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 endedSept. 30, 1998      

          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        (IRS Employer Identification No.)
    of incorporation or organization)

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

      Registrant's telephone number, including area code:  (818) 706-8999, 
                           fax number: (818) 597-8999
 --------------------------------------------------------------------           
                
           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, $.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.        

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 December
11, 1998 as reported on the NASDAQ National Market, was approximately
$28,543,000.  Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock 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 11, 1998, Registrant had outstanding 16,621,541 shares of
Common Stock. 

                       DOCUMENTS INCORPORATED BY REFERENCE


                                      None
                                        
<PAGE>


                         ELECTRONIC CLEARING HOUSE, INC.
                          1998 FORM 10-K ANNUAL REPORT


                                TABLE OF CONTENTS


PART I.                                                         Page

Item 1.          Business. . . . . . . . . . . . . . . . . . . . . 3
Item 2.          Properties. . . . . . . . . . . . . . . . . . . .16
Item 3.          Legal Proceedings . . . . . . . . . . . . . . . .17
Item 4.          Submission of Matters to a Vote of 
                   Security Holders  . . . . . . . . . . . . . . .17


PART II

Item 5.          Market for Registrant's Common Equity 
                   and Related Stockholder Security Matters. . . .18
Item 6.          Selected Consolidated Financial Data. . . . . . .19
Item 7.          Management's Discussion and Analysis 
                   of Financial Condition and Results 
                   of Operations . . . . . . . . . . . . . . . . .20
Item 8.          Financial Statements and Supplementary Data . . .24
Item 9.          Changes in and Disagreements with Accountants 
                   on Accounting and Financial Disclosures . . . .24

PART III

Item 10.         Directors and Executive Officers of the 
                   Registrant. . . . . . . . . . . . . . . . . . .25
Item 11.         Executive Compensation. . . . . . . . . . . . . .27
Item 12.         Security Ownership of Certain Beneficial 
                   Owners and Management . . . . . . . . . . . . .31
Item 13.         Certain Relationships and Related Transactions. .32

PART IV

Item 14.         Exhibits, Financial Statement Schedules, and
                 Reports on Form 8-K . . . . . . . . . . . . . . .33



<PAGE>

                                     PART I

ITEM 1.     Business

General
                 
Electronic Clearing House, Inc., ("ECHO") is a transaction processor with
specialties in Internet transaction delivery, credit card processing and the
design and implementation of integrated systems that utilize the following
ECHO services:

Electronic Funds Transfers (EFT) - the electronic movement and settlement of
   funds from a buyer (customer) to a seller (merchant);
Network Management - the design and management of numerous interactive
   communications systems; 
Specialized Point-Of-Sale (POS) Equipment - the design and manufacture of POS
   terminals and printers with unique qualities and functionality; 
Integrated Software Applications - credit card clearing, money order issuance,
   inventory tracking, cash advance, check guarantee, etc.

The Company presently provides a combination of these services to
approximately 8,000 merchants and 9,000 U-Haul dealers located across the
nation. Since 1991, the Company has designed and installed integrated systems
utilizing the above services for U-Haul International (to track the movement
of U-Haul equipment and dealer compensation), American Express (for the
automation of money order issuance), and the United States Postal Service (for
the small office automation of money order issuance). 

Due to the wide range of technical sophistication and needs of a merchant, the
Company has developed the following variety of methods through which a
merchant may gain access to the services of the Company:

Internet - Either through certified Internet Service Providers (ISP's) or
   directly to ECHO, a merchant can securely accept, process and review
   transactions over the Internet (see Internet).  
PC - Using one of several commercially-available PC programs that have been
   certified to operate on the ECHO network, a merchant can process their
   transactions through ECHO (see ECHOWARE).
POS System - ECHO has maintained compatibility to the most common POS systems
in the market so a merchant who has purchased POS equipment can access ECHO's
services (see ECHOTERM).
Fax Machine  - Based upon character recognition software and special forms
   design, ECHO allows a merchant to register and utilize their office fax
   machine to process transactions through ECHO (see ECHOFAXPAY).
Telephone - For the small merchant who can not justify the purchase of POS
   equipment, ECHO designed and manages an interactive voice response system
   that allows a touch-tone phone to be used to process transactions through
   ECHO (see ECHOTEL).
 
The Company currently operates four active subsidiaries, all wholly-owned by
the Company, to coordinate its business activities.

National Credit Card Reserve Corporation ("NCCR") provides all data center
and customer service activities relating to transaction processing services
which include electronic credit card authorizations, electronic fund
transfers, inventory tracking, electronic deposits utilizing the Automated
Clearing House ("ACH") for merchants, banks and other customers, and
management and development of Internet software and related communication
networks that are involved in providing transaction processing services.

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

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

XpressCheX, Inc. provides check guarantee services to California-based
   merchants (see XpressCheX).
   
The Company's current growth and profitability are being generated primarily
from its credit card processing (which includes Internet-based as well as
traditional transaction delivery methods), U-Haul inventory tracking
activities and CBC's POS equipment sales (see Credit Card Processing, U-Haul
and CBC). 

History of Company

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

Although positioned well in 1986 to take advantage of its new ACH service on a
national scale, the Company was hampered until 1995 by being under-financed
and by unstable bank relationships that prevented the Company from fully
marketing its capabilities over the ensuing years. Management changes at
banks, bank mergers, unilateral policy changes, poor merchant service by bank
personnel and unrelated bank losses caused the Company to incur additional
expenses and seek different and/or additional bank relationships which slowed
the Company's growth. 

Since 1997, the Company has maintained four processing bank relationships,
thereby diminishing the uncertainties it experienced in times prior with
unstable processing banks. This certainty and continuity of bank relationships
has contributed to the Company's growing profitability in the past two years. 

POS Equipment Design and Manufacture 
Since 1985, the Company has written and maintained software to assure that
common POS terminals sold in the marketplace could process over the ECHO
network. In developing the ability to generate the terminal software, the
Company in 1985 purchased CBC, a company that had expertise in computer
control systems. CBC subsequently developed a series of high performance
terminals and secure printers that have been used primarily in the money order
dispensing market by American Express, Comdata and are presently being used in
a pilot program with the United States Postal Service ("USPS") (see CBC and
USPS). In 1995, a system utilizing CBC's terminal, ECHO's data center, and
customer support services was developed and deployed to 2,000 U-Haul dealers
for the real-time management of rental equipment for U-Haul International. The
number of active dealers under the system grew to more than 9,000 by fiscal
year 1998 (see U-Haul). Three patent applications involved with the Company's
printer methodology have been granted (see Patents). 
  
Internet Activities 
In early 1996, the Company purchased a business with specialties in the
Internet, Windows NT programming and world-wide communications networks.
Through this acquisition, the Company has been able to expand its scope of
acceptable transaction input devices beyond the traditional POS systems to
include transactions submitted over the Internet and over a common telephone
(see Internet and ECHOTEL). Through the expertise of the programming and
management personnel resulting from this acquisition, the Company also
expanded the tools it makes available to specific industries to utilize its
services. These tools include ECHOBOX, ECHOCASH, ECHOTRANS, ECHOBATCH and
ECHOLINK services (see Industry Specific Programs and Services).

Marketing
Historically, the marketing of the Company's services has been accomplished in
three primary ways: 1) direct sales utilizing an independent sales
organization; 2) referral programs; and 3) Internet Home Page promotion. For
fiscal 1998, approximately 42% of new merchant relationships came through the
efforts of the independent sales organization and the balance was divided
between the referral and Internet programs (see Marketing and Internet).   

Research and Development
The Company continues to put a high priority on research and development ("R &
D") of both transaction processing and equipment-based solutions to problems
faced by general merchants and/or specific industries in the marketplace. As
profitability of the processing activities grows, the Company intends to
dedicate between 3% and 5% of its revenues to such endeavors.   

General Summary

In management's opinion, the Company's core competency and profitability is in
its transaction processing services. The Company has focused on developing the
highest number of methods of access to the Company, believing such flexibility
is key to meeting the specific needs of merchants in various stages of growth.
Due to the technical capability of the Company, new avenues of transmission
and communication, such as the Internet, have been integrated with the
transaction processing services to generate a distinctive, one-stop provider
of services to the merchant marketplace. The Company's additional expertise in
designing both hardware and software systems to integrate the Company's
financially-based services into customers' information systems, utilizing the
Internet in several ways, can be seen in historic relationships the Company
has developed with U-Haul International, American Express, and the United
States Postal Service.

Strategically, the Company believes that, in the years ahead, every merchant,
large and small, will need a suite of basic financial services, most of which
the Company already offers. Additionally, the Company believes that the
Internet offers the most logical, low-cost method of providing access to many
of these services. In the coming years, the Company anticipates that every
merchant, large and small, will see the need to be represented on the Internet
for marketing purposes and, for some, to accommodate direct purchase activity
over the Internet, commonly called e-commerce.  Based upon this belief, the
Company intends to build both its marketing services and its e-commerce
capabilities relating to the Internet. Additionally, the Company is committed
to focusing its research and development energies to expand and integrate its
credit card clearing, bank account settlement data, cash movement information,
detailed reporting and money order issuance services with its Internet
capabilities (see Internet). Finally, the Company is taking a more aggressive
approach to marketing its services than has been done in the past. These new
measures include additions to the marketing staff, contracted telemarketing
efforts, direct mail, regional office sales management, Internet banners and
marketing programs, compensated referral programs, and strategic alliances.

Credit Card Processing

The Company is a registered Independent Service Organization and Merchant
Service Provider with Visa and MasterCard, respectively. To engage in Visa and
MasterCard processing, a cooperative relationship is required with a bank
which provides necessary sponsorship of Visa and MasterCard transactions. The
Company currently has four primary processing bank relationships (see
Banking). 

For the year ended September 30, 1998, NCCR accounted for 90% of the Company's
revenues.  NCCR presently provides services to over 17,000 users, including
approximately 8,000 merchants and 9,000 U-Haul dealers across the nation.
These services include 24-hour daily credit card processing capability, "800"
number access to customer service personnel and, as needed, various field
support services.

Functioning like an electronic utility, NCCR earns a steady stream of
transaction and processing fees while the multiple computers in its processing
center communicate continuously with merchant terminals, and the databases of
Visa, MasterCard, American Express, Diner's Club, Carte Blanche and Discover.
Utilizing one of the numerous methods of access to the Company, the merchants'
systems dial the Company's host computers and receive credit card
authorizations for accounts which have been electronically verified for credit
validation and other security considerations. Electronic files are then
transmitted daily by NCCR to the major credit card organizations which
subsequently transfer funds from the card issuing banks to one of NCCR's
processing banks.  At NCCR's direction, funds are then electronically moved
from NCCR's processing banks and deposited into the bank of the merchant's
choice.  On a typical day, NCCR will make deposits to 450 banks across the
nation on behalf of its merchant base.  

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

NCCR's compensation for credit card processing is derived from two primary
sources, the merchant's discount rate and the merchant's transaction fee. The
discount rate is expressed as a percentage and is the fee charged to the
merchant for the Company's services. Once set, this percentage is deducted
from the amount of each transaction submitted by the merchant and the net
amount is deposited into the merchant's bank account. Discount rates range
between 1.5% and 3.6% and, overall, the Company's average discount rate is
2.2%.  Depending upon the discount rate charged and the cost of clearing
interchange, from 75% to 90% of the discount rate revenue is paid to card
issuing banks, the card issuing organizations, and the sponsoring bank. 

The transaction fee is charged for each transaction processed and the
Company's average transaction revenue is $0.17 per transaction. The Company
maintains a range up to $0.20 per transaction. Due to lower costs of
communications and negotiated contracts, the Company's direct costs have been
lowered to a range between $.03 and $.05 per transaction, depending upon
duration and method of transmission.

Over the past several years, industry consolidation has been occurring and
impressive growth in recent years in the credit card processing market has
occurred by firms through portfolio acquisitions. Due to the growing
profitability and improved cash flow, the Company intends to seriously pursue
such a growth strategy. Such a strategy raises special challenges that may
involve supporting and integrating numerous processing methodologies,
initiating quality customer support and field support services and, probably
most difficult, maintaining merchant relationships. Merchant portfolios can be
purchased but the merchants who are processing thereunder are under no
obligation to continue to utilize the services of the new owner. This lack of
contractual obligation can lead to a persistency problem. The long-term
profitability of such a strategy will center on the ability of the Company to
minimize such problems and bring innovative services to merchants and
consistently provide timely quality service; however, there is no assurance
that the Company can achieve such objectives.

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

Under the Imperial Bank processing contract, the bank assumes (and is
compensated for bearing) losses due to unauthorized or fraudulent use of
credit cards.  The First Charter Bank, First Regional Bank and The Berkshire
Bank contracts compensate the Company to assume such potential liabilities for
the unauthorized use of credit card information.  Although the Company has
developed and deployed the ECHODETECT system that performs electronic
surveillance and monitoring of fraudulent credit card use, the Company still
could incur substantial losses as the result of the unauthorized or fraudulent
use of credit cards by unscrupulous merchants, which could, depending on the
size of the losses, have a materially adverse effect on the Company. The
Company does not maintain any insurance to protect it against any such losses.
Historically, the Company allocates ten basis points (.001) of daily
processing activity as a reserve against any losses that it may sustain due to
such activity.  The Company has approximately $1,695,000 and $895,000 in
reserve against chargeback receivables for the fiscal year ended 1998 and
1997, respectively. The Company sustained expenses of $954,000 and $836,000
against said chargeback losses for the fiscal years ended 1998 and 1997,
respectively.  The Company believes this mechanism of allocating daily from
processing revenues to a reserve to address these obligations when they arise
will be adequate to address the inherent risks associated with merchant
processing.   

Banking

To engage in Visa and MasterCard processing, a cooperative relationship is
required with a bank which provides necessary sponsorship of Visa and
MasterCard transactions.  The inability of the Company to maintain such a
cooperative relationship with a prior bank in 1989 had a materially adverse
effect upon operations and was the subject of a lawsuit settled in favor of
the Company in 1995. Management changes at the bank, bank mergers, unilateral
policy changes and poor merchant service by bank personnel in the past have
led the Company to seek different or additional bank relationships. Since
1989, the Company has established and subsequently terminated the sponsoring
relationship with three banks, most recently in 1994.  In addition, in 1995,
one of the Company's sponsoring banks experienced major real estate losses,
which required that it seek a capital infusion and motivated the Company to
secure additional relationships as primary sponsor banks. 

Since 1997, the Company continues to enjoy four processing bank relationships
with Imperial Bank, Los Angeles, California, First Charter Bank, Beverly
Hills, California, First Regional Bank, Los Angeles, California and The
Berkshire Bank, New York, New York.

As part of a long-range business plan, the Board of Directors has authorized
management to explore the various options that are available to the Company
that would allow the Company to take a more direct role in the merchant
relationship as it relates to a sponsoring bank.

There can be no assurance that the Company will always be able to maintain its
present banking relationships, establish other such relationships, or, if such
other relationships are available, that they can be obtained on terms
satisfactory to the Company.

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

The Company has capitalized part of its costs associated with the development
of the system and amortizes such costs over three years. Revenues are derived
from equipment sales to U-Haul and income resulting from daily transaction
processing services provided to dealers and U-Haul Corporate. U-Haul
transaction activity and equipment purchases constitute a significant portion
of the Company's growing profitability. During fiscal year 1997, the Company
entered into a three-year contract with U-Haul International which covers
processing services, software development, data distribution, equipment
purchases/warranty, customer support, and consulting.  The contract, estimated
to generate revenues between $4 and $8 million dollars over the three-year
term, has renewal provisions for extending the term.

The Company presently serves approximately 9,000 U-Haul dealers and expects
that an additional 2,500 dealers will be added after new systems, due to be
delivered in the second quarter of fiscal 1999, are fully deployed. 

Internet ("Net")

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

Security 
Security of credit card numbers transmitted over the Net has been a recurring
question.  Serious concern exists in the banking industry about unscrupulous
access to a customer's credit card number when it is presented over the Net.
In the first quarter of fiscal 1997, the Company deployed a secure Internet
World Wide Web ("WWW") server in anticipation of utilizing common commercial
WWW browsers and the Internet as an additional POS transaction delivery
mechanism. The Company has therefore been accepting credit card transactions
over the Internet since January 1997, using a combination of 40 and 128-bit
message encryption and digital signature standards, as well as proprietary
back-end technology that offers additional protection to the cardholder and
merchant. Management believes this combination of technologies offers superior
confidentiality protection as well as substantial cost advantages compared to
alternative, WWW-based transaction technologies. 

In 1996, Visa, MasterCard and major software development corporations
established a methodology standard for moving transactions over the Net,
called Secure Electronic Transactions ("SET"). SET involves the integration of
several technologies and parties, including the purchaser, the seller, the
bank, the processor and the network service provider. Each segment of the
solution is under development and several fully integrated systems are now
available on the market. There are response time problems being seen (up to
one minute or longer) as well as customer and merchant participation issues
that have slowed the SET progress over the past year. The company intends to
be a full participant in the SET community, but only when there appears to be
adequate interest and involvement by all parties to make it a viable solution,
when the response time is within acceptable time frames (10 to 15 seconds) and
when the overall benefits outweigh the costs. In preparation for SET
deployment, the Company has already modified the interface to its internal
transaction processing system to accept transactions via Transmission Control
Protocol/Internet Protocol (TCP/IP).

ECHONLINE 
The Company's service based on these technologies is the ECHONLINE service,
and it is aimed at enabling Internet Service Providers ("ISPs") to submit
transactions to the Company on behalf of themselves and of their own customers
using the Internet.  During fiscal 1997, the Company reached agreements with
two software developers to develop commercial interfaces to ECHONLINE - one
for Unix, and one for Windows NT.  The UNIX software is available at no
charge, and ISPs have been able to process transactions with ECHO within a
week of securing this software.  The Windows NT software is available for a
modest fee, and ISPs and larger merchants that have acquired this software
have been able to process transactions with ECHO within a day of acquisition.
In 1998, another interface was announced by Go Software and listed on
Microsoft's Developers Internet page, generating significant interest in the
ECHONLINE service as a result. 

Fulfillment Tracking
The Company believes that the primary security issue on the Internet regarding
e-commerce is not the security of credit card numbers but, instead, it is the
assurance that the merchant subsequently ships the product to the customer.
This problem presents financial risk to the Company in that the Company would
normally deposit the funds into the merchant's account from a sale on the
Internet within 24 hours. If the product is not shipped or delivered, the
Company must then seek to get the funds back from the merchant in order to
return them to the customer. If the funds are not available or the merchant
account has closed, the Company must still honor the refund request. To
address this issue, the Company has developed a fulfillment tracking system
that operates over the Internet. The system holds a customer's funds until the
merchant advises the Company that fulfillment (or shipment) has been made.
Upon notice, the company e-mails the customer that shipping has occurred and
then deposits the funds into the merchant's account. In management's opinion,
this seriously reduces the risk normally associated with Internet-based
transactions. 

Application Submission and Processing 
In order to streamline the process for a prospective merchant to apply for a
merchant account, the Company deployed a WWW-based merchant application form
in the second quarter of fiscal 1997 to provide this functionality. Intranet
technology is used to help Company personnel quickly review these applications
and move them through the approval process. In addition, the Company has a
referral program for ISPs and other associates that encourage them to refer
merchants to the Company. To assist our associates in tracking these
referrals, the Company's Internet Application System tags application records
using the associates own tracking identifier.  Automating the process using
this back-end technology has encouraged our associates to continue to refer
potential merchants to ECHO and to help keep Company personnel highly
productive as the volume of new merchant applications increases.

Internet Banking 
The Company believes that the Internet will become a common tool used by
financial officers and business owners to evaluate merchant bank account
information and make decisions regarding the status of checks written, funds
availability and other banking issues that are commonly of concern to a
merchant. In addition, small leases for office furniture, phone systems,
copiers, fax machines, POS equipment and such will continue to be desired
financial services of the merchant marketplace. The Company believes it can
integrate such financial activities, referred to above, into the services the
Company presently offers to make a complete package, primarily offered and
accessed over the Internet. 

The Company sees the Internet as a ubiquitous communications network that can
provide low-cost access to the services the Company offers. Rather than refer
to the Company as an Internet-based company, the Company is attuned more to
building the suite of services that will be attractive to the merchant
marketplace and utilize the Internet as a secure access method for delivery of
those services.  
In light of the above issues, the Company has highly trained and knowledgeable
people who are designing, developing and managing its Net activities. 
Although not expected, if for any reason certain key personnel were no longer
available to the Company, the Company would have to look to outside sources
for similar capabilities. No assurance can be made that such expertise would
be found and, if found, available to assist the Company. Additionally, the Net
products being developed and introduced are intended to augment the Company's
present processing activities and are intended to be offered for low entry and
low on-going processing costs when compared to other similar services.  This
strategy is intended to draw retail business relationships presently
processing with other providers to the Company, but there is no assurance such
a strategy will be effective or will be a sustainable pricing strategy in the
long-term.  The Company intends to review this strategy regularly as a result
and make changes in pricing, if necessary, based upon actual experience.

Industry Specific Programs and Services 

One of the Company's core beliefs is that the Company must accommodate as many
different "point-of-interaction" entry methods as possible in order to build
the credit card processing services business, while concentrating on those
methods and techniques that will provide the most leverage for the Company. To
these ends, the Company has developed the following programs and services:

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

ECHOCASH
The ECHOCASH system is an electronic process whereby a mail order/telephone
order-based merchant may collect checking account data from numerous customers
and submit the file to ECHO in order to  electronically move funds from the
customer's checking account into the merchant's account.  This service
eliminates the need for paper checks to be received and processed by the
merchant.

ECHOBOX
The ECHOBOX system is a method of bulk transaction submission to an ECHO
bulletin board system that automatically moves data into a credit card
authorization process and/or credit card deposit for a merchant. 

ECHOBATCH
To accommodate generic high-volume business opportunities, the Company
constructed and successfully beta-tested the ECHOBATCH program, a fulfillment
house-based complement to its popular ECHOBOX processing service. The
ECHOBATCH program runs on standard PC's, resides at the fulfillment house, and
permits the fulfillment houses to submit multiple merchants' data in a highly
controlled, secure manner to the Company's ECHOBOX service interface.

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

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

The ECHOTEL transaction pricing is higher than the normal pricing for a
transaction submitted using other methods of entry but this is offset by no
minimum monthly fee charged to an ECHOTEL merchant. Economically, a merchant
is best served to utilize the ECHOTEL program until his/her volume exceeds
$1,000 per month and, at that time, evaluate which entry method best serves
his/her needs.
  
The Company has chosen to market its ECHOTEL service directly and through
several third parties. To date, approximately 20% of merchants who sign up as
ECHOTEL merchants are active for any period of time. Despite this fact, the
program still generates significant up-front fees and the Company feels this
entry level is needed to provide small businesses and home-based businesses
with an opportunity to evaluate their success prior to making large dollar
investments in processing equipment. 

The Company has also initiated a program that allows the ECHOTEL merchant to
apply the initial set-up fee of their ECHOTEL merchant account to the purchase
of another entry mechanism, (e.g. ECHOTERM, ECHOWARE, or ECHONLINE programs)
for up to two years. This will further allow the small merchant to move
confidently into electronic processing without fear that the funds invested
are lost.

ECHOWARE
The Company has certified several independently-designed PC programs that can
be purchased in most software retailers and, as a group, refers to such PC
programs as the ECHOWARE service.  

ECHOTERM
The Company maintains compatibility with the most common POS terminals in the
nation built by Verifone. It also maintains compatibility with its own series
of systems sold over the past years. As a group, these POS terminals are
referred to as the ECHOTERM program. 

ECHOLINK
In 1998, the Company announced the ECHOLINK program, an Internet-based service
that allows any merchant to review their processing activity in a secure
manner over the Internet. The ECHOLINK program is a chargeable service and
provides the merchant with many methods of sorting the data, including
identifying frequent customers and quickly locating specific transactions
under question by the customer or by the card issuing banks, the latter issues
being commonly referred to as Retrieval Requests and Chargebacks. For
merchants who are in a mail order or telephone order type of business, the
ability to search and respond to Retrieval Requests and Chargebacks is a
significant advantage over the paper-based systems that are still being used
by other processors. The merchant using the ECHOLINK program can access the
data as many times as they wish for no additional charge and has access 24
hours a day. The data are maintained and available to the merchant for a 12
month period which covers all requirements of the card issuing institutions
with regard to providing historic information on requests.

The Company has plans to increase its Internet services and products and is
developing a marketing plan to utilize existing relationships with ISP's and
other Internet specialists to provide the largest complement of services
possible to the Company's merchants. The effectiveness of the products and of
the marketing programs can not be assured but management is encouraged by the
growing interest and use of these special tools by various merchants and by
the interest of many Internet-based businesses to associate with ECHO in order
to access its suite of financially-based services for their merchants.

Computer Based Controls ("CBC")

Equipment Design and Manufacture 
Through the years, the Company has developed software which enables the
Company's host computer to interface with terminals of several manufacturers,
the largest of which, Verifone International, is estimated to have a 70% share
of the POS terminal market.  This capability enables the Company to provide
credit card and check guarantee services not only to merchants who buy or
lease the Company's terminals, but also to merchants who use terminals sold
and leased by other hardware competitors of the Company.  

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

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


Description               Model           Comments
------------------------------------------------------------------------------
Electronic Banker 910     EB910           Replaced the Microfone II POS
                                          terminal and provided greater
                                          flexibility at a competitive price.

Electronic Banker 920     EB920           Replaced the EB910 POS terminal. 
                                          Provided significantly more memory
                                          capacity, ESD immunity, and a faster
                                          modem.  Later upgrades included
                                          direct support for attachment of a
                                          PS/2 keyboard.

Electronic Banker 921     EB921           A modified EB920 POS terminal
                                          intended for the US Postal Service
                                          Electronic Money Order Dispenser
                                          (EMOD) project.  Included additional
                                          ESD provisions and a redesigned
                                          operating system.

Roll Printer 100          RP100           A patented, high security, 40 column
                                          printer originally designed to meet
                                          the needs of the automated money
                                          order dispenser (AMOD) project. 
                                          Also used in cash advance and gift
                                          certificate applications. 

Roll Printer 100+         RP100+          A patented, high security, 40 column
                                          printer derived from the
                                          improvements made in developing the
                                          RP121 printer.  This printer
                                          supports forms up to 8.5" in length
                                          and can reverse to place text at the
                                          extreme edge of a form.  Designed to
                                          meet the needs of automated money
                                          order dispensers, cash advance and
                                          gift certificate applications. 

Roll Printer 120          RP120           A modified RP100+ which includes the
                                          patented ECHOSYMBOLOGY bar code
                                          reading technology.  This system
                                          will scan the printed documents'
                                          serial number at a competitive
                                          price.

Roll Printer 121          RP121           A modified RP120 for the US Postal
                                          Service Electronic Money Order
                                          Dispenser (EMOD) project. Included
                                          significant improvements in print
                                          quality and incorporated
                                          ECHOSYMBOLOGY.

PS2 Keyboard              PS2             A very small and inexpensive 
Protocol                  Convert         converter used to interface standard
Converter                 er              PS/2 keyboards to an RS232
                                          interface. This device handles all
                                          normal BIOS-level operations and
                                          provides an inexpensive method of
                                          adding a keyboard to existing
                                          applications.


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



Description               Models          Comments
-----------------------------------------------------------------------------
AMOD                      EB910 + RP100
                          EB920 + RP100   The AMOD system was purchased by
                                          American Express from 1991 to 1995
                                          to provide a means to electronically
                                          issue and print fully-negotiable
                                          money orders.  The system holds
                                          blank forms in a security enclosure
                                          and prints them as directed by the
                                          agent. CBC has shipped more than
                                          18,000 AMOD systems from 1990 to
                                          1995.

Cash Advance              EB910
                          EB920           The Cash Advance terminal is used
                                          primarily in the gaming industry. 
                                          The system relies on remote credit
                                          authorization.  CBC has shipped more
                                          than 2000 Cash Advance systems from
                                          1992 to 1996.

Cash Advance              RP100           The Cash Advance printer is used
                                          primarily in the gaming industry. 
                                          This system securely prints checks
                                          used within the gaming
                                          establishment.  CBC has shipped more
                                          than 2000 Cash Advance systems from
                                          1992 to 1995.

U-Haul                    EB920 + SK100
                          EB920 + PS/2    The U-Haul system provided a means
                                          to track compensation and inventory
                                          of rental equipment nationwide on a
                                          daily basis.  In addition, the
                                          system allows credit card payment
                                          for rentals through remote credit
                                          authorization.  CBC has shipped more
                                          than 9,000 U-Haul systems from 1994
                                          to 1998.  An additional 2,400
                                          systems will be installed in 1999.

EMOD                      EB921 + RP121   The EMOD system provides a means to
                                          electronically issue and print fully
                                          negotiable money orders.  Security
                                          is enhanced by the ability of the
                                          system to electronically sense the
                                          money order serial number directly
                                          from the form itself. The system
                                          holds blank forms in an enhanced
                                          security enclosure. Money orders may
                                          be issued directly from  the EB921
                                          keypad or remotely via the
                                          Integrated Retail Terminal.  175
                                          systems were shipped in 1997 to the
                                          United States Postal Service.

United States Postal Service ("USPS") Pilot Program 
In November 1995, CBC was awarded a contract to design and build 575
Electronic Money Order Dispensers ("EMOD") for the USPS.  The First Article
Test of the EMOD system was approved in February 1997.  In May 1997, 175
"Stand-Alone" EMOD units were deployed in the Dallas, Texas area.

The Company was informed in January 1998 that the pilot program was being
extended and that the USPS found that the EMOD system generated significant
savings in time and money for the USPS. This was deemed to be due to the lower
cost of money order issuance, management relating thereto, and the system's
ability to electronically transfer daily accounting information to regional
headquarters, lowering administrative and accounting costs accordingly.  The
USPS subsequently asked the CBC to bid the costs of making a software change
to the EMOD that allowed other printers to be utilized with the EB921 control
terminal and CBC submitted such bid in June 1998. Final permission to proceed
was received from the USPS in December, 1998 and delivery of the modified
software is expected to occur in the second quarter of fiscal 1999. It is
anticipated that the software will be tested for a period of two to three
months after delivery at which time the USPS is expected to make a decision on
promoting the EMOD program on a national scale. No assurance can be given that
the EMOD system will perform adequately to justify such national distribution
or that the software will perform the requested tasks or that the estimate of
units that might be required would actually be ordered under such
circumstances.   

Patents
The Company presently has three patents with respect to certain of its
proprietary technology; however, there can be no assurance that if challenged,
these patents can be judicially sustained.  In the absence of such protection,
competitors would be able to duplicate the Company's products.  Furthermore,
even though the Company has patents, there can be no assurances that the
Company's competitors will not independently develop or patent technologies
that are substantially equivalent or superior to the Company's technologies. 
The Company has expended considerable time and resources to develop
information systems to serve its merchant base.  There is no intellectual
property protection on the computer equipment and database that comprise these
systems.  Additionally, although the Company believes that its products and
technologies do not infringe upon the proprietary rights of any third parties,
there can be no assurance that third parties will not assert infringement
claims against the Company.  Similarly, infringement claims could be asserted
against products and technologies which the Company licenses, or has the
rights to use from third parties.  Any such claims, if proven, could
materially and adversely affect the Company's business and results of
operations.  The Company is aware of one party who believes the USPS money
order distribution system provided by the Company violates its patents.  This
party filed a civil action in late 1992 but the suit was later dismissed
without prejudice in May 1998. It is the opinion of management that no
infringement has occurred and has secured legal opinions substantiating such
position but, although any such claims may ultimately prove to be without
merit, the necessary management attention to, and legal costs associated with,
litigation or other resolution of such claims could materially and adversely
affect the Company's business and results of operations.

The Company has obtained a patent on its method of electronically sensing the
serial number of a document.  This method relies on the use of its patented
ECHOSYMBOLOGY bar code.  The patent describes a unique method of illuminating
a form from one side while resolving the bar code image from the opposite
side.  No additional optical components are required beyond the basic
illumination source and the CCD image array.

Leasing

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

XpressCheX

In 1987, the Company initiated its check guarantee services to merchants
located in California so a merchant could accept a customer's check with
impunity. To support merchants in other states, the Company supports
alternative check verification and guarantee services to operate concurrently
with the Company's credit card software in the merchant's terminal. The
Company is presently evaluating a national check service for a possible
strategic association that would provide three types of check-related services
to merchants on a national scale.

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

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

Check Conversion 
The most recent new check service to be announced nationally is called "check
conversion". The merchant slips a customer's check through a check reader that
reads the Magnetic Ink Character Recognition (MICR) line on the check and the
merchant enters the amount of the check into the system. The merchant then
returns the check to the customer and the electronic image, captured by the
reader, allows the processor to settle the check transaction electronically.
This new system is being promoted by the national check services and it is
finding quick acceptance by both customers and banks. Customers like it
because they get their check back immediately and still have their hard copy
of the transaction. Banks like it because no paper has to be handled by the
bank to settle the transaction. Other advantages exist, probably the most
significant being an electronic record is settled in priority to paper-based
transactions which assures an electronic record first access to limited funds
in a customers account. 

The Company intends to offer these services to its national base of merchants
and is negotiating with a national provider to secure such services. However,
there is no assurance that the Company will be successful in its efforts in
securing such services. Currently, XpressCheX, Inc. offers only the check
guarantee type of service to merchants located within the state of California.
It is anticipated that the Company will be able to absorb the merchant base
who utilize the XpressCheX service into the national service with minimal
disruption of services.  

Real Estate

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

Marketing

In 1997, the Company slowed its reliance on an Independent Sales Organization
(ISO) that it had utilized for the past five years to acquire new merchant
accounts. Over the year, approximately 42% of new accounts were generated by
the ISO and the balance of the company's new merchant accounts were generated
through the Internet, the ECHOTEL program and other direct sales programs
being actively promoted by the Company. 
 
Management believes the Company is unique in the number of methods of access
it allows, in its ability to integrate additional services based upon customer
needs and in its ability to support each merchant  through one vertically
integrated source. In most competitive instances, such services are performed
by different parties and, as a consequence, merchants become very frustrated
trying to solve a problem, not knowing which party to call.  

The Company's marketing strategy is threefold:

1)  to build its credit card transaction volume by focusing on the small to
medium-sized merchant segment, defined as merchants processing $25,000 or less
per month in credit card activity, who tend to be overlooked by other
processors in favor of larger volume accounts. This strategy relies primarily
on two programs.  First, a passive program that relies on third-party
relationships that contacts and directs merchants to the Company, and
secondly, active programs wherein the Company takes the lead in new merchant
contact and sales;

2)  to focus the Company's systems integration capabilities on developing
applications for niche markets and national customers such as U-Haul, etc.;

3) to actively promote the Company's Internet capabilities to ISP's and
merchants through various proven marketing channels which would include email
announcements, banner advertisement, direct mail, telemarketing and a regional
sales office strategy.
  
CBC intends to market its electronic products and system integration
capabilities to its existing customers and to develop similar relationships
with customers who have similar needs on a national basis, focusing primarily
on the USPS and banking markets. 

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

Competition

The industries in which the Company operates are highly competitive and are
characterized by 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.  The
Company currently is not a major player in the industries in which it
competes, and, in management's opinion, the Company's share of the markets in
which it competes is relatively small in comparison to most of its
competitors.  Many of the Company's competitors have substantially greater
financial and marketing resources than the Company.  As a result, they may be
better able to respond more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products and services than is the
Company.  Furthermore, in the future, the Company may encounter substantial
additional competition.  There can be no assurance that the Company's current
products and services will not become obsolete, or that the Company will have
the financial resources, technical expertise, marketing capabilities or
manufacturing and support facilities to compete successfully in the future.  

The introduction of products and services embodying new technologies and the
emergence of new industry standards can, in a relatively short period of time,
render existing products obsolete and unmarketable.  The Company believes that
its success will depend upon its ability continuously to develop new products
and services and to enhance its current products and to introduce them
promptly into the market.  There can be no assurance that the Company will be
successful in developing and marketing new product enhancements, new products
or services that respond to technological change or evolving industry
standards. There can be no assurance that the Company will not experience
difficulties that could delay or prevent the success or development,
introduction and marketing of these products, enhancements and services, or
that any new product, product enhancement and services it may introduce will
achieve market acceptance.  Failure to develop and introduce new products,
product enhancements or services, or to gain customer acceptance of such
products, product enhancements or services in a timely fashion could harm the
Company's competitive position and materially adversely affect it.

Employees

The Company employed 83 persons at September 30, 1998, none of whom are
represented by a labor union.  The employees are based in Agoura Hills,
California.  Management believes that its employee relations are good at the
present time.

Forward Looking Statements

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


ITEM 2.      Properties

In October 1994, the Company purchased for $880,000 the three-story, 13,500
square foot building it currently occupies, making a down payment of $320,000
and borrowing $560,000, with a current monthly debt service of approximately
$5,000.  This building houses the Company's headquarters and computer
facilities.

The Company's book value of real estate held for investment was $528,000 for
fiscal years ended 1998 and 1997. A $276,000 reserve allowance was set up as
of September 30, 1998 and 1997 to reflect the $252,000 net book estimated fair
market value less estimated cost to sell the properties. The Company owns
several pieces of raw land for investment consisting of four noncontiguous
parcels in Missouri totaling approximately five acres, two noncontiguous
parcels in Texas totaling approximately forty-four acres, one acre in Castilla
County, Colorado, one-third acre in Eureka County, Nevada, a single lot in
Arrowhead County, Washington, a single lot in Ventura County, California,
three acres in Independence County, Arkansas, and 498 acres in San Bernardino
County, California. The Company has entered into an agreement with a party to
represent and sell its properties.


ITEM 3.     Legal Proceedings

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

The Company is currently involved in lawsuits against fifty-eight merchants
for losses incurred from chargebacks that the Company has paid on behalf of
those merchants.  The amounts of losses claimed aggregate to more than
$800,000.  Additionally, the Company has hired outside counsel to bring suit
against four out-of-state merchants for chargeback losses of more than
$750,000, as of the fiscal year ended September 30, 1998.  There is no
assurance that these amounts are recoverable through litigation.  One out-of-
state merchant has brought suit against the Company for breach of contract
which the Company feels is without merit and is currently vigorously
defending.  Management believes the probability of sustaining material losses
related to this matter is remote.

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

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

Three matters were submitted to a vote of Security Holders during the fiscal
year ended September 30, 1998 at the Annual Shareholders' Meeting held on
February 5, 1998.  A majority of shareholders' votes approved three issues:
(1) election of two directors; (2) amendment of Article Fifth of the Articles
of Incorporation; and (3) ratification and approval of auditors.    
<PAGE>
                                     PART II

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

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

<TABLE>
<CAPTION>

                  FISCAL YEAR ENDED            High       Low      
                    SEPTEMBER 30

                           1998         
                    <S>                <C>          <C>
                    First Quarter       $1.38        $0.88
                    Second Quarter      $1.25        $0.69
                    Third Quarter       $2.00        $0.78
                    Fourth Quarter      $1.88        $0.94

<CAPTION>
                           1997         
                    <S>                <C>          <C>
                    First Quarter       $1.50        $0.72
                    Second Quarter      $2.09        $1.12
                    Third Quarter       $1.69        $1.00
                    Fourth Quarter      $1.56        $1.25

<CAPTION>
                           1996         
                    <S>                <C>          <C>
                    First Quarter       $0.84        $0.31
                    Second Quarter      $0.96        $0.34
                    Third Quarter       $1.53        $0.66
                    Fourth Quarter      $1.16        $0.72

</TABLE>

The prices set forth above are not necessarily indicative of liquidity of the
trading market.  Trading in the Company's Common Stock is limited and
sporadic, as indicated by the average monthly trading volume of 1,042,370
shares for the period from October 1997 to September 1998.  On December 11,
1998, the closing representative price per share of the Company's Common
Stock, as reported through NASDAQ in the over-the-counter market, was $2.09.

Holders of Common Stock

As of September 30, 1998, there were 927 record holders of the Company's
Common Stock, with 15,120,541 shares outstanding. The number of holders of
record is based on the actual number of holders registered on the books of the
Company's 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

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


ITEM 6.     Selected Consolidated Financial Data

The following table sets forth certain selected consolidated financial data,
which should be read in conjunction with the Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included at items 7 and 8 below.  The following data, insofar as
they relate to each of the five years ended September 30, have been derived
from annual financial statements, including the consolidated balance sheet at
September 30, 1998 and 1997 and the related consolidated statement of
operations and of cash flows for the three years ended September 30, 1998, and
notes thereto appearing elsewhere herein. 

<TABLE>
<CAPTION>


                                            Year Ended September 30            
                                   1998     1997     1996     1995     1994
                                  ( Amounts in thousands, except per share ) 
Statement of Operations Data:
<S>                              <C>     <C>      <C>      <C>      <C>
Revenues . . . . . . . . . .    $21,063  $18,623  $14,342 $14,101   $9,585  
Costs and Expenses . . . . .     19,852   18,103   14,526  14,238   10,466  
Income (loss) from operations     1,211      520    (184)   (137)    (881)  
Interest income (expense), net       14    (138)    (228)   (169)     (45)   
Other income (expense), net        (35)      (50)    (182)      135         
Income (loss) before income 
 tax (provision) . . . . . .      1,190      332    (594)   (171)    (926)  
Income tax (provision) . . .       (36)       (4)      (5)       (5)     (5)

Net Income (loss). . . . . .     $1,154   $  328 ($  599)($  176) ($  931)  


Net Income (loss) per 
 share-basic . . . . . . . .      $.077   $ .025  ($.053) ($.016)  ($.117)  
Net Income (loss) per 
 share-fully diluted . . . .      $.053   $ .017     n/a     n/a      n/a   

Weighted Average Number of 
 Common Shares and 
 Equivalents Outstanding-Basic   14,974   19,851   11,297  11,039    7,969  

Balance Sheet Data:
Working Capital 
 surplus (deficit) . . . . .     $3,611   $2,054     $238($  119)       $6  
Current assets . . . . . . .      5,154    3,047    2,254   1,721    4,215  
Total assets . . . . . . . .      8,025    6,084    4,682   4,063    5,963  
Current liabilities. . . . .      1,543      993    2,016   1,840    4,209  
Long-term debt, and payable to 
 stockholders and related 
 parties, less current portion      639      681      597     724       79  
Total stockholders' equity       $5,843   $4,410   $2,069  $1,499   $1,675  

</TABLE>


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

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

Results of Operations

Fiscal years 1998 and 1997

Revenues.    Electronic Clearing House, Inc. recorded a net income of
$1,154,000 for the fiscal year ended September 30, 1998, compared to a net
income of $328,000 for the fiscal year ended September 30, 1997, an increase
of 251.8%.  This is indicative of the revenue growth in fiscal 1998 combined
with an improvement in gross margin in bankcard processing and transaction
revenue from 23.1% in fiscal 1997 to 26.9% in fiscal 1998.  The improvement in
gross margin was mainly due to the implementation of certain industry specific
fees in fiscal 1998 which had virtually no impact on direct costs.

Total revenues increased by 13.1%, from $18,623,000 for fiscal 1997 to
$21,063,000 for fiscal 1998.  The increase reflected revenue growth of 17.3%
in bankcard processing and transaction revenue  which is partially offset by a
12.5% decrease in terminal sales and lease revenue from prior fiscal year.

The increase in processing and transaction revenue is attributable to three
areas: (1) the increase in processing volume from the Company's growing
merchant base along with the overall rate increases for the entire merchant
base as a result of the interchange rate increases implemented by Visa and
MasterCard in April 1998; (2) the increase in inventory transaction volume
with U-Haul International; and (3) the implementation of certain industry
specific fees in the current fiscal year.  

Revenue related to terminal sales is recognized when the equipment is shipped. 
Terminal sales and lease revenue decreased from $2,348,000 in fiscal 1997 to
$2,055,000 in fiscal 1998, a 12.5% decrease.  This decrease in revenue
reflected a $478,000 decrease in terminal sales to merchants which is offset
by the delivery of approximately 3,100 systems to U-Haul International in the
current fiscal year versus 2,400 U-Haul systems and 175 systems to the United
States Postal Service ("USPS") under a pilot program awarded to the Company in
the prior fiscal year. 

The Company provided software and hardware to the USPS for the development and
deployment of automated money order dispensing systems under a pilot program
awarded to Computer Based Controls Inc.("CBC"), a wholly owned subsidiary of
the Company. The USPS extended the pilot program in January 1998 to add
additional features into the overall systems.  CBC designed and implemented
the requested features and a successful First Article Test of the new features
was completed by the USPS in late June of 1998.  Completion of this phase of
the pilot program was deemed successful by the USPS in July 1998.  Additional
features are being incorporated to further reduce paperwork and increase the
speed of service, two primary goals of the USPS.  To meet this need, the USPS
has now authorized a follow-on project to the original pilot program. 
Additionally, the USPS has requested the integration of the terminal provided
by the Company to operate with specific printers the USPS uses in its higher
volume locations.  The Company believes that this request is an indication
that its terminal is under consideration for a broader use in the USPS
environment in the higher volume offices, but no assurance of such use can be
given at this time. 

Other revenues such as check guarantee fees and research and development
revenue remained relatively constant.  There was a slight decrease in other
revenue from $268,000 in fiscal 1997 to $235,000 in fiscal 1998.


Costs and Expenses.    Bankcard processing expenses have generally remained
constant as a percentage of processing revenue.  A majority of the Company's
bankcard processing expenses are fixed as a percentage of each transaction
amount, with the remaining costs being based on a fixed rate applied to the
transactions processed.  Bankcard processing and transaction expense increased
11.6% in the current fiscal year over the prior fiscal year.  This was in
direct relation to the 17.3% increase in processing and transaction revenues.

Cost of terminals sold and leased decreased 12.0% in fiscal year 1998 as
compared to fiscal year 1997.  This relates directly to the 12.5% decrease in
terminal and lease sales for the current fiscal year.

Other operating costs included customer service expenses, check guarantee
expenses, and research and development expenses. Overall, other operating
costs decreased from $875,000 in fiscal 1997 to $837,000 in fiscal 1998,
consistent with the slight decrease in other revenue. 

Selling and general and administrative expenses increased from $3,194,000 in
the current fiscal year to $3,766,000 in fiscal 1998, a 17.9% increase. This
was due to the 13.1% increase in total revenue and also attributable to the
higher employee-related costs in support of the Company's infrastructure and
growth.  

Liquidity and Capital Resources

As of September 30, 1998, the Company had available cash of $2,486,000 and
restricted cash of $651,000 in reserve with its primary processing banks.  The
Company's working capital improved from $2,054,000 in fiscal 1997 to
$3,611,000 in fiscal 1998.

The Company's cash flows generated from operations increased significantly in
fiscal 1998.  It increased from a negative cash flow of $143,000 in fiscal
1997 to a positive cash flow of $1,777,000, an increase of $1,920,000.  The
current level of cash flow from operations is sufficient to support the
required research and development costs and marketing costs.  The positive
cash flow from operations also allows the Company to further develop its suite
of Internet products and services which is essential to the Company's future
growth.

The Company's current ratio improved from 3.07 to 1 at September 30, 1997 to
3.34 to 1 at September 30, 1998.  The Company's debt-to-equity ratio remained
virtually unchanged, from .38 to 1 at September 30, 1997 to .37 to 1 at
September 30, 1998. 

Other - Year 2000 Issue

Many existing computer systems and related software applications, and other
control devices, use only two digits to identify a year in a date field,
without considering the impact of the upcoming change in the century.  Such
systems, applications and/or devices could fail or create erroneous results
unless corrected so that they can process data related to the Year 2000. The
Company relies on computer systems, applications and devices in operating and
monitoring all major aspects of its business, including, but not limited to,
its financial systems, customer services, internal networks and
telecommunication equipment, and end products.  The Company also relies,
directly and indirectly, on the external systems of various independent
business enterprises, such as its customers, sponsoring banks, suppliers,
creditors, financial organizations, and of governments for the accurate
exchange of data and related information.  

In fiscal 1997, the Company received independent certification of Year 2000
compliance from Visa and from MasterCard for processing authorization
requests.  All possible paths for such transactions were demonstrated to be
compliant.


In fiscal 1998, the Company assessed the Year 2000 issues in depth and
developed a comprehensive plan.  The Company is currently executing its plan
to minimize the potential impact of the Year 2000 issues on its business and
expects to be in a testing mode in the first calendar quarter of 1999.  The
Company spent approximately $200,000 in fiscal year 1998 in connection with
the Year 2000 problems. Management's current estimate is that the costs
associated with the Year 2000 issue will be approximately $250,000 in fiscal
1999.  The assignment of resources to address the Year 2000 issue has had a
minor impact on development and/or delay of other Company projects. The
Company's existing contingency plan for business resumption during and
following catastrophic events has been augmented to provide for longer-term
outages that could result from Year 2000 issues.  For example, the
Uninterruptible Power Supply system that has served the Company since 1987 has
been replaced with a much more robust system.  In addition, a stand-alone
power generator has been installed to increase the Company's ability to
sustain longer-term outages.  However, despite the Company's efforts to
address the Year 2000 impact on its internal systems, the Company may have
failed to fully identify all areas and, once discovered, the Company may not
be able to resolve such areas without disruption of its business and without
incurring significant expenses.  In addition, even if the internal systems of
the Company are not materially affected by the Year 2000 issue, the Company
could be affected adversely as a result of any disruption in the operation of
the various third-party enterprises with which the Company interacts.
Significant care is being taken to confirm other key providers/vendors are
fully compliant with Year 2000 issues but no assurance can be given that the
Company's efforts in this regard or that the representations made regarding
compliance with Year 2000 by vendors will prove successful.


Results of Operations

Fiscal years 1997 and 1996

Revenues.    Electronic Clearing House, Inc. recorded a net income of $328,000
for the fiscal year ended September 30, 1997, compared with a net loss of
$599,000 for the fiscal year ended September 30, 1996.  Total revenues
increased by 30%, from $14,342,000 for fiscal 1996 to $18,623,000 for fiscal
1997.  The increase reflected revenue growth of 34% in Bankcard processing and
transactions revenue and a 7% increase in terminal sales and lease revenue
from prior fiscal year.

Revenue derived from the electronic processing of transactions are recognized
at the time the transactions are processed by the merchant.  The increase in
bankcard processing revenue and transaction revenue was primarily from the
increase in the number of active retail merchant accounts and the increased
transaction revenue generated from the increase in the number of dealers
associated with a major equipment rental customer.  As of  September 30, 1997,
the Company processed for approximately 8,300 active merchants, compared with
6,600 active merchants at September 30, 1996, a  26% increase.  The number of
installed equipment rental dealers increased from approximately 3,100 to
6,000, a 94% increase.

The Company's expanding merchant base and profitability is primarily
attributable to: (i) the effective sales efforts of an independent processing-
related sales organization that presently accounts for about 70% of the
Company's new merchant relationships; (ii) the referral from the Company's
existing merchant base; (iii) the direct response to the Company's Internet
Home Page, which accounts for approximately 20% of the Company's merchant
growth; (iv) marketing to targeted retail merchant industry segments which
generally have higher discount rates and processing volume as compared to a
typical retail merchant; and (v) the growing number of installed equipment
rental dealers. 

An important contingency related to processing profitability is the
consistency and multiplicity of the Company's primary bank relationships. 
Primary bank relationships are necessary to assure access to the major credit
card issuing organizations.  Additional primary bank relationships diminish
the potential for disruptions in processing operations that might occur due to
changes in management or ownership of one of the Company's primary banks. 
During fiscal 1997, the Company added two additional primary banks, bringing
its primary bank relationships to a total of four banks.

The ECHONLINE program, the Company's Internet-related product, was introduced
in January 1997 and is being adopted by several Internet Service Providers
("ISP").  The Company anticipates additional growth in merchant volume as
ISP's finalize their interface program to the ECHONLINE system.  A new
feature, called Merchant Fulfillment Service, has been added to the ECHONLINE
service which 1) delivers the Internet-generated order directly to the
merchant, 2) requires the merchant to electronically advise the Company when
they have shipped to the customer, and 3) allows the merchant to issue credits
on a customer order directly with the Company.  By providing these services,
the ECHONLINE service becomes easier for the ISP to adopt and improves its
marketability.

Revenue related to terminal sales are recognized when the equipment is
shipped.  Terminal sales and lease revenue increased from $2,189,000 for
fiscal 1996 to $2,348,000 for fiscal 1997, a  7% increase.  This increase was
primarily related to the sale of terminals to a major equipment rental
customer, from 1,800 systems  for fiscal 1996 to 2,400 systems for fiscal
1997. 

Check guarantee fees decreased from $135,000 for fiscal 1996 to $82,000 for
fiscal 1997, a 40% decrease.  This was a result of the absence of active
marketing or development of the Company's check guarantee service.  The
Company is evaluating whether check guarantee should be retained as a  product
line and, if retained, what its total product line should include and how it
can be effectively marketed outside the state of California.

Cost and Expenses.    Bankcard processing expenses have generally remained
constant as a percentage of processing revenue.  A majority of the Company's
bankcard processing expenses are fixed as a percentage of each transaction
amount, with the remaining costs being based on a fixed rate applied to the
transaction processed.  Bankcard processing expense increased from $9,023,000
for fiscal 1996 to $12,308,000 for fiscal 1997, a 36% increase.  The increase
in bankcard processing expense is directly related to the 34% increase in
bankcard processing revenue for fiscal 1997.  Additionally, chargeback losses
increased from $189,000 for fiscal 1996 to $836,000 for fiscal 1997, a 327%
increase.  This increase is attributable to the $429,000 provision of 
chargeback losses for two former merchants.  The Company is currently pursuing
to recover these chargeback losses through legal means (see Legal
Proceedings).  

Cost of terminals sold and leased decreased  from $1,866,000 for fiscal 1996
to $1,726,000 for fiscal 1997, a 7% decrease.  This was the result of a higher
gross margin on terminals sold during fiscal 1997.

Research and development expense increased from $325,000 for fiscal 1996 to
$420,000 for fiscal 1997, a 29% increase.  This is reflective of the strategic
investments made by the Company, both personnel and products needed, in order
to compete in the electronic commerce industry.

General and administrative expenses increased 13%, from $2,799,000 for fiscal
1996 to $3,157,000 for fiscal 1997.  However, when expressed as a percentage
of total revenues, selling and general and administrative expenses decreased
from 20% of total revenues for fiscal 1996 to 17% of total revenues for fiscal
1997.

Interest expense decreased  from  $266,000 for fiscal 1996 to $206,000 for
fiscal 1997, a 23% decrease.  This was mainly due to the note conversions
during fiscal 1997 and which was partially offset by the increase in capital
lease obligations.


Liquidity and Capital Resources

As of September 30, 1997, the going concern opinion, which has been part of
the Company's independent accountant's report for the past eleven years, has
been lifted.  This was mainly due to (i) the Company's working capital ratio
as of September 30, 1997; (ii) a profitable fiscal year; (iii) a $1,742,000
equipment order from U-Haul International received subsequent to the year end;
(iv) a three year agreement with U-Haul executed during fiscal 1997; and (v)
anticipated positive earnings from operations for fiscal 1998.

At September 30, 1997, the Company had a $2,054,000 working capital as
compared to a $238,000 working capital at September 30, 1996.  The increase in
working capital was mainly attributable to the $900,000 note conversions which
took place during fiscal 1997.  Cash and restricted cash increased from
$688,000 at September 30, 1996 to $1,095,000 at September 30, 1997, a $407,000
increase.  Additionally, net accounts receivable increased $228,000 as a
result of increased processing, increase in chargeback receivable, and leasing
activities. 

A significant source of  cash flow during fiscal year 1997 was from financing
activities.  Total proceeds from issuance of preferred stock, exercise of
stock warrants and stock options was approximately $994,000.  

The Company's subsidiary Computer Based Controls, Inc. ("CBC") received the
First Article Test approval for its EMOD in February 1997 from the USPS. 
Additionally, 175 "Stand-Alone" EMOD units were delivered to the USPS in April
1997 and a phased deployment began in the Dallas, Texas area in May 1997. The
Company was informed in January 1998 that the pilot program was being extended
and that the USPS found that the EMOD system generated significant savings in
time and money for the USPS. This was deemed to be due to the lower cost of
money order issuance, management relating thereto, and the system's ability to
electronically transfer daily accounting information to regional headquarters,
lowering administrative and accounting costs accordingly.  The USPS
subsequently asked the CBC to bid the costs of making a software change to the
EMOD that allowed other printers to be utilized with the EB921 control
terminal and CBC submitted such bid in June 1998. Final permission to proceed
was received from the USPS in December, 1998 and delivery of the modified
software is expected to occur in the second quarter of fiscal 1999. It is
anticipated that the software will be tested for a period of two to three
months after delivery at which time the USPS is expected to make a decision on
promoting the EMOD program on a national scale. No assurance can be given that
the EMOD system will perform adequately to justify such national distribution
or that the software will perform the requested tasks or that the estimate of
units that might be required would actually be ordered under such
circumstances.   

In October 1997, CBC received an equipment order from U-Haul for 3,100
terminals. This equipment will be available for shipment during the second
fiscal quarter of 1998.  After the full deployment period, the Company expects
the total number of dealers utilizing the Company's inventory tracking systems
to be approximately 9,000 dealers. 

At September 30, 1997, the ratio of current assets to current liabilities was
3.08:1 as compared to 1.12:1 at September 30, 1996.


ITEM 8.    Financial Statements and Supplemental Data

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


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

None<PAGE>
                                    PART III


ITEM 10.     Directors and Executive Officers of the Registrant

The officers and directors of the Company are:

<TABLE>
<CAPTION>

                                                           Date first became
Name                                  Position           Officer or Director 

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


Larry Thomas <F1>                  Director, President,           1996
                                   Chief Operating Officer,
                                   Chief Technology Officer

Alice L. Cheung                    Chief Financial Officer,       1996
                                   Treasurer

Jesse Fong                         Vice President                 1994

David Griffin                      Vice President                 1990

Rick Slater                        Vice President                 1998

Patricia Atlas 
 Williams                          Vice President                 1997

Jack Wilson                        Vice President                 1994

Donna L. Camras                    Corporate Secretary            1990

R. Marshall Frost                  Counsel                        1994

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

Carl W. Schafer <F1><F2><F3><F4>   Director                       1986

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

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

</FN>
</TABLE>

JOEL M. BARRY, age 48, has been a Director of the Company since July 8, 1986,
Chairman of the Board since December 26, 1986, served as Chief Financial
Officer from May 1, 1987 to June 9, 1990, and Executive Vice President from
October 12, 1987 to June 29, 1990, when he was designated Chief Executive
Officer of the Company.  Mr. Barry is also a Director and Chief Executive
Officer of the NCCR and CBC subsidiaries.  Since approximately August 1981,
Mr. Barry has been a lecturer and investment counselor regarding investment
partnerships.  Mr. Barry was the founder and President of Basics Financial
Planning & Investments, Inc. ("Basics"), a financial management firm, formed
in August 1983 and dissolved in June 1991.  Basics is the successor to Dynamic
Seminars, a firm founded by Mr. Barry in August 1981.     

LARRY THOMAS, age 52, joined the Company in November 1995, has served as
Senior Vice President since June 1996, and was appointed President and Chief
Operating Officer in October 1997.  Prior to joining the Company, Mr. Thomas
was a charter member of the Cellular Digital Packet Data (CDPD) specification
effort and through the company he founded, XYNet Software Technologies,
managed the development and delivery to several carriers of CDPD accounting
and provisioning software.  Mr. Thomas served Unisys/Burroughs Corporation for
20 years as a system software/hardware developer, manager, and division
general manager, with his last position as Vice President of Unisys Network
Management Systems.  Mr. Thomas has been a consultant, author, and speaker on
Internet and OSI related technologies, network management protocols, complex
software systems and large-network solutions for major system integration
firms.  Mr. Thomas holds an MSEE and BSEE from Rice University in Houston,
Texas, as well as a BA in Economics from Rice.

ALICE L. CHEUNG, age 41, 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 the Company, 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. 

JESSE FONG, age 47, has served as Vice President since September 1994.  Mr.
Fong joined the Company 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 50, has served as Vice President since June 1990.  Previous
to this capacity, he was Vice President of Operations for the Company from
January 1986 until September 1989, at which time he became a consultant to the
Company.  Mr. Griffin has served as Senior Vice President and General Manager
for TeleCheck, Los Angeles 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.  
RICK SLATER, age 38, joined the Company in May 1995 as Vice President of
Computer Based Controls, Inc. (CBC).  In December of 1995, Mr. Slater was
appointed President of CBC.  Prior to joining the Company, 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 numer of sites within the U.S.  Mr.
Slater holds a BS degree in electrical engineering technology from Old
Dominion University, Norfolk, Virginia.

PATRICIA ATLAS WILLIAMS, age 33, joined the Company in September 1996, serving
as Director of Program Management and has recently been appointed Vice
President.  Prior to joining ECHO, Ms. Atlas was an Operations Manager for
Bank of America at their San Francisco headquarters.  Ms. Atlas holds a B.A.
degree in communications from the University of California, Los Angeles. 

JACK WILSON, age 54, has served as Vice President since June 1994 and was
Director of Bank Card Relations for the Company from October 1992 until May
1994.  Mr. Wilson served as Vice President for Truckee River Bank from August
1989 until September 1992.  Previously, he was Senior Vice President/Cashier
of Sunrise Bancorp and a Vice President of First Interstate Bank.  Mr. Wilson
holds a teaching credential from the California Community College System in
business and finance.

DONNA L. CAMRAS, age 49, joined the Company 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 four years and Los Angeles for five
years.

R. MARSHALL FROST, age 51, has served the Company in varying capacities since
1987 and is currently In-House Counsel.  Mr. Frost received his BA degree in
business administration with emphasis in accounting from California State
University at Fullerton, his AA degree in pre-med from Fullerton College, his
JD degree from Ventura College of Law, and his MBA degree from the University
of Redlands.  Mr. Frost is an active member of the California Bar, a member of
the American Bar Association and the International Bar Association, and a
certified broker with the California Department of Real Estate.

FARIBORZ HAMZEI, age 40, has been a Director since 1988.  Mr. Hamzei is
currently an independent financial consultant and has been Vice President of
Market Analysts of Southern California since 1996.  Mr. Hamzei was President
of Caspian Capital Corporation, Los Angeles, California, from July, 1990 to
December, 1991, and Executive Vice President of Caspian Capital Corporation
from August, 1988 to July, 1990.  Previously, he was President and Chief
Executive Officer of International Message Switching Corporation, a publicly
held company from August 1987 to October 1987.  Mr. Hamzei has also held
various positions in two high tech start-up companies, and from 1978 through
1982 held various management positions at Northrop's Aircraft Division.  Mr.
Hamzei holds a BS degree in engineering from Princeton University.

CARL W. SCHAFER, age 62, has been a Director since July 1986.  Mr. Schafer was
Financial Vice President and Treasurer (Chief Financial Officer) of Princeton
University from July 1976 to October 1987.  From October 1987 to April 1990, 
Mr. Schafer was a Principal of Rockefeller & Co., Inc. of New York, an
investment management firm.  He is a Director of The Atlantic Foundation and
Harbor Branch Institution and became President of the Atlantic Foundation in
April 1990.  Mr. Schafer also holds the following positions:  Director/Trustee
of the Paine Webber and Guardian Families of Mutual Funds; Director of Roadway
Express, Inc., a trucking company; Director of Frontier Oil Corporation, an
oil and gas refiner; Director of Evans Systems, Inc., a petroleum product
marketer, convenience store, and diversified company; Director of Nutraceutix,
Inc., a bio technology company; Director of Base Ten Systems, Inc., a software
company; and Chairman of The Johnson Atelier and School Of Sculpture.  He
graduated from the University of Rochester in 1958, and served with the U.S.
Bureau of the Budget, successively, as Budget Examiner, Legislative Analyst,
Deputy Director and Director of Budget Preparation.  He resides in Princeton,
New Jersey.

HERBERT L. LUCAS, age 72, 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 a member of the Board of Directors of the Carnation Company. 
Since 1982, Mr. Lucas has managed his family investment business.  He has
served on the Board of Directors of various financial and business
institutions including Wellington Management Company, Arctic Alaska Fisheries,
Inc., Nutraceutix, and Sunworld International Airways, Inc.  Mr. Lucas also
serves as a Trustee of The J. Paul Getty Trust, the Los Angeles County Museum
of Art, and Winrock International Institute for Agricultural Research and
Development.  He also was formerly a member of the Board of Trustees of
Princeton University.

All directors are to be elected to specific terms, from one year to three
years, by the stockholders and serve until the next annual meeting or until
their terms have expired. The annual meeting of stockholders was held on
February 5, 1998, and the election of directors was held at that time.


ITEM 11.     Executive Compensation

The following table sets forth the total compensation paid and stock options
and warrants offered by the Company to its Chief Executive Officer and to each
of its most highly compensated executive officers, other than the Chief
Executive Officer, whose compensation exceeded $100,000 during the fiscal
years ended September 30, 1998, 1997 and 1996.

<TABLE>

Summary Compensation Table


<CAPTION>

                                              Annual           Long Term
                                           Compensation        Compensation

                  Capacities in                                Securities  
Name              Which Served       Year   Salary<F1>         Underlying
Options<F2>

<S>              <C>                <C>      <C>              <C>
Joel M. Barry     Chairman/Chief    1998    $162,616  <F3>        -   
                  Executive Officer 1997     160,282  <F4>        -   
                                    1996     120,000           650,000
 

Larry Thomas      President/Chief   1998    $146,937  <F5>        -   
                  Operating Officer 1997     111,250  <F6>        -   
                                    1996      85,000           300,000

Jesse Fong        Vice President    1998    $110,135  <F7>        -   
                                    1997      86,120  <F8>      20,000
                                    1996      80,000              -   


---------------------------------------------------
<FN>
<F1>
The Company provides Messrs. Barry and Thomas with an automobile.  Mr. Barry,
Mr. Thomas, and Mr. Fong are participants of a Company sponsored 401(K) plan.
There has been no compensation paid other than that indicated in the above
table.  No bonuses pursuant to employment agreements were granted in the three
fiscal years presented.
<F2>
None of these options has been exercised.  See "Stock Option Plan" and
"Warrants".
<F3>
Mr. Barry's salary includes a $14,000 bonus and a $1,117 vacation paydown.
<F4>
Mr. Barry's salary includes an $18,000 bonus and a $12,282 vacation paydown.
<F5>
Mr. Thomas's salary includes a bonus of $11,000.
<F6>
Mr. Thomas's salary includes a bonus of $11,250.    
<F7>
Mr. Fong's salary includes a bonus of $27,433.     
<F8>
Mr. Fong's salary includes a $1,000 bonus and a $3,320 vacation paydown.

</FN>
</TABLE>

Fiscal 1998 Option Grants Table

The following table sets forth the stock options granted to the Company's
Chief Executive Officer and each of its executive officers, other than the
Chief Executive Officer, whose compensation exceeded $100,000 during fiscal
1998.  Under applicable Securities and Exchange Commission regulations,
companies are required to project an estimate of appreciation of the
underlying shares of stock during the option term.  The Company has chosen to
project this estimate using the potential realizable value at assumed annual
rates of stock price appreciation for the option term at assumed rates of
appreciation of 5% and 10%.  However, the ultimate value will depend upon the
market value of the Company's stock at a future date, which may or may not
correspond to projections below.


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


<S>            <C>          <C>         <C>     <C>       <C>     <C>
Joel M. Barry   none         n/a         -        -        n/a     n/a
Larry Thomas    100,000      37.7%       $1.12    10/07    $53,000 $128,000
Jesse Fong      none         n/a         -        -        n/a     n/a

</TABLE>

The following table sets forth the number of unexercised options and warrants
held by the Company's Chief Executive Officer and each of its executive
officers other than the Chief Executive Officer whose compensation exceeded
$100,000 during fiscal 1998.  No options/warrants have been exercised.

<TABLE>

Aggregated Option/SAR Exercises and Fiscal-Year Option/SAR Value Table


<CAPTION>


                                                                Value of 
                                              Number of        unexercised
                     Shares                  unexercised      in-the-money
                   acquired on     Value    options/SARS      Options/SARS
Name               exercise #   realized $    FY-end #       at FY-end $<F1>
<S>                   <C>         <C>        <C>               <C>
Joel M. Barry         -0-          -0-       650,000            $429,000  
Larry Thomas          -0-          -0-       400,000            $100,000  
Jesse Fong            -0-          -0-        70,000            $ 28,000  

-------------------------------------------------
<FN>
<F1>
Based on the closing sales price of the Common Stock on September 30, 1998 of
$1.06 per share, less the option exercise price.

</FN>
</TABLE>

Compensation Committee Interlocks and Insider Participation

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

Director Compensation

Outside directors are compensated at the rate of $1,500 per quarter plus
reasonable expenses incurred in connection therewith.  Directors are not
compensated for special meetings other than regular meetings.  Each one of the
outside directors was awarded 33,333 shares of stock options at market price
during fiscal 1998.

Employment Agreements

Mr. Thomas entered into a four-year employment contract, effective October 16,
1997, which provides for a salary of $137,500 with $5,000 salary increases
annually.  At the time the employment contract was signed, Mr. Thomas owned
300,000 shares of the Company's stock options which became fully vested
immediately.  Additionally, Mr. Thomas was awarded 100,000 shares of stock
options within one month after signing of the contract, and 100,000 shares of
stock options each year for three additional years within one month after the
anniversary of the contract, issued under the five-year vesting criteria and
having a strike price equal to the existing market bid price on the day of the
award.

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

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

Mr. Thomas is entitled to receive an annual bonus which ranges between 20% to
50% of his base salary compensation provided he meets the target performance
as agreed upon and set each fiscal year by the Company's Chief Executive
Officer and approved by the Board of Directors.  Additionally, Mr. Thomas is
entitled to various performance-based stock options and cash bonuses upon
meeting certain predetermined levels of net income and earnings per share
generated by the Company during the term of the contract. 

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


Stock Option Plan

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

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

On January 2, 1996, Larry Thomas was granted 100,000 five-year options each to
purchase one share of  common stock at $0.50 per share.

On August 30, 1996, Larry Thomas was granted 200,000 five-year options each to
purchase one share of common stock at $0.84 per share.

On November 18, 1996, the Company's Board of Directors authorized an increase
in the Plan to 3,375,000 options and was ratified by the shareholders at the
Annual Meeting held in February 1997.

On October 29, 1997, Donald R. Anderson was granted 20,000 five-year options
each to purchase one share of common stock at $1.12 per share.

On October 29, 1997, Larry Thomas was granted 100,000 five-year options each
to purchase one share of common stock at $1.12 per share.


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


ITEM 12.     Security Ownership of Certain Beneficial Owners and Management

As of December 11, 1998, there were 16,621,541 shares of the Company's Common
Stock outstanding.  The following table sets forth the beneficial owners of
more than 5% of the Company's voting securities.

<TABLE>
<CAPTION>

                                            Amount and
Title        Name and Address                Nature of        Percent
of Class     of Beneficial Owner       Beneficial Ownership  of Class

<S>          <C>                          <C>                  <C>
Common       Arthur Geiger                 1,290,900 <F1>       7.77%
             P.O. Box 309
             Morristown, NJ  07963
       
Common       Robert Feury                    912,000 <F2>       5.49%
             15 East Union Street
             East Rutherford, NJ 07073

Common       Herbert Smilowitz             1,165,000 <F1>       7.00%
             15 East Union Street
             East Rutherford, NJ 07073               

----------------------------------------------
<FN>
<F1>
Includes warrants issued in connection with various loans and underlying
common shares in connection with Series K Preferred Stock.
<F2>
Includes underlying common shares in connection with Series K Preferred Stock.

</FN>
</TABLE>

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

The following table sets forth the number of shares of Common Stock owned
beneficially by the Company's officers and directors, individually, and as a
group, as of December 11, 1998.

<TABLE>
<CAPTION>

                                      Amount and            Percentage of
                                Nature of Beneficial    Outstanding Stock<F1>
Name and Address                     Ownership              At 12/11/98  

<S>                                <C>                          <C>
Joel M. Barry                      1,007,250 <F2>                5.73% 
28001 Dorothy Drive
Agoura Hills, CA  91301

Donna Camras                          60,000 <F2>                0.36%
28001 Dorothy Drive
Agoura Hills, CA  91301

Alice L. Cheung                      170,000 <F2>               1.01%
28001 Dorothy Drive
Agoura Hills, CA  91301

Jesse Fong                           155,110 <F2>               0.93%
28001 Dorothy Drive
Agoura Hills, CA 91301

R. Marshall Frost                     20,000 <F2>               0.12%
28001 Dorothy Drive
Agoura Hills, CA 91301

David Griffin                        182,637 <F2>               1.09%
28001 Dorothy Drive
Agoura Hills, CA  91301

Fariborz Hamzei                      308,333 <F3>                1.82%
28001 Dorothy Drive
Agoura Hills, CA  91301                      

Herbert L. Lucas                     500,222 <F3><F5>           2.95%
12011 San Vicente Boulevard 
Los Angeles, CA  90049

Carl W. Schafer                      408,333 <F3>                2.40%
28001 Dorothy Drive
Agoura Hills, CA 91301                       

Rick Slater                          216,000 <F2>               1.28%
28001 Dorothy Drive
Agoura Hills, CA 91301

Larry Thomas                         905,000 <F2><F4>           5.24%
28001 Dorothy Drive
Agoura Hills, CA  91301

Patricia Atlas Williams               80,000 <F2>               0.48%
28001 Dorothy Drive
Agoura Hills, CA 91301

Jack Wilson                          180,000 <F2>               1.07%
28001 Dorothy Drive
Agoura Hills, CA 91301

All officers and directors
as a group (13 persons)            4,192,885                     20.66%         
        
------------------------------------------

<FN>
<F1>
Outstanding Common Shares with effect given to conversion of preferred stock
and options described in footnotes 2 through 5.
<F2>
Includes options according to the terms of the Incentive Stock Option Plan. 
See "Item 11. Options, Warrants or Rights".
<F3>
Includes options granted to outside directors.
<F4>
Includes Common Shares as payment for acquisition.
<F5>
Includes 141,889 shares indirectly owned by Mr. Lucas through a trust for his
wife.

</FN>
</TABLE>


ITEM 13.     Certain Relationships and Related Transactions 

There were no material related-party transactions.  <PAGE>
                           
 

         PART IV


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

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

      Consolidated Balance Sheet at September 30, 1998 and 1997. . . . . . .F-2

      Consolidated Statement of Operations for each of the three years
       in the period ended September 30, 1998. . . . . . . . . . . . . . . .F-3
  
      Consolidated Statement of Changes in Stockholders' Equity
       for each of the three years in the period ended September 30, 1998. .F-4

      Consolidated Statement of Cash Flows for each of the three years
       in the period ended September 30, 1998. . . . . . . . . . . . . . . .F-5

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

  (2) Financial Statement Schedules:

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

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

(b) Reports on Form 8K for fourth quarter ending September 30, 1998: none  

(c) Exhibits:

Exhibit
Number               Description of Document

1.1   Form of Underwriting Agreement between the Company and J.W. Gant &
      Associates, Inc. <F3>
1.2   Form of Agreement among Underwriters. <F3>
1.3   Form of Selected Dealer's Agreement. <F3>
3.1   Articles of Incorporation of Bio Recovery Technology, Inc., filed with
      the Nevada Secretary of State on December 11, 1981. <F1>
3.2   Certificate of Amendment to Articles of Incorporation of Bio Recovery
      Technology, Inc., filed with the Nevada Secretary of State on September
      1, 1983. <F1>
3.3   Certificate of Amendment of Articles of Incorporation of Bio Recovery
      Technology, Inc., filed with the Nevada Secretary of State on January
      17, 1986. <F1>
3.4   By-Laws of Bio Recovery Technology, Inc. <F1>
4.1   Proposed Form of Purchase Option between the Company and J.W. Gant &
      Associates, Inc. <F3>
4.2   Specimen Common Stock Certificate. <F3>
10.5  Copy of Refinancing Agreement dated June 20, 1989 between Electronic
      Clearing House, Inc., Kenneth Van Zyl Living Trust, and Mrs. Alice A.
      Haessler. <F2>
10.7  Copy of Imperial Bank Agreement dated October 31, 1989 between
      Electronic Clearing House, Inc. and Imperial Bank. <F2>
10.11 Form of Warrants to Purchase Common Stock of Registrant. <F3> 
10.12 Form of Agreement to be entered into by the Officers, Directors, and 5%
      or more Stockholders of the Company with J.W. Gant & Associates, Inc.
      <F3>
10.27 Copy of Agreement between Electronic Clearing House, Inc. and Francis
      David Corporation, dated May 18, 1992. <F4> 
10.28 Copy of Addendum Authorizing Evaluation and Calculation of Loss Reserve
      Requirement and Designation of Las Vegas, Nevada Territory, dated July
      9, 1992. <F4> 
10.31 Copy of Merchant Marketing and Processing Services Agreement between
      Electronic Clearing House, Inc. and First Charter Bank, dated January
      25, 1994. <F6>
10.32 Copy of Escrow Statement of Electronic Clearing House, Inc. for purchase
      of building located at 28001 Dorothy Drive, Agoura Hills, California.
      <F6>
10.33 Copy of Employment Agreement dated October 1, 1994 between Electronic
      Clearing House, Inc. and Donald R. Anderson. <F6>
10.34 Copy of Asset Purchase Agreement between Electronic Clearing House, Inc.
      and Larry Thomas, dated December 31, 1995. <F7>
10.35 Copy of Merchant Marketing and Processing Services Agreement between
      Electronic Clearing House, Inc. and First Regional Bank, dated June 24,
      1997. <F8>
10.36 Copy of Merchant Marketing and Processing Services Agreement between
      Electronic Clearing House, Inc. and The Berkshire Bank, dated July 31,
      1997. <F8>
10.37 Copy of Employment Contract dated October 16, 1997 between Electronic
      Clearing House, Inc. and Larry J. Thomas. <F8>
22.0  Subsidiaries of Registrant. <F2>


------------------------------------------
[FN]
<F1>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1988 and incorporated herein by reference.
<F2>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1989 and incorporated herein by reference.
<F3>
Filed as an Exhibit to Registrant's Form S-1, Amendment No. 3, effective
November 13, 1990 and incorporated herein by reference.
<F4>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1992 and incorporated herein by reference.
<F5>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1993 and incorporated herein by reference.
<F6>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1994 and incorporated herein by reference.
<F7>
Filed as an Exhibit to Registrant's Annual Report on Form 10-K for fiscal year
ended September 30, 1996 and incorporated herein by reference.
<F8>
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.

/FN
<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\ Larry Thomas                                         
                     Larry Thomas, President,
                     Chief Operating Officer and
                     Chief Technology Officer





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


   Signature                     Title                         Date


\s\Larry Thomas       Director, President, and       )  December 23, 1998
    Larry Thomas      Chief Operating Officer,       )
                      Chief Technology Officer       )
                                                     )
\s\Joel M. Barry      Chairman of the Board          )                
    Joel M. Barry     and Chief Executive Officer    )
                                                     )
                                                     )
\s\Fariborz Hamzei    Director                       )                
    Fariborz Hamzei                                  )
                                                     )
                                                     )
\s\Alice L. Cheung    Treasurer and                  )                
    Alice L. Cheung   Chief Financial Officer        )
                                                     )
                                                     )
\s\Marjan Hewson      Controller                     )
    Marjan Hewson                                    )
                                        






                        REPORT OF INDEPENDENT ACCOUNTANTS



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

In our opinion, the accompanying consolidated financial statements listed in
the index appearing under Item 14(a)(1) and (2) on page 33 present fairly, in
all material respects, the financial position of Electronic Clearing House,
Inc. and its subsidiaries at September 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the
period ended September 30, 1998, in conformity with generally accepted
accounting principles.  These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits.  We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for the opinion expressed above.



Los Angeles, California
November 13, 1998
<PAGE>
                         ELECTRONIC CLEARING HOUSE, INC.
<TABLE>
                           CONSOLIDATED BALANCE SHEET
<CAPTION>
                                                          September 30,       
                                                       1998        1997


                                     ASSETS

<S>                                               <C>            <C>
Current assets:
 Cash and cash equivalents                        $ 2,486,000    $772,000
 Restricted cash (Note 1)                             651,000     323,000
 Accounts receivable less allowance 
  of $1,829,000 and $1,025,000 (Note 1)             1,251,000   1,129,000
 Inventory less allowance of $202,000 
  and $70,000 (Note 4)                                718,000     749,000
 Prepaid expenses and other assets                     16,000      23,000
 Notes receivable from related 
  parties (Note 5)                                     32,000      51,000

   Total current assets                             5,154,000   3,047,000

Noncurrent assets:
 Long term receivables (Note 6)                       320,000     373,000
 Property and equipment, net (Note 7)               1,606,000   1,570,000
 Real estate held for investment, net (Note 8)        252,000     252,000
 Other assets, net (Note 9)                           693,000       842,000

                                                                         
                                                  $ 8,025,000 $ 6,084,000

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Short-term borrowings and current portion 
  of long-term debt (Note 10)                     $    92,000 $   150,000
 Accounts payable                                     173,000     112,000
 Accrued expenses (Note 11)                           845,000     731,000
 Deferred income                                      433,000         -0- 

   Total current liabilities                        1,543,000     993,000


Long-term debt (Note 10)                              639,000     681,000

   Total liabilities                                2,182,000   1,674,000

Commitments and contingencies (Note 15)

Stockholders' equity (Note 13):
 Convertible preferred stock, $.01 par value, 
  5,000,000 shares authorized;
 Series "H", 23,511 shares issued 
  and outstanding                                            
 Series "K", 325,000 and 375,000 shares 
  issued and outstanding                                3,000       4,000
 Series "L", 168,000 and 172,000 shares 
  issued and outstanding                                2,000       2,000
 Common stock, $.01 par value, 26,000,000 
  shares authorized; 15,120,541 and 
  14,600,541 shares issued; 15,114,300 and 
  14,594,300 shares outstanding                       151,000     146,000
 Additional paid-in capital                        14,140,000  13,865,000
 Accumulated deficit                               (8,453,000) (9,607,000)

   Total stockholders' equity                       5,843,000   4,410,000
                                                                         
                                                                         
                                                  $ 8,025,000 $ 6,084,000

</TABLE>

          See accompanying notes to consolidated financial statements.<PAGE>
         
 

               ELECTRONIC CLEARING HOUSE, INC.
<TABLE>

                      CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>


                                               Year ended September 30,      
                                            1998         1997          1996

<S>                                 <C>           <C>          <C>

REVENUES:
 Bankcard processing revenue         $ 12,189,000 $ 11,299,000  $  8,926,000
 Bankcard transaction fees              6,584,000    4,708,000     2,992,000
 Terminal sales and lease revenue       2,055,000    2,348,000     2,189,000
 Other revenue                            235,000      268,000       235,000

                                       21,063,000    18,623,000     14,342,000

COSTS AND EXPENSES:
 Bankcard processing and 
  transaction expense                  13,730,000   12,308,000     9,023,000
 Cost of terminals sold and leased      1,519,000    1,726,000     1,866,000
 Other operating costs                    837,000      875,000       807,000
 Selling, general and 
  administrative expenses               3,766,000    3,194,000     2,830,000

                                       19,852,000   18,103,000    14,526,000

Income (loss) from operations           1,211,000      520,000      (184,000)

Interest income                           118,000       68,000        38,000
Interest expense                         (104,000)    (206,000)     (266,000)
Write down of real estate 
 held for investment (Note 8)                -0-          -0-        (84,000)
Loss reserve for notes 
 receivable (Note 5)                         -0-       (50,000)      (98,000)  
  Other expense                           (35,000)        -0-          -0-     
   

Income (loss) before income tax 
 benefit (provision)                    1,190,000      332,000      (594,000)

Income tax provision                     (714,000)    (216,000)       (5,000)
Income tax benefit from 
 NOL utilization                          678,000      212,000        - 0 - 

Net income (loss)                     $ 1,154,000  $   328,000   ($  599,000)

   Earnings (loss) per share - Basic       $0.077       $0.025      ($0.053)

   Earnings per share - Diluted            $0.053       $0.017          N/A 


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

                         ELECTRONIC CLEARING HOUSE, INC.
<TABLE>

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>



                                                       Stock
                                        ----------------------------------- 
                                   Treasury      Common     Preferred    Amount
   


<S>                                 <C>      <C>           <C>        <C>
Balance at September 30, 1995        6,241   11,046,804     27,573$111,000

Exercise of warrants                            125,000           1,000
Exercise of stock options                       150,000           2,000
Issuance of preferred stock                                425,0004,000
Issuance of common stock                        250,000           2,000
Issuance of warrants                                              Net loss

Balance at September 30, 1996        6,241   11,571,804    452,573120,000
 
Exercise of warrants                            275,617           3,000
Exercise of stock options                       220,000           2,000
Conversion of debt                            2,270,345           23,000
Conversion of preferred to common               250,775    (54,062)2,000
Issuance of preferred stock                                172,0002,000
Issuance of common stock                         12,000           
Stock issuance expenses                                           
Net income                                                          

Balance at September 30, 1997        6,241   14,600,541    570,511 152,000

Exercise of warrants                            100,000           1,000
Exercise of stock options                        44,000           
Conversion of preferred to common               376,000    (94,000)3,000
Issuance of preferred stock                                 40,000
Net income                                                        

Balance at September 30, 1998        6,241   15,120,541    516,511$156,000


CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY CONTINUED:





                                                   Accumulated
                                      Additional  Deficit from        
                                        Paid-in    October 1,         
                                        Capital       1987          Total


<S>                                 <C>         <C>            <C>
Balance at September 30, 1995       $10,724,000 $(9,336,000)   $1,499,000

Exercise of warrants                     62,000                    63,000
Exercise of stock options                74,000                    76,000
Issuance of preferred stock             846,000                   850,000
Issuance of common stock                 98,000                   100,000
Issuance of warrants                     80,000                    80,000
Net loss                                           (599,000)     (599,000)

Balance at September 30, 1996        11,884,000  (9,935,000)    2,069,000

Exercise of warrants                    125,000                   128,000
Exercise of stock options               160,000                   162,000
Conversion of debt                      934,000                   957,000
Conversion of preferred to common        (2,000)                      -0-
Issuance of preferred stock             858,000                   860,000
Issuance of common stock                 12,000                    12,000
Stock issurance expenses               (106,000)                 (106,000)
Net income                                          328,000       328,000

Balance at September 30, 1997        13,865,000  (9,607,000)    4,410,000

Exercise of warrants                     49,000                    50,000
Exercise of stock options                29,000                    29,000
Conversion of perferred to common        (3,000)                      -0-
Issuance of preferred stock             200,000                   200,000
Net income                                        1,154,000     1,154,000

Balance at September 30, 1998       $14,140,000 $(8,453,000)   $5,843,000


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

               ELECTRONIC CLEARING HOUSE, INC.

<TABLE>

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<CAPTION>

                                                Year ended September 30,     
                                              1998        1997          1996

<S>                                     <C>          <C>          <C>
Cash flows from operating activities:
 Net income (loss)                      $ 1,154,000   $ 328,000   ($ 599,000)
 Adjustments to reconcile net income 
  (loss) to net cash provided by
  (used in) operating activities:
 Depreciation                               225,000     209,000      199,000
 Amortization                               186,000      82,000       99,000
 Provisions for losses on accounts and 
  notes receivable                          804,000     786,000      252,000
 Provision for loss on real estate held 
  for investment                               -0-         -0-        84,000
 Provision for obsolete inventory           132,000      50,000       20,000
 Fair value of stock warrants issued in 
  connection with debt                         -0-         -0-        80,000
 Fair value of stock issued in connection
  with legal settlement                        -0-       12,000         -0- 
 Changes in assets and liabilities:
  Restricted cash                          (328,000)    193,000     (203,000)
  Accounts receivable                      (872,000) (1,262,000)    (336,000)
  Inventory                                (102,000)   (336,000)    (205,000)
  Prepaid expenses and other assets           7,000      13,000      (20,000)
  Other assets                              (37,000)   (146,000)    (186,000)
  Accounts payable                           61,000     (57,000)     (67,000)
  Accrued expenses                          114,000     (15,000)      30,000
  Deferred income                           433,000        -0-          -0- 
  Other liabilities                             -0-        -0-         5,000


   Net cash provided by (used in) 
    operating activities                  1,777,000    (143,000)    (847,000)

Cash flows from investing activities:
  Purchase of equipment                    (204,000)   (199,000)    (138,000)

  Net cash used in investing activities     (204,000)   (199,000)   (138,000)

Cash flows from financing activities:
  Decrease in notes receivable from 
   stockholders and related parties          19,000        -0-        10,000
  Proceeds from issuance of notes payable      -0-      150,000      200,000
  Repayment of notes payable               (157,000)   (202,000)    (139,000)
  Proceeds from issuance of 
   preferred stock                          200,000     753,000      850,000
  Proceeds from common stock 
   warrants exercised                        50,000     129,000       63,000
  Proceeds from exercise of stock options       29,000     112,000      76,000

   Net cash provided by 
    financing activities                    141,000     942,000    1,060,000

Net increase in cash                      1,714,000     600,000       75,000
Cash and cash equivalents at 
 beginning of period                        772,000     172,000       97,000

Cash and cash equivalents at end 
 of period                             $  2,486,000  $    772,000   $172,000


</TABLE>


          See accompanying notes to consolidated financial statements.<PAGE>


                         ELECTRONIC CLEARING HOUSE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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

Electronic Clearing House, Inc. (ECHO or the Company) is a Nevada corporation. 
The accounting and reporting policies of the Company and its subsidiaries
conform to generally accepted accounting principles.  The following comments
describe the more significant policies.


Principles of Consolidation

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

Cash and Cash Equivalents

Cash and cash equivalents consist of unrestricted balances only.  Cash
equivalents are considered to be all highly liquid debt instruments such as
money market funds.  

Restricted Cash

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

Chargeback

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.  A reserve is established for all
chargebacks not received within ninety (90) days or for those that are deemed
uncollectible. Additionally, under the terms of the Company's processing
agreements with the banks, the Company is responsible for all external costs
of the program and for all support functions including daily accounting,
settlement and security (see Note 16).   

Inventory

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


Property and Equipment

Property and equipment are stated at cost, 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:

         Building                        39 years
         Computer equipment 
           and software                 3-5 years
         Furniture, fixtures 
           and equipment                  5 years
         Building improvements           10 years
         Tooling equipment                2 years
         Automobile                       5 years       

Purchased Technology, Capitalized Software, and Patents

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

In March 1995, the Financial Accounting Standard Board issued Statement of
Financial Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (FAS 121) which requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever event or circumstances indicated that the carry amount of
the asset may not be recoverable.  As of September 30, 1998 and 1997, in
Management's opinion, no such impairment exists.

Revenues and Expenses

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

The Company expensed $930,000, $807,000, and $189,000 for the years ended
September 30, 1998, 1997 and 1996, respectively for bankcard processing
chargeback losses.  The Company provided for other uncollectible leases and
notes receivable balances of $24,000, $72,000 and $217,000 for the years ended
September 30, 1998, 1997 and 1996, respectively.

The Company has one customer that accounted for approximately $3,409,000,
$2,697,000 and $2,135,000 of revenues for the years ended 1998, 1997 and 1996,
respectively.

Income Taxes

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

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes".  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.  

Net Income (Loss) Per Share

Net income (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 net
income per share 
except where it would be anti-dilutive.  For the net income per common share,
the convertible preferred stock is not considered to be equivalent to common
stock.  Earnings (loss) per share-basic amounts included in the consolidated
statement of operations are based upon average shares outstanding of
14,974,125, 13,336,701, and 11,297,316 in fiscal years 1998, 1997, and 1996,
respectively.  Earnings per share-diluted amounts included in the consolidated
statement of operations are based upon average shares outstanding of
21,834,034 and 19,850,870 in fiscal years 1998 and 1997, respectively. 
Earnings per share-diluted assuming full dilution for fiscal year 1998 was
determined on the assumption that the convertible preferred stock was
converted, and the warrants and all the options were exercised on October 1,
1997 or the issuance date, whichever is later.  On November 4, 1998, the
Company issued 705,000 shares of options to certain officers and key employees
of the Company.

Issuance of Common Stock, Warrants and Options

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

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

Stock Based Compensation

In October 1995, the Financial Accounting Standard Board issued Statement of
Financial Standards No. 123, "Accounting for Stock Based Compensation" (FAS
123).  FAS 123 establishes market value accounting and reporting standards for
stock based employee compensation plans.  Companies may elect to continue to
account for stock-based compensation using the intrinsic value approach under
APB Opinion No 25.  The Company was required to adopt FAS 123 for its 1997
fiscal year.  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 a result, the adoption of FAS 123 will
not have an impact on the financial position or results of operations of the
Company.  The pro-forma disclosure required by FAS 123 is included in Note 14
of Notes to Consolidated Financial Statements.

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

Accounting Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the reported
amounts of revenues and expenses during the reporting period.  Actual results
could differ from those estimates.


NOTE 2 - NATURE OF OPERATIONS

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

The Company currently has processing agreements and relationships with four
different banks.  Management expects processing operations to continue to
contribute significantly to cash flow in 1999 and that short term assets will
be sufficient to meet current liabilities.  

NOTE 3 - STATEMENT OF CASH FLOWS:

In fiscal years 1998, 1997 and 1996, cash payments for interest were $104,000,
$174,000 and $220,000, respectively.

Significant non-cash transactions for fiscal 1998 are as follows:

-  Capital equipment of $57,000 was acquired under capital leases.

Significant non-cash transactions for fiscal 1997 are as follows:

-  Capital equipment of $141,000 was acquired under capital leases.

-  Accounts payable of $57,000 was paid by the issuance of 70,345 shares of the
   Company's common stock.

-  A note receivable of $51,000 was obtained from an officer upon the issuance
   of 60,000 shares of the Company's common stock based on the exercise of
   stock options.
 
Significant non-cash transactions for fiscal 1996 are as follows:

-  Computer equipment and Internet specific programs totaling $100,000 were
   purchased for 250,000 shares of the Company's common stock.

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


NOTE 4 - INVENTORY

The components of inventory are as follows:

<TABLE>
<CAPTION>
                                                    September 30  
                                             1998                  1997

<S>                                       <C>                <C>
Raw materials                              $244,000           $  120,000

Finished goods                              677,000              699,000   

                                            921,000              819,000    

Less: Allowance for obsolescence            202,000               70,000    

                                         $  719,000           $  749,000

</TABLE>


NOTE 5 - NOTES RECEIVABLE FROM RELATED PARTIES:

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

Notes receivable from related parties are comprised of the following:




<TABLE>
<CAPTION>

                                                          September 30    
                                                         1998      1997

<S>                                                   <C>       <C>
Note receivable from officer bearing
 8% interest, secured by 60,000 shares
 of the Company's common stock, due 
 July 1998                                             -0-       $51,000

Note receivable from outside director bearing 
 8% interest, secured by 348,333 shares
 shares of the Company's stock options, due 
 February 1999.                                       $ 32,000     -0-  
                                                      $ 32,000   $51,000

</TABLE>

NOTE 6 - LONG TERM RECEIVABLES

Long term receivables consist of the following:

<TABLE>
<CAPTION>
                                                           September 30
                                                          1998     1997

<S>                                                    <C>     <C>
Lease receivables -  consist of
  long term portion of equipment leases to 
  merchants, net of deferred interest                 $ 14,000  $ 84,000

Notes receivable - including accrued
  interest of $16,000, secured by 230,345 shares
  of the Company's common stock, due in November
  1999, bears 6% interest                              306,000   289,000
                                                      $320,000  $373,000

</TABLE>

NOTE 7 - PROPERTY AND EQUIPMENT:

Book value of property and equipment comprise of the following:

<TABLE>
<CAPTION>
                                                          September 30    
                                                         1998      1997
<S>                                                <C>           <C>
Land and building                                  $   880,000    $  880,000
Computer equipment and software                      1,740,000     1,617,000
Furniture, fixtures and equipment                      774,000       669,000
Building improvements                                   78,000        45,000
Tooling equipment                                      285,000       285,000
Automobile                                              21,000        21,000
Cost                                                 3,778,000     3,517,000
Less:  accumulated depreciation 
  and amortization                                  (2,172,000)   (1,947,000)

Net book value                                      $1,606,000    $1,570,000

</TABLE>

Included in property and equipment are assets under capital lease of $219,000
and $322,000 at September 30, 1998 and 1997, with related accumulated
depreciation of $59,000 and $149,000, respectively.  


NOTE 8 - REAL ESTATE HELD FOR INVESTMENT:

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

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

The Company provided $84,000 allowance for estimated losses for the year ended
September 30, 1996 on its investment in real estate to reflect the estimated
fair market value less estimated costs of disposition, no further increases to
the allowance during fiscal 1997 and fiscal 1998 were deemed necessary.


NOTE 9 - OTHER ASSETS:

Other assets comprise of the following:

<TABLE>
<CAPTION>

                                                              September 30 
                                                         1998           1997

<S>                                                   <C>            <C>
Printer technology, net of 
 accumulated amortization of 
 $43,000 and $3,000                                   $ 157,000      $ 197,000

Patents and associated cost, 
 net of accumulated amortization 
 of $20,000 and $10,000                                 149,000        159,000

Software costs, net of accumulated
 amortization of $337,000 and $201,000                  376,000        475,000

Other                                                    11,000         11,000

                                                     $  693,000     $  842,000

</TABLE>

The Company capitalized $317,000 software costs related to the United States
Postal Service (USPS) Pilot Program for the fiscal year ended 1997, and
$57,000 and $34,000 for the development of in-house software for the years
ended 1998 and 1997, respectively.  The printer technology for the Company's
electronic money order device (EMOD) was purchased during fiscal year 1994. 
As of September 30, 1998, this technology has been incorporated in the EMOD
under the USPS Pilot Program and being amortized over the estimated number of
units to be produced. Total amortization of intangible assets was $186,000,
$78,000, and $99,000 for the fiscal years ended 1998, 1997, and 1996,
respectively. Total amortization of software costs was $136,000, $67,000, and
$74,000 for the fiscal years ended 1998, 1997, and 1996, respectively.

NOTE 10 - SHORT-TERM BORROWINGS AND LONG-TERM DEBT:

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

<TABLE>
<CAPTION>

                                                             September 30   
                                                           1998      1997

<S>                                                    <C>       <C>
Note payable, secured by corporate headquarters 
 building, due October 2004.  Interest at 
 3.5% above 11th District cost of funds, 
 which was 8.38% as of September 30, 1998              $ 528,000  $ 539,000

Term loan, secured by computer equipment,
 bearing interest at 11%                                   -0-       17,000

Term loan, secured by lease pool, bearing
 interest at 13%                                          35,000    110,000

Capital leases (Note 15)                                 163,000    160,000

Other                                                      5,000         5,000
                                                         731,000    831,000
Less:  current portion                                   (92,000)    (150,000)

Total long-term debt                                    $639,000   $681,000

</TABLE>

Concurrent with purchasing the corporate office building in fiscal year 1995,
the Company issued a secured note payable for $560,000 to the bank, its
previous owner, amortized over thirty years due in October 2004. Monthly debt
service for principal and interest approximates $5,000. Interest on this note
is tied to the index of the 11th District cost of funds.

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

In February 1997, the Company borrowed $150,000 from a bank, bearing 13%
interest, to be repaid over 24 months.  This term loan is collateralized by
certain lease pools and is fully guaranteed by the Company.

Future maturities of debt are as follows:

<TABLE>
<CAPTION>


Fiscal year ended September 30

        <S>                                                    <C>
         1999                                                   $  92,000 
         2000                                                      47,000 
         2001                                                      44,000 
         2002                                                      41,000 
         2003                                                      14,000 
         thereafter                                               493,000 
                                                                $ 731,000 

</TABLE>

NOTE 11 - ACCRUED EXPENSES:


Accrued expenses are comprised 
  of the following:

<TABLE>
<CAPTION>

                                                         September 30
                                                     1997           1998

<S>                                               <C>            <C>
Accrued bank card fees                            $106,000       $123,000
Accrued compensation and taxes                     277,000        121,000
Accrued communication costs                        181,000        167,000
Accrued professional fees                           91,000        148,000
Accrued commission                                  89,000         79,000
Other                                              101,000         93,000
                                                  $845,000       $731,000

</TABLE>


NOTE 12 - INCOME TAXES:

At September 30, 1998, the Company recorded an income tax benefit of $678,000
for a net operating loss (NOL) utilization. No such benefit was recognized in
1996.  The Company has federal tax loss carryforwards of approximately
$4,044,000 and $5,683,000, and state tax loss carryforwards of $404,000 and
$1,267,000 for the fiscal years ended 1998 and 1997, respectively. These
carryforwards will expire from 1998 through 2010 if not utilized against
future taxable income.  The utilization of a portion of the carryforwards is
subject to limitations under Internal Revenue Code Section 382 (Section 382)
due to a change in ownership of the Company which occurred during fiscal year
1987, and may be further reduced upon future changes of control.  Investment
tax credits of $51,000 are also available to reduce future federal income
taxes and expire in years 1998 through 2000.  The utilization of these credits
is also subject to Section 382 limitations.

The Company has a $1,412,000 and $2,050,000 deferred tax asset for the loss
carryforwards against which it has recorded a 100% valuation reserve based on
the uncertainty of utilization of the federal and state loss carryforwards for
the fiscal years ended 1998 and 1997.  The amount of the deferred tax asset is
based on the current federal and state loss carryforwards after Section 382
limitations. Tax rates of 34% and 9.3%, respectively, were applied to
determine the potential future values of the loss carryforwards.  No tax
effect for temporary differences is recognized as the total deferred taxes
that would result from such differences is minor.

NOTE 13 - STOCKHOLDERS' EQUITY:


Preferred Stock

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

During fiscal 1996, the Company issued 425,000 shares of Series K Preferred
Stock (Class K Stock) for an aggregated price of $850,000.  Class K Stock has
a stated value of $2.00 per share and is convertible into four shares of
common stock.  Class K Stock has priority in liquidation over the Company's
common stock but is junior in liquidation to all previous classes of preferred
stock. During fiscal 1997 and fiscal 1998, 100,000 shares of series K
Preferred stock were converted into 400,000 shares of the Company's common
stock.

During fiscal 1997, the Company issued 172,000 shares of Series L Preferred
Stock (Class L Stock) for an aggregate price of $860,000.  Class L Stock has a
stated value of $5.00 per share and is convertible into four shares of common
stock.  During fiscal 1998, the Company issued 40,000 shares of Series L
Preferred Stock for $200,000.  Additionally, 44,000 shares of Series L
Preferred Stock was converted into 176,000 shares of common stock.  Class L
Stock has priority in liquidation over the Company's common stock, but is
junior in liquidation to all previous classes of preferred stock.

Common Stock Warrants

At September 30, 1998, the following warrants were outstanding:

<TABLE>
<CAPTION>


          Warrants        Option          Expiration
         Outstanding       Price          Date


          <C>              <C>           <C>
           500,000          0.40          February to March 1999
           500,000          0.40          December 1999
         1,000,000       


</TABLE>


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

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

NOTE 14 - COMMON STOCK OPTIONS:

Stock option activity during 1996, 1997, and 1998 was as follows:

<TABLE>
<CAPTION>


                                                          Exercise
                                        Options             Price
<S>                                  <C>                 <C>
          
Outstanding September 30, 1995       2,800,000            $0.40 - $0.85

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

   Granted                             595,000             1.06 - 1.47
   Forfeited                          (200,000)            0.85
   Exercised                          (220,000)            0.50 - 0.85
Outstanding September 30, 1997       3,480,000            $0.40 - $1.47

   Granted                             365,000             0.91 - 1.50
   Forfeited                              -0-                -0-
   Exercised                           (44,000)            0.50 - 1.15

Outstanding September 30, 1998       3,801,000            $0.40 - $1.50


</TABLE>

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

During fiscal 1997, the Company's Board of Directors granted each of its
outside directors 125,000 shares of options exercisable ranging from $1.15 to
$1.47 per share.  In addition, the Company also granted an aggregate of
220,000 options to several officers and key employees to purchase common stock
ranging from $1.06 to $1.47 per share.

During fiscal 1998, the Company's Board of Directors granted each of its
outside directors 33,333 shares of options exercisable at $0.91 per share.  In
addition, the Company also granted an aggregate of 332,000 shares of options
to several officers and key employees to purchase comon stock ranging from
$1.03 to $1.50 per share.

All officer options, with the exception of the 310,000 options granted under
the president's employment agreement, are granted under the Company's
incentive stock option plan.  Options granted to outside directors and
employees are not included in the plan. The exercise price of both the
incentive stock options and directors' and employees' options shall be 100% of
the fair market value on the date the option is granted.  Options granted to
outside directors are normally vested immediately.  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.

On May 13, 1992, the Company's Board of Directors authorized adoption of an
Incentive Stock Option Plan ("Plan"), which was ratified by the shareholders
at the Annual Meeting, held July 10, 1992.  The Plan provided for the issuance
of up to 325,000 stock options, each to purchase one share of the Common Stock
for $0.85 per share, subject to adjustment in the event of stock splits,
combinations of shares, stock dividends or the like.  On November 18, 1996,
the Company's Board of Directors authorized an increase in the Plan to
3,375,000 options.  This Plan amendment was ratified by the shareholders at
the Annual Meeting held in February of 1997. Since grants are made at not less
than fair market value, no compensation cost has been recognized.

The following table summarizes information about stock options outstanding at
September 30, 1998:

<TABLE>
<CAPTION>


                              Options Outstanding       Options Exercisable

                                   Weighted-
                                    Average  Weighted-                     
Weighted-
                       Number      Remaining  Average      Number       Average
   Range of          outstanding  ContractualExercise  Exercisable at  Exercise
Exercise Prices    at Sept 30 1998   Life      Price    Sept 30 1998     Price

<S>                <C>               <C>     <C>       <C>             <C>
$0.40 - $0.56       2,201,000        4.5      $0.47    1,826,000       $0.48
$0.84 - $1.15       1,170,000        4.3      $0.97      790,000       $0.97
$1.21 - $1.50         430,000        5.6      $1.44      265,000       $1.47
                    3,801,000        4.6      $0.74    2,881,000       $0.70


</TABLE>

The weighted average fair value of the options granted, under the plan in
effect at September 30, 1998, during the fiscal years ended September 30,
1996, September 30, 1997 and September 30, 1998 were $0.44, $0.80, and $0.99,
respectively.  Fair value was determined using the Black Scholes options
pricing formula.  For options granted in fiscal 1996, the risk free interest
rate was approximately 6%, the expected life was 3-5 years, the expected
volatility was approximately 81.9% and the expected dividend yield was 0%, all
calculated on a weighted average basis.  For options granted in fiscal 1997,
the risk free interest rate was approximately 6%, the expected life was 3-5
years, the expected volatility was approximately 81.9% and the expected
dividend yield was 0%, all calculated on a weighted average basis.  For
options granted in fiscal 1998, the risk-free interestrate was approximately
5%, the expected life was 3-5 years, the expected volatility was approximately
156.9%, and the expected dividend yield was 0%, all calculated on a weighted
average basis.

On a pro-forma basis under the provision of FAS 123, net loss and net loss per
share would have increased by $143,000 and $0.013 for the year ended September
30, 1996, respectively, net income and net income per share would have
decreased by $390,000 and $0.029 for the year ended September 30, 1997,
respectively, and net income and net income per share would have decreased by
$125,000 and $0.008 for the year ended September 30, 1998, respectively.

NOTE 15 - COMMITMENTS AND CONTINGENCIES:

Terminal equipment leases

The Company leases terminals to customers under agreements that are classified
as sales.  Sales-type lease terms are for two to three years. A total lease
receivable net of unearned income of $180,000 and $396,000 was outstanding at
September 30, 1998 and 1997, respectively.  $116,000 and $85,000 have been
reserved for against lease cancellations at September 30, 1998 and 1997,
respectively.  The interest income recognized on the leases was $42,000,
$60,000 and $31,000 for the years ended September 30, 1998, 1997 and 1996,
respectively.  

During fiscal 1997, the Company pledged as collateral $200,000 of lease
payment streams to American Independent Bank regardless of the collectibility
of any specific lease(s) in the bank's portfolio.  The Company charged
$24,000, $22,000 and $46,000 to expense for leases that became uncollectible
for the years ended September 30, 1998, 1997, and 1996, respectively.  

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

<TABLE>
<CAPTION>




            Fiscal Year                  Payments
            <S>                      <C>
            1999                     $  175,000
            2000                         13,000
                                     $  188,000

</TABLE>

Lease Commitments

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

The Company's future minimum rental payments for capital and operating leases
(Note 9) at September 30, 1998 are as follows:

<TABLE>
<CAPTION>


                                                                 
Fiscal Year                     Capital Leases      Operating Leases
   
<S>                                  <C>                  <C>
1999                                 $ 65,000             $31,000
2000                                   53,000               -0- 
2001                                   46,000               -0- 
2002                                   36,000               -0- 
2003                                    7,000               -0-   

Total minimum lease payments         $207,000             $31,000

Less: imputed interest                 44,000
Present value of net
  minimum lease payment              $163,000

</TABLE>


NOTE 16 - LITIGATION

The Company is currently involved in lawsuits against 58 merchants for losses
incurred from chargebacks that the Company has paid on behalf of those
merchants.  The amounts of losses claimed aggregate to more than $800,000. 
Additionally, the Company has hired outside counsel to bring suit against four
out-of-state merchants for chargeback losses of more than $750,000, as of the
fiscal year ended September 30, 1998.  There is no assurance that these
amounts are recoverable through litigation. One out-of-state merchant has
brought suit against the Company for breach of contract which the Company
believes is without merit and is currently being defended against. Management
believes that the probability of sustaining material loss related to this
matter is remote.




<PAGE>







          ELECTRONIC CLEARING HOUSE, INC. AND CONSOLIDATED SUBSIDIARIES

<TABLE>

                            SCHEDULE VIII TO FORM 10K

            RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<CAPTION>




                                                    REDUCTION  IN      
                                                     RESERVE AND        
                           BALANCE  AT  CHARGED TO    ACCOUNTS    Balance at
DESCRIPTION                  9/30/96      EXPENSE    RECEIVABLE     9/30/97


<S>                       <C>           <C>         <C>         <C>
Allowance for
 trade receivables/
 chargeback receivables    $289,000     $836,000     $100,000   $1,025,000

Allowance for
 notes receivable            98,000       50,000       -0-         148,000


Allowance for
 obsolete inventories       20,000        50,000       -0-          70,000


SCHEDULE VIII TO FORM 10K CONTINUED:

                                       REDUCTION IN
                                        RESERVE AND
                           CHARGED TO    ACCOUNTS    BALANCE AT
DESCRIPTION                  EXPENSE    RECEIVABLE     9/30/98


<S>                       <C>          <C>         <C>
Allowance for
 trade receivables/
 chargeback receivables    $963,000     $159,000   $1,829,000

Allowance for
 note receivable                -0-          -0-      148,000

Allowance for
 obsolete inventories       142,000       10,000      202,000


</TABLE>



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