UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                    FORM 10-K

 X   Annual Report Pursuant to Section 13 or 15(d) of  the  Securities  Exchange
---  Act of 1934 for the fiscal year ended Sept. 30, 2004

     Transition  Report  Pursuant  to  Section  13  or  15(d)  of the Securities
---  Exchange Act of 1934

Commission  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.)

730 PASEO CAMARILLO, CAMARILLO, CALIFORNIA               93010
 (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:  (805) 419-8700, fax number:
                                 (805) 419-8689

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

                                                   Name of each exchange
          TITLE OF EACH CLASS                      ON WHICH REGISTERED
          -------------------                      ---------------------
                 None                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $0.01 par value
                                (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
    ---    ---

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  Registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  X
            ---

     Indicate  by  check mark whether the registrant is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).
Yes     No  X
    ---    ---

     The  aggregate  market  value of the voting stock held by non-affiliates of
the  Registrant,  based upon the closing sale price of the Common Stock on March
31,  2004  as  reported  on  the  NASDAQ  SmallCap  Market,  was  approximately
$60,535,000.  Shares of Common Stock held by each officer and director have been
excluded  in  that  such  persons  may  be  deemed  to  be  affiliates.  This
determination  of affiliate status is not necessarily a conclusive determination
for  other  purposes.

     As  of  December  13,  2004, Registrant had outstanding 6,472,331 shares of
Common  Stock.

                   DOCUMENTS INCORPORATED BY REFERENCE - NONE


<PAGE>
<TABLE>
<CAPTION>
                                   ELECTRONIC CLEARING HOUSE, INC.
                                    2004 FORM 10-K ANNUAL REPORT


                                          TABLE OF CONTENTS
                                          -----------------


PART 1     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
<S>        <C>                                                                                    <C>

ITEM 1.    Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

ITEM 2.    Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

ITEM 3.    Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

ITEM 4.    Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . .  15

PART II    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

ITEM 5.    Market for Registrant's Common Equity and Related Stockholder Security Matters. . . .  16

ITEM 6.    Selected Consolidated Financial Data. . . . . . . . . . . . . . . . . . . . . . . . .  16

ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations  18

ITEM 7A.   Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . .  31

ITEM 8.    Financial Statements and Supplemental Data. . . . . . . . . . . . . . . . . . . . . .  31

ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures  31

ITEM 9A.   Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32

ITEM 9B.   Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32

PART III   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33

ITEM 10.   Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . .  33

ITEM 11.   Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

ITEM 12.   Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . .  40

ITEM 13.   Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . .  42

ITEM 14.   Principal Accounting Fees and Services. . . . . . . . . . . . . . . . . . . . . . . .  42

PART IV    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  44

ITEM 15.   Exhibits, Financial Statement Schedules and Reports on Form 8K. . . . . . . . . . . .  44
</TABLE>


                                        2
<PAGE>
                                     PART 1


            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
            ---------------------------------------------------------

This  2004  Annual  Report  on  Form  10-K  contains statements which constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Those statements include statements regarding our intent, belief or
current expectations.  Examples of forward-looking statements include statements
regarding  our strategy, financial performance and revenue sources.  Prospective
investors  are  cautioned  that  any  such  forward-looking  statements  are not
guarantees  of  future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements  as a result of various factors, including, but not limited to, those
set forth elsewhere in this Annual Report.  See "Item 7. Management's Discussion
and  Analysis  of Financial Condition and Results of Operations - Risk Factors."

ITEM 1.   BUSINESS

OVERVIEW

Electronic Clearing House, Inc. is an electronic payment processor that provides
for  the  payment  processing needs of merchants, banks and collection agencies.
We derive the majority of our revenues from two main business segments, bankcard
and  transaction  processing  services ("bankcard services"), whereby we provide
solutions  to  merchants and banks to allow them to accept credit and debit card
payments  from consumers, and check-related products ("check services"), whereby
we  provide  various services to merchants and banks to allow them to accept and
process  check  payments from consumers.  The principal services we offer within
these  two  segments  include,  with respect to our bankcard services, debit and
credit  card processing, and with respect to our check services, check guarantee
(where, if we approve a check transaction and a check is subsequently dishonored
by  the  check  writer's  bank,  the  merchant  is  reimbursed  by  us),  check
verification  (where,  prior  to  approving  a check, we search our negative and
positive  check  writer  database  to  determine  whether the check writer has a
positive record or  delinquent check-related debts), electronic check conversion
(the  conversion  of  a  paper check at the point of sale to a direct bank debit
which is processed for settlement through the Federal Reserve System's Automated
Clearing  House  ("ACH")  network;  the  ACH  is  the electronic banking network
through  which  a  majority of electronic funds transfers are made in the United
States),  check  re-presentment  (where  we attempt to clear a check on multiple
occasions via the ACH network prior to returning the check to the merchant so as
to  increase  the  number  of  cleared check transactions), and check collection
(where  we  provide  national scale collection services for a merchant or bank).
We  operate  our  services  under  the  following  brands:

     -    MerchantAmerica,  our  retail  provider  of  all  payment  processing
          services  to  both  the  merchant  and  bank  markets;
     -    National  Check  Network ("NCN"), our proprietary database of negative
          and  positive  check  writer  accounts  (i.e.,  accounts  that  show
          delinquent  history  in  the  form  of  non-sufficient funds and other
          negative  transactions),  for  back-end  check  verification,  check
          authorization  and  check  capture  services,  and  for  membership to
          collection  agencies;  and
     -    XPRESSCHEX,  Inc.  for  retail  check  verification, check conversion,
          Automated Clearing House services (which we describe in greater detail
          below),  check  collection  and  check  guarantee  services.
     -    ECHO,  for  wholesale  check processing services offered to Visa banks
          under  the  Visa  POS  Check  Service  program.

We  discuss  our  services  in  greater  detail  below.  Overall, our ability to
program and oversee the management of a merchant's point-of-sale system, provide
credit  card  and debit card processing, provide multiple check services for the
processing  of  checks,  provide  both  electronic  and  traditional  collection
services, and fully integrate all of these services into a single Internet-based
reporting  capability  allows  us  to  provide  for  the majority of the payment
processing  needs  of  our  customers.


                                        3
<PAGE>
We  were  incorporated  in  Nevada  in December 1981.  Our executive offices are
located  at  730 Paseo Camarillo, Camarillo, California 93010, and our telephone
number  is  (805)  419-8700.  Our  common stock is traded on the NASDAQ SmallCap
Market  under  the  ticker  symbol  "ECHO."  Information  on  our  website,
www.echo-inc.com,  does  not  constitute  part  of  this  annual  report.


HISTORY  OF  THE  COMPANY

ECHO  has  been offering bankcard and check services for over 18 years.  We were
incorporated  in Nevada in 1981 under the name Bio Recovery Technology, Inc. and
changed  our  name  to Electronic Clearing House, Inc. with the acquisition of a
credit  card  processing  company, Electronic Financial Systems, Inc. in January
1986.  In  1986,  ECHO  developed  the capability, utilizing the Federal Reserve
System's  Automated  Clearing  House  ("ACH"),  a  network  which  serves  as  a
nationwide,  wholesale  electronic  payment  and  collection  system  by  way of
transferring  funds  between  banks  via  the Federal Reserve System, to deposit
funds  into  any  U.S.  bank  of the merchant's choice. This development made it
possible for remote banks and processors to provide the same processing services
previously  available  only  through  the  merchant's  local  bank.

In  1999,  ECHO  acquired  Magic  Software Development, Inc., a check processing
company located in Albuquerque, New Mexico, that serviced National Check Network
("NCN"),  an  association  of  approximately  60  affiliated collection agencies
across  the nation. At the time, we provided a check guarantee service that only
served  California  merchants, but with the addition of Magic's check processing
capabilities, our check guarantee services have been offered on a national basis
since  1999.  In  fiscal  2000, Magic's corporate name was changed to XPRESSCHEX
and  all  XPRESSCHEX activity was moved to our XPRESSCHEX subsidiary. XPRESSCHEX
provides  and  promotes its check and ACH services to other processors and sales
organizations  in  addition  to  ECHO.

In  November  1999, we acquired Peak Collection Services, a collection agency in
Albuquerque, New Mexico, and incorporated Peak into our XPRESSCHEX operations as
our  Collection  Division  in  December  of 1999. Through filings and individual
testing,  the  XPRESSCHEX  Collection  Division  has completed registration as a
collection  agency  in  48  of  50  states  to date.  Having a fully integrated,
nationally approved collection service allows XPRESSCHEX to operate as a central
check  clearing  facility  for NCN's 260 collection agencies without each agency
having  to  authorize  such  activity.

In  January  2000, we acquired Rocky Mountain Retail Systems ("RMRS") located in
Boulder,  Colorado, which provided a national check verification service to over
200  collection  agencies  across  the  nation. RMRS maintained a national check
database  of  negative  and  positive  check  writer  records.

In  December  2000,  we signed an agreement with Visa U.S.A. to participate in a
point-of-sale  check processing pilot program as both an "Acquirer Processor" (a
role  that  accepts  transactions  from  a merchant's point-of-sale terminal and
reformats  them  for  submission  to  the  Visa  network)  and as a "Third-Party
Processor" (a role that approves or declines checks written on accounts of banks
not  yet  participating  in  the  Visa  POS  Check  Service program and deposits
approved funds utilizing the Federal Reserve System's Automated Clearing House).
Under  the  program,  any one of over 14,000 Visa member banks can offer various
check  processing  services  to  their  merchants  and  utilize Visa's dedicated
communications  network  and banking relationships to clear check activity using
direct  debits  from  the  check  writer's account.  In July 2001, several major
financial institutions began participating in the pilot program. The program was
released  from  pilot  in  December  of  2002  and,  as  of September 2004, nine
financial  institutions  were using ECHO as their Acquirer Processor and sixteen
financial  institutions  were  using  ECHO  as  their  Third-Party  Processor.

In  May  2001,  we  acquired  the  assets  of National Check Network ("NCN") and
combined  the  NCN  positive  and  negative  check  writer records with the RMRS
database,  resulting  in  a  combined  database of over 120 million check writer
records  which  identify  the  positive  and  negative  check writing activities
occurring  with  individual  check  writers  (including  information  related to
accepted  checks, bounced checks, and the frequency of delinquent transactions).
This  database  is  ever-growing  with  additional  contributions  daily.


                                        4
<PAGE>
Also  in  May  2001,  ECHO  launched  MerchantAmerica.com, a web-based source of
financial  information  whereby  an  ECHO  merchant can access its transactional
history,  bank information, significant business and office-related services and
even  build  an  online  store and accept payment in the form of credit cards or
checks. The site also contains a national Merchant Directory that is free to any
merchant  in  the  United  States.  It  also provides any merchant in the United
States  with  the  ability to edit and enhance their directory listing. While we
believe  that  MerchantAmerica.com is a valuable and cost-effective resource for
merchants,  it  also provides us with a low-cost method of keeping our merchants
informed  and  involved  with  us.

OUR  SERVICES

BANKCARD  AND  TRANSACTION  PROCESSING  SERVICES

Services
--------

With  our  bankcard  and  transaction  processing  services,  we provide payment
solutions  to  merchants and banks to allow them to accept credit and debit card
payments  from  consumers.  Our  bankcard  and  transaction  processing services
include  the  following:

Debit and Credit Card Payment Processing
MerchantAmerica,  our retail provider of payment processing services to both the
merchant  and bank markets, currently provides 24-hour daily payment processing,
"800"  number access to customer service personnel and, as needed, various field
support  services.  Utilizing  one  of  several  methods  of  access  to us, the
merchants'  systems  dial  our  host computers and receive credit card and debit
card  authorizations, which have been electronically verified.  Electronic files
are  then  transmitted  daily  by  MerchantAmerica  to  the  major  credit  card
organizations or to the ACH, which subsequently transfer funds from the banks to
MerchantAmerica's  processing  bank, which then deposits the funds into the bank
of  the  merchant's  choice.  On  average, ECHO deposits funds to over 600 banks
across the nation on behalf of its merchant base each day.

Our software programs capture the transactions, retain data and enable merchants
to  review, reconcile and edit transactions.  MerchantAmerica's customer service
efforts  include  a terminal loaner program to minimize downtime, frequent sales
and  activity  reports,  and  sophisticated  security  services  utilizing  the
merchant's  terminal,  our  host  computers  and  assistance  in  the  field.
Additionally,  MerchantAmerica  utilizes  several  advanced  telecommunications
capabilities to provide consistent and reliable services to its merchants.

Other  Payment  Processing  Services
We  also  provide  various services related to our debit and credit card payment
processing,  including:

     -    Internet  Processing  -  ECHO  allows  merchants  to  process  payment
          transactions  online  with  immediate processing, online reporting and
          security  services  that protect the cardholder, merchant and Internet
          Service  Provider  ("ISP")  from  fraud.
     -    Batch  File  Processing  -  ECHO allows mail order, telephone order or
          direct  marketing  merchants  to  process  and  transmit  hundreds  of
          thousands of payments at a time by using Microsoft Excel(R), Access(R)
          or  any  other  program that can create a "flat file" of data. In this
          process,  the merchant can visit the ECHO Merchant Center, log on with
          its  PIN  and  merchant  number,  and  then  upload the file to ECHO's
          processing  center.  The  transactions are processed immediately, with
          reporting  available  almost  immediately  to provide response data on
          each  transaction.

Deriving  Revenues
------------------

Bankcard  and  transaction  processing  services provide for the majority of our
revenues.  For  the  year  ended  September  30,  2004, bankcard and transaction
processing  accounted  for  approximately  76%  of  our  revenues.  Bankcard and
transaction  processing  volume  rose  9.5% in fiscal 2004, from $961,248,000 in
fiscal  2003  to  $1,052,588,000  in  fiscal  2004,  and  revenue  increased
approximately  11.5%,  from  $32,444,000 in fiscal 2003 to $36,161,000 in fiscal
2004.

In  a  typical  transaction,  ECHO receives a percentage-based fee on the dollar
amount  processed and a transaction fee on the number of transactions processed.
ECHO's  revenue  for  debit/credit  card  processing  is  derived  primarily


                                        5
<PAGE>
from three sources: the merchant's discount rate, the merchant's transaction fee
and  set  monthly  fees.  The  discount rate is expressed as a percentage of the
amount  being  processed  and  is  deducted  from the amount of each transaction
submitted by the merchant, while the net amount is deposited into the merchant's
bank  account.

Discount  rates  range  between  1.5% and 4.5%, and our average discount rate is
2.4%,  which is consistent with our rates for the year ended September 30, 2003.
Depending upon the discount rate and the cost of clearing interchange, about 75%
to  90%,  and  about  85%  on  average,  of the discount rate revenue is paid to
card-issuing  banks  and  organizations  and  the  sponsoring  bank.

A  transaction  fee is charged for each transaction processed and ECHO's average
transaction  fee  in fiscal 2004 was $0.20 per transaction, compared to $0.19 in
fiscal 2003. We charge our bankcard merchants a range from $0.15 up to $0.32 per
transaction, depending on the type of transaction and merchant. Larger customers
tend  to  pay  lower transaction fees given the volume of business they provide.
Both Visa and MasterCard have instituted $0.05 to $0.10 transaction fees on each
transaction  processed  that  ECHO  is  required  to pay.  On average, ECHO pays
approximately $0.012 per transaction for communication costs, depending upon the
duration  and  method  of  transmission.

The  market  size  for  credit  card  processing  is  approximately  19  billion
transactions  per  year,  and  this  number is growing annually. ECHO has a very
small  percentage  of  this  market,  but  we  are one of the top 50 credit card
processors  according  to  The  Nilson  Report,  a  monthly  financial
subscription-based  newsletter.  Our competitors include First Data Corporation,
the  biggest  credit  card  processor in the United States, Certegy, NPC, Global
Payments,  and many other smaller payment processors. The credit card processing
market  has  undergone  rapid consolidation, which has raised unique challenges,
including  supporting  and  integrating  numerous  processing  methodologies,
initiating  quality  customer support and field support services and maintaining
merchant  relationships.  While  merchant  portfolios  can  be  purchased  by  a
processor  or  a  credit  card  agent  bank,  merchants  are  generally under no
contractual  obligation  to utilize the services of the new owner so many of the
most active consolidators have been experiencing difficulty in maintaining their
number  of  active  merchants.

In  an  effort to enhance the bankcard transaction processing business segment's
processing  infrastructure  and  control  processing  costs, we licensed several
payment  processing  systems  from  Oasis  Technologies  in  2002  and  a  full
integration  of  this  system is currently projected for 2005.  While we believe
that  our  data  center is reliable and the costs to operate the MerchantAmerica
program  are  currently reasonable, no assurance can be made that such favorable
conditions  will  continue.

In order to engage in Visa and MasterCard processing, a cooperative relationship
is  required  with  a  bank  that sponsors the Visa and MasterCard transactions.
ECHO's  primary  processing bank relationship is with First Regional Bank of Los
Angeles,  California.  As  a  result  of  its relationship, ECHO is a registered
Independent  Sales  Organization  and  Merchant  Service  Provider with Visa and
MasterCard,  respectively,  which  allows  us  to  solicit and support merchants
utilizing  our  services.  We  have an agreement with First Regional Bank, which
continues our relationship through 2005. Pursuant to the terms of the agreement,
among  other matters, we market and sell merchant services and the bank provides
various support services in connection with individual transactions, in exchange
for  our  payment  to the bank, on a monthly basis, of either a payment of $0.02
per transaction, or 10 basis points of the bankcard processing volume, depending
on  the  merchant and/or processing volume requirements.  The agreement does not
allow  either  party  to  terminate  other  than  for  cause  (as defined in the
agreement)  without  incurring  liability  for  breach  of  the  agreement.

CHECK-RELATED  PRODUCTS  (OR  "CHECK  SERVICES")

Overview
--------

ECHO  has  invested  significant  resources  and  management  focus in its check
services  business.  Check  services  revenue  increased  approximately 39.4% in
fiscal  2004,  from  $8,192,000  for fiscal 2003 to $11,423,000 for fiscal 2004.
Revenues  from  ACH and check conversion are all increasing significantly.  Visa
officially  released  its  POS  Check  Service  as  of December 2002 and several
national banks have since approved the program to be offered to their merchants.
Therefore,  ECHO anticipates continued growth in check services as the marketing
efforts  of  participating  banks  in  the  Visa  Program  become  more  widely
implemented.  (See  also  the  discussion  of the Visa POS Check Service program
below.)


                                        6
<PAGE>
Services
--------

With  our  check services, we provide various services to merchants and banks to
allow  them  to  accept  and  process  check payments from consumers.  Our check
services  include  the  following:

Check  Verification
For a fee, we will search NCN, our proprietary database of negative and positive
check writer accounts, attempting to match a specific piece of information, such
as  a  driver's  license  number  or Magnetic Ink Character Recognition ("MICR")
number (the numeric data along the bottom of a check), provided by a merchant. A
match  may identify whether the check writer has a positive record or delinquent
check-related  debts. Upon notification of this match (via a coded response from
the  provider),  the  merchant  decides  whether to accept or decline the check.
Verification  reduces  the  risk  of  accepting  a  bad  check for the merchant,
however,  in  providing this program alone, we typically offer no guarantee that
the  check  will  be  honored  by the check writer's bank and make no promise of
reimbursement  if  the  check  is  dishonored  by  the  bank. Revenue from check
verification  is  derived from fees collected from the merchants when a check is
verified  against  our  positive  and  negative  check database. This revenue is
recognized  when  the  transaction  is  processed,  since  we  have  no  further
performance  obligations.

Check  Guarantee
With this service, if we approve a check transaction and a check is subsequently
dishonored  by  the check writer's bank, the merchant is reimbursed by us and we
acquire rights to collect the delinquent amount from the check writer.

The  principal risk of providing this service is the risk of ever collecting the
amount  we  guarantee from a delinquent check writer whose check transaction was
dishonored  by  his or her own bank.  If we are unable to collect the amount, we
lose  that  amount.  On  average, we usually collect on 50-60% of the amounts we
guarantee  that  have  become delinquent.  Given the risks associated with check
guarantee,  especially  for  large  volume  merchants,  we  exercise strict risk
parameters  with  the  merchants to which this service is offered.  We typically
apply  several  risk  management  approaches  with  this  service, which include
searching  NCN's  database  against  the  data  provided  by  the  merchant, and
"scoring"  each  transaction  according to several factors such as velocity (the
number  of  times a check writer has been searched in a certain period of time),
prior  activity  (historic  negative  or  positive  transactions  with the check
writer),  check  writer's  presence in other databases (these national databases
are selectively searched based upon the size of the check and the prior activity
with  the  check  writer), size of the check, and historic bad check activity by
geographic  and/or  merchant  specific  locations, to name a few. If our scoring
system  concludes  that  the  risk  is  too  high,  we  issue  a  coded response
instructing  the  merchant that we will not guarantee the check.  If our scoring
system  results in a positive result, a coded response advises the merchant that
we  have  guaranteed  payment  on  that  item.

Electronic  Check  Conversion  ("ECC")
Check  conversion  is the ability to convert a paper check to an electronic item
at  the  point of sale.  ECC is a relatively new system of check settlement that
is quickly gaining merchant acceptance.  Under the program, the merchant slips a
customer's  check  either through a check reader that reads the MICR line on the
check  or  a  check imager that records the total image of the face of the check
and  the  merchant enters the amount of the check into the system.  The merchant
has  the customer sign a receipt, much the same as in a credit card transaction,
and gives a copy of the signed receipt along with the check to the customer. The
electronic  image,  captured by the reader, is sent to our processing center and
we  settle  the check transaction electronically. Merchants' customers like this
new  system  because they get their check back immediately and still have a hard
copy  receipt  of  the  transaction.  Banks  like ECC because no paper has to be
handled  by  the  bank to settle the transaction. While large national merchants
already have check-reading equipment, small merchants will adopt the system only
if  their  check  volume  justifies the capital investment in equipment, ranging
from  $150  to  $600  per  reader.

Check  Re-Presentment
The Federal Reserve System's Automated Clearing House ("ACH") provides the tools
to  electronically present, re-present and settle funds between banks. Our check
re-presentment  program  allows  a  merchant  to advise its bank that a returned
check  should  be  sent to the XPRESSCHEX data processing center in Albuquerque,
New  Mexico,  rather  than  returned  to  the merchant. Upon receipt, XPRESSCHEX
converts  the  check  to  an  electronic  ACH


                                        7
<PAGE>
transaction  for  resubmission  through  the ACH network and marks the check for
possible  collection  activity,  should  it  become  necessary.  One  feature  a
merchant may choose is to time the re-presentment so as to coincide with a check
writer's  typical  payday to better the odds of collection.  Generally, the full
face  value  of  the  check  is  returned  to the merchant upon collection and a
collection  fee charged to the check writer, usually in the range of $15 to $25,
is  retained  by  XPRESSCHEX  as  payment  for  its  services.

Internet Check, Batch Check and Virtual Terminal
A  check  can be presented as a form of payment over the Internet and we support
the  multiple  types of ACH entry classes.  XPRESSCHEX allows an e-commerce site
to  accept  a  check  as  payment,  allows  a  batch  of  check  data to be sent
electronically  for  processing  (this  is  commonly used by mail order or phone
order  businesses)  and allows both verification-only and ACH transactions to be
submitted  by  merchants  via  a  secure  logon and passcode connection over the
Internet.

Visa  POS  Check  Service  Program  ("Visa  Program")
-----------------------------------------------------

The  Visa  Program represents a major new initiative by Visa to enable merchants
to  receive  direct  online  authorization  for  checks written against consumer
checking  accounts,  similar to the authorizations provided for credit and debit
card  transactions.  The  Visa Program was offered as a pilot program by Visa to
its  member  banks  from  December  of  2000 to December of 2002 over which time
several  banks  electronically  connected  their  check  writer data to the Visa
network, making verification of the check writer's bank account balance possible
when checks drawn on these select banks were processed. In December of 2002, the
program was officially released out of pilot. As of November 2004, approximately
12%  of  checking  accounts in the United States are electronically connected to
the  Visa  network  through  the  banks  that  are now participating in the Visa
Program.  This  number  is expected to increase to 30% or higher over the coming
year as more banks connect their check writer data with Visa.  ECHO has invested
significant  resources  and  management  focus  in  its check services business,
particularly  with respect to the Visa Program, and anticipates continued growth
in  check  services  as the marketing efforts of participating banks in the Visa
Program  become  more  widely  implemented.

As  described  above, "check conversion" is the ability to convert a paper check
to  an  electronic  item  at  the point of sale.  The Visa Program provides Visa
member  banks  with  a check conversion service that they can sell to their bank
merchants.  The  Visa  check  conversion  service  allows the merchant to get an
immediate  authorization  or decline on a check while the check writer is at the
checkout  counter.  If the check is approved, the service allows the merchant to
immediately  return  the paper check to the check writer since the funds will be
electronically  withdrawn from the check writer's account and deposited into the
merchant's  account.

Being  able  to  approve  or  decline  a check in real time at the point of sale
requires  some  method to verify the check writer has either an adequate balance
in  the  bank  to  cover the check or, if that is not possible, to verify if the
check  written  has  a  match in a negative check account database.  In order to
provide  this  check  service on 100% of the checks received by a merchant, Visa
needed  a solution to approve or decline (and for those approved, electronically
deposit)  the  checks  that processed through the program on a bank that had not
yet  connected  its check writer data to the Visa network.  We are currently one
of  two  companies that provide this service to Visa as a Third-Party Processor.
When  a Visa member bank signs up to offer the Visa Program to its merchants, it
chooses  a Third-Party Processor from the certified providers and, to date, ECHO
serves  as  a  Third-Party Processor for sixteen financial institutions actively
participating  in  the  program.

When Visa receives electronic check data from a merchant and the bank upon which
the  check is drawn has not connected its check writer data to the Visa network,
Visa  routes  that  check  to  the  Third-Party Processor that was chosen by the
merchant's  bank  when  they  set  up  the  program.  The  Third-Party Processor
authorizes  or  declines  a  check  based  upon  the  negative and positive data
contained  in  several  national  check  account databases that are commercially
available  and,  for  those  transactions  that  are  approved,  the Third-Party
Processor  will electronically move the funds from the check writer's account to
either the merchant bank's master clearing account or directly to the merchant's
banking  account  (depending  on the bank's desired settlement method) utilizing
the Automated Clearing House ("ACH"), a funds settlement service offered through
the  Federal  Reserve  Bank.

In  addition to being a Third-Party Processor, we are one of only five companies
that  are  currently  certified  as an Acquirer Processor with Visa, a role that
accepts  transactions  from  the  merchant's  point-of-sale terminal/systems and
reformats  them  for submission to the Visa network. We are chosen by nine banks
currently  in  the  program  to  serve  as their Acquirer Processor.  Most banks
presently  in  the  Visa  Program  are  large  national  or  regional  banks


                                        8
<PAGE>
and already had terminal management service providers that could act as Acquirer
Processor  for  the  Visa  Program.  In  the  future,  as smaller banks make the
decision  to enter the Visa Program, it is expected that many will have no prior
relationship  with a terminal management provider and therefore, may potentially
choose  us  as  their  Acquirer  Processor.

We  derive  transaction  revenue  in  our role as a Third-Party Processor and/or
Acquirer  Processor  by  negotiating a transaction fee with Visa and/or the bank
that  chose  us  as  its  Third-Party Processor and/or Acquirer Processor.  This
transaction  fee  averages  $0.09  per  transaction.  The  party  that sells the
service  to  the  merchant  (usually the bank) enjoys the largest mark-up on the
product,  offering  the  service  in the range of $0.30 to $0.60 per check, with
external cost in the $0.12 to $0.20 range, depending on what the bank negotiates
with  Visa  and  any  third-party  provider.

We  entered into a sponsorship agreement with our primary credit card processing
bank,  First  Regional  Bank,  to enable us to sell the Visa Program directly to
merchants  with  an  obligation  to pay a small transaction fee per check to the
bank.  This  allows  the  bank  to  realize  added revenue, allows us to realize
higher revenues in a marked-up pricing model, and a portion of the mark-up to be
used  to compensate and motivate resellers of our products and services to offer
the  Visa  Program  to merchants in the marketplace.  The balance of the mark-up
after  paying the bank and the sales organization would be additional revenue to
us.  This  will  also  enable us to use our direct sales channels to provide the
Visa  Program  to  ECHO's  current  and  potential  merchant  base.

The  Visa  infrastructure requires ECHO to coordinate and integrate its services
with  several parties and systems. As part of the Visa Program, we have written,
tested  and  installed  special  merchant terminal software that meets specified
Visa Program requirements and certified our terminal and host response code with
Vital  Processing  Services, a major provider of terminal services to many major
banks.  ECHO  has  also  developed  special  add-on  services  and reporting for
specific  banks  or  select  merchants  that  desired to participate in the Visa
Program.  Additionally,  ECHO  has  designed  and  is  implementing several risk
management  tools  that  contribute to the significant reduction in net bad debt
seen  by  a  retailer, making the Visa Program a true competitive alternative to
guarantee  services.

Deriving  Revenues
------------------

For  the  past  several  years,  we  have  invested  significant  resources  and
management  focus in our check services business which provides various services
to  merchants  and banks to allow them to accept and process check payments from
consumers.  This  business  segment  comprised  approximately  24%  of our total
revenues  for  the  fiscal  year  ended  September  30,  2004.  As an individual
segment,  check-related revenue increased by 39.4% to $11,423,000 in fiscal 2004
from  $8,192,000  for  fiscal  2003.

ECHO's  revenue in check services can come from several sources.  Typically, the
merchant pays either a fixed fee for each transaction (verification, conversion,
etc.)  or  a fee based on the face amount of the check (check guarantee) or both
(check  guarantee).  In  the  Visa  model, ECHO can receive transaction fees for
providing  "third-party"  services  to  Visa banks, whereby ECHO assists them in
processing  checks  from  banks  not  participating  in  the  Visa  Program.  In
addition,  ECHO  may  serve  a Visa bank by being a collector of the transaction
data  for the merchant and submitting it to VisaNet, a process referred to as an
"Acquiring  Processor".  Finally,  ECHO can also participate in the mark-up that
is  charged  on  the  sales price to a merchant, although this is only earned by
ECHO  if its primary sales channels secured the relationship. Additional revenue
is  earned  if  the  merchant  utilizes  ECHO's  collection  services  and it is
primarily  derived from the collection fee associated with successful collection
of  an  item.  If  ECHO  refers  a  collection  item  to  an NCN member, a small
participation  in  the collection fee is returned to ECHO through agreement with
the NCN member. Finally, when ECHO provides a guarantee service to a merchant or
a bank, it earns a percentage of every check processed from the merchant or bank
and  ECHO's  earnings  related  thereto  are  directly  tied  to  its success in
collection  and  its  risk  management  capability.

The NCN database includes over 20 million negative check account records and 100
million  positive  records.  Over 260 affiliated collection agencies continually
contribute to the database to enrich its depth and value. Through its network of
NCN  members,  ECHO  can  offer  regional  collection  services  and  distribute
collection  items  to  one or more of a select group of NCN's member agencies to
maximize  a  merchant's  or  bank's ability to collect amounts on a local level.
NCN  provides  an  ongoing revenue stream for ECHO as collection agencies, major
national  merchants, banks, other transaction processors, and thousands of small
merchants  access  the NCN database daily to verify the status of a check writer
in  real  time.  Check  verification  has  been  recognized as one of the lowest


                                        9
<PAGE>
cost  and  most  effective  ways  for  retailers  to  lower the risks and losses
experienced in accepting checks as a form of payment. Our NCN database is one of
only  four  major  databases  in the nation that can serve this market need on a
national  scale,  and  we  are  currently  the  fifth largest check verification
processor  in  the  United States according to the July 2004 issue of The Nilson
Report,  a  monthly  financial  subscription-based  newsletter.  In  addition to
operating  NCN,  we  provide  a common platform where a business can also access
other  major negative check writer databases that are currently available in the
nation.

XPRESSCHEX revenues are growing due to the increased use of our check conversion
services,  which  include the capture (through digital imaging, or the retention
of  specified  personal information) of the necessary check data at the point of
sale  and  submission  of  the transaction electronically to the Federal Reserve
System's  Automated  Clearing  House  for  settlement of funds.  XPRESSCHEX also
maintains  an  active  collection  agency,  registered in 48 states, that serves
primarily as a referral agent to select NCN members that are collection agencies
and  are  located  in  various  regions  of  the  country.

OTHER  SERVICES

ECHO  had  historically  generated  a  small  percentage of its revenue from its
terminal business whereby we deployed proprietary software and terminal hardware
in  a  comprehensive system for real-time credit card authorization, capture and
compilation of compensation data, and in some cases, active management of rental
equipment  information.  However,  we are currently not pursuing the sale of our
proprietary  terminal  system but rather focusing on our core bankcard and check
services business segments.  In fact, in fiscal 2003, we gradually shut down our
terminal  deployment  operations.

STRATEGY

Overview
--------

ECHO's  strategy  is to provide merchants, banks and industry-specific resellers
with  electronic  connectivity  to  various payment services in the credit card,
debit  card  and  check-related  markets.  Our  platform  of  services  is  very
flexible,  enabling  merchant  customization  and  scalability  to  meet  the
requirements of high transaction volumes, as well as access to the Visa Program.
ECHO's services enable merchants to maximize revenues by offering a wide variety
of  payment  options, reducing the costs associated with processing and handling
checks,  improving collections and managing risk more effectively. Additionally,
ECHO  is  committed to customer service and a recent internal survey of customer
satisfaction  rates  showed  an  improvement to 4.43 out of a possible 5.0, from
approximately 4.15 in a similar survey taken three years prior.

We  have  targeted  several  areas  as  significant  opportunities  for  growth,
including  focusing  on  retail  accounts  for  check  services and developing a
scalable  infrastructure  to  support  widespread  implementation  of  the  Visa
Program.  We  also  seek  to  increase  profitability  of our principal merchant
services  by enhancing our back-end technology and identifying and targeting new
low-cost,  incremental  revenue  opportunities,  such as active promotion of our
payment  services  to  non-profit  organizations.

Promote Check Services for Middle Market Retail Accounts
--------------------------------------------------------

While  ECHO  focuses its credit card services to the middle market of retail and
non-face-to-face  merchants,  our check services business, through various sales
channels  like  direct  sales  and  sales  through authorized resellers, has the
ability to target the full scope of merchants in the marketplace, from the small
merchant that may only require check verification to the national retailers that
require  check  conversion  and  national  collection  services.

With  approximately  four  million  merchants in the U.S. and over 95% currently
accepting  credit  cards  as  payment,  ECHO estimates that approximately 60% of
merchants,  or about 2.3 million merchants, that accept credit cards also accept
checks as a form of payment.  Furthermore, of the group that accepts checks as a
form  of payment, we estimate that only 17% of them have an electronic method to
accept  checks  and  the  other  83%  accept a paper check and process it in the
traditional  manner  by  taking  the  check  to  the  bank.

ECHO's  estimated  market  potential  for  check  services  is:


                                       10
<PAGE>
     -    Approximately 1.7 million merchants currently accept credit cards, but
          do  not  currently  accept  checks  as  a  form  of  payment;
     -    Approximately  1.9 million merchants currently accept paper checks and
          may  consider  an  electronic  form  of  payment;
     -    Approximately  400,000  merchants currently converting paper checks to
          electronic  format  at  the  point  of sale may consider changing to a
          better  service  and/or  lower-cost  provider.

While  we  have  the ability to approach all sizes of merchants, efforts will be
focused  on working with our sales channels, like direct sales and sales through
authorized  resellers,  to approach mid-size retail chains that can benefit most
from  automating  check processing and verification or participation in the Visa
Program.  These  mid-size  accounts  typically  offer higher margins than larger
accounts  and  provide a less competitive marketplace.  ECHO has recently signed
agreements  with  several middle market retailers and believes that the pipeline
for  prospective  customers  is  growing.

Promote Visa POS Check Service Program
--------------------------------------

The  Visa  Program  represents a major initiative by Visa to enable merchants to
receive direct online authorization for checks written against consumer checking
accounts,  similar  to  the  authorizations  provided  for credit and debit card
transactions.  Given  ECHO's  role  in  the  early stages of the program and our
investment  of  significant resources and management focus in our check services
business  as  a  whole,  and  specifically  with respect to the Visa Program, we
anticipate  continued  growth  in  check  services  as  the marketing efforts of
participating banks in the Visa Program become more widely implemented.

Overall,  as  the market gains acceptance of the Visa Program, our opportunities
to  market  our check collection services, our stand-alone verification services
(not  currently  part  of the Visa Program) and any other check services that we
are  able  to  provide  will further solidify our relationships with the various
financial  institutions  that  have chosen us as their Acquirer Processor and/or
Third-Party  Processor  under  the  Visa  Program.  We  intend  to utilize these
opportunities  to  expand  our  check  services  business.

As  of  September 2004, sixteen financial institutions actively participating in
the  program  were  using  ECHO's  services  as  a Third-Party Processor and are
beginning to actively sell check services to their merchants. One of the current
participating  banks  sold  the  Visa  Program  to a national specialty-clothing
retailer that became active in the Visa Program in June 2003 and now constitutes
the  largest  single  user  of the Visa Program to date.  This national merchant
participates  in  the  Visa Program by submitting the MICR data in real time and
then  returning  the  paper check to the check writer at the point of sale.  All
deposit  and  collection  activity on approved checks is derived from the use of
the  numeric  check  data  and, to date, we have been successful in lowering the
retailer's  return check percentage to, or below, a competitive level with rates
normally  charged  by national check guarantee services.  Significant savings to
the  retailer are therefore derived (1) from the elimination of having to handle
and  process  paper  checks and (2) from the net financial benefit seen from the
bad  check  write-off percentage falling below the rates charged by the national
guarantee  services.

Altogether,  ECHO  has grown in its knowledge and capability of facilitating the
integration  and implementation of the Visa Program for new banks and developing
a  standardized,  but customizable platform of options based upon its experience
with  the  banks  participating  in  the  Visa  Program.  The  number of project
implementation  staff dedicated to the Visa Program has been increased to assist
current  and  future  banks  in making the fastest and easiest conversion to the
Visa  Program.  However, implementation of new banks, at least in the near term,
will  rely  on  the bank's ability to coordinate the integration of its internal
deposit  account  management  system  to  the  Visa  Program and this process is
outside  of  ECHO's  realm  of  responsibilities.

While  ECHO  believes  that  the  Visa  Program  has  the  potential to generate
significant  revenues for us in the future, the market potential of this service
is  still  unproven  and  its  success  is dependent on the continuing marketing
support  of  Visa  and  its  member  banks.


                                       11
<PAGE>
Promote Merchant Payment Processing for Regional and Community Banks
--------------------------------------------------------------------

ECHO  has  identified  an  under-served,  niche  market  of smaller regional and
community  banks  for  credit  card  and check payment programs. These banks are
characterized  by having an asset base in the $500 million range or less, and/or
equity  capital  in  the $10 to $50 million range.  ECHO has developed a service
that  allows smaller banks to offer credit card and check processing services on
a  private-label  basis  using  our  back-end  infrastructure  with little or no
technical  involvement  by  the  bank.  Much  of  the  reporting to the merchant
utilizes  the  Internet  as  a delivery channel, an environment in which we have
significant  experience  and  knowledge.  We  estimate that approximately 80% of
merchants  are  familiar  with  or  connected  to  the Internet, many from their
personal  residences.  Due  to  the high costs and the perceived high risk, most
small  banks  are  either  unable or unwilling to compete with national banks in
providing  online  transaction  processing and Internet-based reporting tools to
their merchants.  We have designed the program to be adopted by a bank at little
or  no  cost  while  it  allows  the  bank  to generate revenues and earnings in
competition  to  those  earned  by much larger banks that have had to make major
investments  in  the  technology.

This  merchant  payment  processing  service,  which  is  marketed  under  the
MerchantAmerica  name,  incorporates  all  of  ECHO's  web-based  features  and
functionalities  and our full set of services and payment options for the retail
channel.  We  believe  that  our  fully  integrated payment and reporting system
allows  smaller  banks  to  enjoy  competitive  equality  with much bigger banks
without  making  significant  investments  in  technology.  It  enables banks to
compete  feature  by feature with the offering of the major banks with no set-up
fee  or  annual  charge to participate.  We, in turn, benefit from the increased
processing and transaction revenues.  Additional benefits of the MerchantAmerica
program  to  regional  and  community  banks  include  the:

     -    Ability for banks to set processing fees for each merchant;
     -    Assurance  that  the  bank  controls  the  merchant  relationship  and
          maintains  any  financial  asset  value  related  to  ownership;  and
     -    Reduction of fraud risk.

In  addition  to  the  benefits  that the bank receives from the MerchantAmerica
program, the bank's merchants also receive numerous benefits, including a retail
merchant  account  for  credit cards, debit cards and checks; an online shopping
cart  and  check-out  payment  system;  sales  tracking  and  online transaction
history;  automatic  referral  to  collection  agencies;  and dedicated customer
service  available  24  hours  a  day,  seven  days  a  week.

The  program  was  launched  in August 2002 and at the end of fiscal 2004 had 19
participating  banks.  ECHO  estimates  that there are 10,000 community banks in
the  United  States. and no one provider of services has over 10% of the market.
Based  on  third-party  research,  we estimate that approximately 6,000 of these
banks  do  not directly offer bankcard services and the approximately 4,000 that
are  affiliated  with  a  service may be responsive to the MerchantAmerica value
proposition.


SALES  AND  MARKETING

ECHO  sells  its merchant and check services through several marketing channels,
including  independent  sales  organizations  (i.e,  authorized resellers of our
products  and  services),  its  own  internal  sales  force  and direct merchant
referrals  by  existing  merchants.  We  also  offer Merchant Services through a
direct  online  sales  channel,  MerchantAmerica.  Approximately  20% of our new
accounts  have  historically  been generated through the authorized resellers of
our products and services.  In fiscal 2002, ECHO restructured its sales force by
hiring  more  sales  people  for  its Check Services National Sales Group, which
focuses  on  selling  to  major  accounts  and  mid-sized  retail  chains,  and
implementing  an incentive-based commission structure with the goal of targeting
specific  accounts  and shortening the sales cycle.  Due to the growing interest
in  the  Visa Program and being the Third-Party Processor of a national clothing
retailer,  we  have  redirected  much  of  our  marketing and sales resources to
aggressively  promote  the  Visa  Program.


                                       12
<PAGE>
ECHO offers its payment services through several sales channels, including:

     -    MerchantAmerica  -  Payment services offered directly to merchants and
          to  regional  and  community  banks to offer to their local merchants.
          MerchantAmerica combines the ECHO credit card services with a full set
          of  check  and  collection  services.

     -    Primary  Sales Channels - These channels, which include First Regional
          Bank  sponsored  Visa  Program,  direct merchant sales, Check Services
          National Sales, group sales and MerchantAmerica direct merchant sales,
          provide  the  highest  margin  opportunities.

     -    Secondary  Sales  Channels  -  Banks  in  the Visa Program, authorized
          resellers,  NCN  Collection  Agency  Members and MerchantAmerica Agent
          Banks  are  part  of the secondary sales channel. These channels offer
          lower  margins  due  to the added participation in the overall revenue
          such  channels  require.  Currently  ECHO has 150 authorized resellers
          registered  to  sell  ECHO's  check  products. NCN has over 260 member
          collection agencies that serve over 85,000 merchants and many agencies
          are  acting  as  sales  agents  for  ECHO's  check  services.

Management  believes  that  we  are distinctive in the number of payment methods
that we allow, the combination of transaction types that we manage directly, our
ability  to  integrate  additional  services  and  our  ability  to support each
merchant  through  one  vertically  integrated  source.

Our  marketing  strategy  is  to  maximize  cross-selling  opportunities  to our
existing  base  of  retail merchants and financial institutions, including those
merchants and financial institutions in the Visa Program; sell integrated suites
of  check,  credit  and  debit  card processing services through small banks and
industry-specific resellers; enhance and market MerchantAmerica.com; and develop
the  private  label check service program that allows appropriate identification
between  the  customer  and  the  vendor.  ECHO  intends  to:

     -    Market  the  MerchantAmerica  service to regional and community banks,
          through direct sales to merchants and to not-for-profit organizations;

     -    Promote the Visa Program by working with Visa-referred banks to assist
          them  in  initiating  the  service  and also, selling the Visa service
          directly  to merchants through the sponsorship of ECHO's primary bank,
          First  Regional  Bank.

     -    Educate  national  merchants,  processors, banks and industry-specific
          resellers  on the benefits associated with our NCN services, including
          check  conversion,  verification,  ACH  payments,  collection  and our
          positive  and  negative  database  capability  and enlist their active
          sales  thereof.

COMPETITION

Bankcard  processing  and  check  processing  services  are  highly  competitive
industries  and  are characterized by consolidation, rapid technological change,
rapid  rates  of  product obsolescence and introductions of competitive products
often  at lower prices and/or with greater functionality than those currently on
the market.  Credit card and debit card processors have similar direct costs and
therefore  their  products  are becoming somewhat of a commodity product where a
natural advantage accrues to the highest volume processors. To offset this fact,
we  have focused on marketing to niche markets where we can maintain the margins
we  deem necessary to operate profitably but no assurance can be given that this
strategy  will  be  successful  in  the  future.

There are a number of competitors in the check services industry, the largest of
which  are  TeleCheck (the leading provider of conversion and guarantee services
and  a  subsidiary  of  First  Data  Corporation),  SCAN/eFunds  (the  largest
verification  provider  in  the  nation),  Certegy  (a spin-off of Equifax), and
Global  Payments.  While all four have major national accounts, the last two are
now  actively  moving into the smaller merchant and middle market where ECHO has
historically  positioned  itself.  ECHO believes that it can effectively compete
due  to  its  ownership  of  the  NCN  database, its integrated set of check and
collection  services and the technological advantage of having certified as both
a  Third-Party  Processor and Acquirer Processor in the early stages of the Visa
Program.

ECHO is not currently a major player in the credit card processing market but we
do  believe  we  are  among  the  top  50  in  the nation.  We believe we hold a
significant  competitive  position  in  the check services market due largely to


                                       13
<PAGE>
our  investment to date in the Visa POS Check program and the integration of our
check  and  collection capabilities.  Despite this fact, many of our competitors
have  greater  financial and marketing resources than us.  As a result, they may
be  better  able  to  respond  more  quickly to new or emerging technologies and
changes  in  customer  requirements.  Competitors also may enjoy per transaction
cost  advantages due to their high processing volumes that may make it difficult
for  ECHO  to compete. In addition, major players in the check services industry
have  developed  sophisticated  risk  assessment  technology  that may provide a
competitive advantage in providing check guarantee services. We believe that our
success  will  depend  upon our ability to continuously develop new products and
services and to enhance our current products and to introduce them promptly into
the  market.


EMPLOYEES

As  of  September  30,  2004, we employed 210 individuals, 182 of whom were full
time  employees.


REPORTABLE  SEGMENTS

Refer to Note 14 "Segment Information" in the accompanying Notes to Consolidated
Financial Statements for reportable segment information.


ITEM 2.   PROPERTIES

In  March  2004,  we  sold  a  building  in  Agoura  Hills, California which was
previously  our  corporate  headquarters,  for  $2,382,000, and paid off the two
notes collateralized by this building. As a result of this sale, we recognized a
gain  of  $1,319,000  on  a  pre-tax  basis.

In  October  2003, we leased 21,500 square feet of a 40,000 square foot building
in  Camarillo,  California with an option to purchase the building in two years.
Our  principal  executive  offices,  including customer support, data center and
other  operational  departments were moved to this Camarillo location. We signed
an  addendum to the October 2003 lease in July 2004 and added 11,100 square feet
to  the  lease.  We  currently  occupy  32,669  square  feet  of  this Camarillo
building.  The  lease payment for this facility as of September 2004 was $23,700
per  month.  The  lease  payment  will  increase  to $35,936 per month effective
January  2005  pursuant  to  the provisions of the lease governing the property,
which  permitted  a lower rent during the period commencing July 2004 and ending
December  2004.

We  have  additional  real  property  leases  in  Agoura  Hills,  California;
Albuquerque, New Mexico; Boulder, Colorado; and Lawrence, Kansas for sales, data
center  and  other operations, under various agreements, which expire at various
times  over  the next year.  The total of these lease payments are approximately
$40,000  per  month.

ITEM 3.   LEGAL PROCEEDINGS

We  are involved in various lawsuits arising in the ordinary course of business.
Based  upon  current  information,  management,  after  consultation  with legal
counsel,  believes  the  ultimate  disposition  of  these  lawsuits will have no
material  effect  upon  either our results of operations, financial position, or
cash  flows.

In  July  2004, LML Patent Corporation, a wholly-owned subsidiary of LML Payment
Systems,  Inc.  ("LML"),  filed  a  patent  infringement  claim  against us, our
subsidiary,  XPRESSCHEX,  Inc.  and  others, relating with respect to us and our
subsidiary,  to  the  alleged  infringement by our check conversion processes of
three patents held by LML. The suit was filed in the U.S. District Court for the
District  of  Delaware. LML seeks an undisclosed amount of damages in connection
with  the  alleged  infringement.  We  do  not  believe  that  any  of our check
conversion processes infringe upon any valid or enforceable patent rights of LML
and  intend  to  vigorously  defend  our  position  against  the  claims  made.
Ultimately,  we  expect  that  we will not be held liable for any of the alleged
infringement. Despite this belief, the costs associated with our defense will be
significant  in both 2005 and 2006. We estimate  these costs to be approximately
$400,000  or  higher each year. The case is scheduled to go to trial in April of
2006.  Should  we  be  held  liable  for  any alleged infringement, which is not
expected,  the  ultimate  liability we may sustain may include a royalty payment
primarily  calculated  on activity commencing in the middle of calendar 2003 for
only  select  conversion  activity,  as  that  was  the  time period in which we
actively  began  utilizing  the  check  conversion


                                       14
<PAGE>
processes  alleged to infringe the LML patents.  In view of the relatively short
time period involved and the relatively small overall transaction volume arising
from  the  alleged  infringing check conversion services in comparison to ECHO's
total  transaction  volume,  while  having to make any payment relating to these
claims  would  be  disappointing, we believe that any such alleged damages award
should  have  a  relatively minor impact on our results of operations, financial
position,  or  cash  flows.

In  August  2003,  one  of  our  independent sales organizations ("ISO") filed a
breach  of contract arbitration claim against us in Los Angeles, California. The
dispute  involved a disagreement related to the manner in which commissions were
to  be  calculated  under  the  agreement.  The  agreement with the ISO required
binding arbitration of all disputes arising under the agreement. The arbitration
proceedings occurred in December 2004. The arbitration award is expected between
the  end  of  calendar  2004  and  the beginning of 2005. The claim arose in the
ordinary course of business and we have accrued $300,000 as a litigation accrual
related  to  the  dispute.  The  accrual  represents our management's good faith
evaluation  of the dispute after consultation with legal counsel, however, there
can be no assurance that the actual award will not exceed the amount accrued. In
the  event  the arbitration award exceeds the amount accrued, such excess amount
would  impact  our  results of operations, financial position or cash flows. Our
management  does  not  believe  any  such  impact  would  be  material.

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

No  matters were submitted to a vote of ECHO's shareholders in the quarter ended
September  30,  2004.


                                       15
<PAGE>
                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER SECURITY
MATTERS

Since  January  17,  1986,  we  have been trading on the over-the-counter market
under  the  name  Electronic  Clearing  House, Inc.  On October 2, 1989, we were
accepted for listing on the National Association of Securities Dealers Automated
Quotation  System  ("NASDAQ") and trade under the symbol of "ECHO" on the NASDAQ
SmallCap  Market.  The  following  table  sets  forth  the range of high and low
prices  for our common stock during the fiscal periods indicated, as reported on
the  NASDAQ  SmallCap  Market.

<TABLE>
<CAPTION>
     FISCAL YEAR ENDED
        SEPTEMBER 30             High         Low
        ------------            ------       -----
<S>                             <C>          <C>

           2004
           ----
First Quarter                   $11.33       $6.15
Second Quarter                  $13.06       $8.23
Third Quarter                   $11.47       $8.75
Fourth Quarter                  $ 9.99       $6.45

           2003
           ----
First Quarter                   $ 2.85       $1.09
Second Quarter                  $ 2.75       $1.72
Third Quarter                   $ 4.40       $2.47
Fourth Quarter                  $ 9.59       $3.20
</TABLE>

The  prices  set  forth above are not necessarily indicative of liquidity of the
trading  market.  Trading  in  our  common  stock  is  limited  and sporadic, as
indicated by the average monthly trading volume of 829,849 shares for the period
from  October  2003  to  September  2004.  On  December  13,  2004,  the closing
representative  price  per  share of our common stock, as reported on the NASDAQ
SmallCap  Market,  was  $8.00.

HOLDERS  OF  COMMON  STOCK

As  of  December  13,  2004,  there were 839 record holders and 3,374 beneficial
holders  of  our  common stock, with 6,472,331 shares outstanding. The number of
holders  of  record  is  based on the actual number of holders registered on the
books  of  our  transfer agent and does not reflect holders of shares in "street
name"  or  persons,  partnerships,  associations, corporations or other entities
identified  in  security  position  listings  maintained  by  depository  trust
companies.

DIVIDEND  POLICY

We  have  not paid any dividends in the past and have no current plan to pay any
dividends.  We  intend  to  devote all funds to the operation of our businesses.

EQUITY  COMPENSATION  PLAN  INFORMATION

The  Equity  Compensation  Plan Information identified in Item 11 of this Annual
Report  on  Form  10-K  is  incorporated  herein  by  this  reference.

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  in Items 7 and 8 below.  The following data, insofar as it
relates  to each of the five years ended September 30, has been derived from our
annual  financial  statements,  including  the  consolidated  balance  sheets at
September  30,  2004  and  2003,  and  the  related  consolidated  statements of
operations  and of cash flows for the three years ended September 30, 2004, 2003
and  2002,  and  notes  thereto  appearing  elsewhere  herein.


                                       16
<PAGE>
<TABLE>
<CAPTION>
                                                                    YEAR ENDED SEPTEMBER 30
                                               --------------------------------------------------------------------
                                                   2004           2003        2002        2001           2000
                                               -------------  ------------  ---------  ----------  ----------------
                                                      ( ---- AMOUNTS IN THOUSANDS, EXCEPT PER SHARE ---- )
<S>                                            <C>            <C>           <C>        <C>         <C>
STATEMENT OF OPERATIONS DATA:
-----------------------------
Revenues                                       $     47,584   $    40,636   $ 33,291   $  29,943   $        28,340
Costs and expenses                                   44,127        38,211     36,960      29,380            28,324
                                               -------------  ------------  ---------  ----------  ----------------
Income (loss) from operations                         3,457         2,425     (3,669)        563                16
Interest income (expense), net                         (104)         (172)       (74)        106               196
Other income (expense), net                           1,319           -0-        -0-         350               312
                                               -------------  ------------  ---------  ----------  ----------------
Income (loss) before income tax
  (provision) benefit and cumulative
  effect of an accounting change                      4,672         2,253     (3,743)      1,019               524
(Provision) benefit for income taxes                 (1,823)         (925)     1,367        (585)             (233)
                                               -------------  ------------  ---------  ----------  ----------------
Income (loss) before cumulative
  effect of an accounting change                      2,849         1,328     (2,376)        434               291
Cumulative effect of an accounting
  change to adopt SFAS 142[1]                           -0-        (4,707)       -0-         -0-               -0-
                                               -------------  ------------  ---------  ----------  ----------------

Net income (loss)                              $      2,849   $    (3,379)  $ (2,376)  $     434   $           291
                                               =============  ============  =========  ==========  ================


Earnings (loss) per share-basic                $       0.45   $     (0.58)  $  (0.41)  $    0.07   $          0.06
Earnings (loss) per share-diluted              $       0.41   $     (0.56)  $  (0.41)  $    0.07   $          0.05

Weighted average number of common
  shares and equivalents outstanding-basic            6,312         5,812      5,788       5,797             5,257

Weighted average number of common
  shares and equivalents outstanding-diluted          6,900         6,024      5,788       5,964             5,825

BALANCE SHEET DATA:
-------------------
Working capital                                $      8,004   $     3,201   $  3,234   $   5,821   $         6,029
Current assets                                       29,923         9,646      5,728       8,259             7,595
Total assets                                         39,428        18,775     18,191      18,921            17,013
Current liabilities                                  21,919         6,445      2,494       2,438             1,566
Long-term debt, and payable to
  stockholders and related parties,
  less current portion                                  704         1,961      2,159         744               767
Total stockholders' equity                     $     16,240   $    10,369   $ 13,538   $  15,739   $        14,680
</TABLE>

[1]  The  Company completed the transitional impairment testing required by SFAS
     142  in  the  first quarter of fiscal 2003 and determined that its goodwill
     was  fully  impaired  and a $4.7 million goodwill write-off was recognized.


                                       17
<PAGE>
ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

OVERVIEW
Electronic Clearing House, Inc. is an electronic payment processor that provides
for  the  payment  processing needs of merchants, banks and collection agencies.
We derive the majority of our revenues from two main business segments, bankcard
and  transaction  processing  services ("bankcard services"), whereby we provide
solutions  to  merchants and banks to allow them to accept credit and debit card
payments  from consumers, and check-related products ("check services"), whereby
we  provide  various services to merchants and banks to allow them to accept and
process  check  payments from consumers.  The principal services we offer within
these  two  segments  include,  with respect to our bankcard services, debit and
credit card processing, and with respect to our check services, check guarantee,
check verification, electronic check conversion, check re-presentment, and check
collection.

We organize our service offerings under the following brand names:

     -    MerchantAmerica: ECHO's retail provider of payment processing services
          to  both  merchant  and  bank  markets;
     -    National  Check  Network  ("NCN"):  for  wholesale check verification,
          check  authorization  and capture services, and for referral to member
          collection  agencies;
     -    XPRESSCHEX, Inc.: for retail check verification, check conversion, ACH
          services,  check  collection  and  check  guarantee  services.

CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES
Management's  discussion  and  analysis  of  financial  condition and results of
operations  is based upon our consolidated financial statements, which have been
prepared  in  accordance  with  accounting  principles generally accepted in the
United States. The preparation of these financial statements requires management
to  make  estimates  and  judgments  that affect the reported amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and  liabilities.  On  an  on-going  basis,  management evaluates its estimates,
including  those  related  to  revenue  recognition, deferred taxes, reserve for
doubtful  accounts,  capitalization  of  software  costs,  contingencies  and
litigation.  Management  bases  its  estimates  on  historical experience and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances,  the  results  of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other  sources.  Actual  results  may  differ  from  these  estimates.

Management applies the following critical accounting policies in the preparation
of  our  consolidated  financial  statements:

-    REVENUE RECOGNITION POLICY. We earn revenue from services which include the
following:  debit  and credit card processing, check verification, ACH services,
check  conversion,  check re-presentment, check collection, check guarantee, and
inventory  tracking.  All of these services are performed pursuant to a contract
with  customers,  which  state  the  terms  and  fixed  price for all contracted
services.  The price of a service may be a fixed fee for each transaction and/or
a  percentage  of  the  transaction  processed,  depending  on  the service.  We
generally  collect  our  fee  at  the  time  we  process  the  transaction  and
accordingly,  collectibility  of  the  service  fee  is  reasonably  assured.

Revenue  from  debit  and  credit  card  (collectively  called  bankcards)  and
transaction  processing  revenue  is  based  on  a percentage of the transaction
value,  commonly  referred  to  as  a  discount  fee  on a credit and debit card
transaction  processed  by  us.  In  addition,  there  is  a per transaction fee
associated  with each bankcard transaction which is charged to the merchant.  We
recognize  the  processing  and  transaction  revenue  when  the  services  are
performed.

Revenue  from  check  verification  is  derived  from  fees  collected  from the
merchants  when  a check is verified against our own positive and negative check
database  and other check databases that we use. This revenue is recognized when
the  transaction is processed, since we have no further performance obligations.


                                       18
<PAGE>
Revenue  from  check conversion is derived from fees collected from merchants to
convert  the  paper  check  received by merchants into an ACH transaction, which
allows  us  to  settle  the  transaction  electronically  for  the merchant.  We
recognize  the  revenue  related  to check conversion fees when the services are
performed.

Revenue from check re-presentment is derived from fees charged to check writers.
Check re-presentment is a service that allows merchants to collect a paper check
through  the ACH network after a check has previously been presented to the bank
for  collection  unsuccessfully  at  least once.  The fees earned from the check
writer  are  recognized  when  collected,  as  collectibility  is not reasonably
assured  until  that  point.

Revenue from check guarantee is derived from a percentage of the gross amount of
the  check  and guarantees payment of the check to the merchant in the event the
check  is  not  honored by the check writer's bank.  Merchants typically present
customer  checks  for  processing  on a regular basis and, therefore, dishonored
checks  are  generally  identified  within a few days of the date the checks are
guaranteed  by  us.  We  recognize  revenue when the checks are processed at the
point  of  sale.   At the time the guarantee revenue is recognized, we provide a
reserve  for  estimated  guarantee  losses  based  upon  our  historical  loss
experience.  In  the event the check is dishonored, we have the right to collect
the  full  amount  of  the  check  from  the  check writer but have historically
recovered  approximately  50-60%  of  the  guaranteed  checks.  We  establish  a
receivable  from  the  delinquent  check  writer  for  the  full  amount  of the
guaranteed  check.  The check guarantee service also earns revenue based on fees
collected from delinquent check writers, which collection fee is recognized when
collected, as collectibility is not reasonably assured until that point.

Revenue from check collection is derived from collection activities performed on
behalf of a merchant on uncollected checks.  The merchants usually keep the face
amount  of  the  uncollected checks if the collection effort is successful.  Our
revenue  is derived from the collection fee collected from the check writer.  If
we refer the collection item to another collection agency, we will receive a fee
from  the collection agency upon its successful efforts.  Collection fee revenue
is  recognized when collected, as collectibility is not reasonably assured until
that  point.

Revenue  from inventory tracking is derived from transaction fees for processing
and  tracking  U-Haul's  daily  inventory activities. This revenue is recognized
when  the  transaction  is  processed,  since  we  have  no  further performance
obligations.

-    DEFERRED  TAXES.  Deferred  taxes  are  determined based on the differences
between  the  financial statement and tax basis of assets and liabilities, using
enacted  tax  rates in effect for the year in which the differences are expected
to  reverse.  Valuation  allowances  are  established  when  necessary to reduce
deferred  tax  assets  to  the amounts expected to be realized. In assessing the
need for a valuation allowance, management considers estimates of future taxable
income  and  ongoing  prudent  and  feasible  tax  planning  strategies.

-    CHARGEBACK  LOSSES.  Chargeback  losses  occur  when  a  credit card holder
presents  a  valid  claim  against  one  of  our  merchants and the merchant has
insufficient  funds  or  is  no longer in business resulting in the charge being
absorbed  by  us.  We  record  a  receivable for those chargebacks for which the
merchant  is  liable  but  has  not  made  payment.  We  record  a provision for
estimated  chargeback losses at the time bankcard transactions are processed.  A
reserve  is  estimated  based upon a historically-determined percentage of gross
credit  card  processing  volume  and  actual  losses  experienced.

-    RESEARCH  AND DEVELOPMENT EXPENSE.  Expenditures for activities relating to
product  development  and  improvement are charged to expense as incurred.  Such
expenditures amounted to $1,465,000 in fiscal year 2004 and $1,464,000 in fiscal
year  2003.

-    CUMULATIVE  EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.  Effective October 1,
2002,  we  adopted  Statement  of  Financial Accounting Standards No. 142 ("SFAS
142"),  "Goodwill and Other Intangible Assets".  SFAS 142 requires that goodwill
no  longer  be amortized, but instead be tested for impairment at least annually
using  a  fair value-based approach.  In the year of adoption, SFAS No. 142 also
requires us to perform an initial assessment of its reporting units to determine
whether  there  is  any  indication  that  the  goodwill  carrying  value may be
impaired.  This  transitional  assessment is made by comparing the fair value of
each  reporting  unit, as determined in accordance with the new standard, to its
book  value.  To  the  extent  the fair value of any reporting unit is less than


                                       19
<PAGE>
its  book  value,  which  would  indicate  that potential impairment of goodwill
exists,  a  second  transitional  test  is  required  to determine the amount of
impairment.  In  2003, we determined that all of our goodwill was impaired under
SFAS  No.  142  and  accordingly  took a charge to write down the amount of that
impairment.

-    CAPITALIZATION  OF  SOFTWARE  COSTS.  The costs of purchased and internally
developed  software  used to provide services to customers or for the process of
internal  administration  are capitalized and amortized on a straight-line basis
over the lesser of three years or estimated useful life. Under the provisions of
Statement  of  Position  98-1,  "Accounting  for  the Costs of Computer Software
Developed  or Obtained for Internal Use," we capitalize software costs when both
the preliminary project stage is completed and management has authorized further
funding  for  the completion of the project. Capitalization of costs ceases when
the project is substantially complete and the software is ready for its intended
use.  Software  developed  or obtained for internal use is tested for impairment
whenever  events  or  changes in circumstance indicates that its carrying amount
may  not  be  recoverable.


RESULTS  OF  OPERATIONS

FISCAL  YEARS  2004  AND  2003
------------------------------

Financial highlights for fiscal 2004 as compared to fiscal 2003 were as follows:

--   Total revenue increased 17.1% to $47.6 million

--   Gross margin from processing and transaction revenue improved to 37.4% from
     33.9%

--   Operating income increased to $3.5 million from $2.4 million

--   Diluted  earnings  per  share before cumulative effect of accounting change
     were  $0.41  as  compared  to  $0.22  per  share.

--   Bankcard  and  transaction  processing  revenue increased by 11.5% to $36.2
     million

--   Bankcard processing volume increased 9.5% to $1.1 billion

--   Check-related revenue increased by 39.4% to $11.4 million

--   ACH processing volume increased 128.4% to 25.8 million transactions


REVENUE.  Total  revenue  increased  17.1%  to $47,584,000 for fiscal 2004, from
$40,636,000 for fiscal 2003. The increase can be primarily attributable to 11.5%
growth  in bankcard and transaction processing revenue and 39.4% growth in check
services  revenue  year-over-year. This growth has occurred organically from our
existing  merchants and from our marketing initiatives during the year, and as a
result of increasing acceptance of our check services products and the continued
growth  in  the  Visa  Program.

The bankcard and transaction processing revenue increase was mainly attributable
to  a  9.5%  increase  in  bankcard processing volume as compared to last fiscal
year.  This  increase  was  the result of our organic growth and the growth from
our  various  marketing  channels  such  as  the  Agent  Bank  Program  and  the
MerchantAmerica  marketing  program.  The  increase  was partially offset by the
departure of several high volume merchants during the year.

The  check-related  processing  revenue  increase  was  attributable  to a 10.6%
increase  in  check  verification  revenue and a 101.3% increase in ACH services
revenues.  The  high  growth in the ACH revenue was due to the increasing market
acceptance of this product and the continued growth in the Visa Program.

COST  OF SALES. Bankcard processing expenses are directly related to the changes
in  processing revenue. A majority of our bankcard processing expenses are fixed
costs  and  are  reflected  as  a  percentage  of  the total face amount of each
bankcard  transaction, and the remaining costs are based on a fixed rate applied
to the number of transactions processed. Processing-related expenses, consisting
of  bankcard  processing  expense  and transaction and check processing expense,
increased  11.2% for the year, from $26,660,000 in fiscal 2003 to $29,634,000 in
fiscal  2004.  The  increase  reflects  the  17.3%  increase  in  processing and
transaction  revenues  for  the  year.


                                       20
<PAGE>
Gross  margin  from  processing  and transaction services improved from 33.9% in
fiscal  2003  to  37.4%  in  fiscal  2004.  This improvement in gross margin was
mainly  due  to: 1) check-related revenue, which has a higher gross margin, made
up  24.0%  of the total revenue in fiscal 2004 as compared to 20.2% of the total
revenue  in fiscal 2003 and; 2) a rate adjustment was applied to a broad base of
bankcard  merchants  during  fiscal  2004 to offset increases in direct bankcard
processing  expenses.

EXPENSE.  Other operating costs such as personnel costs, telephone, depreciation
expenses and outside services increased 18.5%, from $4,373,000 in fiscal 2003 to
$5,182,000  in  fiscal  2004 primarily due to more staff hired in fiscal 2004 to
support  our  growth.  Research and development expenses remained constant, from
$1,464,000  in fiscal 2003 to $1,465,000 in fiscal 2004. Almost all of our major
development  projects  were  in  the  coding  and testing phases in fiscal 2004.
Several  major development projects should be completed during fiscal year 2005.
However, given the rapid change in technology occurring in our industry, we plan
to  continue  to  invest  in product development in both the bankcard processing
business  segment  and  the  check-related  products  segment in order to remain
competitive  in  these  financial  services  markets.

Selling,  general  and  administrative  (SG&A)  expenses  increased  37.3%  from
$5,714,000  in  fiscal  2003  to  $7,846,000  in  fiscal 2004. This increase was
primarily  attributable  to:  1)  greater  personnel costs due to cost of living
adjustments  and  greater  employee benefits costs, such as health insurance and
worker's  compensation  insurance;  2) growth in sales and marketing expenses to
implement  our  sales  and  marketing  strategies;  3)  increased  legal  and
professional expenses to defend several lawsuits; 4) an increase in rent expense
due  to  our  new  corporate  relocation  in  October  2003;  and  5) a $300,000
litigation  accrual  related  to an ordinary course contract dispute with one of
its  independent  sales  organizations.  The  dispute  is  subject  to  binding
arbitration,  the  award from which is expected between the end of calendar 2004
and  the  beginning  of  2005.  The  accrual  represents management's good faith
evaluation  of  the  dispute  after  consultation  with  its legal counsel. As a
percentage  of  total revenue, SG&A expenses increased from 14.1% in fiscal 2003
to  16.5%  in  fiscal  2004.

OPERATING  INCOME.  Operating income increased from $2,425,000 in fiscal 2003 to
$3,457,000  in  fiscal 2004, an increase of 42.6%.  The improvement in operating
income  was primarily attributable to the 17.1% increase in revenue and the 3.5%
improvement  in  gross  margin  described  above.

INTEREST  EXPENSE.  Interest expense decreased to $175,000 for fiscal 2004, from
$200,000  for  fiscal  2003.  The  decrease was due to the full repayment of two
long-term  notes.  Interest  income  increased  from  $28,000  in fiscal 2003 to
$71,000  in  fiscal  2004 due to higher average cash balances on hand throughout
fiscal  year  2004.

GAIN  ON  SALE  OF  ASSETS.  Fiscal  2004  results  were favorably affected by a
pre-tax  gain on sale of $1,319,000 resulting from the sale of the building that
formerly  held  the  Company's  principal executive offices. After the sale, the
Company used a portion of the proceeds to pay off two loans totaling $1,524,000,
which  were  collateralized  by  the  building.

EFFECTIVE  TAX  RATE. The income tax provision was $1,823,000 for fiscal 2004 as
compared  to  $925,000  for  fiscal  2003.  Our effective tax rate was 39.0% for
fiscal  2004,  as  compared to 37.7% for fiscal 2003.  See Notes to Consolidated
Financial  Statements  included  elsewhere herein for further explanation of the
income  tax  expense and a reconciliation of reported income taxes to the amount
utilizing  the  statutory  rate.

NET INCOME. Net income for fiscal 2004 was $2,849,000, as compared to a net loss
of  $3,379,000 for fiscal 2003. Income before cumulative effect of an accounting
change  to adopt SFAS 142 was $1,328,000 in fiscal 2003 and $2,849,000 in fiscal
2004,  an  increase  of 114.5%.  This increase was primarily attributable to the
17.1%  revenue  growth  year-over-year  and  the  improvements  in gross margin.

SEGMENT RESULTS
Bankcard  and  Transaction  Processing.  For  the year ended September 30, 2004,
bankcard processing and transaction revenue accounted for approximately 76.0% of
our  revenues,  compared  to  79.8%  in  fiscal  2003.  Bankcard  processing and
transaction  revenue  increased  11.5%,  from  $32,444,000  in  fiscal  2003  to
$36,161,000  in  fiscal  2004.  This  increase was mainly attributable to a 9.5%
increase  in  bankcard  processing  volume as compared to last fiscal year. This
increase was partially offset by the departure of several high volume merchants.
To a lesser extent, the increase was positively impacted by a rate adjustment to
our  bankcard merchant base during fiscal 2004. We continue to grow our bankcard
processing  business  primarily  through  organic  growth  and various sales and
marketing  programs.


                                       21
<PAGE>
In  fiscal  2004,  the  bankcard  and  transaction  processing segment generated
operating income of $5,977,000, or 16.5% of the related revenues, as compared to
$4,303,000,  or  13.3%  of the related revenues in fiscal 2003. This increase in
operating  income was reflective of the increase in revenue and the higher gross
margin  as  a  result  of  the broad base rate adjustment to merchants to offset
higher  operating  costs.

In  fiscal  2001,  we  purchased  a  fully  integrated,  multi-modular  bankcard
processing  system  from  Oasis  Technologies for approximately $1.3 million. We
have  incurred  an additional $700,000 of internal development costs thus far in
implementing this system. The implementation of this system will give us greater
flexibility to price our credit card processing services, allowing us to attract
and  retain  larger merchants as well as the small and mid-market merchants that
have  been  our  target  market.  This  project  has  experienced  numerous
implementation delays, mainly as a result of vendor software delivery issues and
the  vigorous  testing  required  prior  to  implementation.  Management  now
anticipates  that  portions of the Oasis system will begin productive use in the
second  half  of  2005.

Check  Related  Products.  Check-related  revenues increased from $8,192,000 for
fiscal  2003  to  $11,423,000  for  fiscal  2004,  an  increase  of 39.4%. Check
verification  revenue  increased  10.6%  to  $3,425,000  for  fiscal  2004, from
$3,097,000  for  fiscal  2003.  Check  conversion,  ACH  services  and  check
re-presentment  revenue  increased  101.3%  to  $5,820,000 for fiscal 2004, from
$2,892,000  for  fiscal  2003.  Additionally, check collection revenue increased
14.0%,  from  $1,791,000  in  fiscal 2003 to $1,816,000 in fiscal 2004. The high
growth  in the check conversion and ACH revenue was due to the increasing market
acceptance  of this product and to the transaction revenue generated by the Visa
Program.  Total  ACH transactions processed during fiscal 2004 were 25.8 million
transactions, as compared to 11.3 million transactions processed in fiscal 2003,
an increase of 128.4%.  ACH transactions, like ACH revenues, increased primarily
from  the increasing market acceptance of the ACH services and the Visa Program.

Check  services  revenue  made  up 24.0% of the total processing and transaction
revenues  for  fiscal  2004  as compared to 20.2% in fiscal 2003.  Check-related
operating  income was $1,644,000 in fiscal 2004, as compared to operating income
of  $591,000  in  fiscal  2003, an increase of 178.2%. The increase in operating
income was mainly due to the 39.4% increase in check-related revenues.

The  Visa  Program  is continuing to gain traction during 2004. We are currently
working  with  16  Visa  member banks that have signed up to participate in this
Visa  Program.  One  of  the  Visa  acquiring banks, using us as the Third-Party
Processor,  rolled  out  this Program to a national retailer in June 2003.  This
one  merchant  accounted  for a significant percentage of revenue generated from
the  Visa  Program  in  fiscal  2004  and  an  increased  volume of transactions
processed. Management continues to believe that the Visa Program will provide us
with  numerous  opportunities  to develop strategic relationships with the banks
who  have  chosen  us  to  be their Third-Party Processor and Acquirer Processor
under  the  Visa  Program.  These  relationships  could  play  a  major  role in
increasing  our  check  services  revenue  in  the  coming  years.


RESULTS  OF  OPERATIONS

FISCAL  YEARS  2003  AND  2002
------------------------------

Financial highlights for fiscal 2003 as compared to fiscal 2002 were as follows:

--   Total revenue increased 22.1% to $40.6 million

--   Gross margin from processing and transaction revenue improved to 33.9% from
     30.1%

--   Operating  income  increased  to  $2.4  million from a loss of $3.7 million
     (which  included  $2.9  million  of  litigation  related  expenses).

--   Diluted  earnings  per  share before cumulative effect of accounting change
     were  $0.22  as compared to diluted loss per share before cumulative effect
     of  accounting  change  of  $0.41.

--   Bankcard  and  transaction  processing  revenue increased by 18.2% to $32.4
     million


                                       22
<PAGE>
--   Bankcard processing volume increased 26.4% to $961 million

--   Check-related revenue increased by 40.4% to $8.2 million

--   ACH processing volume increased 403.8% to 11.3 million transactions


REVENUE.  In  fiscal  2003,  total  revenue increased 22.1% to $40,636,000, from
$33,291,000  for  fiscal  2002.  The  increase was primarily attributable to the
growth  in  the  processing  and  transaction  business.  Total  processing  and
transaction  revenue for fiscal 2003 increased 22.6%, from $32,889,000 in fiscal
2002  to  $40,313,000  in fiscal 2003. The increase was attributable to an 18.2%
increase  in bankcard and transaction processing revenue and a 40.4% increase in
check-related  revenue.

The bankcard and transaction processing revenue increase was mainly attributable
to  an  approximate  26.4% increase in bankcard processing volume as compared to
fiscal  2002.  This  increase  was  also  affected  by  a rate adjustment to the
bankcard merchant base during fiscal 2003 and the fact that we continued to grow
our bankcard processing business organically through various sales and marketing
programs.

The  check-related  processing  revenue  increase  was  attributable  to  a 9.8%
increase in check verification revenue and a 246.0% increase in electronic check
conversion  and  electronic check presentment revenue.  The high growth in check
conversion  revenue was due to the increasing market acceptance of this product.
Additionally,  it  was  attributable  to  the transactions generated by the Visa
Program.

Terminal  sales  decreased by 50.8%, from $252,000 in fiscal 2002 to $124,000 in
fiscal 2003.  During fiscal 2003, U-Haul stopped sending its terminals to us for
repair.  We gradually shut down our terminal deployment operations during fiscal
2003.

COST  OF SALES. Bankcard processing expenses are directly related to the changes
in  processing revenue. A majority of our bankcard processing expenses are fixed
costs  and  reflected  as a percentage of the total face amount of each bankcard
transaction,  and  the  remaining costs are based on a fixed rate applied to the
number  of  transactions  processed.  Processing-related expenses, consisting of
bankcard  processing  expense  and  transaction  and  check  processing expense,
increased  16.0%  in fiscal 2003, from $22,973,000 in fiscal 2002 to $26,660,000
in  fiscal  2003.  The  increase  reflected  a  22.7% increase in processing and
transaction  revenues for the year. Gross margin from processing and transaction
services  improved  from  30.1%  in  fiscal  2002  to 33.9% in fiscal 2003. This
improvement  in  gross  margin was mainly due to: 1) check-related revenue which
has  a  higher gross margin made up 20.2% of the total revenue in fiscal 2003 as
compared  to 17.5% of the total revenue in fiscal 2002; 2) a rate adjustment was
applied  to  a  broad  base  of  bankcard merchants during fiscal 2003 to offset
increases  in  direct  bankcard  processing  expenses; and 3) loss on chargeback
decreased substantially, from $261,000 in fiscal 2002 to $44,000 in fiscal 2003.

EXPENSE.  Other  operating  costs  such  as  personnel  costs,  telephone  and
depreciation  expenses  increased  8.5%,  from  $4,032,000  in  fiscal  2002  to
$4,373,000  in  fiscal  2003  primarily  due  to  the 22.1% increase in revenue.
Research  and development expenses decreased 162% from $1,747,000 in fiscal 2002
to  $1,464,000  in fiscal 2003, as most of our development projects entered into
coding  and  testing  phases.

Selling,  general  and administrative expenses increased 9.5% from $5,219,000 in
fiscal  2002  to  $5,714,000 in fiscal 2003. This increase was mainly due to the
addition of management personnel to support our growth, the increase in employee
benefits costs such as medical insurance, workers compensation insurance and the
increase  in  cost  of  living  adjustments.  As  a percentage of total revenue,
selling,  general and administrative expenses decreased from 15.7% in the fiscal
2002  to  14.1%  in  fiscal  2003.

Amortization  of  goodwill  expense,  which  amounted  to $489,000 in 2002,  was
eliminated  in  fiscal  2003  due  to  the  implementation  of  SFAS  No.  142.

INTEREST  EXPENSE.  Interest expense increased to $200,000 for fiscal 2003, from
$129,000  in  fiscal 2002. The increase was due to a $1.3 million long-term note
from  a  legal  settlement  in fiscal 2002 and an increase in capitalized leases
from  equipment purchases. Interest income decreased from $55,000 in fiscal 2002
to  $28,000  in fiscal 2003 due to a decline in interest rates and lower average
cash  balances.


                                       23
<PAGE>
EFFECTIVE  TAX  RATE.  The  income tax provision was $925,000 for fiscal 2003 as
compared  to an income tax benefit of $1,367,000 for fiscal 2002.  Our effective
tax  benefit  rate  was 36.5% for fiscal 2002 and a tax provision rate was 37.7%
for  fiscal  2003.

NET  LOSS. Net loss for fiscal 2003 was $3,379,000, as compared to a net loss of
$2,376,000 for fiscal 2002. The higher net loss in fiscal 2003 was primarily due
to  a  $4.7  million  goodwill  write-off on our adoption of SFAS 142 in October
2002.  Income  from  operations  improved  substantially  in fiscal 2003, from a
$3,669,000  operating  loss in fiscal 2002 to $2,425,000 in operating income for
fiscal  2003.  The improvement in income from operations between fiscal 2002 and
fiscal  2003  comprised the following: 1) a 22.1% increase in revenue; 2) a 3.8%
improvement  in  gross  margin;  3)  the  elimination  of  $489,000  in goodwill
amortization  expense;  and 4) a one-time $2.5 million legal settlement cost was
incurred  in  fiscal  2002.

SEGMENT RESULTS
Bankcard  and  Transaction  Processing.  For  the year ended September 30, 2003,
MerchantAmerica,  our  primary  generator  of  bankcard  process and transaction
revenue,  accounted  for  approximately  80% of our revenues, compared to 82% in
fiscal  2002.  Bankcard processing and transaction revenue increased 18.2%, from
$27,456,000  in  fiscal  2002  to  $32,444,000 in fiscal 2003. This increase was
mainly  attributable  to  an  approximate  26.4% increase in bankcard processing
volume  as  compared  to  fiscal 2002. This increase was also affected by a rate
adjustment to our bankcard merchant base during fiscal 2003 and the fact that we
continued  to  grow our bankcard processing business organically through various
sales  and  marketing  programs.

In  fiscal  2003,  the  bankcard  and  transaction  processing segment generated
operating income of $4,303,000, or 13.3% of the related revenues, as compared to
$1,996,000,  or  7.3%  of  the related revenues in fiscal 2002. This increase in
operating  income was reflective of the increase in revenue and the higher gross
margin  as a result of the rate adjustment to merchants and the lower chargeback
losses.

Check  Related  Products.  Check-related  revenues increased from $5,835,000 for
fiscal  2002  to  $8,192,000  for  fiscal  2003,  an  increase  of  40.4%. Check
verification  revenue  increased  9.8%  to  $3,097,000  for  fiscal  2003,  from
$2,821,000  for  fiscal  2002. Check conversion and check re-presentment revenue
increased  246.0%  to $2,892,000 for fiscal 2003, from $836,000 for fiscal 2002.
Additionally, check collection revenue increased 5.1%, from $1,453,000 in fiscal
2002  to  $1,526,000  in  fiscal  2003.  The high growth in the check conversion
revenue  was  due  to  the  increasing  market  acceptance  of  this product and
attributable  to  the  transaction  revenue  generated  by  the  Visa  Program.

Check  services  revenue  made  up 20.2% of the total processing and transaction
revenues  for fiscal 2003 as compared to 17.5% in the prior year.  Check-related
operating  income was $591,000 for fiscal 2003, as compared to operating loss of
$872,000  in fiscal 2002. The increase in operating income was mainly due to the
40.4%  increase  in  check-related  revenues.

LIQUIDITY  AND  CAPITAL  RESOURCES

As  of  September  30,  2004,  we  had  available  cash  and cash equivalents of
$7,576,000, restricted cash of $1,024,000 in reserve with our primary processing
banks  and  working  capital  of  $8,004,000.

Accounts  receivable, net of allowance for doubtful accounts, increased slightly
to  $1,943,000  at September 30, 2004 from $1,939,000 at the end of fiscal 2003.
Allowance  for  doubtful accounts, which reflects chargeback losses increased to
$111,000  at  the  end  of fiscal 2004 from $71,000 at September 30, 2003.  This
increase  was  due  to  the  higher processing revenue generated in fiscal 2004.

Net  cash provided by operating activities for the year ended September 30, 2004
was  $5,325,000  as  compared  to  net  cash provided by operating activities of
$4,549,000  for fiscal 2003.  The increase in cash from operations was primarily
attributable  to the $1,032,000 increase in operating income between fiscal 2004
and  2003.  Settlement receivable/payable results from timing differences in our
settlement  process  with  merchants.  These  timing differences account for the
difference between the time that funds are received in our bank accounts and the
time  that  settlement  payments are made to merchants.  Therefore, at any given
time,  settlement  receivable/payable  may  vary  and  ultimately depends on the
volume  of transactions processed. The increase in settlement receivable/payable
in  fiscal  2004  is  primarily  attributable to the high volume of transactions
experienced  from  our  check  services.  As  our  business  grows,  settlement
receivable/payable  balances  will  likely  increase.


                                       24
<PAGE>
Net  cash  used  in  investing  activities was $1,904,000 for the fiscal 2004 as
compared  to  $3,271,000  for  fiscal  year  2003.  During  fiscal 2004, we used
$4,278,000 for purchases of equipment and capitalized software costs as compared
to  $3,291,000  for fiscal 2003.  We should be completing several major projects
in fiscal 2005 related to infrastructure improvements and thereby decreasing the
amount  of  investment  required  in fiscal 2005 as compared to fiscal 2004.  In
fiscal 2004, we also received $2,233,000 in proceeds from the sale of our former
corporate  headquarters  building.

Net  cash provided by financing activities was $1,247,000 for the current fiscal
year as compared to net cash used by financing activities of $179,000 for fiscal
year  2003.  During  fiscal  2004, we received net proceeds of $2,693,000 from a
private  placement.  We  paid off $1,916,000 in notes payable, and used $562,000
for  the repayment of capitalized leases and received $221,000 from the exercise
of  employee  stock  options.

In  November  2003,  we  negotiated  a  $1,000,000  equipment  lease  line and a
$3,000,000  credit  line  with Bank of the West for working capital needs. As of
September  30, 2004, we have drawn down $600,000 of the equipment lease line but
have  not  used  the  $3,000,000  credit  line.


At September, 2004, we had the following cash commitments:

<TABLE>
<CAPTION>
                              Payment Due By Period
                              ---------------------

Contractual                       Less than                            After
Obligations             Total       1 year    2-3 years   4-5 years   5 years
-----------           ----------  ----------  ----------  ----------  --------
<S>                   <C>         <C>         <C>         <C>         <C>
Long-term debt
  including interest  $  970,000  $  434,000  $  356,000  $  180,000  $    -0-
Capital lease
  obligations            757,000     528,000     196,000      33,000       -0-
Operating leases       1,929,000     565,000     909,000     455,000       -0-
                      ----------  ----------  ----------  ----------  --------
Total contractual
  cash obligations    $3,656,000  $1,527,000  $1,461,000  $  668,000  $    -0-
                      ==========  ==========  ==========  ==========  ========
</TABLE>

Our  primary  source  of  liquidity  is  expected to be cash flow generated from
operations and cash and cash equivalents currently on hand.  Management believes
that  our  cash flow from operations together with cash on hand, our lease line,
our  established  line  of  credit  with  Bank  of the West, and cash previously
received  from  our  private  placement financing will be sufficient to meet our
working  capital  and  other  commitments.

NEW  ACCOUNTING  PRONOUNCEMENT

In  December 2004, the FASB issued SFAS 123R, "Share-Based Payment, an amendment
of  FASB  Statements  Nos.  123  and  95,"  that  addresses  the  accounting for
share-based  payment  transactions in which a Company receives employee services
in exchange for either equity instruments of the Company or liabilities that are
based  on  the  fair  value  of  the Company's equity instruments or that may be
settled  by  the  issuance  of such equity instruments. SFAS 123R eliminates the
ability to account for share-based compensation transactions using the intrinsic
method  that  the  Company  currently uses and generally would require that such
transactions  be accounted for using a fair-value-based method and recognized as
expense in the consolidated statement of operations.  SFAS 123R is effective for
interim  and  annual  periods  beginning  after  June  15,  2005.  Management is
currently  evaluating  the  impact  of SFAS 123R and it is expected that it will
have  a  significant  impact  on the consolidated statement of operations as the
Company will be required to expense the fair value of stock option awards.


                                       25
<PAGE>
RISK  FACTORS

Our  business,  and accordingly, your investment in our common stock, is subject
to  a  number  of  risks.  These  risks  could  affect our operating results and
liquidity.  You should consider the following risk factors, among others, before
investing  in  our  common  stock:

RISKS  RELATED  TO  OUR  BUSINESS
---------------------------------


WE  RELY  ON  COOPERATIVE  RELATIONSHIPS  WITH,  AND  SPONSORSHIP BY, BANKS, THE
ABSENCE  OF  WHICH  MAY  AFFECT  OUR  OPERATIONS.

We  currently  rely on cooperative relationships with, and sponsorship by, banks
in  order  to  process our Visa, MasterCard and other bankcard transactions.  We
also  rely  on  several banks for access to the Automated Clearing House ("ACH")
for  submission  of  both  credit  card  and  check  settlements.  Our  banking
relationships  are  currently  with  smaller  banks  (with  assets  of less than
$500,000,000).  Even though smaller banks tend to be more susceptible to mergers
or  acquisitions and are therefore less stable, these banks find the programs we
offer more attractive and we believe we cannot obtain similar relationships with
larger  banks  at  this  time.   A  bank  could  at  any  time  curtail or place
restrictions  on our processing volume because of its internal business policies
or due to other adverse circumstances.  If a volume restriction is placed on us,
it  could materially adversely affect our business operations by restricting our
ability  to  process  credit  card transactions and receive the related revenue.
Our  relationships  with  our  customers  and  merchants would also be adversely
affected  by  our  inability  to  process  these  transactions.

We  currently  maintain  one  primary  bankcard  processing  and  sponsorship
relationship  with  First  Regional  Bank  in  Agoura  Hills,  California.  Our
agreement  with  First  Regional  Bank continues through 2005.  We also maintain
several  banking relationships for ACH processing.  While we believe our current
bank  relationships  are  sound,  we  cannot  assure  that  these banks will not
restrict  our  increasing  processing  volume  or that we will always be able to
maintain  these  relationships  or establish new banking relationships.  Even if
new  banking relationships are available, they may not be on terms acceptable to
us.  With  respect  to  First  Regional  Bank, while we believe their ability to
terminate  our  respective relationships is cost-prohibitive, they may determine
that the cost of terminating their agreement is less than the cost of continuing
to  perform  in  accordance  with  their  terms,  and may therefore determine to
terminate  those  agreements prior to their expiration.  Ultimately, our failure
to  maintain  these  banking  relationships and sponsorships may have a material
adverse  effect  on  our  business  and  results  of  operations.

MERCHANT  FRAUD  WITH RESPECT TO BANKCARD AND ACH TRANSACTIONS COULD CAUSE US TO
INCUR  SIGNIFICANT  LOSSES.

We  significantly  rely  on the processing revenue derived from bankcard and ACH
transactions.  If  any  merchants  were  to  submit  or  process unauthorized or
fraudulent  bankcard  or  ACH transactions, depending on the dollar amount, ECHO
could incur significant losses which could have a material adverse effect on our
business and results of operations.  ECHO assumes and compensates the sponsoring
bank  for  bearing  the  risk  of  these  types  of  transactions.

We  have  implemented  systems  and software for the electronic surveillance and
monitoring  of  fraudulent  bankcard  and ACH use.  As of September 30, 2004, we
maintained  a  dedicated  chargeback  reserve  of  $708,000  at our primary bank
specifically  earmarked for such activity.  Additionally, through our sponsoring
bank,  we had access to approximately $9.9 million in merchant deposits to cover
any  potential chargeback losses.  Despite a long history of managing such risk,
we cannot guarantee that these systems will prevent fraudulent transactions from
being  submitted  and  processed  or  that  the  funds set aside to address such
activity  will  be  adequate to cover all potential situations that might occur.
We do not have insurance to protect us from these losses.  There is no assurance
that  our chargeback reserve will be adequate to offset against any unauthorized
or  fraudulent  processing  losses  that we may incur.  Depending on the size of
such  losses,  our  results  of  operations  could be immediately and materially
adversely  affected.


                                       26
<PAGE>
EXCESSIVE CHARGEBACK LOSSES COULD SIGNIFICANTLY AFFECT OUR RESULTS OF OPERATIONS
AND  LIQUIDITY.

Our  agreements with our sponsoring bank require us to assume and compensate the
bank  for  bearing  the risk of "chargeback" losses. Under the rules of Visa and
MasterCard, when a merchant processor acquires card transactions, it has certain
contingent  liabilities  for  the  transactions  processed.  This  contingent
liability  arises  in  the event of a billing dispute between the merchant and a
cardholder  that  is  ultimately  resolved in the cardholder's favor.  In such a
case,  the disputed transaction is charged back to the merchant and the disputed
amount is credited or otherwise refunded to the cardholder.  If we are unable to
collect  this  amount from the merchant's account, or if the merchant refuses or
is  unable  to reimburse us for the chargeback due to merchant fraud, insolvency
or other reasons, we will bear the loss for the amount of the refund paid to the
cardholders.

A  cardholder,  through its issuing bank, generally has until the later of up to
four  months  after  the  date a transaction is processed or the delivery of the
product  or  service  to  present  a  chargeback  to  our sponsoring bank as the
merchant  processor.  Therefore,  management believes that the maximum potential
exposure  for  the chargebacks would not exceed the total amount of transactions
processed  through  Visa  and  MasterCard  for  the  last  four months and other
unresolved  chargebacks  in  the process of resolution. For the last four months
through  September  30, 2004, this potential exposure totaled approximately $352
million.  At  September  30,  2004,  we,  through  our  sponsoring  banks,  had
approximately  $168,000  of  unresolved  chargebacks that were in the process of
resolution.  At September 30, 2004, we, through our sponsoring banks, had access
to $9.9 million belonging to our merchants. This money has been deposited at the
sponsoring bank by the merchants to cover any potential chargeback losses.

For  the  fiscal  years 2004 and 2003, we processed approximately $1,053 million
(2004)  and  $961  million  (2003)  of  Visa  and MasterCard transactions, which
resulted  in  $7.6  million  in  gross chargeback activities for the fiscal year
ended 2004 and $9.3 million for the fiscal year ended 2003. Substantially all of
these  chargebacks  were  recovered  from  the  merchants.

Nevertheless,  if  we  are  unable  to  recover  these  chargeback  amounts from
merchants,  having  to pay the aggregate of any such amounts would significantly
affect  our  results  of  operations  and  liquidity.

FAILURE  TO  PARTICIPATE IN THE VISA POS CHECK SERVICE PROGRAM WOULD CAUSE US TO
SIGNIFICANTLY  SHIFT  OUR  OPERATING  AND  MARKETING  STRATEGY.

We  have  significantly  increased  our  infrastructure, personnel and marketing
strategy to focus on the potential growth of our check services through the Visa
POS  Check  Service  program.  We  currently  provide  critical  back-end
infrastructure  for the service, including our NCN database for verification and
our  access  to  the Federal Reserve System's Automated Clearing House for funds
settlement  and for checks written on bank accounts with banks not participating
in  the  program.

Because  we  believe the market will continue to gain acceptance of the Visa POS
Check  Service  program,  we  have  expended significant resources to market our
check  conversion  services  and  verification services to our merchant base, to
solidify  our  strategic  relationships  with the various financial institutions
that  have chosen us as their Acquirer Processor and Third-Party processor under
the  program,  and  to  sell  our  other check products such as electronic check
re-presentments  and  check  guarantee  to  the Visa member banks.  We have also
increased  our  personnel to handle the increased volume of transactions arising
directly  from  our  participation  in  the  program.

If  we  fail  to  adequately market our services through this relationship, this
could  materially affect our marketing strategy going forward.  Additionally, if
we fail to adequately grow our infrastructure to address increases in the volume
of transactions, cease providing services as a Third-Party processor or Acquirer
Processor  or  are  otherwise  removed or terminated from the Visa Program, this
would require us to dramatically shift our current operating strategy.

THE BUSINESS IN WHICH WE COMPETE IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE
THAT  OUR CURRENT PRODUCTS AND SERVICES WILL STAY COMPETITIVE OR THAT WE WILL BE
ABLE TO INTRODUCE NEW PRODUCTS AND SERVICES TO COMPETE SUCCESSFULLY.

We  are  in  the  business  of processing payment transactions and designing and
implementing  integrated  systems  for our customers so that they can better use
our services.  This business is highly competitive and is characterized by rapid
technological  change,  rapid  rates of product obsolescence, and rapid rates of
new  products


                                       27
<PAGE>
introduction.  Our  market  share is relatively small as compared to most of our
competitors  and most of these competitors have substantially more financial and
marketing  resources  to  run their businesses.  While we believe our small size
provides  us the ability to move quickly in some areas, our competitors' greater
resources  enable them to investigate and embrace new and emerging technologies,
quickly  to  respond to changes in customers needs, and to devote more resources
to  product  and  services  development  and  marketing.  We  may face increased
competition  in  the  future  and  there  is  no  assurance  that current or new
competition  will  allow  us  to  keep our customers.  If we lose customers, our
business  operations  may be materially adversely affected, which could cause us
to  cease our business or curtail our business to a point where we are no longer
able  to generate sufficient revenues to fund operations.  There is no assurance
that  our  current products and services will stay competitive with those of our
competitors  or  that  we will be able to introduce new products and services to
compete  successfully  in  the  future.

IF  WE ARE UNABLE TO PROCESS SIGNIFICANTLY INCREASED VOLUME ACTIVITY, THIS COULD
AFFECT OUR OPERATIONS AND WE COULD LOSE OUR COMPETITIVE POSITION.

We  have  built  transaction  processing  systems  for check verification, check
conversion,  ACH  processing, and bankcard processing activities.  While current
estimates regarding increased volume are within the capabilities of each system,
it is possible that a significant increase in volume in one of the markets would
exceed  a  specific  system's  capabilities.  To  minimize  this  risk, ECHO has
redesigned and upgraded its check related processing systems and has purchased a
high  end  system  to  process  bankcard  activity.  This  system  is  not  yet
operational,  and  even  when  it becomes operational, no assurance can be given
that  it  would  be  able to handle a significant increase in volume or that the
operational  enhancements  and  improvements  will  be completed in such time to
avoid  such  a  situation.  In  the  event we are unable to process increases in
volume, this could significantly adversely affect our banking relationships, our
merchant  customers  and our overall competitive position, and could potentially
result  in  violations of service level agreements which would require us to pay
penalty  fees  to  the  other  parties  to  those  agreements.  Losses  of  such
relationships,  or  the  requirement  to  pay penalties, may severely impact our
results  of  operations  and  financial  condition.

WE INCUR FINANCIAL RISK FROM OUR CHECK GUARANTEE SERVICE.

The  check  guarantee  business  is  essentially a risk management business. Any
limitation  of  a  risk  management system could result in financial obligations
being  incurred by ECHO relative to our check guarantee activity. While ECHO has
provided  check  guarantee services for several years, there can be no assurance
that  our  current  risk  management  systems are adequate to assure against any
financial  loss  relating to check guarantee. ECHO is enhancing its current risk
management  systems  and  it is being conservative with reference to the type of
merchants  to  which it offers guarantee services in order to minimize this risk
but  no  assurance  can be given that such measures will be adequate. During the
year  ended  September 30, 2004, we incurred $128,000 in losses from uncollected
guaranteed  checks.

SECURITY  BREACHES  COULD  IMPACT  OUR  CONTINUED  OPERATIONS.

We  process  confidential  financial  information and maintain several levels of
security  to  protect  this  data.  Security  includes  hand  and  card-based
identification  systems at our data center locations that restrict access to the
specific  facilities,  various  employee  monitoring  and  access  restriction
policies,  and  various  firewall  and  network  management  methodologies  that
restrict  unauthorized  access  through  the  Internet. While these systems have
worked  effectively  in  the  past,  there  can  be  no assurance that they will
continue to operate without a security breach in the future.  Depending upon the
nature of the breach, the consequences of security breaches could be significant
and  dramatic  to  ECHO's  continued  operations.

THE  INDUSTRY  IN  WHICH WE OPERATE INVOLVES RAPIDLY CHANGING TECHNOLOGY AND OUR
FAILURE  TO  IMPROVE  OUR  PRODUCTS  AND  SERVICES  OR TO OFFER NEW PRODUCTS AND
SERVICES  COULD  CAUSE  US  TO  LOSE  CUSTOMERS.

Our  business  industry involves rapidly changing technology.  Recently, we have
observed  rapid  changes  in  technology  as  evidenced  by  the  Internet  and
Internet-related  services and applications, new and better software, and faster
computers and modems.  As technology changes, ECHO's customers desire and expect
better products and services.  Our success depends on our ability to improve our
existing  products  and  services  and  to  develop  and market new products and
services.  The  costs  and  expenses  associated  with  such  an effort could be
significant to us.  There is no assurance that we will be able to find the funds
necessary  to  keep  up  with  new


                                       28
<PAGE>
technology  or that if such funds are available that we can successfully improve
our  existing  products  and  services  or successfully develop new products and
services.  Our  failure  to  provide  improved  products  and  services  to  our
customers or any delay in providing such products and services could cause us to
lose  customers  to  our  competitors.  Loss  of customers could have a material
adverse  effect  on  ECHO.

OUR  INABILITY  TO  PROTECT  OR  DEFEND OUR TRADE SECRETS AND OTHER INTELLECTUAL
PROPERTY  COULD  HURT  OUR  BUSINESS.

We  have expended a considerable amount of time and money to develop information
systems for our merchants.  We regard these information systems as trade secrets
that  are  extremely important to our payment processing operations.  We rely on
trade  secret  protection  and  confidentiality  and/or  license agreements with
employees,  customers, partners and others to protect this intellectual property
and  have  not  otherwise taken steps to obtain additional intellectual property
protection  or  other  protection  on  these  information systems.  We cannot be
certain  that we have taken adequate steps to protect our intellectual property.
In  addition, our third-party confidentiality agreements can be breached and, if
they  are,  there  may  not be an adequate remedy available to us.  If our trade
secrets  become  known, we may lose our competitive position, including the loss
of  our  merchant  and  bank  customers.  Such  a loss could severely impact our
results  of  operations  and  financial  condition.

Additionally,  while  we  believe that the technology underlying our information
systems  does  not  infringe  upon  the rights of any third parties, there is no
assurance  that third parties will not bring infringement claims against us.  We
also  have  the  right  to  use the technology of others through various license
agreements.  If  a third party claimed our activities and/or these licenses were
infringing  their  technology,  while  we  may  have  some  protection  from our
third-party licensors, we could face additional infringement claims or otherwise
be  obligated to stop utilizing intellectual property critical to our technology
infrastructure.  If  we are not able to implement other technology to substitute
the  intellectual  property underlying a claim, our business operations could be
severely  effected.  Additionally, infringement claims would require us to incur
significant defense costs and expenses and, to the extent we are unsuccessful in
defending  these claims, could cause us to pay monetary damages to the person or
entity making the claim.  Continuously having to defend such claims or otherwise
making  monetary  damages payments could materially adversely affect our results
of  operations.

IF  WE  DO NOT CONTINUE TO INVEST IN RESEARCH AND DEVELOPMENT, WE COULD LOSE OUR
COMPETITIVE  POSITION.

Because  technology  in the payment processing industry evolves rapidly, we need
to  continue  to  invest  in  research  and  development  in  both  the bankcard
processing  business  segment and the check-related products segment in order to
remain  competitive.  Research  and  development expenses remained constant from
$1,464,000  in fiscal 2003 to $1,465,000 in fiscal 2004. Most of our development
project  costs  were capitalized once we entered into coding and testing phases,
we continue to evaluate projects, which we believe will assist us in our efforts
to  stay competitive.  Although we believe that our investment in these projects
will  ultimately increase earnings, there is no assurance as to when or if these
new  products  will show profitability or if we will ever be able to recover the
costs  invested  in these projects.  Additionally, if we fail to commit adequate
resources  to  grow  our technology on pace with market growth, we could quickly
lose  our  competitive  position,  including  the  loss of our merchant and bank
customers.

FAILURE  TO OBTAIN ADDITIONAL FUNDS CAN IMPACT OUR OPERATIONS AND FUTURE GROWTH.

We use funds generated from operations, as well as funds obtained through credit
facilities  and  equity  financing,  to finance our operations.  In light of our
recent  financing  efforts,  and  as  a  result  of the cash flow generated from
operations,  we  believe  we  have  sufficient  cash  to  support  our  business
activities,  including  research,  development  and  marketing  costs.  However,
future  growth  may depend on our ability to continue to raise additional funds,
either through operations, bank borrowings, or equity or debt financings.  There
is no assurance that we will be able to continue to raise the funds necessary to
finance  growth  or  continue  to  generate  the  funds  necessary  to  finance
operations,  and  even  if  such  funds  are  available,  that the terms will be
acceptable to us.  The inability to generate the necessary funds from operations
or  from  third parties in the future may require us to scale back our research,
development  and  growth opportunities, which could harm our overall operations.


                                       29
<PAGE>
WHILE  WE  MAINTAIN INSURANCE PROTECTION AGAINST CLAIMS RELATED TO OUR SERVICES,
THERE  IS  NO ASSURANCE THAT SUCH PROTECTION WILL BE ADEQUATE TO COVER POTENTIAL
CLAIMS AND OUR INABILITY TO OTHERWISE PAY SUCH CLAIMS COULD HARM OUR BUSINESS.

We  maintain  errors and omissions insurance for the services we provide.  While
we  believe  the  limit on our errors and omissions insurance policy is adequate
and consistent with industry practice, if claims are brought by our customers or
other  third  parties,  we  could  be required to pay the required claim or make
significant  expenditures  to  defend against such claims in amounts that exceed
our  current  insurance  coverage.  There  is no assurance that we will have the
money  to  pay  potential  plaintiffs  for  such claims if they arise beyond the
amounts  insured  by  us.  Making  these  payments could have a material adverse
effect  on  our  business.

INVOLVEMENT IN LITIGATION COULD HARM OUR BUSINESS.

We  are involved in various lawsuits arising in the ordinary course of business.
Although we believe that the claims asserted in such lawsuits are without merit,
the  cost  to  us for the fees and expenses to defend such lawsuits could have a
material  adverse  effect  on  our financial condition, results of operations or
cash flow.  In addition, there can be no assurance that we will not at some time
in  the  future experience significant liability in connection with such claims.
As of September 30, 2004, we have spent approximately $279,000 in legal fees and
expenses  defending  these  claims.

OUR INABILITY TO RECOVER FROM NATURAL DISASTERS COULD HARM OUR BUSINESS.

We  currently  maintain three data centers: one in Camarillo, California, one in
Albuquerque,  New Mexico and one in Boulder, Colorado. Should a natural disaster
occur  in  any  of  the locations, it is possible that ECHO would not be able to
fully  recover  full  functionality at one of its data centers. To minimize this
risk,  ECHO  centralized  its  data processing functionality in Camarillo during
fiscal  2004  and  will  make  Albuquerque a fully redundant site. Prior to that
time,  it  is  possible  a  natural disaster could limit or completely disable a
specific  service  offered  by  ECHO  until such time that the specific location
could resume its functionality. Our inability to provide such service could have
a  material  adverse  effect  on  our  business  and  results  of  operations.

INCREASES IN THE COSTS OF TECHNICAL COMPLIANCE COULD HARM OUR BUSINESS.

The  services  which ECHO offers require significant technical compliance.  This
includes  compliance  to  both  Visa  and MasterCard regulations and association
rules,  NACHA  guidelines  and  regulations  with  regard to the Federal Reserve
System's  Automated Clearing House and check related issues, and various banking
requirements  and  regulations.  ECHO  has personnel dedicated to monitoring our
compliance  to  the  specific  industries  we  serve and, when possible, ECHO is
moving  the technical compliance responsibility to other parties, as is the case
with  the  recent  purchase of the Oasis Technologies bankcard processing system
wherein  the  vendor,  Oasis  Technologies,  assumes  much  of  the  compliance
obligations  regularly updated by Visa and MasterCard.  As the compliance issues
become  more defined in each industry, the costs associated with that compliance
may  present  a  risk  to  ECHO.  These costs could be in the form of additional
hardware,  software  or  technical  expertise  that  ECHO  must  acquire  and/or
maintain.  While  ECHO  currently  has  these  costs  under  control, we have no
control over those entities that set the compliance requirements so no assurance
can be given that ECHO will always be able to underwrite the costs of compliance
in  each  industry  wherein  we  compete.

RISKS  ASSOCIATED  WITH  OUR  COMMON  STOCK
-------------------------------------------

IF  WE  NEED  TO  SELL  OR  ISSUE  ADDITIONAL  SHARES  OF COMMON STOCK OR ASSUME
ADDITIONAL  DEBT  TO FINANCE FUTURE GROWTH, OUR STOCKHOLDERS' OWNERSHIP COULD BE
DILUTED  OR  OUR  EARNINGS  COULD  BE  ADVERSELY  IMPACTED.

Our  business  strategy  may  include  expansion  through  internal  growth,  by
acquiring  complementary  businesses  or by establishing strategic relationships
with  targeted customers and suppliers.  In order to do so, or to fund our other
activities,  we  may  issue  additional  equity securities that could dilute our
stockholders'  stock  ownership.  We


                                       30
<PAGE>
may  also assume additional debt and incur impairment losses related to goodwill
and  other  tangible  assets  if  we  acquire  another  company  and  this could
negatively  impact  our  results  of operations.  As of the date of this report,
management  has  no  plan  to  raise  additional  capital  through  the  sale of
securities and believes that our cash flow from operations together with cash on
hand and our established line of credit with Bank of the West will be sufficient
to  meet  our  working  capital  and  other  commitments.

WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE PRICE OF
OUR  COMMON  STOCK.

Our  rights agreement, our ability to issue additional shares of preferred stock
and  some  provisions  of our articles of incorporation and bylaws could make it
more  difficult for a third party to make an unsolicited takeover attempt of us.
These anti-takeover measures may depress the price of our common stock by making
it more difficult for third parties to acquire us by offering to purchase shares
of  our  stock  at  a  premium  to  its  market  price.

OUR STOCK PRICE HAS BEEN VOLATILE.

Our  common  stock  is  quoted  on  the NASDAQ SmallCap Market, and there can be
substantial volatility in the market price of our common stock.  Over the course
of  the  quarter  ended September 30, 2004, the market price of our common stock
has  been  as high as $9.99, and as low as $6.45.  Additionally, over the course
of  the  year ended September 30, 2004, the market price of our common stock has
been  as  high  as  $13.06  and as low as $6.15.  The market price of our common
stock  has  been,  and  is  likely  to  continue  to  be, subject to significant
fluctuations  due  to  a  variety  of factors, including quarterly variations in
operating  results,  operating  results  which  vary  from  the  expectations of
securities  analysts  and  investors, changes in financial estimates, changes in
market  valuations  of  competitors, announcements by us or our competitors of a
material  nature,  loss of one or more customers, additions or departures of key
personnel,  future  sales  of  common  stock  and  stock market price and volume
fluctuations.  In  addition, general political and economic conditions such as a
recession,  or  interest rate or currency rate fluctuations may adversely affect
the  market  price  of  our  common  stock.

WE  HAVE  NOT PAID AND DO NOT CURRENTLY PLAN TO PAY DIVIDENDS, AND YOU MUST LOOK
TO  PRICE  APPRECIATION  ALONE  FOR  ANY  RETURN  ON  YOUR  INVESTMENT.

Some  investors  favor  companies  that  pay  dividends, particularly in general
downturns  in the stock market.  We have not declared or paid any cash dividends
on  our  common  stock.  We  currently  intend to retain any future earnings for
funding  growth, and we do not currently anticipate paying cash dividends on our
common  stock in the foreseeable future.  Because we may not pay dividends, your
return  on this investment likely depends on your selling our stock at a profit.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We  are  currently  not  exposed  to any significant financial market risks from
changes  in  foreign currency exchange rates or changes in interest rates and do
not  use  derivative  financial  instruments.  All  of  our  revenue and capital
spending  is  transacted  in U.S. dollars.  However, in the future, we may enter
into  transactions  in  other  currencies.  An  adverse change in exchange rates
would  result  in  a decline in income before taxes, assuming that each exchange
rate  would  change  in  the  same  direction  relative  to the U.S. dollar.  In
addition  to  the  direct  effects  of  changes  in exchange rates, such changes
typically  affect  the  volume  of  sales  or  foreign  currency  sales price as
competitors'  products  become  more  or  less  attractive.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The  Financial  Statements  and  Supplementary  Data  are listed under "Item 15.
Exhibits, Financial Statement Schedules and Reports on Form 8K".

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.


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<PAGE>
ITEM 9A.  CONTROLS AND PROCEDURES

As  of  September  30, 2004, the end of the period covered by this report, under
the  supervision  and  with the participation of management, including our Chief
Executive  Officer  and  our  Chief  Financial  Officer,  we  have evaluated the
effectiveness  of  the  design  and  operation  of  our  disclosure controls and
procedures  pursuant  to  Exchange Act Rules 13a-15 and 15d-15.  Based upon that
evaluation,  our  Chief  Executive  Officer and our Chief Financial Officer have
concluded  that  our disclosure controls and procedures are effective in causing
material  information  to be recorded, processed, summarized and reported by our
management  on  a  timely basis and to ensure that the quality and timeliness of
our  public  disclosures  complies  with  its Securities and Exchange Commission
disclosure  obligations.  During the quarter ended September 30, 2004, there was
no  change  in  our  internal  control  over financial reporting that materially
affects, or that is reasonably likely to materially affect, our internal control
over  financial  reporting.

ITEM 9B.  OTHER INFORMATION

None.


                                       32
<PAGE>
                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The officers and directors of ECHO are:

<TABLE>
<CAPTION>
                                                     Date first became
         Name                    Position           Officer or Director
-----------------------  -------------------------  -------------------
<S>                      <C>                        <C>
Joel M. Barry            Chairman of the Board,            1986
                         Chief Executive Officer,

Alice L. Cheung          Chief Financial Officer,          1996
                         Treasurer

Alex Seltzer[1]          Chief Operating Officer/          2002
                         Chief Information Officer

Steven Smith[1]          Chief Information Officer         2004

Sharat Shankar           Senior Vice President             2003

Patricia M. Williams     Senior Vice President             1997

Jack Wilson              Senior Vice President             1994

Kris Winckler            Senior Vice President             1999

Arnold Feinberg          Vice President                    2000

Jesse Fong               Vice President                    1994

David Griffin            Vice President                    1990

Robert Hare              Vice President                    1999

Steve Hoofring           Vice President                    2003

David Piatt              Vice President                    2003

Rick Slater              Vice President                    1998

Donna L. Rehman          Corporate Secretary               1990

Herbert L. Lucas         Director                          1991

Aristides W. Georgantas  Director                          1999

Carl R. Terzian          Director                          2002

Richard Field            Director                          2004
</TABLE>

[1]  Steven  Smith succeeds Alex Seltzer, with respect to information technology
duties  previously  performed  by  Mr.  Seltzer, and joins us as a result of Mr.
Seltzer's  decision  to  pursue  other  business  interests.  Mr.  Seltzer  will
continue  providing services to us through December 31, 2004, the effective date
of  his  resignation.

JOEL M. BARRY, age 54, has been a Director of ECHO since July 1986, and Chairman
of  the  Board since December 1986.  Mr. Barry served as Chief Financial Officer
from  May  1987  to June 1990, and Executive Vice President from October 1987 to
June  1990, when he was designated Chief Executive Officer of ECHO. Mr. Barry is


                                       33
<PAGE>
also  a  Director  and  Chief  Executive  Officer  of  the  MerchantAmerica  and
XPRESSCHEX,  Inc. wholly-owned subsidiaries.  From August 1981 to June 1991, Mr.
Barry  was  a  lecturer and investment counselor for Dynamic Seminars, a firm he
founded  in  1981,  and  Basics  Financial  Planning  and Investments, a firm he
founded  in  1983.  From  1972 to 1974, Mr. Barry owned and operated a recording
business  and  from  1975  to 1981 was employed as the Director of Marketing and
Sales  with  Financial  Dynamics,  a  financial planning firm located in Covina,
California.  Mr.  Barry  attended  Oklahoma  State University from 1969 to 1970,
majoring  in  Accounting  and Ozark Bible College from 1970 to 1972, majoring in
music.

ALICE  L.  CHEUNG,  age  47, has served as Treasurer and Chief Financial Officer
since  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.  Prior to
joining  ECHO,  Ms.  Cheung  was  the  Treasurer  and Chief Financial Officer of
American  Mobile Systems from February 1988 to January 1996, prior to its merger
with  Nextel Communications, Inc. Ms. Cheung is an active member of the American
Institute of Certified Public Accountants and Financial Executive Institute.

ALEX  SELTZER, age 52, joined ECHO in August 2002 as Chief Operating Officer and
Chief  Information  Officer.  Prior to joining ECHO, Mr. Seltzer was the CIO and
co-founder  of  Online Resources Corporation, an e-financial services outsourcer
providing  home  banking,  bill  payment,  and  integrated third-party financial
services  to small and medium-sized U.S. banks. Mr. Seltzer holds a BS degree in
Applied  Math  and  Computer Science from MIT in Cambridge, Massachusetts and an
MBA from Stanford Graduate School of Business in Stanford, California.

STEVEN SMITH, age 44, joined ECHO in November 2004 as Chief Information Officer.
Prior  to  joining ECHO, Mr. Smith was Vice President of Engineering for Digital
Insight (a financial services ASP providing Internet banking, bill payment, cash
management  and  loan  origination  capabilities  to  over  1,500  financial
institutions  across  North  America),  where he was accountable for all product
development.  Mr.  Smith has also served as a CIO and Vice President of Research
and  Development  for  Lombardi  Software in Austin, Texas and as a Partner with
Ernst  &  Young/CAP  Gemini.  Mr.  Smith holds a B.A. degree in Computer Science
from  The  University  of  Texas  in  Austin.

SHARAT  SHANKAR,  age  34,  joined  ECHO  in June 2003 as Vice President of Risk
Management  and Business Intelligence. Prior to joining ECHO, Mr. Shankar worked
at  TeleCheck for approximately eight years where he held a variety of positions
leading up to Vice President of Risk Management. Prior to TeleCheck, Mr. Shankar
held positions at MetLife as well as Hong Kong and Shanghai Bank, Madras, India.
Mr.  Shankar holds a Bachelor of Commerce degree from Loyola College, India, and
a  Master  of  Business  Administration  degree  from  James Madison University,
Virginia.

PATRICIA M. WILLIAMS, age 39, joined ECHO in September 1996, serving as Director
of  Program  Management,  Ms. Williams was appointed Vice President of Corporate
Program  Management  in  October  1997  and  Vice President of Check Services in
October  2001.  In  June  of 2003, Ms. Williams was appointed to the position of
Vice  President  of Sales and Marketing. Prior to joining ECHO, Ms. Williams was
an  Operations Manager for Bank of America Systems Engineering in San Francisco.
Ms.  Williams  has  also  served as a Senior Program manager for the Los Angeles
office  of LANSystems, Inc., a nationwide systems integrator as well as a Senior
Project  Manager and Systems Engineer for Bank of America Systems Engineering in
Los  Angeles.  Ms.  Williams  holds  a  B.A.  degree  in communications from the
University  of  California,  Los  Angeles.

JACK  WILSON,  age  60,  has served as Vice President of Merchant Services since
June  1994  and  was  Director  of Bankcard Relations for ECHO 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.

KRIS  WINCKLER,  age 39, joined ECHO in April, 1999, as Vice President of ECHO's
XPRESSCHEX  subsidiary.  Mr.  Winckler is currently the Senior Vice President of
Product  and Strategic Planning at ECHO. Prior to joining ECHO, Mr. Winckler was
a  consultant  at  Andersen  Consulting  and  the President of Magic Software, a
company  specializing  in  check verification, conversion, and ACH software. Mr.
Winckler has been active in the check and collection industry for over ten years
and  has  been a member of the Electronic Check Council of NACHA since 1998. Mr.
Winckler  holds  a  B.S. degree in Electrical Engineering from the University of
New  Mexico,  an  MBA  from the University of Illinois, and is an Accredited ACH
Professional (AAP) and Certified Treasury Professional (CTP).


                                       34
<PAGE>
ARNOLD FEINBERG, age 55, joined ECHO in January 2000 as Vice President of sales.
Prior  to  joining  ECHO,  Mr.  Feinberg was an independent sales consultant for
Rocky  Mountain  Retail  Systems,  a  company  that provided check authorization
software  and  transaction processing services and was acquired by ECHO in 2000.
From  1986  to  1993,  Mr.  Feinberg was employed by Lawrence Data Service, Inc.
where  he  developed  the franchise division for regional check verification and
collection  under  National  Check Association.  Mr. Feinberg graduated from the
University of Kansas with a B.S. in Accounting and Finance.

JESSE  FONG,  age  53, has served as Vice President of Information Systems since
September 1994.  Mr. Fong joined ECHO in 1984 and has served as programmer, Data
Processing  manager  and  MIS  director.  He 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.

DAVID GRIFFIN, age 56, has served as Vice President of Major Accounts since June
2003.  Previous  to this capacity, he was Vice President of Check Guarantee from
October  2001  to June 2003, Vice President of Check Services for ECHO from June
1990  to  October  2001 and Vice President of Operations from January 1986 until
September  1989,  at which time he became a consultant to ECHO.  Mr. Griffin has
served  as  Senior Vice President and General Manager for TeleCheck, Los Angeles
and  TeleCheck,  San  Diego,  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.

ROBERT  HARE, age 39, joined ECHO in April,1999 through the acquisition of Magic
Software  Development,  a  company  he  co-founded  in  1991  to  provide  check
verification,  conversion  and  ACH  software.  Prior to founding Magic Software
Development, Mr. Hare was a software developer with Titan Business Systems and a
systems  analyst  with  the  University  of  New Mexico.  Mr. Hare holds an A.S.
degree in Computer Programming from the University of New Mexico.

STEVE  HOOFRING,  age  44, joined ECHO in October 2001 as Implementation Manager
for  the Check Services group and was appointed Vice President of Visa POS Check
and  Client Services in October 2003.  Mr. Hoofring was President of Running Dog
Software,  Inc.,  which developed 'Enterprise' software for small to medium size
businesses.  Prior  to this, Mr. Hoofring held several management positions with
Emerson Power Transmission, a subsidiary of Emerson Electric, Inc.  Mr. Hoofring
holds  a  B.S.  degree  in  Business  Administration  from  Northern  Kentucky
University.

DAVID  PIATT, age 45, joined ECHO in October 2003 as a Vice President of systems
management.  Mr.  Piatt  has  over  20  years  of  reengineering,  information
technology  and  business  experience in financial transaction processing, grant
management, online banking, engineering and manufacturing systems.  His business
experience  includes operations, program/project management, marketing, business
development,  business  process  reengineering,  Continuous Process Improvement,
Total Quality Management, Activity Based Costing, Work Breakdown Structure, cost
benefit  analysis  and ROI analyses.  Mr. Piatt was awarded a Master's degree in
physics  from  Texas A&M and a bachelor's degree from Colorado State University.

RICK SLATER, age 44, joined ECHO in May 1995 as Vice President of Computer Based
Controls,  Inc.  ("CBC").  Mr. Slater was appointed President of CBC in December
1995,  Vice  President  of ECHO in November 1998 and Chief Technology Officer in
October  1999.  Prior  to  joining  ECHO,  Mr.  Slater  was  President of Slater
Research,  which provided contract engineering services to various institutions.
During  this  time,  Mr.  Slater  directly  participated in the U.S. Coast Guard
COMSTA upgrade project including site surveys, systems design and system upgrade
integration  in  a  number of sites within the U.S.  Prior to this position, Mr.
Slater  served  as a group leader at Aiken Advanced Systems.  Mr. Slater holds a
BS  degree  in  electrical  engineering technology from Old Dominion University,
Norfolk,  Virginia.


                                       35
<PAGE>
DONNA  L.  REHMAN,  age  55,  joined  ECHO  in  1988 and has served as Corporate
Secretary  since  1990.  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.

HERBERT  L. LUCAS, age 78, has been a Director since 1991.  Mr. Lucas 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 as
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
Trust  Company,  Arctic  Alaska Fisheries, Inc., Scolr Pharma, Inc. and Sunworld
International  Airways,  Inc.  Mr.  Lucas has served as a Trustee of The J. Paul
Getty  Trust, the Los Angeles County Museum of Art, The Morgan Library, National
Association  of Independent Schools and Winrock International. He was formerly a
member  of  the  Board  of  Trustees  of  Princeton  University.

ARISTIDES  W.  GEORGANTAS, age 60, has served as a Director since February 1999.
Mr.  Georgantas, prior to his retirement, was Executive Vice President and Chief
Operating  Officer  at  Chase  Manhattan  Bank's Global Asset Management/Private
Banking  Division.  He serves as a director of Horizon Blue Cross Blue Shield of
New Jersey, the Glenmede Corporation, the Glenmede Trust Company, the Foundation
for  Public  Broadcasting  in New Jersey,  Mathematica Policy Research, Inc. and
the  Rita  Allen  Foundation.  Mr. Georgantas is a graduate of the University of
Massachusetts and the Columbia University Graduate School of Business.

CARL  R.  TERZIAN,  age  69, has served as a Director since December, 2002.  Mr.
Terzian  graduated magna cum laude from the University of Southern California in
1957.  Following  his USC education, Mr. Terzian served as an international good
will  ambassador  for  President  Eisenhower  and Secretary of State John Foster
Dulles;  director  of  public  and  church  relations  for the Lutheran Hospital
Society  of  Southern  California;  civic  affairs  consultant to the California
savings  and  loan  industry; and dean and professor of government and speech at
Woodbury  University. In 1965, Mr. Terzian joined Charles Luckman Associates, an
architectural  firm, to handle its public relations throughout the United States
and  worldwide and began his own public relations firm, Carl Terzian Associates,
in 1969. Mr. Terzian currently serves as a director on the board of Transamerica
Investors,  Inc.  and  Mercantile  National  Bank  along with various non-profit
boards,  commissions,  advisory  groups,  and  task  forces.

RICHARD  FIELD,  age  64,  became a director of ECHO in July 2004. Mr. Field has
worked  in  the financial services industry for over 35 years as an executive of
the  Bank  of  New  York,  Chase,  and  Citigroup,  and a director of Mastercard
International  and  Chairman  of  its U.S. Board.  Since retiring from full time
employment in 1997, he has continued his career in the specialty financial areas
as  a  co-founder  and  director  of LendingTree, Inc. as well as serving on the
boards  of  Providian  Financial Corporation and HPSC, Inc.  Mr. Field graduated
from Salisbury School, Connecticut, in 1959 and Trinity College, Connecticut, in
1963  with  a  B.A.  in  English  and  Economics.

All  directors  are  to  be  elected to three year terms by the stockholders and
serve  until  their  respective  terms  have  expired.  The  Annual  Meeting  of
Stockholders  was  held  on  February 9, 2004, and the election of directors was
held  at  that  time.

CODE  OF  ETHICAL  CONDUCT

Our  Board  of  Directors  has  adopted  a Code of Ethical Conduct (the "Code of
Conduct"). We require all employees, directors and officers, including our Chief
Executive  Officer and Chief Financial Officer, to adhere to the Code of Conduct
in addressing legal and ethical issues encountered in conducting their work. The
Code  of  Conduct  requires  that these individuals avoid conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest
and  ethical  manner  and otherwise act with integrity and in our best interest.
The  Code  of  Conduct contains additional provisions that apply specifically to
our  Chief  Financial  Officer and other financial officers with respect to full
and  accurate  reporting.  The  Code  of  Conduct is available on our website at
www.echo-inc.com.


                                       36
<PAGE>
AUDIT  COMMITTEE  FINANCIAL  EXPERT

Our Board of Directors has determined that Aristides W. Georgantas, the Chairman
of  the  Audit  Committee  of  the  Board  of  Directors, is an "audit committee
financial  expert"  as defined in Item 401(h) of Regulation S-K.  Mr. Georgantas
is  "independent"  for  purposes  of  Rule 4200(a)(15) of the NASDAQ Marketplace
Rules.

IDENTIFICATION  OF  AUDIT  COMMITTEE

Our  Board  of  Directors  has  a separately standing Audit Committee. The Audit
Committee currently consists of Messrs. Richard D. Field, Herbert L. Lucas, Jr.,
Aristides  W.  Georgantas, and Carl R. Terzian. Messrs. Field, Lucas, Georgantas
and  Terzian  are  "independent  directors"  within  the  meaning  of Rule 10A-3
promulgated  under  the  Securities  Exchange  Act  of 1934, as amended, and the
NASDAQ  Marketplace  Rules.  The  Audit  Committee's  primary  duties  and
responsibilities  include appointment of the independent auditors, evaluation of
the  performance  and  independence  of  such  auditors and review of the annual
audited  financial statements and the quarterly financial statements, as well as
the  adequacy  of  our  internal  controls.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a)  of the Securities Exchange Act of 1934, as amended, requires our
directors  and  executive  officers and the holders of 10% or more of our Common
Stock  to  file  with  the Securities and Exchange Commission initial reports of
ownership  and  reports of changes in ownership of our equity securities.  Based
solely  on  our  review  of  the  copies of the forms received by us and written
representations  from certain reporting persons that they have complied with the
relevant  filing  requirements, we believe that, during the year ended September
30,  2004,  all  of  our executive officers, directors and the holders of 10% or
more  of  our  Common Stock complied with all Section 16(a) filing requirements.

ITEM 11.  EXECUTIVE COMPENSATION

The  following  table  sets  forth the total compensation paid and stock options
offered  by  us  during the fiscal years ended September 30, 2004, September 30,
2003  and  September 30, 2002, to our Chief Executive Officer and to each of our
five  most highly compensated executive officers, other than the Chief Executive
Officer  (collectively  with  the  Chief Executive Officer, the "Named Executive
Officers"),  whose  compensation  exceeded $100,000 during the fiscal year ended
September  30,  2004.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

                                                      Annual         Long Term
                                                   Compensation     Compensation
                                                ------------------  ------------
                                                                     Securities
                        Capacities in                                Underlying
Name                     Which Served     Year   Salary    Bonus     Options[2]   Other[3]
--------------------  ------------------  ----  --------  --------  ------------  ---------
<S>                   <C>                 <C>   <C>       <C>       <C>           <C>
Joel M. Barry[1]      Chairman/Chief      2004  $241,500  $ 50,000        60,000  $     -0-
                      Executive Officer   2003   223,125       -0-        40,000        -0-
                                          2002   209,000       -0-        50,000        -0-

Alex Seltzer[4]       Chief Information   2004  $190,565  $ 48,000        30,000  $   5,110
                      Officer/Chief       2003   148,295       -0-         5,000      2,250
                      Operating Officer   2002    14,230       -0-        50,000        -0-


Alice Cheung          Chief Financial     2004  $138,000  $ 40,000        35,000  $   4,940
                      Officer/Treasurer   2003   125,500    15,000        15,000      4,175
                                          2002   110,500    11,500         5,000      3,450


                                       37
<PAGE>
Sharat Shankar        Sr. Vice President  2004  $131,430    47,500        35,000  $   2,343
                                          2003    46,333     5,000        50,000        -0-
                                          2002       -0-       -0-           -0-        -0-

Patricia M. Williams  Sr. Vice President  2004  $123,000  $ 35,000        35,000        -0-
                                          2003   111,190    15,000        15,000        -0-
                                          2002   103,750    16,500        10,000      3,000


Jack Wilson[1]        Sr. Vice President  2004  $123,000  $ 35,000        35,000  $   4,412
                                          2003   111,190    15,000        15,000      2,998
                                          2002   103,750    16,500         5,000      2,250
</TABLE>

_______________________

[1]  We  provide Mr. Barry and Mr. Wilson with an automobile.  There has been no
     compensation  paid  other  than  that  indicated  in  the  above  table.
[2]  Mr.  Seltzer exercised 1,000 of his options at $1.30 per option, granted in
     fiscal  2003  and  10,000  of  his  options at $1.29 per option, granted in
     fiscal  2002;  Ms.  Williams  exercised  2,000  of her options at $2.15 per
     option,  granted  in  fiscal  2002.
[3]  Represents our match of contributions to our 401(k) Plan. We contribute 50%
     of  the  last  6%  of  each  employee's  contribution  to  the 401(k) Plan.
[4]  Mr.  Seltzer  has decided to pursue other business interests.  As a result,
     he  will  only continue providing services to us through December 31, 2004,
     the  effective  date  of  his  resignation.

FISCAL 2004 OPTION GRANTS TABLE

The  following table sets forth the stock options granted to our Chief Executive
Officer  and  each  of the other Named Executive Officers during the fiscal year
ended  September  30, 2004.  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.  We have 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 our stock at a future date, which may or may not correspond to
the  following  projections.

<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[1]    Fiscal Year     per share      Date          5%            10%
-----------------  ----------  ----------------  ----------  ----------  -------------  ------------
<S>                <C>         <C>               <C>         <C>         <C>            <C>
Joel M. Barry          60,000            14.12%  $     6.85    12/15/13  $    167,000   $   390,000
Alex Seltzer           30,000             7.06%  $     6.85    12/15/13  $     84,000   $   195,000
Alice  Cheung          35,000             8.24%  $     6.85    12/15/13  $     98,000   $   228,000
Sharat Shankar         35,000             8.24%  $     6.85    12/15/13  $     98,000   $   228,000
Patricia Williams      35,000             8.24%  $     6.85    12/15/13  $     98,000   $   228,000
Jack Wilson            35,000             8.24%  $     6.85    12/15/13  $     98,000   $   228,000
</TABLE>

[1]  All  options  vest  in  five  equal annual installments beginning 12 months
     following the date of the grant.


                                       38
<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL-YEAR OPTION/SAR VALUE TABLE

The  following  table  sets  forth  information concerning the exercise of stock
options  during  the  fiscal  year ended September 30, 2004 by each of our Named
Executive  Officers and the number and value of unexercised options held by each
of  our Named Executive Officers as of the fiscal year ended September 30, 2004.

<TABLE>
<CAPTION>
                                                              Value of
                                               Number of     unexercised
                        Shares                unexercised   in-the-money
                      acquired on    Value    options/SARS  Options/SARS
Name                   exercise    realized    at FY-end    at FY-end[1]
--------------------  -----------  ---------  ------------  -------------
<S>                   <C>          <C>        <C>           <C>
Joel M. Barry              32,500  $     -0-       250,000  $   1,126,000
Alex Seltzer               11,000  $     -0-        74,000  $     389,000
Alice Cheung                7,500  $     -0-        85,000  $     361,000
Sharat Shankar                -0-  $     -0-        85,000  $     748,000
Patricia M. Williams        1,000  $     -0-        89,000  $     367,000
Jack Wilson                 8,500  $  65,400        71,500  $     287,000
</TABLE>

_____________________

[1]  Based  on the closing sales price of the Common Stock on September 30, 2004
     of  $8.80  per  share,  less  the  option  exercise  price.

EQUITY  COMPENSATION  PLAN  INFORMATION

The following table sets forth information concerning our equity compensation
plans as of September 30, 2004.

<TABLE>
<CAPTION>
                                                                 (c) Number of securities
                        (a) Number of                             remaining available for
                      securities to be                             future issuance under
                         issued upon      (b) Weighted-average      equity compensation
                         exercise of        exercise price of      (excluding securities
Plan Category        outstanding options   outstanding options   reflected in column (a))
-------------------  -------------------  ---------------------  ------------------------
<S>                  <C>                  <C>                    <C>
Equity compensation
plans approved by
security holders[1]            1,133,925  $                4.86                   193,000
</TABLE>

_____________________

[1]  Plan represents the Officers and Key Employees Incentive Stock Option Plan,
     which expired in May 2002, and our 2003 Incentive Stock Option Plan.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No  interlocking relationship exists between our Board of Directors or Executive
Officers  Compensation  Committee  and  the  board  of directors or compensation
committee  of  any  other  company.

DIRECTOR  COMPENSATION

Each  outside director received $48,250 in fiscal 2004; $28,000 and 3,031 shares
of  Common Stock in fiscal 2003; and $15,000 and 6,912 shares of Common Stock in
fiscal  2002.  Mr.  Field,  appointed on July 12, 2004, to fill a vacancy on the
Board  of  Directors, received $13,750 in fiscal 2004. Directors are compensated
for  all  reasonable expenses and are not compensated for special meetings other
than  regular  meetings.


                                       39
<PAGE>
EMPLOYMENT  AGREEMENTS

None.

BONUS,  PROFIT-SHARING  AND  OTHER REMUNERATION PLANS AND PENSION AND RETIREMENT
PLANS

In  addition  to  salary,  the Compensation Committee of the Board of Directors,
from  time  to  time,  grants  options  to  executive officers and key personnel
pursuant  to  the  2003 Incentive Stock Option Plan.  The Compensation Committee
thus  views  option  grants  as  an  important  component  of  its  long-term,
performance-based compensation philosophy.  Since the value of an option bears a
direct relationship to our stock price, the Compensation Committee believes that
options  motivate  executive officers and key personnel to manage us in a manner
which  will  also  benefit  shareholders.  As  such,  options are granted at the
current  market  price.  One  of  the  principal  factors considered in granting
options to executive officers or key personnel is their ability to influence our
long-term  growth  and  profitability.

The  Compensation  Committee  has  also  established  a  bonus program to reward
extraordinary  performance  that exceeds pre-set goals established for executive
officers  and  key  personnel. We believe that such a bonus program provides the
incentive to exceed such goals, thereby building shareholder value.

We  have  a  contributory  401(K)  Retirement  Pension  Plan,  which  covers all
employees who are qualified under the plan provisions.

STOCK  OPTION  PLANS

On  May  13, 1992, our Board of Directors authorized adoption of an Officers and
Key  Employees  Incentive  Stock  Option Plan (the "1992 Plan"), ratified by the
shareholders  at  the Annual Meeting held July 10, 1992.  The 1992 Plan provided
for  the  issuance  of  up to 81,250 shares of our Common Stock to be subject to
stock  options,  each  to  purchase  one share of the Common Stock for $3.40 per
share,  subject  to  adjustment  in  the  event of stock splits, combinations of
shares,  stock  dividends  or  the  like.

On  November 18, 1996, our Board of Directors authorized an increase in the 1992
Plan to 843,750 shares to be subject to stock options, which action was ratified
by the shareholders at the Annual Meeting held in February 1997.

On  February  4, 1999, our Board of Directors authorized an increase in the 1992
Plan  to  1,343,750  shares  to  be  subject  to stock options, which action was
ratified by the shareholders at the Annual Meeting held in February 1999.

On  May  13, 2002, the 1992 Plan expired.  The 2003 Incentive Stock Option Plan,
which  provided  for  the  issuance  of  up  to  900,000  shares of Common Stock
underlying  stock  options,  was  approved  by our Board of Directors and by our
shareholders at the Annual Meeting of Shareholders held on February 3, 2003.

On  April  19,  2004,  our  Compensation Committee approved certain non-material
changes  to  our  2003  Incentive  Stock  Option  Plan.

On  December  21,  2004,  our Compensation Committee authorized an amendment and
restatement of the 2003 Incentive Stock Option Plan to, among other matters, (i)
increase the number of shares to be issued under the 2003 Incentive Stock Option
Plan  from  900,000 to 1,150,000 shares, and (ii) permit the grant of restricted
stock under the plan, subject to shareholder approval.

With  the  exception  of  the  foregoing, we have no stock option plans or other
similar  or related plans in which any of our officers or directors participate.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As  of  December  13,  2004,  there  were  6,472,331  shares of our Common Stock
outstanding.  Based  on our review of a Schedule 13D/A filed with the Securities
and  Exchange  Commission  on  September  7,  2004, the following individual has
beneficial ownership or control over 5% or more of our outstanding Common Stock:


                                       40
<PAGE>
<TABLE>
<CAPTION>
                                    Amount and         Percentage of
                               Nature of Beneficial  Outstanding Stock
Name and Address                    Ownership           At 12/13/04
-----------------------------  --------------------  ------------------
<S>                            <C>                   <C>

Melvin Laufer                               519,839               8.03%
136 Beach 140th Street
Far Rockaway, NY 11694

Based  on  our review of a Schedule 13G/A filed with the Securities and Exchange
Commission  on  July  8,  2004, the following entity has beneficial ownership or
control  of  5%  or  more  of  our  outstanding  Common  Stock:

William Blair and Company LLC               708,952              10.95%
222 W. Adams Street
Chicago, IL 60606
</TABLE>

The  following  table  sets  forth  the  number  of shares of Common Stock owned
beneficially by our (i) directors, (ii) the Named Executive Officers (as defined
below),  and  (iii)  the  executive  officers  and  directors  as a group, as of
December  13,  2004.  Such  figures  are based upon information furnished by the
persons  named.

<TABLE>
<CAPTION>
                                  Amount and           Percentage of
                             Nature of Beneficial  Outstanding Stock[1]
Name and Address                  Ownership             At 12/13/04
---------------------------  --------------------  ---------------------
<S>                          <C>                   <C>
Joel M. Barry                       236,119[2]                     3.58%
730 Paseo Camarillo
Camarillo, CA 93010

Alice L. Cheung                      45,500[2]                     0.70%
730 Paseo Camarillo
Camarillo, CA 93010

Richard Field                       100,000                        1.55%
49 Locust Avenue
New Canaan, CT 06840

Aristides W. Georgantas              16,521                        0.26%
180 Springdale Road
Princeton, NJ  08540

Herbert L. Lucas, Jr.                57,880[3]                     0.89%
12011 San Vicente Blvd.
Los Angeles, CA 90049

Alex Seltzer                         36,500[2][6]                  0.56%
730 Paseo Camarillo
Camarillo, CA 93010

Sharat Shankar                       10,000[2]                     0.15%
730 Paseo Camarillo
Camarillo, CA 93010

Carl R. Terzian                       3,031                        0.05%
12400 Wilshire Blvd.
Los Angeles, CA 90025

Patricia M. Williams                 39,675[2]                     0.61%
730 Paseo Camarillo
Camarillo, CA 93010

Jack Wilson                          15,075[2][4]                  0.23%
730 Paseo Camarillo
Camarillo, CA 93010

All officers and directors
as a group (19 persons) [5]         778,479                       11.47%
</TABLE>


                                       41
<PAGE>
------------------------------

[1]  Under  Rule 13d-3, certain shares may be deemed to be beneficially owned by
     more  than  one person (if, for example, persons share the power to vote or
     the  power  to dispose of the shares). In addition, shares are deemed to be
     beneficially  owned  by a person if the person has the right to acquire the
     shares (for example, upon exercise of an option) within 60 days of the date
     as  of  which  the  information  is  provided.  In computing the percentage
     ownership  of  any  person,  the  amount of shares outstanding is deemed to
     include  the  amount  of shares beneficially owned by such person (and only
     such  person)  by  reason  of  these  acquisition  rights. As a result, the
     percentage  of outstanding shares of any person as shown in this table does
     not  necessarily reflect the person's actual ownership or voting power with
     respect  to  the  number  of shares of Common Stock actually outstanding at
     December  13,  2004.
[2]  Includes  stock  options  according  to  the  terms of the Officers and Key
     Employees  Incentive  Stock Option Plan and the 2003 Incentive Stock Option
     Plan,  which  for  the  following  number  of  shares and for the following
     individuals  could be acquired within 60 days through the exercise of stock
     options:  Joel  M. Barry, 120,500 shares; Alice Cheung, 34,500 shares; Alex
     Seltzer,  10,000  shares; Sharat Shankar, 10,000 shares; Patricia Williams,
     35,000  shares;  and  Jack  Wilson  10,500  shares.
[3]  Includes  17,972  shares  indirectly owned by Mr. Lucas through a trust for
     his  wife.
[4]  Includes  530  shares  indirectly  owned  by  Mr.  Wilson through his wife.
[5]  Includes  shares  and  stock options according to the terms of the Officers
     and  Key Employees Incentive Stock Option Plan and the 2003 Incentive Stock
     Option Plan, which for the following number of shares and for the following
     individuals  could be acquired within 60 days through the exercise of stock
     options:  Arnold  Feinberg, 20,000 shares; Jesse Fong, 13,778 shares; David
     Griffin,  12,686  shares; Robert Hare, 61,032 shares; Steve Hoofring, 8,500
     shares; David Piatt, 4,000 shares; Donna Rehman, 3,850 shares; Rick Slater,
     34,000  shares;  and  Kris  Winckler,  60,332  shares.
[6]  Mr.  Seltzer  has decided to pursue other business interests.  As a result,
     he  will  only continue providing services to us through December 31, 2004,
     the  effective  date  of  his  resignation.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no related-party transactions.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

AUDIT  FEES

PricewaterhouseCoopers,  LLP,  our  independent  accountants
("PricewaterhouseCoopers")  billed us an aggregate of approximately $135,000 and
$113,000  in fees for professional services rendered for the audit of our annual
financial statements for the fiscal years ended September 30, 2004 and September
30,  2003, respectively, and the reviews of the financial statements included in
our  Form  10-Q's  for  fiscal  2004  and  2003.

AUDIT-RELATED  FEES

PricewaterhouseCoopers  billed  us  an  aggregate  of  approximately $50,000 and
$7,000  in  fees  for assurance and related services related to the audit of our
annual  financial  statements  for the fiscal years ended September 30, 2004 and
September  30,  2003,  respectively.


                                       42
<PAGE>
Our  Audit  Committee is directly responsible for interviewing and retaining our
independent  accountant,  considering  the  accounting  firm's  independence and
effectiveness,  and  pre-approving the engagement fees and other compensation to
be  paid  to,  and  the services to be conducted by, the independent accountant.
The Audit Committee does not delegate these responsibilities. During each of the
fiscal  years  ended  September  30,  2004  and  2003,  respectively,  our Audit
Committee  pre-approved  100%  of  the  services  described  above.


                                       43
<PAGE>
                                     PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K

(a)  The following documents are filed as part of this report:

     (1)  Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                Page
                                                                                ----
<S>                                                                             <C>
          Report of Independent  Registered Public Accounting Firm . . . . . .   F-1

          Consolidated Balance Sheets at September 30, 2004 and 2003 . . . . .   F-2

          Consolidated Statements of Operations for each of the three years
            in the period ended September 30, 2004 . . . . . . . . . . . . . .   F-3

          Consolidated Statements of Changes in Stockholders' Equity
            for each of the three years in the period ended September 30, 2004   F-4

          Consolidated Statements of Cash Flows for each of the three years
            in the period ended September 30, 2004 . . . . . . . . . . . . . .   F-5

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

     (2)  Financial  Statement  Schedule:

          Schedule II - Valuation and Qualifying Accounts and Reserves . . . .   S-1
</TABLE>

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 ended September 30, 2004:

Current  Report  on  Form 8-K dated July 12, 2004, filed with the Securities and
Exchange  Commission  on  July  14,  2004.

Current  Report on Form 8-K dated August 11, 2004, filed with the Securities and
Exchange  Commission  on  August  11,  2004.

Current  Report  on Form 8-K dated September 27, 2004, filed with the Securities
and  Exchange  Commission  on  September  30,  2004.

(c)  Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number   Description of Document
-------  -----------------------
<C>      <S>

   2.1   Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Magic Software Development, Inc., dated April 20, 1999.[5]
   2.2   Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Rocky Mountain Retail Systems, Inc., dated January 4, 2000.[6]
   3.1   Articles of Incorporation of Bio Recovery Technology, Inc., filed with the Nevada Secretary of State on
         December 11, 1981. [1]
   3.4   By-Laws of Bio Recovery Technology, Inc. [1]
   4.2   Specimen Common Stock Certificate. [3]
  10.35  Copy of Merchant Marketing and Processing Services Agreement between Electronic Clearing House, Inc.
         and First Regional Bank, dated June 24, 1997. [4]


                                       44
<PAGE>
  10.36  Copy of Merchant Marketing and Processing Services Agreement between Electronic Clearing House, Inc.
         and The Berkshire Bank, dated July 31, 1997. [4]
  10.41  Copy of Processing and Software Development and License Agreement between Electronic Clearing
         House, Inc. and National Bank Drafting Systems, Inc., dated October 22, 1999.[6]
  10.42  Copy of Addendum to Agreement between Electronic Clearing House, Inc. and U-Haul International, dated
         January 1, 2000.[6]
  10.44  Copy of Electronic Check Services Agreement between Electronic Clearing House, Inc. and National Bank
         Drafting Systems, Inc., dated May 17, 2000.[6]
  10.46  Copy of Amended and Restated Merchant Marketing and Processing Services Agreement between
         Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[6]
  10.47  Copy of Addendum to Amended and Restated Merchant Marketing and Processing Services Agreement
         between Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[6]
  10.48  Copy of POS Check Third-Party Services Agreement between Visa U.S.A., Inc. and Electronic Clearing
         House, Inc., dated December 12, 2000.[7]
  10.49  Copy of Asset Purchase Agreement between National Check Network, Inc. and Electronic Clearing
         House, Inc., dated April 19, 2001. [7]
  10.50  Copy of Addendum to Agreement between U-Haul International and Electronic Clearing House, Inc., dated
         October 1, 2001. [7]
  10.51  Copy of First Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., Inc.
         and Electronic Clearing House, Inc. dated December 12, 2000. [8]
  10.52  Copy of Second Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., and
         Electronic Clearing House, Inc. dated December 12, 2000. [8]
  10.53  Copy of Third Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., and
         Electronic Clearing House, Inc. dated December 12, 2000. [8]
  10.54  Form of Securities Purchase Agreement by and among the Registrant and the Purchasers identified
         therein. [9]
  10.55  Form of Registration Rights Agreement by and among the Registrant and the Purchasers identified
         therein. [9]
  10.56  Office Lease dated May 21, 2003, by and between the Registrant and the 1989 Sheehan Family Trust
         dated October 24, 1989, with respect to principal executive offices located at 730 Paseo Camarillo,
         Camarillo, California 93010.[10]
  10.57  Addendum to Office Lease dated July 7, 2004, by and between the Registrant and the 1989 Sheehan
         Family Trust dated October 24, 1989, with respect to principal executive offices located at 730 Paseo
         Camarillo, Camarillo, California 93010.
   21.0  Subsidiaries of Registrant. [2]
   23.1  Consent of PricewaterhouseCoopers LLP
   24.1  Power of Attorney [11]
   31.1  Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(b) under the Securities and Exchange Act of 1934, as amended.
   31.2  Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(b) under the Securities and Exchange Act of 1934, as amended.
   32.1  Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(b) under the Securities and Exchange Act of 1934, as amended.
   32.2  Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(b) under the Securities and Exchange Act of 1934, as amended.
</TABLE>

------------------------------

[1]  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.
[2]  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.
[3]  Filed  as  an  Exhibit to Registrant's Form S-1, Amendment No. 3, effective
     November  13,  1990  and  incorporated  herein  by  reference.
[4]  Filed  as  an Exhibit to Registrant's Annual Report on Form 10-K for fiscal
     year  ended  September  30,  1997  and  incorporated  herein  by reference.
[5]  Filed  as  an Exhibit to Registrant's Annual Report on Form 10-K for fiscal
     year  ended  September  30,  1999  and  incorporated  herein  by reference.


                                       45
<PAGE>
[6]  Filed  as  an Exhibit to Registrant's Annual Report on Form 10-K for fiscal
     year  ended  September  30,  2000  and  incorporated  herein  by reference.
[7]  Filed  as  an Exhibit to Registrant's Annual Report on Form 10-K for fiscal
     year  ended  September  30,  2001  and  incorporated  herein  by reference.
[8]  Filed  as  an Exhibit to Registrant's Annual Report on Form 10-K for fiscal
     year  ended  September  30,  2002  and  incorporated  herein  by reference.
[9]  Filed  as  an  Exhibit  to  Registrant's  Current  Report on Form 8-K dated
     October  30,  2003  and  incorporated  herein  by  reference.
[10] Filed  as  an Exhibit to Registrant's Annual Report on Form 10-K for fiscal
     year  ended  September  30,  2003  and  incorporated  herein  by reference.
[11] Included  on  signature  page.


                                       46
<PAGE>
                                   SIGNATURES

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


          ELECTRONIC CLEARING HOUSE, INC.


          By:  /s/ Joel M. Barry
               ----------------------------------
               Joel M. Barry, Chief Executive
               Officer and Chairman

                                POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Joel M. Barry
and  Alice  L.  Cheung,  and  each  of  them,  as  their  true  and  lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for  them and in their name, place and stead, in any and all capacities, to sign
any  or  all amendments to this Annual Report on Form 10-K and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities  and  Exchange  Commission,  granting unto said attorneys-in-fact and
agents,  and  each  of them, full power and authority to do and perform each and
every  act  and  thing  requisite  and  necessary  to  be  done in and about the
foregoing,  as  fully  to  all  intents  and purposes as he might or could do in
person,  hereby  ratifying  and  confirming  all that said attorneys-in-fact and
agents,  or either of them, or their substitutes, may lawfully do or cause to be
done  by  virtue  hereof.

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/  Joel M. Barry            Chairman of the Board         )  December 29, 2004
----------------------------  and Chief Executive Officer   )
     Joel M. Barry                                          )
                                                            )
/s/  Aristides W. Georgantas  Director                      )
----------------------------                                )
     Aristides W. Georgantas                                )
                                                            )
/s/  Herbert L. Lucas, Jr.    Director                      )
----------------------------                                )
     Herbert L. Lucas, Jr.                                  )
                                                            )
/s/  Carl R. Terzian          Director                      )
----------------------------                                )
     Carl R. Terzian                                        )
                                                            )
/s/   Richard Field           Director                      )
----------------------------                                )
      Richard Field                                         )
                                                            )
/s/  Alice L. Cheung          Chief Financial Officer       )
----------------------------  and Treasurer                 )
     Alice L. Cheung                                        )
                                                            )
/s/ Marjan Hewson             Controller                    )
----------------------------                                )
     Marjan Hewson                                          )


                                       47
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors:

In  our  opinion,  the  consolidated  financial  statements  listed in the index
appearing  under  Item  15(a)(1)  on  page  44  present  fairly, in all material
respects,  the  financial  position  of  Electronic Clearing House, Inc. and its
subsidiaries at September 30, 2004 and 2003, and the results of their operations
and  their  cash flows for each of the three years in the period ended September
30,  2004  in  conformity  with  accounting principles generally accepted in the
United  States of America.  In addition, in our opinion, the financial statement
schedule  listed  in the index appearing under Item 15(a)(2) on page 44 presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedule  are  the  responsibility of the
Company's  management.  Our  responsibility  is  to  express an opinion on these
financial  statements  and financial statement schedule based on our audits.  We
conducted  our  audits  of  these statements in accordance with standards of the
Public  Company  Accounting  Oversight  Board  (United  States)  Those standards
require  that we plan and perform the audit to obtain reasonable assurance about
whether  the  financial  statements  are free of material misstatement. An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the  financial  statements, 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  our  opinion.

As discussed in Note 3 to the financial statements, effective October 1, 2002,
the Company adopted Financial Accounting Standards Board Statement No. 142,
"Goodwill and Other Intangible Assets" and changed its method of accounting for
good will.


PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
DECEMBER 17, 2004


<PAGE>
<TABLE>
<CAPTION>
                                ELECTRONIC CLEARING HOUSE, INC.
                                  CONSOLIDATED BALANCE SHEETS
                                  ---------------------------

                                                                          September 30,
                                                                    ---------------------------
                                                                        2004          2003
                                                                    ------------  -------------
<S>                                                                 <C>           <C>
                                            ASSETS
                                            ------
Current assets:
  Cash and cash equivalents                                         $ 7,576,000   $  2,908,000
  Restricted cash                                                     1,024,000        977,000
  Settlement deposits                                                18,282,000      2,733,000
  Settlement receivables less allowance of $22,000 and $21,000          451,000        696,000
  Accounts receivable less allowance of $111,000 and $71,000          1,943,000      1,939,000
  Prepaid expenses and other assets                                     368,000        307,000
  Deferred tax asset                                                    279,000         86,000
                                                                    ------------  -------------

Total current assets                                                 29,923,000      9,646,000

Noncurrent assets:
  Property and equipment, net                                         2,293,000      2,928,000
  Software, net                                                       6,844,000      4,445,000
  Deferred tax asset                                                        -0-      1,256,000
  Other assets, net                                                     368,000        500,000
                                                                    ------------  -------------

      Total assets                                                  $39,428,000   $ 18,775,000
                                                                    ============  =============

                             LIABILITIES AND STOCKHOLDERS' EQUITY
                             ------------------------------------

Current liabilities:
  Short-term borrowings and current portion of
    long-term debt and capital leases                               $   878,000   $    901,000
  Accounts payable                                                      305,000        779,000
  Settlement payable                                                 18,733,000      3,429,000
  Accrued expenses                                                    2,003,000      1,336,000
                                                                    ------------  -------------

Total current liabilities                                            21,919,000      6,445,000

Noncurrent liabilities:
  Long-term debt and capital leases                                     704,000      1,961,000
  Deferred tax liability                                                565,000            -0-
                                                                    ------------  -------------

      Total liabilities                                              23,188,000      8,406,000
                                                                    ------------  -------------

Commitments and contingencies - see Note 12

Stockholders' equity:
  Common stock, $.01 par value, 36,000,000 shares authorized;
    6,451,331 and 5,920,174 shares issued; 6,413,062 and 5,881,905
    shares outstanding                                                   64,000         59,000
Additional paid-in capital                                           24,658,000     21,641,000
Accumulated deficit                                                  (8,016,000)   (10,865,000)
Less treasury stock at cost, 38,269 and 38,269 common shares           (466,000)      (466,000)
                                                                    ------------  -------------

      Total stockholders' equity                                     16,240,000     10,369,000
                                                                    ------------  -------------

      Total liabilities and stockholders' equity                    $39,428,000   $ 18,775,000
                                                                    ============  =============
<FN>
                  See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                     ELECTRONIC CLEARING HOUSE, INC.
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                  -------------------------------------

                                                                         Year ended September 30,
                                                                 ----------------------------------------
                                                                     2004          2003          2002
                                                                 ------------  ------------  ------------
<S>                                                              <C>           <C>           <C>
REVENUES                                                         $47,584,000   $40,636,000   $33,291,000
                                                                 ------------  ------------  ------------
COSTS AND EXPENSES:
    Processing and transaction expense                            29,634,000    26,660,000    22,973,000
    Other operating costs                                          5,182,000     4,373,000     4,032,000
    Research and development expense                               1,465,000     1,464,000     1,747,000
    Selling, general and administrative expenses                   7,846,000     5,714,000     5,219,000
    Amortization expense - goodwill                                      -0-           -0-       489,000
    Legal settlement                                                     -0-           -0-     2,500,000
                                                                 ------------  ------------  ------------

                                                                  44,127,000    38,211,000    36,960,000
                                                                 ------------  ------------  ------------

Income (loss) from operations                                      3,457,000     2,425,000    (3,669,000)

Interest income                                                       71,000        28,000        55,000
Interest expense                                                    (175,000)     (200,000)     (129,000)
Gain on sale of assets                                             1,319,000           -0-           -0-
                                                                 ------------  ------------  ------------

Income (loss) before (provision) benefit for income taxes
and cumulative effect of an accounting change                      4,672,000     2,253,000    (3,743,000)

(Provision) benefit for income taxes                              (1,823,000)     (925,000)    1,367,000
                                                                 ------------  ------------  ------------

Income (loss) before cumulative effect of an accounting change     2,849,000     1,328,000    (2,376,000)
Cumulative effect of an accounting change to adopt SFAS 142              -0-    (4,707,000)          -0-
                                                                 ------------  ------------  ------------

Net income (loss)                                                $ 2,849,000   $(3,379,000)  $(2,376,000)
                                                                 ============  ============  ============

Basic net earnings (loss) per share
    Before cumulative effect of accounting change                $      0.45   $      0.23   $     (0.41)
    Cumulative effect of accounting change                               -0-         (0.81)          -0-
                                                                 ------------  ------------  ------------
    Basic net earnings (loss) per share                          $      0.45   $     (0.58)  $     (0.41)
                                                                 ============  ============  ============

Diluted net earnings (loss) per share
    Before cumulative effect of accounting change                $      0.41   $      0.22   $     (0.41)
    Cumulative effect of accounting change                               -0-         (0.78)          -0-
                                                                 ------------  ------------  ------------
    Diluted net earnings (loss) per share                        $      0.41   $     (0.56)  $     (0.41)
                                                                 ============  ============  ============
<FN>
                       See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                  ELECTRONIC CLEARING HOUSE, INC.
                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                    ----------------------------------------------------------

                                            Shares
                               ---------------------------------              Additional
                                                                   Common      Paid-in      Treasury    Accumulated
                               Treasury     Common    Preferred     Stock      Capital       Stock        Deficit        Total
                               ---------  ----------  ----------  ---------  ------------  ----------  -------------  ------------
<S>                            <C>        <C>         <C>         <C>        <C>           <C>         <C>            <C>

Balance at September 30, 2001    39,269   5,809,095      25,000   $  58,000  $21,260,000   $(469,000)  $ (5,110,000)  $15,739,000

Exercise of stock options                     5,500                               11,000                                   11,000
Issuance of common stock to
  outside directors                          20,736                               45,000                                   45,000
Conversion of preferred to                   25,000     (25,000)
  common
Exchange of stock for note                  (25,000)                             (54,000)                                 (54,000)
  receivable
Tax benefit from exercise of                                                     173,000                                  173,000
  stock options
Net loss                                                                                                 (2,376,000)   (2,376,000)
                               ---------  ----------  ----------  ---------  ------------  ----------  -------------  ------------

Balance at September 30, 2002    39,269   5,835,331         -0-      58,000   21,435,000    (469,000)    (7,486,000)   13,538,000

Exercise of stock options                    75,750                   1,000      157,000                                  158,000
Issuance of common stock to
  outside directors                           9,093                               21,000                                   21,000
Issuance of stock for            (1,000)                                                       3,000                        3,000
  equipment purchase
Expense related to stock
  option issuance                                                                 28,000                                   28,000
Net loss                                                                                                 (3,379,000)   (3,379,000)
                               ---------  ----------  ----------  ---------  ------------  ----------  -------------  ------------

Balance at September 30, 2003    38,269   5,920,174         -0-      59,000   21,641,000    (466,000)   (10,865,000)   10,369,000

Private Placement                           437,957                   4,000    2,689,000                                2,693,000
Exercise of stock options                    93,200                   1,000      220,000                                  221,000
Expense related to stock
  option issuance                                                                 33,000                                   33,000
Tax benefit from exercise of                                                      75,000                                   75,000
  stock option
Net income                                                                                                2,849,000     2,849,000
                               ---------  ----------  ----------  ---------  ------------  ----------  -------------  ------------

Balance at September 30, 2004    38,269   6,451,331         -0-   $  64,000  $24,658,000   $(466,000)  $ (8,016,000)  $16,240,000
                               =========  ==========  ==========  =========  ============  ==========  =============  ============
<FN>
                                   See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                   ELECTRONIC CLEARING HOUSE, INC.
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                -------------------------------------

                                                                    Year ended September 30,
                                                           -----------------------------------------
                                                               2004           2003          2002
                                                           -------------  ------------  ------------
<S>                                                        <C>            <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                        $  2,849,000   $(3,379,000)  $(2,376,000)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
  (Gain) loss on sale of assets                              (1,319,000)       16,000           -0-
  Cumulative effect of an accounting change                         -0-     4,707,000           -0-
  Depreciation                                                  634,000       512,000       480,000
  Amortization of software                                    1,350,000     1,081,000       697,000
  Amortization of goodwill                                          -0-           -0-       489,000
  Provisions for losses on accounts and notes receivable         92,000        67,000       302,000
  Provision for obsolete inventory                               46,000       110,000       300,000
  Write-down of real estate                                         -0-        55,000       100,000
  Fair value of stock issued in connection
    with director's compensation                                    -0-        21,000        45,000
  Deferred income taxes                                       1,628,000       942,000    (1,375,000)
  Stock option compensation                                      33,000        28,000           -0-
  Tax benefit from exercise of stock option                      75,000           -0-           -0-
  Legal settlement                                                  -0-           -0-     1,300,000
Changes in assets and liabilities:
  Restricted cash                                               (47,000)      (71,000)      504,000
  Settlement deposits                                       (15,549,000)   (2,133,000)      (21,000)
  Accounts receivable                                           (95,000)     (389,000)     (162,000)
  Settlement receivable                                         244,000      (569,000)     (106,000)
  Accounts payable                                             (474,000)      578,000        66,000
  Settlement payable                                         15,304,000     2,700,000       111,000
  Accrued expenses                                              661,000       349,000      (376,000)
  Prepaid expenses                                             (107,000)      (76,000)       63,000
                                                           -------------  ------------  ------------
  Net cash provided by operating activities                   5,325,000     4,549,000        41,000
                                                           -------------  ------------  ------------
Cash flows from investing activities:
  Other assets                                                  141,000       (51,000)      (81,000)
  Purchase of equipment                                        (744,000)     (664,000)     (253,000)
  Purchased and capitalized software                         (3,534,000)   (2,627,000)   (1,501,000)
  Proceeds from sale of building                              2,233,000           -0-           -0-
  Proceeds from sale of asset                                       -0-        71,000           -0-
                                                           -------------  ------------  ------------

Net cash used in investing activities                        (1,904,000)   (3,271,000)   (1,835,000)
                                                           -------------  ------------  ------------

Cash flows from financing activities:
  Proceeds from issuance of notes payable                       811,000       292,000           -0-
  Repayment of notes payable                                 (1,916,000)     (177,000)     (151,000)
  Repayment of capitalized leases                              (562,000)     (452,000)     (215,000)
  Proceeds from sales and leaseback of equipment                    -0-           -0-       390,000
  Proceeds from private placement of common stock             2,693,000           -0-           -0-
  Proceeds from exercise of stock options                       221,000       158,000        11,000
                                                           -------------  ------------  ------------

  Net cash provided by (used in) financing activities         1,247,000      (179,000)       35,000
                                                           -------------  ------------  ------------

Net increase (decrease) in cash                               4,668,000     1,099,000    (1,759,000)
Cash and cash equivalents at beginning of period              2,908,000     1,809,000     3,568,000
                                                           -------------  ------------  ------------

Cash and cash equivalents at end of period                 $  7,576,000   $ 2,908,000   $ 1,809,000
                                                           =============  ============  ============
<FN>
                    See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>
                         ELECTRONIC CLEARING HOUSE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


NOTE  1  -  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------------------------------------------

Electronic  Clearing  House, Inc. (ECHO or the Company) is a Nevada corporation.
The Company provides bankcard authorizations, electronic deposit services, check
guarantee,  check verification, check conversion, and check collection services.

The following comments describe the more significant accounting policies.

Principles  of  Consolidation
-----------------------------

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

Cash  and  Cash  Equivalents
----------------------------

Cash  and  cash  equivalents consist of unrestricted balances only.  The Company
considers all highly liquid investments with original maturities of three months
or  less  to  be  cash  equivalents.

Restricted  Cash
----------------

Under  the  terms  of  the  processing  agreements  with  the  Company's primary
processing  banks,  the  Company  maintains  several  cash accounts as a reserve
against  chargeback  losses.  As  processing fees are received by the processing
banks,  they are allocated per the processing agreement to the reserve accounts.

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.  The
Company  records  a  receivable  for those chargebacks for which the merchant is
liable  but  has not made payment. The Company records a provision for estimated
chargeback  losses at the time bankcard transactions are processed. A reserve is
estimated  based  upon a historically-determined percentage of gross credit card
processing  volume  and  actual  losses  experienced.

Settlement  Deposits,  Receivables  and  Payables
-------------------------------------------------

Settlement  receivable/payable  results from timing differences in the Company's
settlement process with merchants. These timing differences are primarily due to
the  timing  between  the  funds  received  in  the  Company's bank accounts and
settlement  payments made to the merchants.  Cash held by the Company associated
with  this  settlement  process  is  classified  as  settlement  deposits in the
consolidated  balance  sheets.

Property  and  Equipment
------------------------

Property  and  equipment  are  stated at cost, less accumulated depreciation and
amortization.  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:


<PAGE>
Note  1:  (Continued)
-------


               Building                                39 years
               Computer  equipment  and  software      3-5 years
               Furniture,  fixtures  and  equipment    5 years
               Building  improvements                  5-10 years


Other  Assets
-------------

Other assets consist primarily of deposits and intangible assets such as patents
and  trademarks.  Costs  related  to  obtaining  a  patent  and  trademark  are
capitalized  and  amortized over the estimated life of the patent and trademark.
Disclosures  regarding  intangible  assets  as  required  under SFAS No. 142 are
included  in  Note  6.

Software  Development  Costs
----------------------------

Under the provisions of Statement of Position 98-1, "Accounting for the Costs of
Computer  Software  Developed  or  Obtained  for  Internal  Use,"  the  Company
capitalizes  costs associated with software developed for internal use when both
the preliminary project stage is completed and management has authorized further
funding  for  the  completion of the project. Capitalized costs include only (1)
external  direct  costs  of  materials  and  services  consumed in developing or
obtaining  internal-use  software,  (2)  payroll  and  payroll-related costs for
employees  who  are  directly  associated  with  the  software  project, and (3)
interest  costs incurred, when material, while developing internal-use software.
Capitalization of such costs ceases no later than the point at which the project
is substantially complete and ready for its intended purpose. Software developed
or obtained for internal use is tested for impairment whenever events or changes
in  circumstance  indicates  that  its  carrying  amount may not be recoverable.
Capitalized  software  development  costs  are amortized using the straight-line
method over the lesser of three years or estimated useful life.

Costs  incurred to establish the technological feasibility of software and other
computer  software  maintenance  costs  are recorded as research and development
costs  and  are  charged  to  expense  when  incurred.

Goodwill
--------

Goodwill represents the excess of purchase price over net assets acquired in the
acquisition  of  XPRESSCHEX and Rocky Mountain Retail Systems. In July 2001, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and
Other  Intangible  Assets",  which is effective for fiscal years beginning after
December 15, 2001.  SFAS 142 requires, among other things, the discontinuance of
goodwill  amortization.  The  Company  adopted  SFAS 142 in the first quarter of
fiscal  2003.  Based  upon  the evaluation findings, the Company determined that
its  goodwill  was  fully  impaired  and a non-cash charge equal to the goodwill
carrying  amount  of  $4.7  million  was  recognized during the first quarter of
fiscal  2003.  See  Note  3.

Long-Lived  Assets
------------------

When  circumstances  warrant,  the  Company  reviews  its  long-lived assets for
impairment  using  estimated undiscounted future cash flows associated with such
assets.  An  impairment  loss  would be determined as the difference between the
fair values and the carrying amounts of the assets.  Management believes no such
impairment  has  occurred  as  of  September  30,  2004.


<PAGE>
Note  1:  (Continued)
-------

Revenue  Recognition
--------------------

The  Company  earns revenue from services which include the following: debit and
credit  card  processing, check guarantee, check verification, check conversion,
check  re-presentment,  check  collection  and inventory tracking.  All of these
services  are  performed  pursuant to a contract with customers which states the
terms  and  fixed price for all contracted services.  The price of a service may
be  a  fixed  fee  for  each  transaction and/or a percentage of the transaction
processed,  depending  on  the  service.  At  the  time the guarantee revenue is
recognized,  the Company provides a reserve for estimated guarantee losses based
upon  its  historical loss experience. The Company generally collects its fee at
the  time  it  processes  the  transaction  and  accordingly,  collectibility is
assured.  Based  on  the  Company's  underwriting  criteria  and  ongoing credit
monitoring  of  customers,  collectibility on service transactions is reasonably
assured.

Revenue  from  debit  and  credit  card  (collectively  called  "bankcards") and
transaction  processing  revenue  is  based  on  a percentage of the transaction
value,  commonly  referred  to  as  a  discount  fee  on a credit and debit card
transaction  processed  by the Company.  In addition, there is a per transaction
fee  associated with each bankcard transaction which is charged to the merchant.
The  Company recognizes the processing and transaction revenue when the services
are  performed.

Revenue from check guarantee is derived from a percentage of the gross amount of
the  check  and guarantees payment of the check to the merchant in the event the
check  is  not  honored by the check writer's bank.  Merchants typically present
customer  checks  for  processing  on a regular basis and, therefore, dishonored
checks  are  generally  identified  within a few days of the date the checks are
guaranteed  by  the  Company. The Company recognizes revenue when the checks are
processed at the point of sale.  In the event a check is dishonored, the Company
has  the right to collect the full amount of the check from the check writer but
has  historically  recovered approximately 50-60% of the guaranteed checks.  The
Company  establishes  a receivable from the delinquent check writer for the full
amount of the guaranteed check.  The Company establishes a reserve against these
receivables  based  on  historical loss experience.  The check guarantee service
also  earns revenue based on fees collected from delinquent check writers, which
collection fee is recognized when collected, as collectibility is not reasonably
assured  until  that  point.

Revenue  from  check  verification  is  derived  from  fees  collected  from the
merchants  when  a check is verified against the Company's positive and negative
check  database.  This  revenue is recognized when the transaction is processed,
since  the  Company  has  no  further  performance  obligations.

Revenue  from  check conversion is derived from fees collected from merchants to
convert  the  paper  check  received by merchants into an ACH transaction, which
allows  the  Company  to settle the transaction electronically for the merchant.
The  Company  recognizes  the  revenue related to check conversion fees when the
services  are  performed.

Revenue from check re-presentment is derived from fees charged to check writers.
Check re-presentment is a service that allows merchants to collect a paper check
through  the  Automated  Clearing  House  ("ACH")  network  after  a  check  has
previously  been  presented  to  the bank for collection unsuccessfully at least
once.  The  fees  earned  from  check  writer  are recognized when collected, as
collectibility  is  not  reasonably  assured  until  that  point.

Revenue from check collection is derived from collection activities performed on
behalf of a merchant on uncollected checks.  The merchant usually keeps the face
amount  of  the  uncollected checks if the collection effort is successful.  The
Company's  revenue  is  derived from the collection fee collected from the check
writer.  If the Company refers the collection item to another collection agency,
the  Company  will  receive a fee from the collection agency upon its successful
efforts.  Collection fee revenue is recognized when collected, as collectibility
is  not  reasonably  assured  until  that  point.

Revenue  from inventory tracking is derived from transaction fees for processing
and  tracking  U-Haul's  daily  inventory activities. This revenue is recognized
when  the transaction is processed, since the Company has no further performance
obligations.


<PAGE>
Note 1: (Continued)
------


Income  Taxes
-------------

The  Company accounts for income taxes in accordance with Statement of Financial
Accounting  Standards No. 109, "Accounting for Income Taxes" (FAS 109).  FAS 109
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.  A  valuation  allowance  is
established,  when  necessary,  to  reduce  deferred  tax  assets  to the amount
expected  to  be  realized.

Earnings  (Loss)  Per  Share
----------------------------

Earnings  (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 included in the weighted average for the calculation of diluted net
income  per  share  except  where  it  would  be  anti-dilutive.

Stock-Based  Compensation
-------------------------

The  Company  has  elected  to account for its stock-based compensation plans in
accordance with APB Opinion No. 25 and to adopt only the disclosure requirements
of  FAS  123,  as  amended  by  SFAS  No.  148.

The  Company  measures  compensation  expense  for  its  employee  stock-based
compensation  under  APB  25.  The Company provides pro-forma disclosures of net
income  and  earnings per share as if a fair value method had been applied using
the  Black  Scholes  option pricing model. Compensation expense is recognized in
association  with  the  issuance  of  stock  options for the difference, if any,
between  the trading price of the stock at the time of issuance and the price to
be  paid  by  the  optionee.  Compensation  expense is recorded over the vesting
period.  Pro forma compensation costs for employee stock and stock option awards
is  amortized  over  the related service periods using the straight-line method.

The  weighted  average fair value of the options granted during the fiscal years
ended  September  30,  2004,  2003  and  2002  were  $4.93,  $1.66  and  $1.52,
respectively.  For  options  granted in fiscal 2004, the risk free interest rate
was approximately 3%, the expected life was 7 years, the expected volatility was
approximately 84.0%, and the expected dividend yield was 0%, all calculated on a
weighted  average  basis.  For  options  granted  in  fiscal 2003, the risk free
interest  rate was approximately 3%, the expected life was 5 years, the expected
volatility  was approximately 90.8%, and the expected dividend yield was 0%, all
calculated on a weighted average basis.  For options granted in fiscal 2002, the
risk free interest rate was approximately 4%, the expected life was 5 years, the
expected volatility was approximately 90.6%, and the expected dividend yield was
0%,  all  calculated  on  a  weighted  average  basis.

The  following  table  compares net income and earnings per share as reported to
the  pro  forma  amounts  that  would  be reported had compensation expense been
recognized  for  the  stock-compensation plans in accordance with the fair value
recognition  provisions  of SFAS No. 123, as amended by SFAS No. 148, Accounting
for  Stock-Based  Compensation:


<PAGE>
Note  1:  (Continued)
-------

<TABLE>
<CAPTION>
                                                   For the Fiscal Years Ended
                                                          September 30,
                                                2004          2003          2002
                                             -----------  ------------  ------------
<S>                                          <C>          <C>           <C>
Net income (loss)
    As reported                              $2,849,000   $(3,379,000)  $(2,376,000)

    Add: stock-based employee
    compensation expense included
    in reported net income, net of
    tax effect                                   20,000           -0-           -0-

    Deduct: total stock-based employee
    compensation expense determined
    under fair value-based method for
    all awards, net of related tax effects   $ (395,000)  $  (212,000)  $  (269,000)
                                             -----------  ------------  ------------

Pro forma net income (loss)                  $2,474,000   $(3,591,000)  $(2,645,000)
                                             ===========  ============  ============

Basic earnings (loss) per share:
    As reported                              $     0.45   $     (0.58)  $     (0.41)
    Pro forma                                $     0.39   $     (0.62)  $     (0.46)

Diluted earnings (loss) per share:
    As reported                              $     0.41   $     (0.56)  $     (0.41)
    Pro forma                                $     0.36   $     (0.60)  $     (0.46)
</TABLE>


Accounting  Estimates
---------------------

The  preparation  of  financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and  assumptions that affect the reported amounts of assets and liabilities, the
disclosure  of  contingent liabilities, and the reported amounts of revenues and
expenses  during  the  reporting period. Significant estimates include allowance
for  chargeback losses and deferred tax assets. Actual results could differ from
those  estimates.

Fair  Value  of  Financial  Instruments
---------------------------------------

The  amount  recorded  for  financial  instruments in the Company's consolidated
financial  statements  approximates  fair  value  as  defined  in  SFAS No. 107,
"Disclosures  about  Fair  Value  of  Financial  Instruments".

Reclassifications
-----------------

Certain  amounts  in  the  September  30,  2003  and 2002 consolidated financial
statements  have  been reclassified to conform to the current year presentation.

New  Accounting  Pronouncement
------------------------------

In  December 2004, the FASB issued SFAS 123R, "Share-Based Payment, an amendment
of  FASB  Statements  Nos.  123  and  95,"  that  addresses  the  accounting for
share-based  payment  transactions in which a Company receives employee services
in exchange for either equity instruments of the Company or liabilities that are
based  on  the  fair  value  of  the Company's equity instruments or that may be
settled  by  the  issuance  of such equity instruments. SFAS 123R eliminates the
ability to account for share-based compensation transactions using the intrinsic
method  that  the  Company  currently uses and generally would require that such
transactions  be accounted for using a fair-value-based method and recognized as
expense in the consolidated statement of operations.  SFAS 123R is effective for
interim  and  annual  periods  beginning  after  June  15,  2005.  Management is
currently  evaluating  the  impact  of SFAS 123R and it is expected that it will
have  a  significant  impact  on the consolidated statement of operations as the
Company  will  be  required  to  expense  the fair value of stock option awards.


<PAGE>
NOTE 2 - STATEMENT OF CASH FLOWS:
--------------------------------

<TABLE>
<CAPTION>
                             September 30
                             ------------
                       2004      2003      2002
                     --------  --------  --------
<S>                  <C>       <C>       <C>
Cash paid for:
  Interest           $175,000  $200,000  $129,000
  Income taxes          8,000     1,000   137,000
</TABLE>

Significant non-cash transactions for fiscal 2004 are as follows:

     -    Software  purchases of $285,000 and capital equipment of $152,000 were
          acquired  under  capital  leases.

Significant non-cash transactions for fiscal 2003 are as follows:

     -    Capital  equipment  of  $525,000  was  acquired  under capital leases.

Significant non-cash transactions for fiscal 2002 are as follows:

     -    A  refund  and  tax credit totaling $173,000 was recognized due to the
          filing  of  amended  tax returns for options exercised in fiscal years
          1999  and  2000.

     -    A $1.3 million 15-year long-term promissory note was issued as part of
          the  Premiere  Lifestyles  International  Corporation  vs.  ECHO legal
          settlement.

     -    Capital  equipment  of  $663,000  was  acquired  under capital leases.

     -    A software license scheduled payment of $93,000 was paid directly by a
          leasing  company.

     -    The  Company  acquired 25,000 shares of ECHO's common stock, valued at
          $54,000  for  satisfaction  of  a  chargeback  receivable  owed to the
          Company.

NOTE 3 - CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:
------------------------------------------------------------

Effective October 1, 2002, the Company adopted Statement of Financial Accounting
Standards  No.  142  ("SFAS 142"), "Goodwill and Other Intangible Assets".  SFAS
142  requires  that  goodwill  no longer be amortized, but instead be tested for
impairment  at least annually using a fair value-based approach.  In the year of
adoption,  SFAS  No.  142  also  required  the  Company  to  perform  an initial
assessment  of  its reporting units to determine whether there is any indication
that  the goodwill carrying value may be impaired.  This transitional assessment
is  made  by  comparing  the fair value of each reporting unit, as determined in
accordance  with  the  new  standard, to its book value.  To the extent the fair
value  of  any  reporting unit is less than its book value, which would indicate
that  potential  impairment  of  goodwill exists, a second transitional test was
required  to  determine  the  amount  of  impairment.

The  Company has determined that it has two reporting units, which correspond to
its  two reportable business segments; the "Bankcard and Transaction Processing"
unit  and  the  "Check  Related  Products"  unit.  All of the Company's goodwill
relates  to  business  acquisition  transactions, which apply exclusively to the
Check  Related Products unit.  The Company completed the transitional impairment
testing  required  by SFAS 142 in the first quarter of fiscal 2003.  The Company
determined  the  estimated  fair value of its reporting units using a discounted
cash  flow technique and a market approach based upon the Company's total market
capitalization  as  of  October 1, 2002.  Based upon the valuation findings, the
Company  determined  that  its goodwill was fully impaired and a non-cash charge
equal  to  the  goodwill  carrying  amount of $4.7 million was recognized in the
Company's  consolidated  financial  statements.  As  prescribed by SFAS 142, the
Company  treated  this  non-cash  goodwill  impairment as a cumulative effect of
change  in  accounting principle.  No income tax benefit has been recognized for
this  charge  as  the  goodwill  is  not  deductible  for  income  tax purposes.

Note  3:  (Continued)
-------


<PAGE>
Had the provisions of SFAS No. 142 been applied for the year ended September 30,
2002,  the  Company's  net  loss  before  the  cumulative  effect of a change in
accounting  principle,  and  net  (loss)  per  share would have been as follows:

<TABLE>
<CAPTION>
                                                  For the Fiscal Year Ended
                                                            2002
                                                 ---------------------------
<S>                                              <C>
Net (loss), as reported                          $               (2,376,000)

Add:
  Goodwill amortization                                             489,000
                                                 ---------------------------

Adjusted net (loss)                              $               (1,887,000)
                                                 ===========================

Basic (loss) per share, as reported              $                    (0.41)
Effect of SFAS No. 142                                                 0.08
                                                 ---------------------------

Adjusted basic (loss) per share                  $                    (0.33)
                                                 ===========================
Diluted (loss) per share, as reported            $                    (0.41)
Effect of SFAS No. 142                                                 0.08
                                                 ---------------------------

Adjusted diluted (loss) per share                $                    (0.33)
                                                 ===========================
</TABLE>

NOTE 4 - PROPERTY AND EQUIPMENT:
--------------------------------

Property and equipment are comprised of the following:

<TABLE>
<CAPTION>
                                                         September 30
                                                  --------------------------
                                                      2004          2003
                                                  ------------  ------------
<S>                                               <C>           <C>
Land and building                                 $       -0-   $   880,000
Computer equipment                                  3,630,000     3,973,000
Furniture, fixtures and equipment                     897,000     1,240,000
Building improvements                                  76,000       291,000
Tooling equipment                                         -0-       285,000
Auto                                                   34,000        16,000
                                                  ------------  ------------
Cost                                                4,637,000     6,685,000
Less:  accumulated depreciation and amortization   (2,344,000)   (3,757,000)
                                                  ------------  ------------

Net book value                                    $ 2,293,000   $ 2,928,000
                                                  ============  ============
</TABLE>

Included  in property and equipment are assets under capital lease of $1,062,000
and  $1,098,000  at  September  30,  2004  and  2003,  with  related accumulated
depreciation  of  $372,000  and  $236,000, respectively.  Amortization of assets
recorded  under  capital  leases  is  included  with  depreciation  expense.

In  March  2004,  the Company sold a building, which formerly held the Company's
corporate  offices.  The  total  sales price was $2,382,000, which resulted in a
pre-tax gain of $1,319,000.  Proceeds from the sale were used in part to pay off
the  two  notes  collateralized  by  the  building.


<PAGE>
NOTE  5  -  SOFTWARE
--------------------

The  following  table sets forth information regarding the costs associated with
software  purchased  and  developed  for  internal  use:

<TABLE>
<CAPTION>
                                       September 30
                                --------------------------
                                    2004          2003
                                ------------  ------------
<S>                             <C>           <C>

Software                        $11,005,000   $ 7,495,000

Less: accumulated amortization   (4,161,000)   (3,050,000)
                                ------------  ------------

Net book value                  $ 6,844,000   $ 4,445,000
                                ============  ============
</TABLE>

Included  in  software  cost  are  assets  under  capital  lease of $508,000 and
$399,000 at September 30, 2004 and 2003, and related accumulated amortization of
$132,000  and  $109,000,  respectively.

NOTE  6  -  OTHER  ASSETS
-------------------------

Other assets consist of the following at September 30, 2004:

<TABLE>
<CAPTION>
                            Accumulated       Net
                   Cost    Amortization   Book Value
                 --------  -------------  -----------
<S>              <C>       <C>            <C>
Patents          $173,000  $      78,000  $    95,000
Trademarks        280,000         87,000      193,000
Other             199,000        119,000       80,000
                 --------  -------------  -----------

                 $652,000  $     284,000  $   368,000
                 ========  =============  ===========
</TABLE>

Other assets consist of the following at September 30, 2003:

<TABLE>
<CAPTION>
                            Accumulated       Net
                   Cost    Amortization   Book Value
                 --------  -------------  -----------
<S>              <C>       <C>            <C>
Patents          $173,000  $      68,000  $   105,000
Trademarks        276,000         59,000      217,000
Other             356,000        178,000      178,000
                 --------  -------------  -----------

                 $805,000  $     305,000  $   500,000
                 ========  =============  ===========
</TABLE>

Amortization  expense  for  the  years  ended  September  30,  2004 and 2003 was
$115,000  and  $46,000, respectively.  Based on the current amount of intangible
assets  subject  to amortization, the estimated amortization expense for each of
the  five  succeeding  years  is  $38,000.


NOTE  7  -  INCOME  TAXES
-------------------------

The (provision) benefit for income taxes consists of the following components:


<PAGE>
Note  7:  (Continued)
-------


<TABLE>
<CAPTION>
                                                           September 30
                                              -------------------------------------
                                                  2004         2003        2002
                                              ------------  ----------  -----------
<S>                                           <C>           <C>         <C>
Current federal taxes                         $   (19,000)  $     -0-   $      -0-
Current state taxes                               (87,000)     (5,000)      (5,000)
Deferred taxes                                 (1,717,000)   (920,000)   1,372,000
                                              ------------  ----------  -----------

  Total (provision) benefit for income taxes  $(1,823,000)  $(925,000)  $1,367,000
                                              ============  ==========  ===========
</TABLE>

The  effective  tax  rate  varies  from  the  U.S.  Federal  statutory  tax rate
principally  due  to  the  following:

<TABLE>
<CAPTION>
                                                           September 30
                                              -------------------------------------
                                                  2004         2003        2002
                                              ------------  ----------  -----------
<S>                                           <C>           <C>         <C>
U.S. Federal statutory tax rate                    34.00%      (34.00%)    (34.00%)
Add (deduct):
Non-deductible goodwill                               -0-       65.00%       4.30%
State and local taxes                               5.10%        4.50%      (6.90%)
All other                                          (0.10%)       2.20%       0.10%
                                              ------------  ----------  -----------

Effective tax rate                                  39.00%      37.70%     (36.50%)
                                              ============  ==========  ===========
</TABLE>

Components of the deferred tax asset (liabilities) include:

<TABLE>
<CAPTION>
                                                September 30
                                         -------------------------
                                             2004         2003
                                         ------------  -----------
<S>                                      <C>           <C>
Deferred tax assets (liabilities):
  Capitalized software                   $(1,727,000)  $ (715,000)
  Reserve for bad debts                       60,000       35,000
  Inventory reserve                              -0-          -0-
  Reserve on real estate                         -0-          -0-
  Reserve on legal settlement                125,000          -0-
  Inventory cost capitalized                     -0-       52,000
  State tax expense                          103,000          -0-
  Installment note expense                       -0-      513,000
  Stock option exercise                       94,000          -0-
  Net operating loss carryforward            861,000    1,299,000
  Business tax credit                        113,000      113,000
  AMT credit                                  85,000       45,000
                                         ------------  -----------
Total deferred tax assets (liabilities)  $  (286,000)  $1,342,000
                                         ============  ===========
</TABLE>

The  Company  has a federal net operating loss carryforward of $2,296,000, which
expires in 2010 through 2022. The Company has not recorded a valuation allowance
against  deferred tax assets because it expects to have future taxable income to
recognize  these  assets.


<PAGE>
NOTE 8 - SHORT-TERM BORROWINGS AND LONG-TERM DEBT:
-------------------------------------------------

Short-term borrowings and long-term debt consist of the following:

<TABLE>
<CAPTION>
                                                                           September 30
                                                                     ------------------------
                                                                        2004         2003
                                                                     -----------  -----------
<S>                                                                  <C>          <C>
Long-term promissory note collateralized by corporate headquarters
building, bearing interest at 8% per annum, repaid during 2004       $      -0-   $1,229,000

Term loan collateralized by corporate headquarters building,
bearing interest at 7.87% per annum, repaid during 2004                     -0-      343,000

Term loan, collateralized by equipment, due 2005, bearing
interest at prime rate, 4.75% at September 30, 2004                      26,000      107,000

Term loan, collateralized by various assets of the Company,
  due June 19, 2006, bearing interest at prime rate plus 1%, 5.75%
  at September 30, 2004                                                 269,000      292,000

Equipment lease line, collaterrized by various assets of the
Company, converted into term loan on October 31, 2004, interest
at prime rate plus .50%, 5.00% at September 30, 2004                    600,000          -0-

Capital leases                                                          687,000      891,000
                                                                     -----------  -----------
                                                                      1,582,000    2,862,000
Less:  current portion                                                 (878,000)    (901,000)
                                                                     -----------  -----------
                                                                     $  704,000   $1,961,000
                                                                     ===========  ===========
</TABLE>

The  weighted  average interest rate on the prime rate term loans for the period
they were outstanding during the year ended September 30, 2004 was 4.08%.

One  of  the  term  loans contains restrictive debt covenants consisting of debt
service  coverage ratio and tangible net worth requirements. As of September 30,
2004,  the  Company  is in compliance with all such covenants. The Company has a
$3,000,000  credit  line  with a bank, which was unused during fiscal year 2004.

In  January 2003, an $800,000 line of credit and a $700,000 lease line for Oasis
software  installment  payments  were  secured  from  First  Regional Bank, at a
borrowing  rate  of prime + 1%. The Company has drawn down $503,000 of the Oasis
lease  line as of September 30, 2004.  In October 2003, the Company secured a $3
million  credit  line for working capital needs and a $1 million equipment lease
line  with  Bank  of  the  West.  The  Company  has  drawn  down $600,000 of the
equipment  lease  line  as  of  September  30,  2004.

Future maturities of debt are as follows:

<TABLE>
<CAPTION>
Fiscal year ended September 30
------------------------------
<S>                             <C>
            2005                $  878,000
            2006                   312,000
            2007                   185,000
            2008                   193,000
            2009                    14,000
            thereafter                 -0-
                                ----------
                                $1,582,000
                                ==========
</TABLE>


<PAGE>
NOTE  9  -  ACCRUED  EXPENSES:
-----------------------------

<TABLE>
<CAPTION>
                                                       September 30
                                                  ----------------------
Accrued expenses are comprised of the following:     2004        2003
                                                  ----------  ----------
<S>                                               <C>         <C>
Accrued bankcard fees                             $  235,000  $  178,000
Accrued compensation and payroll taxes               700,000     535,000
Accrued communication costs                          138,000     215,000
Accrued professional fees                            212,000     168,000
Accrued commission                                   220,000      88,000
Accrued litigation expense                           300,000         -0-
Other                                                198,000     152,000
                                                  ----------  ----------
                                                  $2,003,000  $1,336,000
                                                  ==========  ==========
</TABLE>


NOTE  10  -  STOCKHOLDERS'  EQUITY:
----------------------------------

Stockholders'  Rights  Plan
---------------------------

The  Company  has  a  Stockholders'  Rights Plan, which was amended in September
2004.  As  amended,  the  rights  plan  provides  that all stockholders have two
preferred  share  purchase rights (each a "Right") for each outstanding share of
common  stock  of  the  Company.  Each  Right  entitles the registered holder to
purchase  from  the  Company  four  one-hundredths of a share of series A Junior
Participating  Preferred  Stock, no par value ("Preferred Stock") of the Company
at  a  price  of  $2.00  per  one  one-hundredth  of  a share of Preferred Stock
("Purchase  Price").  The description and terms of the Rights are set forth in a
Rights Agreement dated as of September 30, 1996 ("Rights Agreement"), as amended
in  January  2003  and  September  2004.

The  Rights  will  separate  from  the Common Stock and a Distribution Date will
occur  upon  the  earlier  of  (i) 10 days following a public announcement that,
without  consent  of  the Board of Directors, a person or group of affiliated or
associated  persons  ("Acquired  Person")  have acquired beneficial ownership of
twenty-percent  (20%)  or  more  of  the  outstanding  Common  Stock, or (ii) 10
business days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person becomes an Acquired Person) following
the  commencement  of, or announcement of an intention to make a tender offer or
exchange  offer  the  consummation  of  which  would  result  in  the beneficial
ownership  by  a  person  or  group  of  twenty-percent  (20%)  or  more of such
outstanding  Common  Stock.

In  the  event  that  any  person becomes the beneficial owner of twenty-percent
(20%)  or  more  of  the  Common  Stock of the Company, ten (10) days thereafter
("Flip-In Event") each Right would permit the holder of such Right to thereafter
have  the  right  to receive, upon exercise thereof at the then current Purchase
Price  of  the Right, Common Stock which has a value of eight times the Purchase
Price  of the Right (such right being called the "Flip-In Right").  In the event
the  Company  is  acquired in a merger or other business combination transaction
where  the  Company is not the surviving corporation or in the event that 50% or
more  of  its assets or earning power is sold, proper provision shall be made so
that  each  Right  would  permit the holder of such Right to thereafter have the
right  to  receive, upon the exercise thereof at the then current Purchase Price
of  the  Right,  common stock of the acquiring entity which has a value of eight
times  the  Purchase  Price  of  the  Right.  Upon the occurrence of the Flip-In
Event,  any  Rights  that  are  or were at any time owned by an Acquiring Person
shall  become  null  and  void  insofar  as  they  relate  to the Flip-In Right.

The  Rights  are not exercisable until the Distribution Date.  One of the Rights
will expire on September 30, 2006 and the other Right will expire on January 29,
2013,  unless  the  Rights  are earlier redeemed or exchanged by the Company, in
each  case,  as  described  in  the  Rights  Agreement.


<PAGE>
Note  10:  (Continued)
--------


Earnings  (Loss)  Per  Share
----------------------------

The  following  table  sets  forth the computation of basic and diluted earnings
(loss)  per  share:

<TABLE>
<CAPTION>
                                                                September 30
                                                    --------------------------------------
                                                       2004         2003          2002
                                                    ----------  ------------  ------------
<S>                                                 <C>         <C>           <C>
Numerator:
  Income (loss) before cumulative effect of
    an accounting change                            $2,849,000  $ 1,328,000   $(2,376,000)
  Cumulative effect of an accounting change
    to adopt SFAS 142                                      -0-   (4,707,000)          -0-
                                                    ----------  ------------  ------------

      Net income (loss):                            $2,849,000  $(3,379,000)  $(2,376,000)
                                                    ==========  ============  ============

Denominator:
  Weighted average shares outstanding for basic
    earnings (loss) per share                        6,311,643    5,812,005     5,788,071
  Effect of dilutive stock options                     588,608      212,035           -0-
                                                    ----------  ------------  ------------

      Adjusted weighted average shares outstanding
        for diluted earnings (loss) per share        6,900,251    6,024,040     5,788,071
                                                    ==========  ============  ============


Basic net earnings (loss) per share:
  Before cumulative effect of accounting change     $     0.45  $      0.23   $     (0.41)
  Cumulative effect of accounting change                   -0-        (0.81)          -0-
                                                    ----------  ------------  ------------
  Basic net earnings (loss) per share               $     0.45  $     (0.58)  $     (0.41)
                                                    ==========  ============  ============

Diluted net earnings (loss) per share:
  Before cumulative effect of accounting change     $     0.41  $      0.22   $     (0.41)
  Cumulative effect of accounting change                   -0-        (0.78)          -0-
                                                    ----------  ------------  ------------
  Diluted net earnings (loss) per share             $     0.41  $     (0.56)  $     (0.41)
                                                    ==========  ============  ============
</TABLE>

For  the  years  ended  September 30, 2004, 2003 and 2002, approximately 77,500,
270,000  and  597,584  shares,  respectively,  attributable  to  the exercise of
outstanding  options  were  excluded from the calculation of diluted EPS because
the  effect  was  antidilutive.

NOTE  11  -  COMMON  STOCK  OPTIONS:
-----------------------------------

The  Company  had  a  1992  Incentive Stock Option Plan (the "1992 Plan"), which
provided for the issuance of up to 1,343,750 stock options, each to purchase one
share  of  the common stock at a price not less than 100% of the market price at
the  date of grant. In May 2002, the 1992 Plan expired. The 2003 Incentive Stock
Option  Plan  was approved at the Annual Shareholders' Meeting in February 2003.
The 2003 Incentive Stock Option Plan has similar provisions as the 1992 Plan. On
December  21,  2004,  our  Compensation  Committee  authorized  an amendment and
restatement of the 2003 Incentive Stock Option Plan to, among other matters, (i)
increase the number of shares to be issued under the 2003 Incentive Stock Option
Plan  from  900,000  shares  to  1,150,000  shares, and (ii) permit the grant of
restricted stock under the plan, subject to shareholder approval.


<PAGE>
Note  11:  (Continued)
--------


Stock option activity during 2004, 2003, and 2002 was as follows:

<TABLE>
<CAPTION>
                                                   Exercise
                                    Options         Price
                                   ----------  ----------------
<S>                                <C>         <C>
Outstanding September 30, 2001       694,667   $1.60  -  $16.48
                                   ==========

  Granted                            197,000    1.29  -    2.17
    Forfeited                       (173,583)   1.60  -   10.24
    Exercised                         (5,500)   2.00
                                   ----------
Outstanding September 30, 2002       712,584   $1.29  -  $16.48
                                   ==========

  Granted                            238,000    1.30  -    8.50
    Forfeited                        (65,959)   2.00  -    5.88
    Exercised                        (75,750)   2.00  -    4.84
                                   ----------
Outstanding September 30, 2003       808,875   $1.29  -  $16.48
                                   ==========

  Granted                            425,000    6.85  -    9.56
    Forfeited                         (6,750)   1.30  -    8.48
    Exercised                        (93,200)   1.29  -    7.00
                                   ----------
Outstanding September 30, 2004     1,133,925   $1.29  -  $16.48
                                   ==========

Exercisable at September 30, 2002    318,000   $1.29  -  $16.48
                                   ==========
Exercisable at September 30, 2003    321,000   $1.29  -  $16.48
                                   ==========
Exercisable at September 30, 2004    355,035   $1.29  -  $16.48
                                   ==========
Options available for grant
  at September 30, 2003              614,500
                                   ==========
Options available for grant
  at September 30, 2004              193,000
                                   ==========
</TABLE>

All  officer  and  key  employee options are granted under the 1992 Plan and the
2003  Plan.  The  exercise price of the incentive stock options shall be 100% of
the  fair  market  value  on  the date the option is granted. Options granted to
officers and employees are normally vested over a five-year period.  Options are
exercisable  for  a  period  of  five  years  from  date  of  vest.

The  following  table  summarizes information about stock options outstanding at
September  30,  2004:

<TABLE>
<CAPTION>
                             Options Outstanding             Options Exercisable
                  --------------------------------------  --------------------------
                                   Weighted
                                    Average    Weighted                    Weighted
                      Number       Remaining    Average       Number       Average
Range of          Outstanding at  Contractual  Exercise   Exercisable at   Exercise
Exercise Prices   Sept. 30, 2004     Life        Price    Sept. 30, 2004    Price
----------------  --------------  -----------  ---------  --------------  ----------
<S>               <C>             <C>          <C>        <C>             <C>
  1.29 - $2.00           172,000          7.2  $    1.39          54,000  $     1.58
  2.15 - $3.50           305,000          7.3  $    2.64         107,000  $     2.66
  4.00 - $5.88           143,000          3.9  $    4.24         144,000  $     4.24
 7.00 - $16.48           514,000          8.6  $    7.51          50,000  $     9.34
                  --------------                          --------------
                       1,134,000          7.5  $    4.86         355,000  $     4.07
                  ==============                          ==============
</TABLE>


<PAGE>
NOTE  12  -  COMMITMENTS,  CONTINGENT  LIABILITIES,  AND  GUARANTEES:
---------------------------------------------------------------------

The  Company currently relies on cooperative relationships with, and sponsorship
by,  one  bank  in  order  to  process  its  Visa, MasterCard and other bankcard
transactions.  The  agreement  between  the  bank  and  the Company requires the
Company  to  assume and compensate the bank for bearing the risk of "chargeback"
losses.  Under  the  rules  of  Visa  and  MasterCard, when a merchant processor
acquires  card  transactions,  it  has  certain  contingent  liabilities for the
transactions  processed.  This  contingent  liability  arises  in the event of a
billing  dispute  between  the  merchant  and  a  cardholder  that is ultimately
resolved in the cardholder's favor.  In such a case, the disputed transaction is
charged  back  to  the merchant and the disputed amount is credited or otherwise
refunded  to  the  cardholder.  If  the Company is unable to collect this amount
from  the  merchant's  account,  and  if  the  merchant  refuses or is unable to
reimburse  the  Company  for the chargeback due to merchant fraud, insolvency or
other  reasons, the Company will bear the loss for the amount of the refund paid
to  the cardholders.  The Company is also exposed to financial risk in providing
Automated  Clearing House ("ACH") services to the merchants.  As the Third-Party
processor  for  multiple  originating  banks,  the  Company  is  liable  for any
fraudulent  activities committed by the merchants initiating the ACH activities.
The Company utilizes stringent underwriting guidelines combined with a number of
systems  and  procedures  to  manage  merchant  risk.  In  addition, the Company
requires  cash  deposits  by  certain merchants, which are held by the Company's
sponsoring  banks  to  minimize  the  risk  related  to  merchant  frauds  and
chargebacks.

A  cardholder,  through its issuing bank, generally has until the later of up to
four  months  after  the  date a transaction is processed or the delivery of the
product  or  service to present a chargeback to the Company's sponsoring bank as
the  merchant  processor.  Therefore,  management  believes  that  the  maximum
potential  exposure  for  the  chargebacks  would not exceed the total amount of
transactions  processed through Visa and MasterCard for the last four months and
other  unresolved  chargebacks  in  the process of resolution. For the last four
months through September 30, 2004, this potential exposure totaled approximately
$352  million. At September 30, 2004, the Company, through its sponsoring banks,
had approximately $168,000 of unresolved chargebacks that were in the process of
resolution.  At  September  30, 2004, the Company, through its sponsoring banks,
had  access  to  $9.9  million  belonging  to our merchants. This money has been
deposited  at  the  sponsoring  bank  by  the  merchants  to cover any potential
chargeback  losses.

For  the  fiscal years 2004 and 2003, the Company processed approximately $1,053
million  (2004)  and  $961  million  (2003) of Visa and MasterCard transactions,
which  resulted  in  $7.6  million in gross chargeback activities for the fiscal
year  ended  2004 and $9.3 million for the fiscal year ended 2003. Substantially
all  of  these  chargebacks  were  recovered  from  the  merchants.

The  Company's  contingent  obligation with respect to chargebacks constitutes a
guarantee as defined in Financial Accounting Interpretation No. 45, "Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Others"  ("FIN  45").  FIN 45 requires that guarantees issued or
modified  subsequent  to December 231, 2002 be initially recorded as liabilities
in  the  Statement  of  Financial  Position  at fair value.  Since the Company's
agreement  with  its  sponsoring bank which establishes the guarantee obligation
was entered into prior to December 31, 2002 and has not been modified since that
date,  the measurement provisions of FIN 45 are not applicable to this guarantee
arrangement.

In  accordance  with  SFAS  No.  5,  "Accounting for Contingencies", the Company
records  a  reserve  for  chargeback  losses  based on its processing volume and
historical  trends  and  data.  As of September 30, 2004 and 2003, the allowance
for  chargeback  losses, which is classified as a component of the allowance for
uncollectible  accounts  receivable, was $46,000 and $32,000, respectively.  The
expense  associated  with the chargeback allowance is included in processing and
transaction  expense in the accompanying consolidated statements of income.  The
Company  expensed  $50,000,  $44,000, and $261,000 for the years ended September
30, 2004, 2003 and 2002, respectively for bankcard processing chargeback losses.

The  Company  has  a  small  check  guarantee business.  The Company charges the
merchant  a percentage of the face amount of the check and guarantees payment of
the  check  to  the  merchant in the event the check is not honored by the check
writer's  bank.  Merchants typically present customer checks for processing on a
regular  basis and, therefore, dishonored checks are generally identified within
a  few  days  of  the  date  the  checks  are


<PAGE>
Note  12:  (Continued)
--------


guaranteed  by  the  Company.  Accordingly,  management  believes  that its best
estimate  of  the  Company's maximum potential exposure for dishonored checks at
any  given  balance  sheet  date  would  not  exceed  the  total mount of checks
guaranteed  in the last 10 days prior to the balance sheet date. As of September
30,  2004,  the  Company  estimates  that its maximum potential dishonored check
exposure  was  approximately  $631,000.

For  the  fiscal years ended 2004 and 2003, the Company guaranteed approximately
$19,382,000  (2004) and $15,338,000 (2003) of merchant checks, which resulted in
$139,000  (2004)  and  $468,000  (2003)  of  dishonored  checks presented to the
Company  for  payments.  The Company has the right to collect the full amount of
the check from the check writer.  Based on its actual collection experience, the
Company  collects approximately 50-60% of the total dishonored checks with image
and  10 - 20% without image. The Company establishes a reserve for this activity
based on historical and projected loss experience.  As of September 30, 2004 and
2003,  the  reserve  for  check  guarantee  loss  was $56,000 (2004) and $24,000
(2003).  The  expense  associated  with  the  guarantee  costs  is  included  in
processing  and  transaction expense in the accompanying consolidated statements
of  income.

Lease  Commitments
------------------

The Company leases real property under agreements, which expire at various times
over  the  next  five  years.  The  Company's future minimum rental payments for
capital  and  operating  leases  at  September  30,  2004  are  as  follows:

<TABLE>
<CAPTION>
Fiscal Year                      Capital Leases   Operating Leases
------------------------------  ----------------  -----------------
<S>                             <C>               <C>
2005                            $       528,000   $         565,000
2006                                    160,000             466,000
2007                                     36,000             443,000
2008                                     33,000             455,000
2009                                        -0-                 -0-
                                ----------------  -----------------

Total minimum lease payments    $       757,000   $       1,929,000
                                                  =================

Less: imputed interest of 8.5%          (70,000)
                                ----------------
Present value of net
  minimum lease payment         $       687,000
                                ================
</TABLE>

Rent  expense  for  the  years  ended September 30, 2004, 2003, and 2002 totaled
$572,000,  $299,000  and  $212,000,  respectively. Certain operating leases have
renewal options at the end of the lease term solely at the Company's discretion.
In  May  2003,  the  Company  leased  new  corporate  office space in Camarillo,
California.  The  lease  is  for  a  period  of  five years at a monthly rate of
$24,000.  The  lease  grants  us  a  right  of  first  refusal  with  respect to
additional  space  in the building that is not currently rented, and includes an
option  for  us  to  purchase  the property, at fair value, during the first two
years  of  the  lease.


NOTE  13  -  LITIGATION
-----------------------

The Company is involved in various legal cases arising in the ordinary course of
business.  Based  upon  current information, management, after consultation with
legal  counsel,  believes the ultimate disposition thereof will have no material
effect  upon  either  the  Company's  results  of  operations  or  its financial
position.

In  July  2004, LML Patent Corporation, a wholly-owned subsidiary of LML Payment
Systems,  Inc.  ("LML"),  filed a patent infringement claim against the Company,
our  subsidiary,  XPRESSCHEX,  Inc.  and  others,  relating  with respect to the
Company  and its subsidiary, to the alleged infringement by our check conversion
processes of three patents held by LML.  The suit was filed in the U.S. District
Court  for the District of Delaware.  LML seeks an undisclosed amount of damages
in  connection with the alleged infringement.  We do not believe that any of our
check  conversion processes infringe upon any valid or enforceable patent rights
of  LML  and  intend  to  vigorously


<PAGE>
Note  13:  (Continued)
--------


defend our position against the claims made.  Ultimately, we expect that we will
not be held liable for any of the alleged infringement. The case is scheduled to
go  to  trial  in  April  of  2006.  Should  we  be  held liable for any alleged
infringement,  which  is not expected, the ultimate liability we may sustain may
include  a  royalty  payment  primarily calculated on activity commencing in the
middle  of  calendar  2003  for only select conversion activity, as that was the
time  period in which we actively began utilizing the check conversion processes
alleged  to  infringe  the  LML  patents.  In  view of the relatively short time
period involved and the relatively small overall transaction volume arising from
the  alleged  infringing check conversion services in comparison to ECHO's total
transaction  volume,  we believe that any such alleged damages award should have
a  relatively  minor impact on our results of operations, financial position, or
cash  flows.

In  August  2003,  one  of our independent sales organizations filed a breach of
contract  arbitration  claim  against us in Los Angeles, California. The dispute
involved  a  disagreement  related to the manner in which commissions were to be
calculated  under  the  agreement.  The  agreement with the ISO required binding
arbitration  of  all  disputes  arising  under  the  agreement.  The arbitration
proceedings occurred in December 2004. The arbitration award is expected between
the  end  of  calendar  2004  and  the beginning of 2005. The claim arose in the
ordinary course of business and we have accrued $300,000 as a litigation accrual
related  to  the  dispute.  The  accrual  represents our management's good faith
evaluation  of the dispute after consultation with legal counsel, however, there
can be no assurance that the actual award will not exceed the amount accrued. In
the  event  the arbitration award exceeds the amount accrued, such excess amount
would  impact  our  results of operations, financial position or cash flows. Our
management  does  not  believe  any  such  impact  would  be  material.

NOTE  14  -  SEGMENT  INFORMATION
---------------------------------

The  Company  has  adopted  FAS  No.  131,  "Disclosures  about  Segments  of an
Enterprise  and  Related  Information"  (FAS  131).  FAS 131 established revised
standards  for  public  companies  related  to  the  reporting  of financial and
descriptive  information about their operating segments in financial statements.

Certain  information  is  disclosed,  per  FAS  131, based on the way management
organizes  financial  information  for  making operating decisions and assessing
performance.

The  Company  currently  operates  in  two  business  segments:  Bankcard  and
Transaction  Processing  and Check Related Products, all of which are located in
the  United  States.  The  Company  also  has certain corporate expenses such as
salaries and benefits, legal and professional fees, rent, and litigation accrual
expenses which are not allocated to the two business segments.

The  Company's  reportable operating segments have been determined in accordance
with  the  Company's  internal management structure, which is organized based on
operating activities.  The accounting policies of the operating segments are the
same  as those described in the summary of significant accounting policies.  The
Company  evaluates  performance  based  upon  two  primary  factors,  one is the
segment's  operating income and the other is based on the segment's contribution
to the Company's future strategic growth.

<TABLE>
<CAPTION>
                                                      September 30
                                        ----------------------------------------
Business Segments                           2004          2003          2002
--------------------------------------  ------------  ------------  ------------
<S>                                     <C>           <C>           <C>
Revenues:
  Bankcard and Transaction Processing   $36,161,000   $32,444,000   $27,456,000
  Check Related Products                 11,423,000     8,192,000     5,835,000
                                        ------------  ------------  ------------
                                        $47,584,000   $40,636,000   $33,291,000
                                        ============  ============  ============

Operating Income (loss):
  Bankcard and Transaction Processing   $ 5,977,000   $ 4,303,000   $ 1,996,000
  Check Related Products                  1,644,000       591,000      (872,000)
  Other - Corporate Expenses             (4,164,000)   (2,469,000)   (2,293,000)
  Legal Settlement                              -0-           -0-    (2,500,000)
                                        ------------  ------------  ------------
                                        $ 3,457,000   $ 2,425,000   $(3,669,000)
                                        ============  ============  ============

Depreciation and Amortization:
  Bankcard and Transaction Processing   $   966,000   $   867,000   $   727,000
  Check Related Products                  1,255,000       727,000       938,000
                                        ------------  ------------  ------------
                                        $ 2,221,000   $ 1,594,000   $ 1,665,000
                                        ============  ============  ============


<PAGE>
Note  14:  (Continued)
--------


Capital Expenditures:
  Bankcard and Transaction Processing   $ 2,258,000   $ 2,479,000   $ 1,474,000
  Check Related Products                  2,513,000     1,365,000       712,000
                                        ------------  ------------  ------------
                                        $ 4,771,000   $ 3,844,000   $ 2,186,000
                                        ============  ============  ============

Total Assets:
  Bankcard and Transaction Processing   $ 8,014,000   $ 7,051,000   $ 5,399,000
  Check Related Products                 23,933,000     6,794,000     7,710,000
  Other                                   7,481,000     4,930,000     5,082,000
                                        ------------  ------------  ------------
                                        $39,428,000   $18,775,000   $18,191,000
                                        ============  ============  ============
</TABLE>

NOTE  15  -  QUARTERLY  FINANCIAL  DATA  (Unaudited)
----------------------------------------------------

The  following summarizes the quarterly financial results of the Company for the
fiscal  years  ended  September  30,  2004 and September 30, 2003 (in thousands,
except  share  data):

<TABLE>
<CAPTION>
                                           Year Ended September 30, 2004
                                     -----------------------------------------
                                       First     Second     Third     Fourth
                                      Quarter    Quarter   Quarter    Quarter
                                     ---------  ---------  --------  ---------
<S>                                  <C>        <C>        <C>       <C>
Net revenues                         $ 11,355   $  11,766  $ 12,152  $  12,311
Gross profit                            4,394       4,243     4,484      4,582
Profit from operations                  1,013         706     1,082        656
Net income                                589       1,206       651        403
Earnings per share - basic           $   0.10   $    0.19  $   0.10  $    0.06
Earnings per share - diluted         $   0.09   $    0.17  $   0.09  $    0.06

                                           Year Ended September 30, 2003
                                     -----------------------------------------
                                       First     Second     Third     Fourth
                                      Quarter    Quarter   Quarter    Quarter
                                     ---------  ---------  --------  ---------

Net revenues                         $  9,301   $   9,767  $ 10,578  $  10,990
Gross profit                            2,973       3,360     3,467      4,153
Profit from operations                    527         465       564        869
Net (loss) income                      (4,473)        268       308        518
(Loss) earnings per share - basic    $  (0.77)  $    0.05  $   0.05  $    0.09
(Loss) earnings per share - diluted  $  (0.77)  $    0.05  $   0.05  $    0.08
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                 ELECTRONIC CLEARING HOUSE, INC. AND CONSOLIDATED SUBSIDIARIES
                                                    SCHEDULE II TO FORM 10K
                                   RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                              REDUCTION IN                             REDUCTION IN
                                               RESERVE AND                              RESERVE AND
                    BALANCE AT   CHARGED TO     ACCOUNTS     BALANCE AT   CHARGED TO     ACCOUNTS     BALANCE AT   CHARGED TO
DESCRIPTION         09/30/2001     EXPENSE     RECEIVABLE    09/30/2002     EXPENSE     RECEIVABLE    09/30/2003     EXPENSE
------------------  -----------  -----------  -------------  -----------  -----------  -------------  -----------  -----------
<S>                 <C>          <C>          <C>            <C>          <C>          <C>            <C>          <C>

Allowance for
trade receivables/
chargeback
receivables         $   313,000  $   302,000  $     184,000  $   431,000  $    67,000  $     407,000  $    91,000  $   218,000

Allowance for
obsolete
inventories         $    18,000  $   300,000  $      18,000  $   300,000  $   110,000  $     410,000  $       -0-  $    46,000


                    REDUCTION IN
                     RESERVE AND
                      ACCOUNTS     BALANCE AT
DESCRIPTION          RECEIVABLE    09/30/2004
------------------  -------------  -----------
<S>                 <C>            <C>

Allowance for
trade receivables/
chargeback
receivables         $     176,000  $   133,000

Allowance for
obsolete
inventories         $         -0-  $    46,000
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number   Description of Document
-------  -----------------------------------------------------------------------------------------------------------
<C>      <S>

   2.1   Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Magic Software Development, Inc., dated April 20, 1999.[5]
   2.2   Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Rocky Mountain Retail Systems, Inc., dated January 4, 2000.[6]
   3.1   Articles of Incorporation of Bio Recovery Technology, Inc., filed with the Nevada Secretary of State on
         December 11, 1981. [1]
   3.4   By-Laws of Bio Recovery Technology, Inc. [1]
   4.2   Specimen Common Stock Certificate. [3]
  10.35  Copy of Merchant Marketing and Processing Services Agreement between Electronic Clearing House, Inc.
         and First Regional Bank, dated June 24, 1997. [4]
  10.36  Copy of Merchant Marketing and Processing Services Agreement between Electronic Clearing House, Inc.
         and The Berkshire Bank, dated July 31, 1997. [4]
  10.41  Copy of Processing and Software Development and License Agreement between Electronic Clearing
         House, Inc. and National Bank Drafting Systems, Inc., dated October 22, 1999.[6]
  10.42  Copy of Addendum to Agreement between Electronic Clearing House, Inc. and U-Haul International, dated
         January 1, 2000.[6]
  10.44  Copy of Electronic Check Services Agreement between Electronic Clearing House, Inc. and National Bank
         Drafting Systems, Inc., dated May 17, 2000.[6]
  10.46  Copy of Amended and Restated Merchant Marketing and Processing Services Agreement between
         Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[6]
  10.47  Copy of Addendum to Amended and Restated Merchant Marketing and Processing Services Agreement
         between Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[6]
  10.48  Copy of POS Check Third-Party Servicer Agreement between Visa U.S.A., Inc. and Electronic Clearing
         House, Inc., dated December 12, 2000.[7]
  10.49  Copy of Asset Purchase Agreement between National Check Network, Inc. and Electronic Clearing
         House, Inc., dated April 19, 2001.[7]
  10.50  Copy of Addendum to Agreement between U-Haul International and Electronic Clearing House, Inc., dated
         October 1, 2001.[7]
  10.51  Copy of First Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., Inc.
         and Electronic Clearing House, Inc. dated December 12, 2000. [8]
  10.52  Copy of Second Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A.,
         and Electronic Clearing House, Inc. dated December 12, 2000. [8]
  10.53  Copy of Third Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., and
         Electronic Clearing House, Inc. dated December 12, 2000. [8]
  10.54  Form of Securities Purchase Agreement by and among the Registrant and the Purchasers identified
         therein. [9]
  10.55  Form of Registration Rights Agreement by and among the Registrant and the Purchasers identified
         therein. [9]
  10.56  Office Lease dated May 21, 2003, by and between the Registrant and the 1989 Sheehan Family Trust
         dated October 24, 1989, with respect to principal executive offices located at 730 Paseo Camarillo,
         Camarillo, California 93010.[10]
  10.57  Addendum to Office Lease dated July 7, 2004, by and between the Registrant and the 1989 Sheehan
         Family Trust dated October 24, 1989, with respect to principal executive offices located at 730 Paseo
         Camarillo, Camarillo, California 93010.
   21.0  Subsidiaries of Registrant. [2]
   23.1  Consent of PricewaterhouseCoopers LLP
   24.1  Power of Attorney [11]
   31.1  Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(a) under the Securities and Exchange Act of 1934, as amended.
   31.2  Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(a) under the Securities and Exchange Act of 1934, as amended.
   32.1  Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(b) under the Securities and Exchange Act of 1934, as amended.
   32.2  Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to Rule
         13a-14(b) under the Securities and Exchange Act of 1934, as amended.
</TABLE>


<PAGE>
------------------------------

     [1]  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.
     [2]  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.
     [3]  Filed  as  an  Exhibit  to  Registrant's  Form  S-1,  Amendment No. 3,
          effective  November  13,  1990  and  incorporated herein by reference.
     [4]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  1997  and  incorporated herein by
          reference.
     [5]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  1999  and  incorporated herein by
          reference.
     [6]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2000  and  incorporated herein by
          reference.
     [7]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2001  and  incorporated herein by
          reference.
     [8]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2002  and  incorporated herein by
          reference.
     [9]  Filed  as  an Exhibit to Registrant's Current Report on Form 8-K dated
          October  30,  2003  and  incorporated  herein  by  reference.
     [10] Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2003  and  incorporated herein by
          reference.
     [11] Included  on  signature  page.


<PAGE>