentage of each transaction amount, with the remaining 
costs being based on a fixed rate applied to the transactions processed.  
Processing-related expenses, consisting of bankcard processing expense, check
guarantee expense and customer service expense, increased 41% to $9,505,000 
from $6,758,000 for fiscal 1995.  This was in direct relation to the increase
in processing revenues.

Check guarantee fees have decreased 30% from $194,000 to $135,000 and related
expenses have decreased 29% from $93,000 to $66,000, reflecting the absence of
active marketing or development of the Company's check guarantee services.  
Check guarantee services are not presently actively promoted for two primary 
reasons; 1) negative check writer data are only available on California 
activity while much of the Company's base of merchants are in other states, 
and 2) development focus and resources are being placed in bankcard 
processing and terminal sales programs that are viewed by management to have 
a higher growth and revenue potential.

The primary variables affecting equipment sales are inventory levels, software
design and development by the Company, the timing of customer orders and the 
lead time required for delivery of such orders.  The Company's primary 
terminal system, the EB920, is a highly customer-specific terminal and for 
this reason, as well as the financial costs related thereto, the Company does
not maintain significant on-hand inventory beyond depot requirements.  
Customer orders have historically been in large quantities that exceed the 
inventory amounts the Company maintains and such orders are typically 
received only one or two times per year per customer. The time from receipt 
of the customer's order to the delivery of the systems is presently a four
(4) month period, primarily due to the lead-times of electronic components 
for the system.  Subsequent to September 30, 1996, the Company received an 
order for 2,379 EB920A terminals from its national rental organization customer.

Revenue related to terminal sales are recognized when the equipment is shipped. 
Terminal sales and lease revenue for fiscal 1996 decreased 61% to $2,189,000 
from $5,617,000 for fiscal 1995.  This significant reduction in revenue 
between the two periods can be attributed to two primary causes.  First, the 
Company's equipment subsidiary focused much of the year on performance under 
an award by the USPS that generated no revenue during the year.  Secondly, 
6,000 systems were delivered to two major accounts in 1995 and 1,800 to one 
account in 1996.  Due to the type of customer who finds the Company's 
equipment useful, larger orders placed annually are the norm rather than 
small orders placed more frequently.  This inherent difference in similar 
periods makes revenue comparison more difficult.  Related costs have 
decreased 57%, directly related to the lower sales.

Research and development revenue increased from $37,000 for fiscal 1995 to
$100,000 for fiscal 1996, reflecting an increase in fee-paid developmental work
for existing customers.  Research and development expense increased 43% from
$228,000 to $325,000 for the same period, reflecting primarily the developmental
effort required under a pilot program to design and deploy electronic money 
order systems for the USPS that was awarded to the Company in November 1995. 
The Company decided to invest a significant portion of its resources in the 
USPS pilot program for two primary reasons; 1) the potential exists for a 
national program with the USPS if the pilot program proves to be successful, 
and 2) the new system will meet the needs of other customers and markets that
the Company feels it can solicit effectively.  

There was a 67% decrease in equipment sales expense from $93,000 for fiscal 1995
to $31,000 for fiscal 1996.  This decrease reflects a reduction in the direct
sales efforts on behalf of the Company's equipment subsidiary, CBC.  

General and administrative expense decreased marginally from $2,823,000 for 
fiscal 1995 to $2,799,000 for fiscal 1996.  This is a result of the Company's
ability to effectively control costs and the effects of an in-house 
automation program that lowers operating costs while allowing increased 
processing volume.  

Interest expense increased 36% from $196,000 for fiscal 1995 to $266,000 for
fiscal 1996.  This is mainly attributable to the interest amortization expense
related to warrants issued during 1996 as a consideration for the extension of
certain existing and new term loans.

Liquidity and Capital Resources

At September 30, 1996, the Company had a $238,000 working capital as compared to
$119,000 negative working capital in fiscal year 1995.  This increase in working
capital primarily reflects the increase in cash and restricted cash as of
September 30, 1996.  The Company had available cash of $172,000 and $516,000 of
restricted cash in reserve with its primary processing bank as of September 30,
1996.  Subsequent to September 30, 1996, the Company received a $438,000
downpayment on an order for 2,379 EB920A terminals.

Accounts receivable increased $194,000 from September 30, 1995 to September 30,
1996.  This increase was the result of increases in the number of merchants and
the increases in processing volume in fiscal year 1996.  Inventory increased
$186,000 from September 30, 1995 to September 30, 1996.  This increase was
primarily related to the inventory build-up for the USPS pilot program.  Short-
term borrowings increased $213,000 as a result of $200,000 convertible notes 
which are due in March 1997.

Capital expenditures were approximately $138,000 for fiscal 1996 as compared to
$299,000 for fiscal 1995. Capital expenditures in 1996 were primarily the result
of purchase of tooling for the Company's manufacturing processes and upgrades to
computer systems.

The significant increase in cash provided by financing activities for fiscal 
year 1996 resulted from the sale of $850,000 of Series K Preferred Stock, the
issuance of $200,000 of short-term notes, and $139,000 from the proceeds of 
warrants and options exercised.


The report of the Company's independent accountants during the past ten years
has contained an explanatory paragraph as to the uncertainty of the Company's
ability to continue as a going concern resulting from recurring losses.  The 
profitability of the Company's processing activities diminishes this risk 
significantly even though CBC is expected to continue to operate at a loss 
for fiscal year 1997.

CBC's activities are being focused almost entirely on the performance under the
USPS pilot program and other developmental projects are being postponed.  This
concentration of energy and resources has resulted in an operating loss in the
fiscal year 1996 from CBC activities alone that exceeds the total operating loss
shown by the Company in fiscal year 1996.  Since the development portion of the
USPS pilot program is nearing completion, continued investment at the current
level into CBC is not expected to be necessary in fiscal year 1997 and as a
result, the operating losses for CBC are expected to be reduced significantly.

In November, 1995, CBC was awarded a contract to design and build 575 Electronic
Money Order Dispensers (EMOD) for the USPS. The First Article Test of the CBC
beta system was done in September 1996 and passed approximately 85% of the 
necessary criteria. A re-testing is scheduled for the first quarter, fiscal 
1997, and, if successful, it is anticipated that a phased deployment of the 
systems will occur in the Dallas, Texas area beginning in the first quarter 
of calendar year 1997. The USPS has advised the Company that they are having 
difficulty in securing a printing company that is able to economically 
produce the desired EMOD form stock with the necessary security components.  
This may delay decisions regarding further deployment after the pilot program
begins and/or may generate the need for a redesign of the existing systems to
accommodate a modified paper stock. Such events are not certain but possible.  

Based upon continued growth in its processing operations and the recent order of
2,379 EB920A terminals, cash flow from operations is expected to be positive in
fiscal year 1997.  As described above in "Results of Operations", contingencies
that could impact liquidity are mitigated by continuing successes in the 
expansion of the customer base and by the establishment of multiple banking 
relationships.

In November 1996, $100,000 of short-term debt was converted into 250,000 shares
of common stock. The remaining $800,000 of short-term debt is also convertible
into common stock at $.40-$.50 a share.  The Company is reviewing its options to
either 1) refinance the $800,000 debt or 2) effect repayment through private
placement funds when the notes become due in March and April of 1997 if the
conversion option has not been exercised by the noteholders at that time.

At September 30, 1996, the ratio of current assets to current liabilities was
1.12:1 as compared to 0.94:1 at September 30, 1995.  The twelve-month average
collection period for receivables was 20 days for fiscal year 1996 as 
compared to 25 days for fiscal year 1995.  The Company's annualized inventory
turnover ratios for fiscal year 1996 was 4.50, as compared to 5.12 for fiscal
year 1995.

When used in the Management's Discussion and Analysis of Financial Condition and
Results of Operations or elsewhere in this document, the words "believes",
"anticipates", "contemplates", and similar expressions are intended to identify
forward-looking statements.  Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected.  Those risks and uncertainties included changes in economic 
conditions locally and nationally, and changes in laws and regulations 
affecting the Company's primary lines of business. The Company undertakes no 
obligation to publicly release the results of any revisions to those forward-
looking statements which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.


ITEM 8.    Financial Statements and Supplemental Data

The Financial Statements and Supplementary Data are listed under "Item 14.
Exhibits, Financial Statement Schedules and Reports on Form 8K".


ITEM 9.     Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures

None

                                    PART III



ITEM 10.     Directors and Executive Officers of the Registrant

The officers and directors of the Company are:

<TABLE>
<CAPTION>

                                                           Date first became
        Name                   Position                   Officer or Director 
<C>                        <C>                                <C>  
Donald R. Anderson <F1>    Director, President,             1986
                           Chief Operating Officer

Joel M. Barry<F1><F3><F4>  Chairman of the Board,           1986
                           Chief Executive Officer

David Griffin              Vice President                   1990

Larry Thomas               Senior Vice President,           1996
                           Chief Technology Officer

Jesse Fong                 Vice President                   1994

Jack Wilson                Vice President                   1994

Alice L. Cheung            Chief Financial Officer,         1996
                           Treasurer
                 
Donna L. Camras            Corporate Secretary              1990

R. Marshall Frost          Counsel                          1994

Fariborz Hamzei<F2><F3><F4>Director                         1988

Carl W. Schafer<F1><F2><F3>Director                         1986

Herbert L. Lucas<F1><F3><F4>Director                        1991

<FN>             
<F1>
Member, Finance Committee
<F2>
Member, Audit Committee
<F3>
Member, Nominating Committee
<F4>
Member, Executive Compensation Committee
</FN>

</TABLE>
DONALD R. ANDERSON, age 61, has been President and a Director of the Company 
since December 4, 1986.  Mr. Anderson was Chief Executive Officer from 
December 4, 1986, to June 29, 1990, at which time he became Chief Operating 
Officer of the Company.  Mr. Anderson is also President and a Director of the
EPS, XpressCheX and NCCR subsidiaries and a Director of the CBC subsidiary.  
Mr. Anderson received his B.S. degree in mathematics and his M.S. degree in 
engineering from California State University.  He participated in the 
founding of Science Dynamics Corporation, a medical information systems 
company, in August 1969, and served as its Vice President until October 1984,
when Science Dynamics was purchased by McDonnell Douglas Corporation.  From 
October 1984 until December 1986, Mr. Anderson was employed by McDonnell 
Douglas Corporation as Vice President, Market Research and Product Planning. 
In August 1992, he was appointed to the Board of Directors of Pacific 
Christian College and has served as a director on the Board of Cornerstone 
Christian School since September 1994.

JOEL M. BARRY, age 46, has been a Director of the Company since July 8, 1986,
Chairman of the Board since December 26, 1986, served as Chief Financial Officer
from May 1, 1987 to June 9, 1990, and Executive Vice President from October 12,
1987 to June 29, 1990, when he was designated Chief Executive Officer of the
Company.  Mr. Barry is also a Director and Chief Executive Officer of the NCCR 
and CBC subsidiaries.  Since approximately August 1981, through various 
entities, Mr. Barry has been a lecturer and investment counselor regarding 
investment partnerships.  Mr. Barry was the founder and President of Basics 
Financial Planning & Investments, Inc. ("Basics"), a financial management 
firm, formed in August 1983 and dissolved in June 1991.  Basics is the 
successor to Dynamic Seminars, a firm founded by Mr. Barry in August 1981.     

DAVID GRIFFIN, age 48, has served as Vice President of Sales since June 1990. 
Previous to this capacity, he was Vice President of Operations for the Company
from January 1986 until September 1989, at which time he became a consultant to
the Company.  Mr. Griffin has served as Senior Vice President and General 
Manager for TeleCheck, Los Angeles, from May 1983 to August 1985.  Prior to 
these appointments, he was Regional Manager of TeleCheck Services, a 
franchiser of check guarantee services, a division of Tymshare Corporation, 
which was subsequently acquired by McDonnell Douglas Corporation.  Mr. 
Griffin holds a business administration degree with a major in accounting 
from the University of Houston. 

LARRY THOMAS, age 50, joined the Company in November 1995, has served as Senior
Vice President since June 1996, and was appointed as Chief Technology Officer in
September 1996.  Prior to joining the Company, Mr. Thomas was a charter 
member of the Cellular Digital Packet Data (CDPD) specification effort and 
through the company he founded, XYNet Software Technologies, managed the 
development and delivery to several carriers of CDPD accounting and 
provisioning software.  Mr. Thomas served Unisys/Burroughs Corporation for 20
years as a system software/hardware developer, manager, and division general 
manager, with his last position as Vice President of Unisys Network 
Management Systems.  Mr. Thomas has been a consultant, author, and speaker on 
Internet and OSI related technologies, network management protocols, complex 
software systems and large-network solutions for major system integration 
firms.  Mr. Thomas holds an MSEE and BSEE from Rice University in Houston, 
Texas, as well as a BA in Economics from Rice.

JESSE FONG, age 45, has served as Vice President of MIS since September 1994. 
Mr. Fong joined the Company in 1984 and has served as programmer, Data 
Processing manager and MIS director.  He was born in Hong Kong, received a 
degree major in M.E. and minor in Computer Science in 1972, received an 
International Marketing certificate in 1975 and a Business Administration 
certificate in 1976.  Mr. Fong worked as Marketing manager, Sales manager and
Trainer with the Xerox Corporation in Taiwan from 1974 to 1978.  After that, 
he joined Abbott Laboratory as Country manager for two years.  After 
immigrating to the United States in 1980, he worked as International 
Marketing manager in a trading firm for four years.  

JACK WILSON, age 52, has served as Vice President of Bank Card Relations since
June 1994 and was Director of Bank Card Relations for the Company from October
1992 until May 1994.  Mr. Wilson served as Vice President for Truckee River Bank
from August 1989 until September 1992.  Previously, he was Senior Vice
President/Cashier of Sunrise Bancorp and a Vice President of First Interstate
Bank.  Mr. Wilson holds a teaching credential from the California Community
College System in business and finance.

ALICE L. CHEUNG, age 39, accepted the position of Treasurer and Chief Financial
Officer in July 1996.  Ms. Cheung received her BS degree in business
administration/accounting from California State University in Long Beach,
California and became a Certified Public Accountant in May 1982.  Ms. Cheung was
the Treasurer and Chief Financial Officer of American Mobile Systems from 
February 1988 to January 1996 and has had sixteen years experience in all 
phases of corporate accounting, financial management and strategic planning. 
Ms. Cheung is an active member of the American Institute of Certified Public 
Accountants. 

DONNA L. CAMRAS, age 47, joined the Company in 1988.  For three years prior
thereto, she was self-employed in Woodland Hills, California in educational 
books and toys.  She attended Southern Illinois University in  Carbondale and
was employed as an administrative assistant in Chicago for 4 years and Los 
Angeles for 5 years.

R. MARSHALL FROST, age 49, has served the Company in varying capacities since
1987 and is currently In-House Counsel.  Mr. Frost received his BA degree in 
business administration with emphasis in accounting from California State 
University at Fullerton, his AA degree in pre-med from Fullerton College, his
JD degree from Ventura College of Law, and his MBA degree from the University
of Redlands.  Mr. Frost is an active member of the California Bar, a member 
of the American Bar Association and the International Bar Association, and a 
certified broker with the California Department of Real Estate.

FARIBORZ HAMZEI, age 38, is currently an independent financial consultant,
specializing in real estate investments and is Vice President of Market Analysts
of Southern California, a non-profit organization conducting technical analyses
of financial markets.  Mr. Hamzei was President of Caspian Capital Corporation,
Los Angeles, California, from July, 1990 to December, 1991, and Executive Vice
President of Caspian Capital Corporation from August, 1988 to July, 1990. 
Previously, he was President and Chief Executive Officer of International 
Message Switching Corporation, a publicly held company from August 1987 to 
October 1987.  Mr. Hamzei has also held various positions in two high tech 
start-up companies, and from 1978 through 1982 held various management 
positions at Northrop's Aircraft Division.  Mr. Hamzei holds a BSE degree 
from Princeton University.

CARL W. SCHAFER, age 60, has been a Director since July 1986.  Mr. Schafer was
Financial Vice President and Treasurer (Chief Financial Officer) of Princeton
University from July 1976 to October 1987.  From October 1987 to April 1990, 
Mr. Schafer was a Principal of Rockefeller & Co., Inc. of New York, an 
investment management firm.  He is a Trustee of The Atlantic Foundation and 
Harbor Branch Institution and became  President of the Atlantic Foundation in
April 1990.  Mr. Schafer also holds the following positions:  Director/
Trustee of the Paine Webber and Guardian Families of Mutual Funds; Director 
of Roadway Express, Inc., a trucking company; Director of Wainoco Oil 
Corporation, an oil and gas producer and refinery; Director of Evans Systems,
Inc., a petroleum product marketer, convenience store, and diversified 
company; Director of Nutraceutix, Inc., a bio technology company; and 
Director of The Johnson Atelier and School Of Sculpture.  He graduated from 
the University of Rochester in 1958, and served with the U.S. Bureau of the 
Budget, successively, as Budget Examiner, Legislative Analyst, Deputy 
Director and Director of Budget Preparation.  He resides in Princeton, New 
Jersey.

HERBERT L. LUCAS, age 70, received a BA degree in History in 1950 from Princeton
University and an MBA degree in 1952 from Harvard University Graduate School of
Business Administration.  He served as President from 1972 to 1981 of Carnation
International in Los Angeles and a member of the Board of Directors of the
Carnation Company.  Since 1982, Mr. Lucas has managed his family investment
business.  He has served on the Board of Directors of various financial and
business institutions including Wellington Management Company, Arctic Alaska
Fisheries, Inc., Nutraceutix, and Sunworld International Airways, Inc.  Mr. 
Lucas also serves as a Trustee of The J. Paul Getty Trust, the Los Angeles 
County Museum of Art, and Winrock International Institute for Agricultural 
Research and Development.  He also was formerly a member of the Board of 
Trustees of Princeton University.

All directors are to be elected to specific terms, from one year to three years,
by the stockholders and serve until the next annual meeting or until their terms
have expired. The annual meeting of stockholders was held on February 21, 1996,
and the election of directors was held at that time.

ITEM 11.     Executive Compensation

The following table sets forth the total compensation paid and stock options and
warrants offered by the Company to its Chief Executive Officer and to each of
its most highly compensated executive officers, other than the Chief Executive
Officer, whose compensation exceeded $100,000 during the fiscal years ended
September 30, 1996, 1995 and 1994.

<TABLE>
Summary Compensation Table

<CAPTION>

                                                      Annual      Long Term
                                                   Compensation Compensation

                     Capacities in                                Securites
Name                 Which Served           Year   Salary<F1>    Underlying
Options<F2>
<S>                  <C>                     <C>        <C>          <C>
Joel M. Barry        Chairman/Chief        1996    $120,000         -   
                     Executive Officer     1995     115,000      650,000
                                           1994     115,000             
 

Donald R. Anderson   President/Chief       1996    $160,000<F3>         -   
                     Operating Officer     1995     160,000<F3>         310,000
                                           1994     121,000       50,000

<FN>
<F1>                                           
The Company provides both Mr. Barry and Mr. Anderson with an automobile.  Mr.
Barry and Mr. Anderson are both participants of a Company sponsored 401(K) plan.
There has been no compensation paid other than that indicated in the above 
table. No bonuses pursuant to employment agreements were granted in the three
fiscal years presented.
<F2>
None of these options has been exercised.  See "Stock Option Plan" and 
"Warrants".
<F3>
According to the terms of Mr. Anderson's employment agreement, $125,000 of Mr.
Anderson's salary was annual income and $35,000 was repayment of deferred 
income.
</FN>
</TABLE>

Fiscal 1996 Option Grants Table

The following table sets forth the stock options granted to the Company's Chief
Executive Officer and each of its executive officers, other than the Chief
Executive Officer, whose compensation exceeded $100,000 during fiscal 1996.  
Under applicable Securities and Exchange Commission regulations, companies 
are required to project an estimate of appreciation of the underlying shares 
of stock during the option term.  The Company has chosen to project this 
estimate using the potential realizable value at assumed annual rates of 
stock price appreciation for the option term at assumed rates of appreciation
of 5% and 10%.  However, the ultimate value will depend upon the market value
of the Company's stock at a future date, which may or may not correspond to 
projections below.

<TABLE>
<CAPTION>


                                                         Potential Realization
                                                           Value at Assumed
                                                            Annual Rates of
                                                              Stock Price
                            Percent of                     Appreciation for
                           Total Granted Exercise             Option Term
                  Options to Employees in  Price Expiration          
Name              Granted   Fiscal Year   ($/sh)    Date    5% ($)   10% ($)

<S>                 <C>           <C>       <C>      <C>     <C>      <C>
Joel M. Barry       none          n/a       -        -       n/a      n/a
D. R. Anderson      none          n/a       -        -       n/a      n/a


</TABLE>
The following table sets forth the number of unexercised options and warrants
held by the Company's Chief Executive Officer and each of its executive 
officers other than the Chief Executive Officer whose compensation exceeded 
$100,000 during fiscal 1996.  No options/warrants have been exercised.

<TABLE>
Aggregated Option/SAR Exercises and Fiscal-Year Option/SAR Value Table
<CAPTION>
                                                                 Value of
                                                 Number of      unexercised
                          Shares                unexercised    in-the-money
                        acquired on     Value  options/SARS    Options/SARS
Name                    exercise #   realized $  FY-end #     at FY-end $<F1>
<S>                          <C>         <C>        <C>            <C>

Joel M. Barry             -0-          -0-      650,000        $247,000
Donald R. Anderson        -0-          -0-      510,000        $ 98,000

<FN>
<F1>
Based on the closing sales price of the Common Stock on September 30, 1996 of
$0.78 per share, less the option exercise price.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation

Joel M. Barry, Chairman of the Board and Chief Executive Officer, Herbert L.
Lucas, Jr., Director, and Fariborz Hamzei, Director, serve on the compensation
committee.  No executive officer of the Company serves on the compensation
committee of another entity or as a director of another entity with an executive
officer on the Company's compensation committee.  

Director Compensation

Outside directors are compensated at the rate of $1,500 per quarterly meeting
plus reasonable expenses incurred in connection therewith.  Directors are not
compensated for special meetings other than regular quarterly meetings.

Employment Agreements

Mr. Anderson entered into a three-year employment agreement, effective 
October 1, 1994, which provides for a salary of $120,000 during fiscal 1995, 
$125,000 during fiscal 1996 and $130,000 during fiscal 1997, plus a 
retirement plan contribution of $60,000 per year for the term of the 
agreement or 3% of the pre-tax earnings of the Company, whichever is greater,
up to a maximum allocation in any year of $120,000.  In connection with this 
agreement, the Company also issued Mr. Anderson 310,000 options, each to 
purchase one share of Common Stock at $0.50 per share, vested over the three 
years of this agreement.

Bonus, Profit-Sharing and Other Remuneration Plans and Pension and Retirement
Plans

Mr. Anderson is entitled to an annual bonus of 3% of the Company's pre-tax net
profits. This bonus will be offset against the current year retirement plan
contribution of $60,000. Additionally, the Board of Directors has granted Mr.
Anderson the authority and discretion to distribute up to 2 1/2% of the annual
pre-tax net profits to other "Senior Officers". 

In fiscal 1996, the Company adopted a bonus plan which covers several of its
officers.  Each participant could earn up to 30% of their annual salary as a 
bonus based on each individual's performance and the overall performance of 
the Company. 

The Company has a contributory 401(K) Retirement Pension Plan which covers all
employees who are qualified under the plan provisions.

Stock Option Plan

On May 13, 1992, the Company's Board of Directors authorized adoption of a
Directors and Officers Stock Option Plan ("Plan"), ratified by the shareholders
at the Annual Meeting held July 10, 1992.  The Plan provided for the issuance of
up to 325,000 stock options, each to purchase one share of the Common Stock for
$0.85 per share, subject to adjustment in the event of stock splits, 
combinations of shares, stock dividends or the like.  

During fiscal 1994, Mr. Anderson converted 150,000 warrants to common stock
options exercisable at $0.85.

On April 5, 1994, Donald R. Anderson was granted 50,000 five-year options 
each to purchase one share of common stock at $0.56 per share. 

On September 13, 1994, the Company's Board of Directors authorized an 
increase in the Plan to 2,375,000 options and was ratified by the 
shareholders at the Annual Meeting held in February of 1995.

On September 30, 1995, Joel M. Barry was granted 650,000 five-year options each
to purchase one share of common stock at $0.40 per share.

With the exception of the foregoing, the Company has no stock option plans or
other similar or related plans in which any of its officers or directors
participate.



ITEM 12.     Security Ownership of Certain Beneficial Owners and Management

As of September 30, 1996, there were 11,571,804 shares of the Company's Common
Stock outstanding.  The following table sets forth the beneficial owners of more
than 5% of the Company's voting securities.

<TABLE>
<CAPTION>
Title     Name and Address              Amount and Nature      Percent
of Class  of Beneficial Owner        of Beneficial Ownership  of Class
<S>       <C>                                    <C>             <C>
Common    Herbert Smilowitz                  800,000  <F1>      6.47%
          P.O. Box 511
          East Rutherford, NJ  07073

Common    Leo and Maurine Weiner             775,000  <F2>      6.28%
          160 Broadway
          New York, NY  10038

Common    Arthur Geiger                      950,000  <F3>      7.59%
          P.O. Box 309
          Morristown, NJ  07963
          
Common    Moses Marx                         787,500  <F4>      6.37%
          160 Broadway
          New York, NY  10038

Common    Prudential Insurance Co.           702,450            6.07%
          Prudential Plaza
          Newark, NJ  07102

Common    Michael Rich                       720,000            6.22%
          245 E. 87th St.
          New York, NY  10128

Common    Dr. Kenneth Van Zyl                889,313  <F5>      7.40%
          1859 St. Andrews Drive
          McMinnville, OR 97128

                                                               
<FN>
<F1>
300,000 shares are warrants issued in connection with various loans and 500,000
shares are loan conversion rights.
<F2>
275,000 shares are warrants issued in connection with various loans and 500,000
shares are loan conversion rights.                
<F3>
375,000 shares are warrants issued in connection with various loans and 575,000
shares are loan conversion rights.
<F4>
287,500 shares are warrants issued in connection with various loans and 500,000
shares are loan conversion rights.
<F5>
447,900 shares of Dr. Van Zyl's common stock is 22,395 of unconverted Preferred
Series H Stock.
</FN>
</TABLE>

To the Company's knowledge, no other individual has beneficial ownership or
control over 5% or more of the Company's outstanding Common Stock.  

The following table sets forth the number of shares of Common Stock owned
beneficially by the Company's officers and directors, individually, and as a
group, as of September 30, 1996.

<TABLE>
<CAPTION>


                              Amount and                Percentage of
                        Nature of Beneficial        Outstanding Stock<F1>
  Name and Address           Ownership                  At 9/30/96  
  <S>                              <C>                        <C>
  Donald R. Anderson           588,659  <F2><F3><F7><F10>    4.86%
  28001 Dorothy Drive
  Agoura Hills, CA  91301

  Joel M. Barry                729,250  <F7>                 5.97% 
  28001 Dorothy Drive
  Agoura Hills, CA  91301

  Donna Camras                  50,000  <F7>                 0.43%
  28001 Dorothy Drive
  Agoura Hills, CA  91301

  Alice L. Cheung              100,000  <F7>                 0.86%
  28001 Dorothy Drive
  Agoura Hills, CA  91301

  Jesse Fong                   150,110  <4><7>               1.28%
  28001 Dorothy Drive
  Agoura Hills, CA 91301

  R. Marshall Frost             60,000  <F7>                 0.52%
  28001 Dorothy Drive
  Agoura Hills, CA 91301

  David Griffin                253,312  <F7><F9>             2.14%
  28001 Dorothy Drive
  Agoura Hills, CA  91301

  Fariborz Hamzei              250,000  <F5>                 2.11%
  28001 Dorothy Drive
  Agoura Hills, CA  91301               
  
  Herbert L. Lucas             391,889  <F5><F8>             3.31%
  12011 San Vicente Boulevard 
  Los Angeles, CA  90049

  Carl W. Schafer              300,000  <F5>                 2.53%
  28001 Dorothy Drive
  Agoura Hills, CA 91301                

  Larry Thomas                 550,000  <F6><F7>             4.63%
  28001 Dorothy Drive
  Agoura Hills, CA  91301

  Jack Wilson                  160,000  <F7>                 1.36%
  28001 Dorothy Drive
  Agoura Hills, CA 91301

  All officers and directors
  as a group (12 persons)    3,583,220                      30.00%          



                                                                             
<FN>
<F1>
Outstanding Common Shares with effect given to conversion of Preferred Stock,
options and warrants described in footnotes 2 through 10.
<F2>
Includes 45,473 shares owned by the Anderson Family Trust of which Mr. Anderson
is a co-trustee and 1,775 shares owned by Mr. Anderson's wife.
<F3>
Reflects conversion of Series H Convertible Preferred Stock into Common Stock.
<F4>
Includes warrants awarded by the Board of Directors of the Company.
<F5>
Includes options granted to outside directors.
<F6>
Includes Common Shares as payment for acquisition.
(F7>
Includes options according to the terms of the Incentive Stock Option Plan.  See
"Item 11. Options, Warrants or Rights".
<F8>
Includes 141,889 shares indirectly owned by Mr. Lucas through a trust for his
wife.
<F9>
Includes 675 shares owned by Mr. Griffin's wife. 
<F10>
Includes 310,000 options granted to Mr. Anderson pursuant to his employment
agreement of September 15, 1994.  See "Item 11. Employment Agreements".
</FN>
</TABLE>

ITEM 13.     Certain Relationships and Related Transactions 

There were no material related-party transactions.  


<PAGE>
                                     PART IV


ITEM 14.  Exhibits, Financial Statement Schedules and Reports on Form 8K

(a) The following documents are filed as part of this report:
 
   (1) Consolidated Financial Statements                                        
                                           Page
       
           Report of Independent Accountants . . . . . . . . . . . . . . . . F-1

           Consolidated Balance Sheet at September 30, 1996 and 1995 . . . . F-2

           Consolidated Statement of Operations for each of the three years
           in the period ended September 30, 1996. . . . . . . . . . . . . . F-3
  
           Consolidated Statement of Changes in Stockholders' Equity
           for each of the three years in the period ended 
           September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . F-4

           Consolidated Statement of Cash Flows for each of the three years
           in the period ended September 30, 1996. . . . . . . . . . . . . . F-5

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

    (2) Financial Statement Schedules:

           Schedule VIII - Valuation and Qualifying Accounts . . . . . . . .S-1 

All other schedules are omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.

(b) Reports on Form 8K for fourth quarter ending September 30, 1996:  

           Form 8K, dated September 30, 1996, incorporated herein by reference

(c) Exhibits:

 Exhibit
 Number                             Description of Document

        1.1    Form of Underwriting Agreement between the Company and J.W. Gant
               & Associates, Inc. <F3>
        1.2    Form of Agreement among Underwriters. <F3>
        1.3    Form of Selected Dealer's Agreement. <F3>
        3.1    Articles of Incorporation of Bio Recovery Technology, Inc., filed
               with the Nevada Secretary of State on December 11, 1981. <F1>
        3.2    Certificate of Amendment to Articles of Incorporation of Bio
               Recovery Technology, Inc., filed with the Nevada Secretary of 
               State on September 1, 1983. <F1>
        3.3    Certificate of Amendment of Articles of Incorporation of Bio
               Recovery Technology, Inc., filed with the Nevada Secretary of 
               State on January 17, 1986. <F1>
        3.4    By-Laws of Bio Recovery Technology, Inc. <F1>
        4.1    Proposed Form of Purchase Option between the Company and J.W. 
               Gant & Associates, Inc. <F3>
        4.2    Specimen Common Stock Certificate. <F3>

       10.5    Copy of Refinancing Agreement dated June 20, 1989 between
               Electronic Clearing House, Inc., Kenneth Van Zyl Living Trust,
               and Mrs. Alice A. Haessler. <F2>
       10.7    Copy of Imperial Bank Agreement dated October 31, 1989 between
               Electronic Clearing House, Inc. and Imperial Bank. <F2>
       10.11   Form of Warrants to Purchase Common Stock of Registrant. <F3> 
       10.12   Form of Agreement to be entered into by the Officers, Directors,
               and 5% or more Stockholders of the Company with J.W. Gant &
               Associates, Inc. <F3>
       10.27   Copy of Agreement between Electronic Clearing House, Inc. and
               Francis David Corporation, dated May 18, 1992. <F4> 
       10.28   Copy of Addendum Authorizing Evaluation and Calculation of Loss
               Reserve Requirement and Designation of Las Vegas, Nevada 
               Territory, dated July 9, 1992. <F4> 
       10.31   Copy of Merchant Marketing and Processing Services Agreement
               between Electronic Clearing House, Inc. and First Charter Bank,
               dated January 25, 1994. <F6>
       10.32   Copy of Escrow Statement of Electronic Clearing House, Inc. for
               purchase of building located at 28001 Dorothy Drive, Agoura 
               Hills, California. <F6>
       10.33   Copy of Employment Agreement dated October 1, 1994 between
               Electronic Clearing House, Inc. and Donald R. Anderson. <F6>
       10.34   Copy of Asset Purchase Agreement between Electronic Clearing 
               House, Inc. and Larry Thomas, dated December 31, 1995.
       22.0    Subsidiaries of Registrant. <F2>


                                                      
[FN]
<F1>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1988 and incorporated herein by reference.
<F2>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1989 and incorporated herein by reference.
<F3>
Filed as an Exhibit to Registrant's Form S-1, Amendment No. 3, effective 
November 13, 1990 and incorporated herein by reference.
<F4>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1992 and incorporated herein by reference.
<F5>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1993 and incorporated herein by reference.
<F6>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1994 and incorporated herein by reference.

[/FN]



                                   SIGNATURES


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



               ELECTRONIC CLEARING HOUSE, INC.


               By:    \s\ Donald R. Anderson                                 
                     Donald R. Anderson, President
                     and Chief Operating Officer





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


            Signature                        Title             Date




 \s\ Donald R. Anderson   Director, President, and     )      December 24, 1996
      Donald R. Anderson  Chief Operating Officer      )
                                                       )
                                                       )
 \s\ Joel M. Barry        Chairman of the Board        )                
      Joel M. Barry       and Chief Executive Officer  )
                                                       )
                                                       )
 \s\ Fariborz Hamzei      Director                     )                
      Fariborz Hamzei                                  )
                                                       )
                                                       )
 \s\ Alice L. Cheung      Treasurer and                )                
      Alice L. Cheung     Chief Financial Officer      )
                                                       )
                                                       )


                                        




                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
and Stockholders of
Electronic Clearing House, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 30 present fairly, in all material 
respects, the financial position of Electronic Clearing House, Inc. and its 
subsidiaries at September 30, 1996 and 1995, and the results of their 
operations and their cash flows for each of the three years in the period 
ended September 30, 1996, in conformity with generally accepted accounting 
principles.  These financial statements are the responsibility of the 
Company's management; our responsibility is to express an opinion on these 
financial statements based on our audits.  We conducted our audits of these 
statements in accordance with generally accepted auditing standards which 
require that we plan and perform the audit to obtain reasonable assurance 
about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the 
accounting principles used and significant estimates made by management, and 
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in Note 2 to
the consolidated financial statements, the Company has suffered recurring 
losses from operations and has an accumulated deficit that raises substantial
doubt about its ability to continue as a going concern.  Management's plans 
in regard to these matters are also described in Note 2.  The consolidated 
financial statements do not include any adjustments that might result from 
the outcome of this uncertainty.

As disclosed in the consolidated financial statements, the Company has extensive
transactions and relationships with related parties.  Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated 
parties.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes effective October 1, 1993.



Los Angeles, California
November 15, 1996
<PAGE>
<TABLE>
                 ELECTRONIC CLEARING HOUSE, INC.

                   CONSOLIDATED BALANCE SHEET

<CAPTION>
                                                September 30,    

                                              1996        1995

                             ASSETS
<S>                                             <C>        <C>
Current assets:
 Cash and cash equivalents                  $172,000    $97,000
 Restricted cash (Note 1)                    516,000    313,000
 Accounts receivable less allowance of 
 $289,000 and $824,000                       901,000    707,000
 Inventory less allowance of $20,000 
 in 1996 (Note 4)                            579,000    393,000
 Prepaid expenses and other assets            36,000     16,000
 Notes receivable from stockholders 
 and related parties (Note 5)                 50,000    195,000

      Total current assets                 2,254,000  1,721,000

Noncurrent assets:
 Property and equipment, net (Note 6)      1,489,000  1,430,000
 Real estate held for investment, 
 net (Note 7)                                252,000    336,000
 Other assets, net (Note 8)                  687,000    576,000

                                          $4,682,000 $4,063,000

              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Short-term borrowings and current 
 portion of long-term debt (Note 9)     $  1,044,000 $  831,000
 Accounts payable                            178,000    245,000
 Accrued expenses (Note 10)                  794,000    764,000

      Total current liabilities            2,016,000  1,840,000


Long-term debt (Note 9)                      597,000    724,000

      Total liabilities                    2,613,000  2,564,000

Commitments and contingencies (Note 14)

Stockholders' equity (Note 12):
 Convertible preferred stock, $.01 par value, 
 5,000,000 shares authorized;
  Series "A", 2,500 shares issued 
  and outstanding  
  Series "D", 1,562 shares issued 
  and outstanding                              
  Series "H", 23,511 shares issued 
  and outstanding                                   
  Series "K", 425,000 shares issued 
  and outstanding                              4,000
 Common stock, $.01 par value, 20,000,000 
  shares authorized;                           
  11,571,804 and 11,046,804 shares issued; 
  11,565,563 and 11,040,563  
  shares outstanding                        116,000    111,000 
 Additional paid-in capital              11,884,000 10,724,000 
 Accumulated deficit                     (9,935,000)(9,336,000)

    Total stockholders' equity            2,069,000  1,499,000 
                                                    
                                         $4,682,000 $4,063,000 

</TABLE>
  See accompanying notes to consolidated financial statements.

<TABLE>

                 ELECTRONIC CLEARING HOUSE, INC.

              CONSOLIDATED STATEMENT OF OPERATIONS

<CAPTION>

                                    Year ended September 30,  
                                   1996        1995       1994
<S>                                 <C>        <C>         <C>
REVENUES:
 Bankcard processing revenue   $8,926,000 $6,078,000  $5,299,000
 Bankcard transaction fees      2,992,000  2,175,000   1,863,000
 Terminal sales and 
  lease revenue                 2,189,000  5,617,000   2,072,000
 Check guarantee fees             135,000    194,000     264,000
 Research and development         100,000     37,000      87,000


                               14,342,000 14,101,000   9,585,000

COSTS AND EXPENSES:
 Bankcard processing            9,023,000  6,292,000   5,432,000
 Cost of terminals sold 
   and leased                   1,866,000  4,335,000   1,645,000
 Check guarantee                   66,000     93,000     121,000
 Customer service                 416,000    373,000     326,000
 Selling                           31,000     94,000     112,000
 General and administrative     2,799,000  2,823,000   2,476,000
 Research and development         325,000    228,000     354,000


                               14,526,000  14,238,000  10,466,000

Loss from operations            (184,000)  (137,000)   (881,000)

Interest income                   38,000     27,000      46,000 
Interest expense                (266,000)  (196,000)    (91,000) 
Legal settlement (Note 16)                  327,000 
Write down of real estate 
 held for investment (Note 7)    (84,000)  (192,000) 
Loss reserve for notes 
 receivable (Note 5)             (98,000)                       

Loss before income taxes        (594,000)  (171,000)   (926,000)
Income tax provision              (5,000)    (5,000)     (5,000)

Net loss                       ($599,000) ($176,000)  ($931,000)

Net loss per share                ($.053)    ($.016)     ($.117)


</TABLE>

  See accompanying notes to consolidated financial statements.



<TABLE>
                                      ELECTRONIC CLEARING HOUSE, INC.


                         CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' 
                         EQUITY
<CAPTION>



                                                                             
                                                                              
                                                 Stock            Additional  
                                                                    Paid-in   
                            Treasury   Common    Preferred  Amount  Capital     
                                                            ---in thousands--
<S>                          <C>    <C>          <C>         <C>   <C>          
Balance at Sept 30, 1993     6,241  6,980,400    216,614     $72   $9,858       

Exercise of warrants                  205,000                  2                
Conversion of debt                    225,405     23,511       3      440       
Conversion of preferred 
 to common                          3,459,448  (221,980)      32     (32)       
Issuance of preferred 
 stock                                            18,251              460    
Issuance of common stock                   91                                   
Net loss                                                                        

Balance at Sept 30, 1994     6,241 10,870,344     36,396    109    10,726      

Conversion of preferred 
  to common                           176,460    (8,823)       2      (2)     
Net loss                                                                        

Balance at Sept 30, 1995     6,241 11,046,804     27,573     111   10,724       

Exercise of warrants                  125,000                  1       62       
Exercise of stock options             150,000                  2       74       
Issuance of preferred stock                      425,000       4      846       
Issuance of common stock              250,000                  2       98       
Issuance of warrants                                                   80      
Net loss                                                                        

Balance at Sept 30, 1996     6,241 11,571,804    452,573    $120  $11,884       


</TABLE>


<TABLE>

                     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
                     EQUITY (CONTINUED)

<CAPTION>

                                               Accumulated
                                               Deficit
                                               from
                                               October 1,
                                               1981               Total
                                                 ---- in thousands-----


<S>                                            <C>                <C>
Balance at September 30, 1993                  $(8,229)           $1,701

Exercise of warrants                                                   2
Conversion of debt                                                   443
Conversion of preferred to common   
Issuance of preferred stock                                          460
Issuance of common stock
Net loss                                          (931)             (931)

Balance at September 30, 1994                   (9,160)            1,675

Conversion of preferred to common
Net loss                                          (176)             (176)

Balance at September 30, 1995                   (9,336)            1,499

Exercise of warrants                                                  63
Exercise of stock options                                             76
Issuance of preferred stock                                          850
Issuance of common stock                                             100
Issuance of warrants                                                  80
Net loss                                          (599)             (599)

Balance at September 30, 1996                   (9,935)            2,069
       
</TABLE>

                       See accompanying notes to consolidated financial 
                       statements.

<TABLE>
                         ELECTRONIC CLEARING HOUSE, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<CAPTION>

                                                 Year ended September 30,     
                                                 1996      1995         1994
<S>                                        <C>         <C>        <C>
Cash flows from operating activities:
   Net loss                                ($  599,000)($ 176,000)($ 931,000)
   Adjustments to reconcile net loss 
    to net cash (used in) provided 
    by operating activities:
    Depreciation                                199,000    189,000    282,000
    Provisions for losses on accounts 
     and notes receivable                       252,000  (158,000)   (39,000)
    Provision for loss on real estate 
    held for investment                          84,000   192,000
    Provision for obsolete inventory             20,000              (50,000)
    Fair value of stock warrants issued 
     in connection with debt                     80,000
    Changes in assets and liabilities:
     Restricted cash                          (203,000)  (212,000)    (6,000)
     Accounts receivable                      (312,000)   705,000    (89,000)
     Inventory                                (205,000)   907,000   (727,000)
     Prepaid expenses and other assets         (20,000)   156,000    (65,000)
     Other assets, net                        (111,000)   204,000   (214,000)
     Accounts payable                         ( 67,000)(1,557,000) 1,135,000 
     Accrued expenses                           30,000 (1,394,000) 1,356,000 
     Other liabilities                           5,000                 7,000 


     Net cash (used in) provided by 
     operating activities                     (847,000)(1,144,000)    659,000

Cash flows from investing activities:
   Purchase of equipment                      (138,000)  (299,000)  (140,000)
   Investment in real estate                             (880,000)           

    Net cash used in investing activities     (138,000)(1,179,000)  (140,000)

Cash flows from financing activities:
   (Increase) decrease in notes receivable 
    from stockholders and related parties       10,000     (5,000)    25,000 
   Proceeds from issuance of notes payable     200,000  1,373,000            
   Repayment of notes payable                 (139,000)  (146,000)  (195,000)
   Proceeds from issuance of preferred stock   850,000               350,000 
   Common stock warrants exercised              63,000                 2,000 
   Proceeds from exercise of stock options      76,000                       

    Net cash flows provided by financing 
     activities                              1,060,000  1,222,000    182,000

Net increase (decrease) in cash                 75,000 (1,101,000)   701,000
Cash and cash equivalents at beginning of year  97,000  1,198,000    497,000

Cash and cash equivalents at end of year       $172,000   $97,000  $1,198,000

(/TABLE>

          See accompanying notes to consolidated financial statements.

                         ELECTRONIC CLEARING HOUSE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Electronic Clearing House, Inc. (ECHO or the Company), a Nevada corporation, is
the continuing entity of the merger of Electronic Financial Systems, Inc. (EFS)
and Bio Recovery Technology, Inc. (BIO) which occurred in January 1986.  In this
transaction, EFS was treated as the acquirer and subsequently the Company was
reorganized with BIO (which changed its name to Electronic Clearing House, Inc.)
as the parent company and EFS as a subsidiary.

ECHO provides credit card authorizations, electronic deposit services and check
guarantee services for retail and wholesale merchants and banks.  In addition, 
the Company develops and sells electronic terminals for use by its customers 
and other processing companies.  The Company has five wholly owned 
subsidiaries:  ECHO Payment Services, Inc. (formerly GCLC Corporation), 
Computer Based Controls, Inc., ECHO R&D Corporation (formerly EBVIII Brain 
R&D Corporation), XpressCheX, Inc. and National Credit Card Reserve Corporation.

The Company's significant accounting policies are as follows:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries.  All significant intercompany transactions and accounts 
have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consist of unrestricted cash balances only.  Cash
equivalents are considered to be all highly liquid debt instruments purchased
with an original maturity of three months or less.  

Restricted Cash

Under the terms of a five year processing agreement effective from January 25,
1994, the Company maintains a cash reserve account at its primary processing 
bank as a contingency against chargeback losses.  Chargeback losses occur 
when a credit card holder presents a valid claim against one of the Company's
merchants and the merchant has insufficient funds or is no longer in business
resulting in the charge being absorbed by the Company.  As processing fees 
are received by the processing bank, they are allocated per the processing 
agreement to the reserve account. Additionally, under the terms of the 
Company's processing agreement with the bank, the Company is responsible for 
all external costs of the program and for all back room functions including 
daily accounting, settlement and security.   

The Company also has $104,000 of cash, the use of which is restricted to 
repayment of $600,000 of notes payable maturing March 31, 1997.  (See Note 9).

Inventory

Inventory is stated at the lower of cost or market, cost being determined on the
first-in, first-out method.  Inventory consists of terminals and printers 
held for sale or lease and related component parts.

Property and Equipment

Property and equipment are stated at cost.  Expenditures for additions and major
improvements are capitalized.  Repair and maintenance costs are expensed as
incurred.  When property and equipment are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts.  Gains
or losses from retirements and disposals are credited or charged to income. 
Depreciation and amortization are computed using the straight-line method 
over the shorter of the estimated useful lives of the respective assets or 
terms of the related leases.  The useful lives and lease terms for 
depreciable assets are as follows:

         Company headquarters building          39 years
         Computer equipment and software       3-5 years
         Furniture fixtures and equipment        5 years
         Leasehold improvements                 10 years
         Tooling equipment                       2 years

Purchased Technology, Capitalized Software, and Patents

Costs related to the purchase of technology are amortized over the estimated
useful life of five years using the straight-line method.  Capitalized software
costs are being amortized over three years.  Costs related to establishing a
patent are being capitalized and amortized over the life of the patent, once the
patent is granted and officially issued. If the patent application is denied,
the associated capitalized costs are expensed.


Revenues and Expenses

Processing and check guarantee fees are recorded at the time of processing. 
Processing costs paid to banks are included in costs and expenses.  Terminal
leases are recorded as sales-type leases.  Interest income related to such 
leases is recognized over the life of the lease.  Revenue is recognized on 
such leases, and on sales of terminals, upon installation.  Additional 
revenue is also recognized when a lease is assigned and sold to a third party.  

The Company expensed $189,000, $65,000, and $166,000 for the years ended 
September 30, 1996, 1995 and 1994, respectively for bankcard processing 
chargeback losses.  $217,000, $132,000 and $46,000 were provided for other 
uncollectible leases and notes receivable balances for the years ended 
September 30, 1996, 1995 and 1994.

The Company has one customer that accounted for approximately $2,135,000 of
revenues for the year ended September 30, 1996, and two customers that accounted
for approximately $5,094,000 and $1,478,000 for the years ended 1995, and 1994,
respectively.


Income Taxes

Income taxes are provided based on earnings reported for financial statement
purposes.  Deferred income taxes are provided for timing differences between
financial and taxable income.

In October 1993, the Company adopted Statement of Financial Accounting Standards
No. 109 (FAS 109), "Accounting for Income Taxes".  The adoption of FAS 109 
changes the Company's method of accounting for income taxes from the deferred
method (APB 11) to an asset and liability approach.  Previously, the Company 
deferred the past tax effects of timing differences between financial 
reporting and taxable income.  The asset and liability approach requires the 
recognition of deferred tax liabilities and assets for the expected future 
tax consequences of temporary differences between the carrying amounts and 
the tax bases of assets and liabilities.  The adoption of FAS 109 had no 
material impact on the financial position or results of operations of the 
Company.

Net Loss Per Share

Net loss per share is based on the weighted average number of common shares and
dilutive common equivalent shares outstanding during the period.  The shares
issuable upon conversion of preferred stock and exercise of options and warrants
are not included in the weighted average because their inclusion would be anti-
dilutive.  Net loss per share amounts included in the consolidated statement of
operations are based upon average shares outstanding of 11,297,316, 11,039,451,
and 7,968,562 in fiscal years 1996, 1995, and 1994, respectively.  

Issuance of Common Stock, Warrants and Options

Costs associated with the issuance of common stock are accounted for as a
reduction of paid-in capital in the year of issuance of the common stock. Gains
or losses on the sale of treasury stock are recorded as a charge to additional
paid-in capital.

Stock purchase warrants issued with debt are accounted for as additional paid-in
capital.  Warrants are valued at their estimated fair value at the time of
issuance, reflected as a discount which is amortized to interest expense 
using the interest method.

Compensation expense is recognized in association with the issuance of stock
options and warrants as the difference, if any, between the trading price of the
stock at the time of issuance and the price to be paid by an officer or 
director.  Compensation expense is recorded over the period the officer or 
director performs the related service.

Industry Segment Information

The Company operates principally in the electronic transaction processing and
related equipment sales industry.  The Company also occasionally engages in real
estate transactions; however, the real estate portion of the Company's business
historically has not, and is not expected to, generate a significant part of the
Company's revenues.  

NOTE 2 - BASIS OF PRESENTATION:

The Company has incurred losses from operations in each of the past three fiscal
years.  The Company has historically relied upon private placement funds and
short-term borrowings to meet liquidity needs.

While management anticipates that cash flow from operations and financing
activities will be sufficient to meet obligations and liabilities as they 
mature, there is no assurance that the Company will be successful in 
generating sufficient cash from operations and financing activities to avoid 
depletion of its capital resources.  The consolidated financial statements do
not include any adjustments relating to the recoverability and classification
of recorded asset amounts nor the amounts and classifications of liabilities 
that might be necessary should the Company not be able to continue in existence.

During fiscal 1996, the Company continued to enhance its banking relationship
with its primary processing bank and expanded its merchant base.  In July 1996, 
the Company signed a Letter of Intent with American Independent Bank ("AIB") 
to have AIB as another primary processing bank. Management expects processing
operations to contribute significantly to cash flow in 1997 and that short 
term assets will be sufficient to meet current liabilities.  

NOTE 3 - STATEMENT OF CASH FLOWS:

In fiscal years 1996, 1995 and 1994, cash payments for interest were $219,660,
$137,000, and $76,000, respectively.

Significant non-cash transactions for fiscal 1996 are as follows:

   $100,000 of computer equipment and Internet specific programs were 
   purchased for 250,000 shares of common stock.

   An automobile for $21,000 was acquired under capital lease.  

Significant non-cash transactions for fiscal 1995 are as follows:

   8,823 shares of Class F Preferred Stock were converted to 176,460 shares of
   common stock.

   $34,000 of computer equipment and $32,000 of testing equipment were acquired
   under capital leases.


Significant non-cash transactions for fiscal 1994 are as follows:

   $100,000 of short term debt and accrued interest of $11,000 were converted to
   220,843 shares of Common Stock.

   $16,000 of long term debt was converted by an officer of the Company to 1,116
   shares of class H Preferred Stock.  The officer also converted $3,000 of 
   short term debt to 4,562 shares of Common Stock.

   $243,000 of long term shareholder debt and $70,000 of accrued interest were
   converted to 22,395 shares of class H Preferred Stock.

   $200,000 of technology was purchased for 3,667 shares of class J Preferred
   Stock and a $90,000 short term payable.

   221,980 shares of class A, D, E, F, G, I, and J Preferred Stock were 
   converted to 3,459,448 shares of Common Stock.


NOTE 4 - INVENTORY

The components of inventory are as follows:

</TABLE>
<TABLE>
<CAPTION>

                                                      September 30,  
                                                   1996         1995
<S>                                           <C>          <C>
Raw materials                                 $  406,000   $  184,000  

Finished goods                                   193,000      209,000

                                                 599,000      393,000

Less: Reserve for obsolescence 
 of inventory                                     20,000         - 0 -

                                              $  579,000   $  393,000

</TABLE>

NOTE 5 - NOTES RECEIVABLE FROM STOCKHOLDERS AND RELATED PARTIES:

The Company occasionally engages in transactions with stockholders, the terms of
which may not be the same as those that would result from transactions among
wholly unrelated parties.

Notes receivable from stockholders and related parties comprise:
<TABLE>
<CAPTION>


                                                            September 30,    
                                                         1996          1995
<S>                                               <C>           <C>
Notes receivable from two stockholders, 
 one of whom was a member of the Board 
 of Directors until April 1994, bearing 
 6% interest                                      $    - 0 -    $    24,000

Note receivable from officer bearing
 6% interest                                           - 0 -         13,000

Note receivable, (net) due on demand, 
 secured by common shares of closely held 
 company and personal guarantee of owner, 
 a previous stockholder, non-interest bearing         50,000        158,000

                                                $     50,000   $    195,000



</TABLE>
The Company received $5,000 from a noteholder for a two year option to purchase
certain real property from the Company at book value at the time of the 
purchase.

NOTE 6 - PROPERTY AND EQUIPMENT:

Property and equipment comprise:
<TABLE>
<CAPTION>
                                                       September 30,    
                                                    1996        1995
<S>                                           <C>            <C>
Land and building                             $    880,000   $  880,000 
Computer equipment and software                  1,410,000    1,271,000 
Furniture, fixtures and equipment                  578,000      511,000 
Building improvements                                5,000      333,000 
Tooling equipment                                  333,000      308,000 
Automobile                                          21,000              
                                                 3,227,000    3,303,000 
Less:  accumulated depreciation                 (1,738,000)  (1,873,000)

                                                $1,489,000    $1,430,000


</TABLE>
Included in property and equipment are assets under capital lease of $215,000
and $400,000 at September 30, 1996 and 1995, with related accumulated 
depreciation of $114,000 and $187,000, respectively.  

In October 1994, the Company purchased the building it currently occupies for
$880,000, paying $240,000 as a down payment and borrowing $560,000 from the bank
which previously owned the building. The Company capitalized a fee of $80,000
which was paid to a stockholder to facilitate the acquisition of the building
and its financing.


NOTE 7 - REAL ESTATE HELD FOR INVESTMENT:

Investments in real estate consist of undeveloped land, the majority of which
was contributed to the Company as part of the original capitalization.

The Company provided $84,000 and $192,000 for estimated losses for the years 
ended September 30, 1996 and 1995 on its investment in real estate to reflect
the estimated market value of real estate holdings.


NOTE 8 - OTHER ASSETS:

Other assets comprise:
<TABLE>
<CAPTION>
                                                         September 30,  
                                                     1996            1995
<S>                                                <C>            <C>
Purchased technology, net of 
 accumulated amortization of 
 $101,000 and $80,000                              $  5,000        $ 27,000

Printer technology                                  200,000         200,000

Patents and associated cost, 
 net of accumulated amortization 
 of $4,000 in 1996                                  111,000         107,000

Software costs, net of 
 accumulated amortization 
 of $134,000 and $60,000                            272,000         166,000

Other                                                99,000          76,000

                                                   $687,000        $576,000

</TABLE>
During 1996, the Company capitalized $134,000 software costs for the development
of a United States Postal Service Pilot Program and $34,000 for the development
of in-house software.  The printer technology for the Company's electronic money
order device (EMOD) was purchased during fiscal year 1994.  As of September 30,
1996, this technology was not incorporated in the EMOD; therefore, the printer
technology has not been amortized.  Management expects sales of products 
utilizing this technology to begin in fiscal 1997 and will commence 
amortization in fiscal year 1997. Total amortization of intangible assets was
$99,000 in fiscal 1996, $74,000 being the amortization of software costs over
three years, and $21,000 for the amortization of purchased technology over 
five years and $4,000 for the amortization of patents over eighteen years.



NOTE 9 - SHORT-TERM BORROWINGS AND LONG-TERM DEBT:

Short-term borrowings and long-term debt consist of the following:
<TABLE>
<CAPTION>
                                                           September 30,   
                                                         1996         1995
<S>                                                   <C>          <C>
Convertible notes payable with detached 
 warrants, unsecured, due March 15, 1997, 
 stated interest of 12%, convertible at the 
 option of the holder to common stock at 
 $.40 per share                                       $200,000     $   - 0 -

Convertible notes payable with detached 
 warrants, unsecured, due April 1, 1997, 
 stated interest of 12%, convertible at 
 the option of the holder to common stock 
 at $.50 per share                                     100,000     100,000      
    
Convertible notes payable with detached 
 warrants, unsecured, due March 31, 1997, 
 stated interest of 12%, convertible at 
 the option of the holder to common stock 
 at $.40 per share                                     600,000      600,000 

Note payable, secured by corporate 
 headquarters building, ten year maturity 
 with a variable interest rate of 8.4% as 
 of September 30, 1996                                 550,000      557,000 

Term loan, secured by computer equipment,
 bearing interest at 11%                                94,000      150,000 

Capital leases (Note 14)                                91,000      143,000 

Other                                                    6,000        5,000 

                                                     1,641,000    1,555,000 
Less:  current portion                              (1,044,000)    (831,000)

Total long-term debt                                  $597,000     $724,000 


</TABLE>
Concurrent with purchasing the corporate office building in fiscal year 1995,
the Company issued a secured note payable for $560,000 to the bank, previous 
owner, amortized over thirty years due in ten years. Monthly debt service for
principal and interest approximates $4,000.

In December 1994, the Company issued 12% convertible notes payable aggregating
$600,000 with detached warrants to purchase 600,000 shares of common stock.  The
convertible notes contain, among other covenants, provisions setting forth the
establishment of a collateral cash account of $500,000 at the Company's primary
processing bank and the recording of a second deed of trust on the corporate
office building.  As of September 30, 1996, the Company had deposited 
$100,000 in the collateral cash account and the noteholders had waived the 
remaining $400,000 cash collateral and the recording of a second deed of 
trust on the corporate office building requirement. The due date of the notes
was extended to March 31, 1997.  As a consideration, the exercise price of 
the original 600,000 warrants was reduced from $.50 to $.40 per share and an 
additional 300,000 warrants, exercisable at $.40, was awarded. These warrants
were valued at $78,000 to be amortized as interest expense over a 15-month 
period.

Three 12% notes aggregating $150,000 became due April 1, 1995.  One note for
$50,000 was retired and the additional notes were extended to April 1, 1996. 
These notes were further extended to April 1, 1997 during fiscal year 1996.

In fiscal 1995, the Company opened a line of credit for $150,000 with its 
primary processing bank to upgrade the Company's bankcard processing system. 
The line was converted to a 2 year term loan at January 1, 1996, bearing 11% 
interest and secured by the hardware upgrades.

In March 1996, the Company issued 12% convertible notes payable aggregating
$200,000 with detached warrants to purchase 200,000 shares of common stock at
$.40 per share. These warrants were valued at $2,000 to be amortized as interest
expense over a 12-month period.

Future maturities of debt are as follows:
<TABLE>
<CAPTION>

            Fiscal year

              <S>                    <C>
              1997                   $1,044,000
              1998                       47,000
              1999                       11,000
              2000                        7,000                           
              2001 and thereafter       532,000
                                     $1,641,000

</TABLE>

NOTE 10 - ACCRUED EXPENSES:

<TABLE>
<CAPTION>


Accrued expenses are comprised of the following:              
                                                              
                                                        September 30,   
                                                       1996      1995
<S>                                                 <C>      <C>
Accrued bank card fees                              $116,000 $ 66,000
Accrued compensation and payroll taxes               158,000  194,000
Accrued communication costs                          171,000  131,000
Accrued professional fees                            112,000  177,000
Accrued commission                                   118,000   46,000
Other                                                119,000  150,000
                                                    $794,000 $764,000

</TABLE>

NOTE 11 - INCOME TAXES:

The Company had a net operating loss for tax reporting purposes for the year 
ended September 30, 1996.  In prior reporting periods, the Company had 
consistently incurred net operating losses.  At September 30, 1996, the 
Company had federal tax loss carryforwards of approximately $5,910,000 and 
state tax loss carryforwards of $3,126,000. These carryforwards will expire 
from 1996 through 2010 if not utilized against future taxable income.  The 
utilization of a portion of the carryforwards is subject to limitations under
Internal Revenue Code Section 382 (Section 382) due to a change in ownership 
of the Company which occurred during fiscal year 1987, and may be further 
reduced upon future changes of control. Investment tax credits of $51,000 are
also available to reduce future federal income taxes and expire in years 1996
through 2000.  The utilization of these credits is also subject to Section 
382 limitations.

The Company has a $2,300,000 deferred tax asset for the loss carryforwards 
against which it has recorded a 100% valuation reserve based on the 
uncertainty of utilization of the federal and state loss carryforwards.  The 
amount of the deferred asset is based on the current federal and state loss 
carryforwards after Section 382 limitations as reported on the Company's 
September 30, 1995 tax return and as adjusted for the September 30, 1996 
federal taxable loss of $318,000 and state taxable loss of $323,000.  Tax 
rates of 34% and 9.3%, respectively, were applied to determine the potential 
future values of the loss carryforwards.  No tax effect for temporary 
differences is recognized as the total deferred taxes that would result from 
such differences is minor.

The Company adopted the provisions of FAS No. 109, "Accounting for Income 
Taxes", as of October 1, 1993.  Previously, the Company accounted for taxes 
under APB 11.  The adoption had no impact on 1996 result of operations.


NOTE 12 - STOCKHOLDERS' EQUITY:


Preferred Stock

During the year ended September 30, 1994, 12,500 of the 15,000 outstanding 
shares of Series A Preferred Stock (Class A Stock) were converted to 156,250 
shares of common stock. The remaining 2,500 shares of Class A Stock, par 
value $.01, stated value $10.00, are convertible into twelve and one-half 
shares of common stock for each share of Class A Stock.  Holders of Class A 
Stock have preference in liquidation over all other stockholders.

In June 1991, the Company issued 1,000 shares of Series D Preferred Stock (Class
D Stock).  In October 1991, the Company issued 9,375 shares of Class D Stock and
ceded notes payable in the amount of $94,000 in exchange for a note secured by
deed of trust in the amount of $188,000.  Each share of Class D Stock is
convertible at the rate of twenty-five shares of common stock for each share of
Class D Stock and is callable at the Company's option for $21 per share.  The
Class D Stock has priority in liquidation over the Company's common stock but is
junior in liquidation to Series A Preferred Stock (Class A Stock).  Holders 
of the Class D Stock are entitled to receive dividends if and when declared 
and paid on the common stock at the ratio of an amount per share equivalent 
to the amount of dividends declared on twenty-five shares of common stock. 
During fiscal 1994, 8,813 shares of Class D Stock were converted to 122,663 
shares of common stock.

From February to July 1992, the Company issued 50,005 shares of Series F 
Preferred Stock (Class F Stock) for an aggregate price of $850,000.  Class F 
Stock has a stated value of $17 per share and is convertible into twenty 
shares of common stock.   During fiscal 1994, 41,182 shares of Class F Stock 
were converted to 823,640 shares of common stock.  During fiscal 1995, the 
remaining 8,823 shares of Class F Stock were converted to 176,460 shares of 
common stock.

On March 31, 1994, the Company issued 23,511 shares of Series H Preferred Stock
(Class H Stock) to two noteholders in exchange for $329,000 of debt and accrued
interest.  1,116 of these Class H shares were issued to the Company's 
president.  Class H Stock has a stated value of $14.00 and is convertible 
into 20 shares of common stock.  The Company may call Class H Stock at any 
time at a price of $14.50 per share.  Class H Stock has priority in 
liquidation over the Company's common stock but is junior in liquidation to 
all previous classes of preferred stock. 

During fiscal 1996, the Company issued 425,000 shares of Series K Preferred 
Stock (Class K Stock) for an aggregated price of $850,000.  Class K Stock has
a stated value of $2.00 per share and is convertible into four shares of 
common stock. Class K Stock has priority in liquidation over the Company's 
common stock but is junior in liquidation to all previous classes of 
preferred stock.

Common Stock Warrants

At September 30, 1996, the following warrants were outstanding:
<TABLE>
<CAPTION>

          Warrants         Option         Expiration
         Outstanding       Price          Date
           <C>             <C>            <C>
           125,000         $0.50          December 1996 to March 1997
            37,500          0.50          March 1997
           100,000          0.50          May 1998
           600,000          0.40          December 1999
           500,000          0.40          February to March 1999
         1,362,500       

</TABLE>
   Warrants to purchase 150,000 shares of common stock at $0.50 per share were
   issued between December 1992 and March 1993 in connection with notes with an
   aggregate face value of $600,000 and stated interest rate of 12%.  The 
   warrants were recorded as additional paid-in capital with a corresponding 
   discount to the notes payable based upon the estimated fair value of such 
   warrants at the grant date.  The warrants are exercisable for three years 
   subsequent to date of grant. During fiscal 1994, 37,500 warrants to 
   purchase 37,500 shares of common stock at $0.50 per share were issued in 
   connection with an extension of three notes aggregating $150,000.  The 
   warrants are exercisable for three years subsequent to the date of grant. 
   In May 1995, an additional 100,000 warrants to purchase 100,000 shares of 
   common stock at $0.50 per share were issued in connection with an 
   extension of two notes aggregating $100,000 which remain outstanding.  The
   warrants are exercisable for three years subsequent to the date of grant.

   Warrants to purchase 600,000 shares of common stock at $.50 per share were
   issued in December 1994 in connection with notes with an aggregate face value
   of $600,000 and stated interest rate of 12%.  The warrants are exercisable
   for five years subsequent to date of grant.  300,000 of these warrants can
   be called at $0.50 per share by the Company after a period of thirty 
   months. If the warrants are called, the holder shall be given thirty days 
   to exercise the warrants or permit them to expire.  The exercise price of 
   the 600,000 warrants was reduced to $.40 per share in February 1996.  In 
   addition, 300,000 warrants were issued in February 1996, exercisable at 
   $.40 per share for three years in connection with several term loan 
   extensions.

   Warrants to purchase 200,000 shares of common stock at $.40 per share were
   issued in March 1996 in connection with notes with an aggregated face 
   value of $200,000 and stated interest rate of 12%.  The warrants are 
   exercisable for three years subsequent to date of grant.


NOTE 13 - COMMON STOCK OPTIONS:

Stock option activity during 1994, 1995, and 1996 was as follows:
<TABLE>
<CAPTION>

                                                         Exercise
                                     Options             Price
   <S>                               <C>                  <C>
   Outstanding September 30, 1994    1,840,000            0.50 - 0.85

     Granted                         1,110,000            0.40 - 0.85
     Forfeited                        (150,000)           0.85
   Outstanding September 30, 1995    2,800,000            0.40 - 0.85

     Granted                           925,000            0.40 - 1.03
     Forfeited                        (270,000)           0.50
     Exercised                        (150,000)           0.50 - 0.56
   Outstanding September 30, 1996    3,305,000            0.40 - 1.03

            
</TABLE>

During fiscal 1994, 650,000 warrants previously issued to officers and directors
were converted to common stock options.  The options issued had the same 
features as the warrants terminated.  300,000 are exercisable at $0.56 and 
350,000 at $0.85.

In April 1994, an aggregate of 90,000 options were granted each to purchase one
share of common stock for $0.56.  The President was granted 50,000 options and
four other officers of the Company were granted 10,000 options each.

On September 13, 1994, the Company's Board of Directors granted an aggregate of
850,000 options, each to purchase one share of Common Stock for $0.50, 
vesting 1/5 per year over a period of five years.  Six officers of the 
Company were granted from 50,000 to 250,000 options each.  

During fiscal 1995, the President of the Company, as part of a new employment
agreement, was granted 310,000 options to purchase one share of common stock for
$.50, vesting over three years.  In addition, the Chief Executive Officer and
Chairman was granted 650,000 options to purchase one share of common stock for
$.40 each and an officer was granted 50,000 options to purchase one share of
common stock at $.50 each.  Also during fiscal 1995, an officer's warrants to
purchase 100,000 shares of common stock at $.85 each were converted to 100,000
options each to purchase one share of common stock for $0.85.  150,000 options
previously issued to an officer expired during the year.  

During fiscal 1996, the Company's Board of Directors granted each of its outside
directors options to purchase 100,000 shares of common stock ranging from 
$.40 to $1.03 per share during the term of their respective service on the 
board.  In addition, the Company also granted an aggregate of 625,000 options
to four officers and an employee to purchase common stock ranging from $.50 
to $.84 per share.

All officer options, with the exception of the 310,000 options granted under the
president's employment agreement, are granted under the Company's incentive 
stock option plan.  Options granted to outside directors are not included in 
the plan.

On May 13, 1992, the Company's Board of Directors authorized adoption of an
Incentive Stock Option Plan ("Plan"), which was ratified by the shareholders at
the Annual Meeting, held July 10, 1992.  The Plan provided for the issuance 
of up to 325,000 stock options, each to purchase one share of the Common 
Stock for $0.85 per share, subject to adjustment in the event of stock 
splits, combinations of shares, stock dividends or the like.  On September 
13, 1994, the Company's Board of Directors authorized an increase in the Plan
to 2,375,000 options.  This Plan amendment was ratified by the shareholders 
at the Annual Meeting held in February of 1995.  

No compensation expense was recognized in fiscal years 1996, 1995 and 1994 
related to the issuance of stock options.

NOTE 14 - COMMITMENTS AND CONTINGENCIES:

Terminal equipment leases

The Company leases terminals to customers under agreements that are 
classified as sales.  Sales-type lease terms are for two to three years. A 
total lease receivable of $233,000 and $107,000 was outstanding at September 
30, 1996 and 1995, respectively.  $28,000 and $17,000 have been reserved for 
against lease cancellations at September 30, 1996 and 1995, respectively.  
The interest income recognized on the leases was $31,000, $20,000 and $20,000
for the years ended September 30, 1996, 1995 and 1994, respectively.  

Prior to March 1993, the majority of receivables resulting from sales-type 
leases were sold to the Company's primary processing bank upon origination.  
Though the Company is currently factoring a very limited number of new 
leases, the stream of payments for leases previously sold, which totalled 
$16,000 at September 30, 1996, is guaranteed to the bank regardless of the 
collectibility of any specific lease(s) in the bank's portfolio.  The Company
charged $46,000, $37,000 and $19,000 to expense for leases that became 
uncollectible for the years ended September 30, 1996, 1995, and 1994, 
respectively.  

The Company's future payment stream on in-house leases is as follows:

<TABLE>
<CAPTION>

            Fiscal Year                  Payments
            <S>                            <C>
            1997                       $144,000
            1998                         89,000
                                                            
                                      $ 233,000
</TABLE>

Account Receivable

Included in accounts receivable are amounts aggregating $180,000 due from one
former credit card processing customer.  The Company has received a default
judgement in its favor.  Management believes the Company will be successful in
collecting these judgements and has therefore not recorded reserves against
amounts due.


Lease Commitments

In November 1994, the Company entered into a five-year lease for a 4,200 square
foot warehouse facility to house its manufacturing repair facility at a monthly
rental of $2,600.

The Company's future minimum rental payments for capital and operating leases
(Note 9) at September 30, 1996 are as follows:
<TABLE>
<CAPTION>

                                                                 
   Fiscal Year          Capital Leases         Operating Leases
   <S>                        <C>                    <C>
   1997                    62,000                 32,000
   1998                    21,000                 32,000
   1999                     6,000                 31,000  
   2000                     2,000
                                                            

                          $91,000                $95,000    

</TABLE>

NOTE 15 - SUBSEQUENT EVENTS:

In November 1996, the remaining 2,500 shares of Series A Preferred Stock (Class
A Stock) were converted to 31,250 shares of common stock.

In November 1996, the remaining 1,562 shares of Series D Preferred Stock (Class
D Stock) were converted to 19,525 shares of common stock. 

In November 1996, $100,000 of short term debt was converted to 250,000 shares of
common stock.

NOTE 16 - LITIGATION

The Company recognized $327,000 in income during fiscal year 1995 which was
related to a lawsuit settlement against its previous processing bank.






<PAGE>
<TABLE>







                      ELECTRONIC CLEARING HOUSE, INC. AND CONSOLIDATED 
                      SUBSIDIARIES

                                        SCHEDULE VIII TO FORM 10K

                        RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND  
                        RESERVES



                                                        
                                                                   
<CAPTION>
                                 REDUCTION IN                                  
                    BALANCE AT     ACCOUNTS     BALANCE AT    CHARGED TO       
DESCRIPTION           9/30/94     RECEIVABLE      9/30/95       EXPENSE        
<S>                        <C>          <C>           <C>           <C>         

Allowance for
trade receivables     $982,000      $158,000      $824,000      $242,000       

Allowance for
receivables included                                                            
in other assets        150,000       150,000             0             0        

Allowance for
obsolete inventories         0             0             0        20,000        
</TABLE>

<TABLE>   
                      SCHEDULE VIII TO FORM 10K (CONTINUED)

<CAPTION>



                                REDUCTION IN
                                RESERVE AND
                                ACCOUNTS                    BALANCE AT
                                RECEIVABLE                  9/30/96

<S>                             <C>                         <C>
Allowance for
 trade receivables              $777,000                    $289,000

Allowance for
 receivables included
 in other assets                       0                           0

Allowance for
 obsolete inventories                  0                       20,000
  
</TABLE>

                                                 S-1




                                                                  EXHIBIT 10.34 



                            ASSET PURCHASE AGREEMENT

This agreement is between Electronic Clearing House, Inc. (hereinafter referred 
to as "ECHO"), a Nevada corporation and publicly traded company with its primary
offices located at 28001 Dorothy Drive, Agoura Hills, California and Larry 
Thomas (hereinafter referred to as "Thomas"), a married man with his 
principal office located at 1534 N. Moorpark Road, Thousand Oaks, California 
91360.

Whereas, ECHO desires to purchase certain assets of Thomas, and;

Whereas, Thomas desires to sell such assets;

Now, therefore, ECHO and Thomas have agreed to the following terms of purchase:

1)  Assets to be Purchased
    ECHO shall purchase certain assets, as listed on Exhibit A which is attached
    hereto and incorporated herein as part of this agreement.  Such assets shall
    include the following items:

    Select computer equipment, hardware and software systems;
    Specific furniture and office equipment, and;
    Certain software programs and intellectual properties.

2)  Valuation of and Consideration for Assets
    ECHO shall pay the current market value of said assets as defined in Exhibit
    A, a value of $100,000, in the form of 250,000 shares of ECHO Common Stock,
    a conversion rate of $0.40 per share, reflecting the value of ECHO stock on
    the day the Letter of Intent was signed, October 25, 1995, which letter is
    attached hereto and incorporated herein, identified as Exhibit B.

3)  No Ownership of CDPD Product
    Thomas does not sell and ECHO does not purchase any interest in the CDPD
    software, systems or processes relating thereto.


AGREED TO AND ACCEPTED BY:

ELECTRONIC CLEARING HOUSE, INC.     LARRY THOMAS


/s/Joel M. Barry                    /s/Larry Thomas
Joel M. Barry                       Larry Thomas


12/31/95                            12/31/95
Date                                Date



                                    EXHIBIT A

This attachment identifies the equipment and software that ECHO will be 
purchasing from Larry Thomas (XYNet) as part of our Agreement.

Computer Server Hardware ($14,000)

  Compaq XL 590                     (Web Server 1)
  17" Monitor for above
  Compaq XL 590                     (Web Server 2)
  15" Monitor for above
  High Performance Video for above
  Ethernet Cards for above
  SCSI Boards for above
  1GB Hard Drives for above
  DAT Tape backup device for above
  Two CD Rom Drives for above

Computer Server Software ($5,000)

  One Windows NT Server for above
  10 Windows NT Client Licenses for above
  1 SMS Server for above
  10 SMS Client Licenses
  1 SQL Server 4.2 for above
  10 SQL Server Client Licenses
  Misc. Software (e.g. backup) for above
  Windows NT Resource Kit
  Windows NT Tutorial (already delivered to Jessie)

Printers and Ethernet for Printer ($2,200)

  HP Laser Jet 4 Printer     JPBF090122
  ExtendNet for HP4          154587
  Deskjet 560 C color Printer

Desktop Hardware ($6,000)

  CompaqXL466        (Paul's machine)
  17" Monitor for above      

  Compaq DeskPro66M  (Larry's machine)
  17" Monitor for above

Desktop PC Software (other than OS) ($1,700)

  One Adobe Photoshop for PC
  One Adobe Acrobat Distiller for PC
  One Act II for PC
  One Quick Books for PC
  One Visual Basic Development for PC
  One Crystal Reports Development for PC

CD ROMs ($800)

  CDPD Specification
  Microsoft TechNet (1 per month)
  Microsoft DevNet (many CDs)

Internet Connectivity Hardware ($1,700)

  Ascend P50 (ISDN Router)

LAN Server and Management Software ($7,000)

  Netware 3.12 (10 User License)
  SNMPc (SNMP Management Software)
  PVCS (Version Control Software - 10 Users)

PBX and Phones ($6,000)

  Panasonic Digital Business System
  Card for 8 trunk lines
  Card for 8 digital phones
  Card for 8 analog phones
  3 Digital Executive Phones
  Misc. analog phones

Office Furniture Partitions ($7,000)

  Modular Partitions for approx. 9 4X6 cubicles

Office Desk and Chairs Furniture ($5,000)

  Nine computer desks with drop down keyboard
  1 Conference Table (oak-like finish)
  6 Conference Chairs
  9 Programmers Chairs
  1 Desk Chair (Larry)
  1 Desk Chair (was Kacey)
  2 Sec Chairs
  Executive Chair (old)

Office Storage Furniture ($1,500)

  Three 7' Teak bookshelves
  Three 2.5' bookshelves
  One 4' bookshelf
  Four 4-drawer file cabinets
  One 2-drawer file cabinet

Computer Room Equipment ($40)

  One 64 Slot Rack Mount Patch Panel
  Misc. Level 5 cables of varying lengths

Purchased, Installed, and Configured Internet Software ($35,000)

  Internet Firewall Software
  Trusted Information Associates Firewall configured on Internet Firewall 
  Server. 
  Provides protection to internal computer equipment and softrware from Internet
  hackers.  Provides Mail and WEB Proxies.

  Internet Web Software
  O'Reilly WebSite (Windows NT) (Installed - used for XYNet Web Site)
  Purveyor Web Server (2 copies - educational license) - provides caching
  capability. Not installed.
  Caching HTTP Server for UNIX. (not installed on XYNet server, but we have
  installed it on an Aspen server.



  Internet Mail Software
  SMTP confiured on Mail Server - provides Internet mail gateway, and local mail
server.
  POP Server. Provides access to SMTP from workstations. Allows public 
domain mail clients to run on each workstation.
  MajorDomo configured on Mail Server. Provides subscription-based mailing 
lists. Mail lists can be set up for any purpose, and digest of mail messages can
be archived for viewing at a later date.  Simplifies administration of 
maintaining mailing lists for multicast purposes.

  Internet DNS Software
  BIND configured on Internet Mail Server
  BIND configured on Windows NT
  BIND configured on Internet Firewall
  DNS software is in support of domain naims (e.g. ECHOxxx.com, XYNet.com, etc.)

XYNet Developed Internet Software ($25,000)

  WebPresenter by XYNet Software Technologies
  WebPresenter simplifies mass production of certain kinds of linked WWW pages,
and supports sophisticated   indexing of those pages and an SQL-server based 
search engine to find WEB pages.

Internet Connection (set-up fees paid) ($1,000)

  Internet connectivity to AdNetSol

Development Tools ($8,000)

  ASN.1 compiler (XYNet currently owns this).

Internet Customers ($1,000)

  Gecko Group
  Travel Expo
  ECHO

Miscellaneous ($1,500)

  Paid up Membership in CDPD Forum through June, 1996.

Loaned Machines to ECHO (these do not belong to XYNet)

  One Compaq 466i (Internet Firewall Server)
  One 17" Monitor for above
  One Compaq 66M (Internet Mail Server)
  One 17" Monitor for above

Exclusions

  Specifically excluded from the list of Assets included in Attachment A are the
  Loaned Machines mentioned above and XYNet's CDPD/AO software that XYNet
  developed under contract with McCaw Cellular.  The only Assets that are 
  included are those that are specifically listed.



EXHIBIT B

October 25, 1995

Memorandum of Understanding

Electronic Clearing House, Inc. (ECHO), a publicly traded company, and XYNet,
Inc., a privately owned company, have been in discussions regarding the 
potential purchase of XYNet by ECHO.  This memorandum, although not binding, 
does represent the basis for the acquisition of XYNet, absent either parties 
written rescission of the terms contained herein.

ECHO will purchase XYNet for $100,000 in ECHO stock which shall be valued at the
prevailing rate over the past month, $.40 per share, for a total of 250,000 
shares of ECHO stock.  All XYNet assets, which include but are not limited to
XYNet's internet related products, computer equipment, office furniture, 
software programs, pending contracts and goodwill, will be purchased.  
XYNet's CDPD product shall be excluded from the purchase.

ECHO shall guarantee the employment of Larry Thomas and Paul Neesen for a one
year period beginning November 13 at $100,000 and $80,000 respectively and a 
bonus plan will be designed for each individual based upon various 
performance criteria yet to be determined.  Each man will also be included in
a stock option plan for officers at a level yet to be determined.

XYNet understands the uncertainties that exist with regard to ECHO's continuing
NASDAQ qualification requirement and ECHO's present cash flow position.  ECHO
understands that the name "XYNet" must be changed, that XYNet's internet product
offerings have not been profitable to date and that no guarantee of such
profitability has been promised or guaranteed to ECHO by XYNet.

Our signatures below indicate our agreement with the statements contained in 
this Memorandum of Understanding.  Should the terms as defined herein not be 
executed by December 1, 1995, this Memorandum of Understanding will become void.


\s\ Joel M. Barry                                     \s\ Larry J. Thomas      
                         
Joel M. Barry                    Date                 Larry J. Thomas          
       Date