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

                                    FORM 10-K

 X     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
---    Act of 1934 for the fiscal year ended SEPTEMBER 30, 2005

       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)

                                [GRAPHIC OMITTED]

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

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


       Registrant's telephone number, including area code:(805) 419-8700,
                           fax number: (805) 419-8682

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

     TITLE OF EACH CLASS          NAME OF EACH EXCHANGE ON WHICH REGISTERED
     -------------------          -----------------------------------------
           None                                     None

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

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

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

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

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Act).     Yes      No  X
                                                 ---     ---

     The  aggregate  market  value of the voting stock held by non-affiliates of
the  Registrant,  based upon the closing sale price of the Common Stock on March
31,  2005,  as  reported  on  the  NASDAQ  Capital  Market,  was  approximately
$51,246,840.  Shares of Common Stock held by each officer and director have been
excluded  in  that  such  persons  may  be  deemed  to  be  affiliates.  This
determination  of affiliate status is not necessarily a conclusive determination
for  other  purposes.

     As of December 12, 2005, the Registrant had outstanding 6,661,701 shares of
Common  Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE - NONE


<PAGE>
<TABLE>
<CAPTION>
                                   ELECTRONIC CLEARING HOUSE, INC.
                                    2005 FORM 10-K ANNUAL REPORT


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

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

ITEM 1.    Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
ITEM 2.    Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 3.    Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 4.    Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . 14

PART II     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ITEM 5.    Market for Registrant's Common Equity, Related Stockholder Matters
           and Issuer Purchases of Equity Securities. . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 6.    Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations  17
ITEM 7A.   Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . 30
ITEM 8.    Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . 30
ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures  30
ITEM 9A.   Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 9B.   Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

PART III    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ITEM 10.   Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 31
ITEM 11.   Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ITEM 12.   Security of Certain Beneficial Owners and Management
           and Related Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ITEM 13.   Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . 40
ITEM 14.   Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . 40

PART IV     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

ITEM 15.   Exhibits, Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>


                                        2
<PAGE>
                                     PART I



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

This  2005  Annual  Report  on  Form  10-K  contains statements which constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Those statements include statements regarding our intent, belief or
current expectations.  Examples of forward-looking statements include statements
regarding  our strategy, financial performance and revenue sources.  Prospective
investors  are  cautioned  that  any  such  forward-looking  statements  are not
guarantees  of  future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements  as a result of various factors, including, but not limited to, those
set forth elsewhere in this Annual Report.  See "Item 7. Management's Discussion
and  Analysis  of Financial Condition and Results of Operations - Risk Factors."

ITEM 1.     BUSINESS

OVERVIEW
Electronic Clearing House, Inc. is an electronic payment processor that provides
for  the  payment  processing needs of merchants, banks and collection agencies.
We  derive  the  majority  of  our  revenue  from two main business segments: 1)
bankcard  and  transaction processing services ("bankcard services"), whereby we
provide  solutions  to  merchants  and  banks to allow them to accept credit and
debit  card  payments  from  consumers;  and  2)  check-related products ("check
services"),  whereby we provide various services to merchants and banks to allow
them  to  accept  and  process  check  payments  from  consumers.  The principal
services  we  offer  within  these  two  segments  include,  with respect to our
bankcard  services,  debit  and  credit card processing, and with respect to our
check  services, check guarantee (where, if we approve a check transaction and a
check  is  subsequently  dishonored  by the check writer's bank, the merchant is
reimbursed  by  us),  check  verification (where, prior to approving a check, we
search  our negative and positive check writer database to determine whether the
check  writer  has  a  positive  record  or  delinquent  check-related  debts),
electronic  check  conversion  (the  conversion of a paper check at the point of
sale  to  a  direct  bank  debit  which  is processed for settlement through the
Federal  Reserve  System's  Automated  Clearing  House  ("ACH")  network), check
re-presentment  (where we attempt to clear a check on multiple occasions via the
ACH  network  prior to returning the check to the merchant so as to increase the
number  of  cleared  check transactions), and check collection (where we provide
national  scale  collection  services  for  a merchant or bank).  We operate our
services  under  the  following  brands:

     -    MerchantAmerica,  our  retail  provider of all credit card, debit card
          and  check  payment  processing services to both the merchant and bank
          markets;
     -    National  Check  Network ("NCN"), our proprietary database of negative
          and  positive  check  writer  accounts  (i.e.,  accounts  that  show
          delinquent  history  in  the  form  of  non-sufficient funds and other
          negative  transactions),  for  check  verification,  check  conversion
          capture  services,  and  for  membership  to  collection  agencies;
     -    XPRESSCHEX,  Inc.  for  check  collection  services;  and
     -    ECHO,  for  wholesale  credit  card  and  check  processing  services.

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

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


                                        3
<PAGE>
HISTORY  OF  THE  COMPANY

ECHO  has  been offering bankcard and check services for over 19 years.  We were
incorporated  in Nevada in 1981 under the name Bio Recovery Technology, Inc. and
changed  our  name  to Electronic Clearing House, Inc. with the acquisition of a
credit  card  processing  company, Electronic Financial Systems, Inc. in January
1986.  In  1986,  ECHO  developed  the capability, utilizing the Federal Reserve
System's  Automated  Clearing  House  ("ACH"),  a  network  that  serves  as  a
nationwide,  wholesale  electronic  payment  and  collection  system  by  way of
transferring  funds  between  banks  via  the Federal Reserve System, to deposit
funds  into  any  U.S.  bank  of the merchant's choice. This development made it
possible for remote banks and processors to provide the same processing services
previously  available  only  through  the  merchant's  local  bank.

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

In  November  1999, we acquired Peak Collection Services, a collection agency in
Albuquerque, New Mexico, and incorporated Peak into our XPRESSCHEX operations as
our  Collection Division in December of 1999. The XPRESSCHEX Collection Division
conducts  collections on a national basis. Having a fully integrated, nationally
approved  collection  service  allows  XPRESSCHEX  to operate as a central check
clearing  facility  for  NCN's collection agencies without each agency having to
authorize  such  activity.

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

In  December  2000,  we signed an agreement with Visa U.S.A. to participate in a
point-of-sale  check processing pilot program as both an "Acquirer Processor" (a
role  that  accepts  transactions  from  a merchant's point-of-sale terminal and
reformats  them  for  submission  to  the  Visa  network)  and as a "Third-Party
Processor" (a role that approves or declines checks written on accounts of banks
not  yet  participating  in  the  Visa  POS  Check  Service program and deposits
approved  funds  utilizing  the ACH).  Under the program, any one of over 14,000
Visa member banks can offer various check processing services to their merchants
and utilize Visa's dedicated communications network and banking relationships to
clear  check  activity  using direct debits from the check writer's account.  In
July 2001, several major financial institutions began participating in the pilot
program.  The  program  was  released  from pilot in December of 2002 and, as of
September  2005,  nine  financial institutions were using ECHO as their Acquirer
Processor  and  fifteen  financial  institutions  were  using  ECHO  as  their
Third-Party  Processor.

In  May  2001,  we  acquired  the  assets  of National Check Network ("NCN") and
combined  the  NCN  positive  and  negative  check  writer records with the RMRS
database,  resulting  in  a  combined  database of over 120 million check writer
records  which  identify  the  positive  and  negative  check writing activities
occurring  with  individual  check  writers  (including  information  related to
accepted  checks, bounced checks, and the frequency of delinquent transactions).
This  database  is  ever-growing  with  additional contributions daily and as of
September  30,  2005,  contained  over  160  million  records.

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


                                        4
<PAGE>
OUR  SERVICES

BANKCARD  AND  TRANSACTION  PROCESSING  SERVICES

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

Debit  and  Credit  Card  Payment  Processing
ECHO currently provides 24-hour daily payment processing, "800" number access to
customer  service  personnel  and,  as  needed,  various field support services.
Utilizing  one  of  several methods of access to us, the merchants' systems dial
our host computers that are connected to all the major card authorizing centers,
and  receive credit card and debit card authorizations.  At the end of each day,
electronic  files of authorized transactions are transmitted to the major credit
card  organizations.  They  withdraw  the  funds from the card issuing banks and
deposit a lump sum for the day's processing activity into our processing bank on
the following morning.  Using a distribution file that we provide to them daily,
our  processing  bank  then  distributes  and deposits the individual merchant's
funds into the bank account of the merchant's choice.  On average, ECHO deposits
funds  to  over 600 banks across the nation on behalf of its merchants each day.

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

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

Deriving  Revenue
-----------------
Bankcard  and  transaction  processing  services provide for the majority of our
revenue.  For  the  year  ended  September  30,  2005,  bankcard and transaction
processing  accounted  for  approximately  74.0%  of  our revenue.  Bankcard and
transaction  processing volume rose 12.7% in fiscal 2005, from $1,052,657,000 in
fiscal  2004  to  $1,186,397,000  in  fiscal  2005,  and  revenue  increased
approximately  11.4%,  from  $36,897,000 in fiscal 2004 to $41,093,000 in fiscal
2005.

ECHO's  revenue for debit/credit card processing is derived primarily from three
sources:  the  merchant's  discount rate, the merchant's transaction fee and set
monthly  fees.

The discount rate is expressed as a percentage of the amount being processed and
is deducted from the amount of each transaction submitted by the merchant, while
the  net  amount  is  deposited into the merchant's bank account. Discount rates
range  between  1.5% and 3.5%.  Interchange, the fee charged by the card-issuing
bank and paid each day when transactions are processed, normally constitutes 75%
to  85%  of  the  discount  rate revenue. Other external costs, such as Visa and
MasterCard  dues  and  bank fees, increase external fees we pay to 85% to 90% of
the  total  discount  rate  charged.

A  transaction  fee is charged for each transaction processed and ECHO's average
transaction  fee in fiscal 2005 was $0.20 per transaction, the same as in fiscal
2004.  Both  Visa and MasterCard have instituted a $0.10 transaction fee on each
transaction  processed  that  ECHO  and  all processors are required to pay.  In
addition,  on  average,  ECHO  pays  approximately  $0.01  per  transaction  for
communication  costs,  depending  upon  the duration and method of transmission.


                                        5
<PAGE>
The  market  size  for  credit  card  processing  is  approximately  19  billion
transactions  per  year,  and  this  number is growing annually. ECHO has a very
small  percentage  of  this  market,  but  we  are one of the top 50 credit card
processors  according  to  The  Nilson  Report,  a  monthly  financial
subscription-based  newsletter.  Our competitors include First Data Corporation,
the  biggest  credit  card  processor in the United States, NPC/Bank of America,
Total  Systems,  Global Payments, and a few other direct payment processors. The
credit  card  processing  market  has  undergone  rapid consolidation, which has
raised  unique  challenges,  including  supporting  and  integrating  numerous
processing  methodologies, initiating quality customer support and field support
services  and maintaining merchant relationships.  While merchant portfolios can
be purchased by a processor or a credit card agent bank, merchants are generally
under no contractual obligation to utilize the services of the new owner so many
of  the  most  active  consolidators  have  been  experiencing  difficulty  in
maintaining  their  number  of  active  merchants.

In  an  effort to enhance the bankcard transaction processing business segment's
processing  infrastructure  and control processing costs, we have acquired three
payment  processing  modules  from Oasis Technologies/eFunds; Clearing, Merchant
Accounting  System  (MAS)  and  Switch.  Integration  of  the Clearing module is
currently  scheduled  to  be  complete in the second quarter of 2006 followed by
several  months  of  testing.  While  we believe that the new processing modules
will  operate  as  represented and result in significant operating efficiencies,
there  is  no  assurance  this  will  actually  be  the  case.

Historically,  ECHO  has  been  effective in selling to merchants who operate in
non-face-to-face,  card  not  present  environments,  such as the internet, mail
order and telephone order types of businesses.  Approximately 70% of our monthly
credit  card  volume comes from these types of merchants. Our Agent Bank program
brings  retail, face-to-face, card present types of merchants to us so we intend
to  continue  to promote this channel going forward. Once the Clearing module is
installed  and  operational,  we  also  intend to broaden our marketing reach to
actively  pursue  more retail types of business. Since there is more competition
for  this type of business, the price we charge to the merchant for our services
will reflect lower margins than we have historically been accustomed to getting.
While  we  intend  to  continue  to  pursue  our historic higher margin merchant
markets,  the  added scope of merchant we intend to pursue and the lower margins
inherent  in  this  market  may compress our margins overall, depending upon how
successful  each  channel  is  in  bringing  new  merchant  relationships.

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

CHECK-RELATED  PRODUCTS  (OR  "CHECK  SERVICES")

Overview
--------
ECHO  has  invested  significant  resources  and  management  focus in its check
services  business.  Check  services  revenue  increased  approximately 26.6% in
fiscal  2005,  from  $11,423,000  in  fiscal 2004 to $14,458,000 in fiscal 2005.
Revenue  from  ACH  and check conversion continues to increase.  Growth has come
primarily from four sources: Internet wallet providers, cross-selling electronic
checks into the credit card merchant base we already serve, casino check cashing
services  and  the  Visa  POS  Check  program.

Wallet  providers  allow a customer to fund an online wallet with a lump sum and
then  the  customer  can  use  the  wallet  at  various  sites  on the Internet.
(Probably  the  best  known  wallet service on the Internet is PayPal, a service
owned  by eBay.)  ECHO is assisting various providers of wallet services to fund
the  initial  wallet  transaction. Subsequent transactions of transferring funds
from  the online wallet are generally not handled by ECHO because the payment is
typically  handled  online  by  the  wallet  provider  themselves.


                                        6
<PAGE>
Approximately  70%  of  ECHO's  credit  card  processing merchants operate their
businesses  in non-face-to-face environments such as mail order, phone order and
the  Internet.  These  relationships historically have higher margins than those
seen  with  normal retail merchants because of the higher risk of fraud.  We are
finding  good success in selling electronic checks to these merchants because it
is  a  significantly  lower  cost  form  of  payment.

ECHO  has  established  an  integrated  processing relationship with the largest
check  cashing  provider  to  the  gaming  and  casino market.  Our services are
primarily  centered  on  providing check verification (using our NCN data base),
check  conversion  (moving  paper checks to electronic transactions at the check
cashing  cage in the casino), and several sophisticated risk management services
that  are  used  to assist the provider in confidently accepting checks. Through
this  source,  ECHO  expects to provide these services to several of the largest
casinos  and  gaming  customers  in  the  industry.

ECHO  is both a Third-Party Processor and an Acquirer Processor for the Visa POS
Check  Program.  Visa  officially  released its POS Check Service as of December
2002  and several national banks have entered the program since its inception to
both  sell  the  service to their merchants and to connect all of their checking
accounts  to  the Visa network.  While the transactional growth in 2005 has been
slower  than  expected,  Visa's  connectivity  to  checking account balances has
increased significantly over the past year, moving nationally from less than 10%
to  20%,  and  30% and higher in many metropolitan areas. (See the discussion of
the  Visa  POS  Check  Service  program  below.)

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

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

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

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


                                        7
<PAGE>
Electronic  Check  Conversion  ("ECC")
Check  conversion  is the ability to convert a paper check to an electronic item
at  the  point of sale.  ECC is a relatively new system of check settlement that
is quickly gaining merchant acceptance.  Under the program, the merchant slips a
customer's  completely  filled-in check either through a check reader that reads
the MICR line on the check or a check imager that records the total image of the
face  of  the  check  and  the  merchant enters the amount of the check into the
system.  The  merchant  has  the  customer sign a receipt, much the same as in a
credit  card  transaction, and gives a copy of the signed receipt along with the
check  to the customer. The electronic image, captured by the reader, is sent to
our  processing  center  and  we  settle  the  check transaction electronically.
Merchants'  customers  like  this  new  system because they get their check back
immediately  and  still  have a hard copy receipt of the transaction. Banks like
ECC  because  no  paper has to be handled by the bank to settle the transaction.
While  most  national merchants already have MICR check-reading equipment, small
merchants will adopt the system only if their check volume justifies the capital
investment  in  equipment, ranging from $125 to $150 per MICR reader and $300 to
$600  for  an  imager.

Check  Re-Presentment
The Federal Reserve System's Automated Clearing House ("ACH") provides the tools
to  electronically present, re-present and settle funds between banks. Our check
re-presentment  program  allows  a  merchant  to advise its bank that a returned
check  should  be  sent to the XPRESSCHEX data processing center in Albuquerque,
New  Mexico,  rather  than  returned  to  the merchant. Upon receipt, XPRESSCHEX
converts the check to an electronic ACH transaction for resubmission through the
ACH  network  and  marks  the  check for possible collection activity, should it
become  necessary.  One  feature  a  merchant  may  choose  is  to  time  the
re-presentment  so as to coincide with a check writer's typical payday to better
the odds of collection.  Generally, the full face value of the check is returned
to  the  merchant  upon  collection  and  a  collection fee charged to the check
writer, usually in the range of $15 to $25, is retained by XPRESSCHEX as payment
for  its  services.

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

Visa  POS  Check  Service  Program  ("Visa  Program")
-----------------------------------------------------
The  Visa  POS  Check  Program  enables  merchants  to  receive  direct  online
authorization  for checks written against consumer checking accounts, similar to
the  authorizations  provided  for credit and debit card transactions.  The Visa
Program was offered as a pilot program by Visa to its member banks from December
of  2000  to  December  of  2002  over  which  time several banks electronically
connected  their  check  writer data to the Visa network, making verification of
the  check  writer's  bank  account  balance possible when checks drawn on these
select  banks  were  processed.  In December of 2002, the program was officially
released  out  of  pilot  and  more  banks have been added each year to the Visa
network.  As  of  September 2005, a national merchant could expect connection to
around  20%  of  the  nation's  checking accounts from all locations and, within
select  metropolitan areas, 30% or higher connectivity.  This number is expected
to increase to 30% on average for a national merchant and, within select cities,
40% or higher over the coming year as more banks connect their check writer data
to  the  Visa  network.  ECHO  has invested significant resources and management
focus  in  its  check  services  business, particularly with respect to the Visa
Program.

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

Being  able  to  approve  or  decline  a check in real time at the point of sale
requires  some  method to verify the check writer has either an adequate balance
in  the  bank  to  cover the check or, if that is not possible, to verify if the
check written is in a negative check account database.  In order to provide this
check  service  on  100%  of  the  checks  received by a merchant, Visa needed a
solution  to approve or decline (and for those approved, electronically deposit)
the  checks  that  processed  through  the  program  on  a bank that had not yet
connected  its  check  writer  data


                                        8
<PAGE>
to  the  Visa  network.  We are currently one of two companies that provide this
service to Visa as a Third-Party Processor.  When a Visa member bank signs up to
offer the Visa Program to its merchants, it chooses a Third-Party Processor from
the certified providers and, to date, ECHO serves as a Third-Party Processor for
fifteen  financial  institutions  actively  participating  in  the  program.

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

In  addition  to being a Third-Party Processor, we are currently certified as an
Acquirer  Processor  with  Visa,  a  role  that  accepts  transactions  from the
merchant's  point-of-sale  terminal/systems and reformats them for submission to
the Visa network. We were chosen by nine banks currently in the program to serve
as their Acquirer Processor.  Most banks presently in the Visa Program are large
national or regional banks and already had terminal management service providers
that  could  act  as Acquirer Processor for the Visa Program.  In the future, as
smaller  banks  make the decision to enter the Visa Program, it is expected that
many  will  have  no  prior relationship with a terminal management provider and
therefore,  may  potentially  choose  us  as  their  Acquirer  Processor.

We  derive  transaction  revenue  in  our role as a Third-Party Processor and/or
Acquirer  Processor  by  negotiating a transaction fee with Visa and/or the bank
that  chose  us  as  its  Third-Party  Processor and/or Acquirer Processor. This
Third-Party  Processor  transaction  fee averages $0.07 to $0.09 per transaction
and  the  Acquirer  Processor  transaction  fee is generally $0.02 to $0.04. The
party  that  sells  the  service  to  the merchant (usually the bank) enjoys the
largest  mark-up  on  the product, offering the service in the range of $0.20 to
$0.50  per  check,  with external cost in the $0.12 to $0.15 range, depending on
what  the  bank  negotiates  with  Visa  and  any  third-party  provider.

We  entered into a sponsorship agreement with our primary credit card processing
bank,  First  Regional  Bank,  to enable us to sell the Visa Program directly to
merchants  with  an  obligation  to pay a $0.01 transaction fee per check to the
bank. This allows the bank to realize added revenue, allows us to realize higher
revenue in a marked-up pricing model, and a portion of the mark-up to be used to
compensate and motivate resellers of our products and services to offer the Visa
Program  to  merchants  in  the  marketplace.  The  balance of the mark-up after
paying  the  bank  and the sales organization would be additional revenue to us.
This  will  also  enable us to use our direct sales channels to provide the Visa
Program  to  ECHO's  current  and  potential  merchant  base.

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

In fiscal 2005, the Visa POS Check Program has not grown at the pace anticipated
but  several major marketing hurdles have been addressed. At its initial release
in  2002,  there  were  five primary concerns expressed by banks and/or national
merchants  who were approached to either sell and/or participate in the service.
Those  concerns  were:

     -    Visa was connected to less than 10% of the nation's checking accounts.
          The added value that justified the higher cost of the Visa Program was
          questionable when compared to a simple check verification service that
          utilizes  national  negative  databases.
     -    It  was  believed  that a merchant would have to buy a check imager to
          participate in the program at a cost of around $600 for each check-out
          lane,  a  major  investment  for  national  merchants.


                                        9
<PAGE>
     -    There  was  a  concern  as to how customers would react, positively or
          negatively,  to  getting  their  checks  back  at  the  point of sale.
     -    There  was  a  concern  that the service would slow down the check-out
          time.
     -    There was concern that ECHO could perform, being such a small company.

Regarding  the  first four concerns, Visa has effectively addressed the issue of
check  coverage  by  increasing its connectivity nationally to around 20% and in
certain  areas to 30% or higher; the perceived need for an imager to be used has
been  disproved by several national merchants who are on the program, being very
successful using their existing MICR check reading equipment; check writers have
accepted  the  program  very positively; and, there has been no slow-down in the
check-out  times  at  the  point  of  sale.

On the final concern of ECHO's performance, several national merchants have come
on the Visa POS Check program and are using ECHO.  These would include merchants
such  as Gap, Banana Republic, Old Navy, Burlington Coat Factory, Pearle Vision,
Things  Remembered and Sheetz Petroleum, to name a few. All these merchants have
seen  significant  costs  savings  in centralizing their check clearing services
into  one  account  (compared  to  literally  thousands of bank accounts in some
cases) and all have seen a significant reduction in their bad check losses since
moving  to  the  Visa  POS  Check  program.

With  each  of  the  initial  concerns  about  the  Visa POS Check Program being
adequately  addressed, we believe the merchants and/or banks that were initially
made  aware  of  the Program should be advised of the progress and encouraged to
take another look at participating in the Program.  We plan to do this ourselves
and,  as  requested,  to assist Visa and any of its member banks in sharing this
positive  update  on  the  growing  effectiveness of the Visa POS Check program.

Deriving  Revenue
-----------------
For  the  past  several  years,  we  have  invested  significant  resources  and
management  focus  in  our  check  services  business.  This  business  segment
comprised  approximately  26.0%  of  our total revenue for the fiscal year ended
September  30,  2005.  As an individual segment, check-related revenue increased
by  26.6%  to  $14,458,000  in  fiscal  2005  from  $11,423,000  in fiscal 2004.

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

The NCN database includes over 30 million negative check account records and 130
million  positive  records.  Approximately  300  affiliated  collection agencies
continually  contribute  to  the database to enrich its depth and value. Through
its  network  of  NCN  members,  ECHO can offer regional collection services and
distribute  collection  items  to  one or more of a select group of NCN's member
agencies  to  maximize  a  merchant's  or bank's ability to collect amounts on a
local  level.  NCN  provides  an  ongoing  revenue stream for ECHO as collection
agencies,  major  national  merchants,  banks, other transaction processors, and
thousands  of small merchants access the NCN database daily to verify the status
of  a  check writer in real time.  Check verification has been recognized as one
of  the lowest cost and most effective ways for retailers to lower the risks and
losses experienced in accepting checks as a form of payment. Our NCN database is
one  of  only  four  national  databases  that  can  serve this market need on a
national  scale,  and  we  are  currently  the  fifth largest check verification
processor  in  the  United  States  according to the September 2005 issue of The
Nilson  Report,  a monthly financial subscription-based newsletter.  In addition
to  operating NCN, we provide a common platform where a business can also access
other  major negative check writer databases that are currently available in the
nation.


                                       10
<PAGE>
XPRESSCHEX  collection  revenue  comes  from  two  sources:  service  fees  and
percentage  of  the check collection agreements. When XPRESSCHEX is engaged by a
merchant or a bank to immediately collect on returned checks that were converted
from  paper  to an electronic item, XPRESSCHEX normally receives the service fee
of  $15  to  $25  that  is  charged to the check writer, not the merchant.  Some
merchants  also  engage XPRESSCHEX in the active collection of paper checks that
have  bounced or in the active collection of secondary efforts after all initial
attempts  at  collection  have  been  exhausted by the merchant. In these cases,
XPRESSCHEX negotiates a percentage of the check amount, ranging from 10% to 25%,
depending  on  several  factors.

STRATEGY

Overview
--------
ECHO's  service  strategy  is  to provide merchants, banks and industry-specific
resellers  with electronic payment services that combine credit card, debit card
and  electronic  check  and  collection  services with quality customer support.
ECHO's  services enable merchants to maximize revenue by offering a wide variety
of  payment options, minimize costs by dealing with one source and improve their
bad  debt  collection rates through use of ECHO's integrated collection and risk
management  services.

Our  sales  strategy  is four-fold: to target providers of point-of-sale systems
who  serve various industries in the merchant marketplace; to continue to pursue
community  banks  with the combined set of services we currently offer; to focus
our direct sales team on specific associations and merchants in industries where
both  checks  and  credit  cards are common forms of payment; and to continue to
support  and promote the Visa POS Check Program.  We intend to capitalize on our
advantage  of  being  a  full  credit  card and check processor by combining our
products  and  using  our  lower  overall  processing  costs to allow the system
provider,  community bank or association to enjoy a financial benefit from their
customer's  processing  activity.

Electronic  Payment  Services  for  POS  System  Providers
We  believe  there  are  significant opportunities in working closely with those
firms  that  specialize  in certain industries and provide a point-of-sale (POS)
capability  to  merchants  of some nature. By aligning our processing with these
parties,  we  believe  we  can  leverage our sales activity and have longer term
relationships with merchants than are historically the case for most processors.
We  also  believe  our  full  processing capability allows us to include the POS
system  provider  with  some  economic benefit from the processing volume of the
users  of  its  system.

Promote  Merchant  Payment  Processing  for  Regional  and  Community  Banks
ECHO  pursues  small  regional  and  community  banks  for credit card and check
payment  programs  that  are  characterized  by having an asset base in the $500
million  range  or  less, and/or equity capital in the $10 to $50 million range.
ECHO  has developed a service that allows smaller banks to offer credit card and
check  processing  services  on  a  private-label  basis  using  our  back-end
infrastructure with little or no technical involvement by the bank.  Much of the
reporting  to  the  merchant  utilizes  the  Internet  as a delivery channel, an
environment  in  which we have significant experience and knowledge.  Due to the
high  costs  and  the perceived high risk, most small banks are either unable or
unwilling to compete with national banks in providing credit card and check real
time  processing services and Internet-based reporting tools to their merchants.
We  have designed the program to be adopted by a bank at little or no cost while
it  allows  the  bank  to  generate revenue and earnings in competition to those
earned  by  much  larger  banks  that  have had to make major investments in the
technology.

This  merchant  payment  processing  service,  which  is  marketed  under  the
MerchantAmerica  name,  incorporates  all  of  ECHO's  web-based  features  and
functionalities  and  our  full set of services and payment options.  We believe
that  our  fully integrated payment and reporting system allows smaller banks to
enjoy  competitive  equality  with  much bigger banks without making significant
investments  in  technology.  We, in turn, benefit from the increased processing
and  transaction  revenue. Additional benefits of the MerchantAmerica program to
regional  and  community  banks  include  the:

     -    Ability  for  banks  to  set  processing  fees  for  each  merchant;
     -    Assurance  that  the  bank  controls  the  merchant  relationship; and
     -    Reduction  of  fraud  risk.


                                       11
<PAGE>
In  addition  to  the  benefits  that the bank receives from the MerchantAmerica
program, the bank's merchants also receive numerous benefits, including a retail
merchant  account  for  credit cards, debit cards and checks; an online shopping
cart  and  check-out  payment  system;  sales  tracking  and  online transaction
history;  all  returned  check  being  automatically  referred to our collection
agency;  and  dedicated  customer service available 24 hours a day, seven days a
week.

The  program  was  launched  in  August  2002  and at the end of fiscal 2005 had
twenty-four participating banks.  ECHO estimates that there are 10,000 community
banks  in  the United States and no one provider of services has over 10% of the
market.  Based  on third-party research, we estimate that approximately 6,000 of
these  banks  do  not  offer  any  payment solution but refer their merchants to
outside  providers.  The  approximately  4,000  banks that are affiliated with a
payment  service,  we  believe,  will  be very responsive to the MerchantAmerica
value  proposition  when  a  comparison  of  features  and  costs  is  reviewed.

Promote  to  Associations  and  Guilds
There  are  over  8,000 associations and guilds in the United States and many of
the  4.1 million merchants belong to one of these organizations.  We believe our
combination  of  services  and  our  controlled  cost structure will allow us to
attract  many  of  these organizations to actively refer their members to us for
meeting  their  payment  processing  needs.

Promote Visa POS Check Service Program
Given  ECHO's  role as a "first adopter" in the early stages of the Visa Program
and our subsequent investment of significant resources and management focus with
respect to the Visa Program, we expect to see increased growth in check services
as  the marketing efforts of participating banks in the Visa Program become more
widely  implemented.

A  large participating bank sold the Visa Program to the national retailer, Gap,
and  it  deployed  the  service to all of their stores (Gap, Banana Republic and
Old  Navy)  in  June of  2003.  Their stores submit check MICR data (the numbers
along the bottom of a check) in real time and then return the paper check to the
check writer at the point of sale.  ECHO responds with an approval or decline to
the check in less than two seconds and for those it approves, it moves the funds
nightly  from  the  customers  account  to  the  merchant's  account.  ECHO also
coordinates all electronic check representment and collection on returned checks
when  needed.  Gap  remains  the  largest  merchant in the Visa Program to date.

The  primary source of savings to merchants on the Visa Program are derived from
(1) the elimination of having to handle and process paper checks and (2) the net
financial benefit seen from the bad check write-off percentage falling below the
rates  charged  by  the  national  guarantee  services.

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

SALES  AND  MARKETING

ECHO  offers  its  payment  services  through  several  sales  channels.

     -    Primary  Sales  Channels  -  Direct  sales  personnel are dedicated to
          various  industries and/or services. We employ approximately 20 people
          who  serve  in  either field or office positions that are dedicated to
          sales.
     -    Secondary  Sales  Channels - All or a portion of our services are sold
          through banks who sign up with our MerchantAmerica Agent Bank program,
          through  banks  who  are  selling  the Visa POS Check Program, through
          authorized  resellers,  independent  sales  organizations  (ISO's) and
          through  one  of our 300 NCN Collection Agency Members. These channels
          offer  lower  margins  to  us  due  to  the added participation in the
          overall  revenue  such  channels  require.  Currently  ECHO  has  150
          authorized  resellers  registered  to  sell  ECHO's  check  products.


                                       12
<PAGE>
Management  believes  that  we  are distinctive in the number of payment methods
that we allow, the combination of transaction types that we manage directly, our
ability  to  integrate  additional  services  and  our  ability  to support each
merchant  through  one  vertically  integrated  source.

Our  marketing  strategy  is  to  build  processing  relationships  with certain
providers  of POS software/hardware that serve select merchant markets; maximize
cross-selling  opportunities  to  our  existing  base  of  retail  merchants and
financial  institutions;  sell integrated suites of check, credit and debit card
processing services through small banks and industry-specific resellers; enhance
and  market  MerchantAmerica.com;  and  pursue  associations  aggressively.

COMPETITION

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

There are a number of competitors in the check services industry, the largest of
which  are  TeleCheck (the leading provider of conversion and guarantee services
and  a  subsidiary  of  First  Data  Corporation),  SCAN/eFunds  (the  largest
verification  provider  in the nation), Certegy (recently purchased by Fidelity)
and  Global Payments.  While all four have major national accounts, we have been
successful  in  winning  the processing relationships for national accounts from
each one.  ECHO believes that it can effectively compete due to its ownership of
the  NCN  database,  its integrated set of check and collection services and the
technological advantage of having been certified as both a Third-Party Processor
and  Acquirer  Processor  with  the  Visa  POS  Check  Program.

ECHO  is among the top 50 credit card processors in the nation when evaluated by
processing  volume.  ECHO  is  among  a  much  smaller  group  when evaluated by
processing  capability.  Of  the  top  50  firms,  approximately  40 of them are
independent  sales  organizations  or  banks  that  may  manage  the  front-end
authorization  service  but  they  hire  the  back-end  clearing  and settlement
services  from  a  full  service processor. There are probably 10 or fewer firms
capable  of  full  credit  card  processing  and  these would include First Data
Corporation,  Total  Systems,  NPC  (Bank  of  America),  Global Payments, First
Horizon,  and  CSS.  We  believe  we  hold the distinction of being the smallest
public  company who, with the installation of the Oasis Clearing module in 2006,
will  serve as a full service processor in credit cards.  All of our competitors
have  greater  financial and marketing resources than us.  As a result, they may
be  better  able  to  respond  more  quickly to new or emerging technologies and
changes  in  customer  requirements.  Competitors also may enjoy per transaction
cost  advantages due to their high processing volumes that may make it difficult
for  ECHO  to  compete.

We  believe  that  being the smallest processor also has some advantages.  There
are  many  merchants  who  are  sizable  to us that the larger processors do not
consider  to  be  major  merchants.  We  are  finding these merchants appreciate
getting  preferential  treatment from their processor.  Also, our willingness to
send top management into the field to meet regularly with our major merchants at
their  location  is  a  perceived  distinction and we are using it as a merchant
retention  tool.  While we understand that slightly lower costs can be generated
by  processing  high  volumes, we do not think the economic advantages that high
volume  affords  are  enough  to eliminate ECHO as an acceptable and competitive
processor in most cases. Despite these potential advantages, we believe that our
success  will  depend largely on our ability to continuously exceed expectations
in  terms  of  performance,  service,  and  price, on our ability to develop new
products  and  services,  and on how well and how quickly we enhance our current
products  and  introduce  them  into  the  market.

EMPLOYEES

As  of  September  30,  2005, we employed 222 individuals, 203 of whom were full
time  employees.


                                       13
<PAGE>
REPORTABLE  SEGMENTS

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

ITEM 2.     PROPERTIES

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

In  October  2003, we leased 21,566 square feet of a 40,000 square foot building
in  Camarillo,  California.  Our principal executive offices, including customer
support,  data  center  and  other  operational  departments  were moved to this
Camarillo  location.  We  signed an addendum to the Camarillo lease in July 2004
and  added  11,103  square feet to the lease.  We currently occupy 32,669 square
feet  of  the  Camarillo  building.  The  lease  payment for this facility as of
September  2005  was  $35,936  per  month.

We  have  additional  real property leases in Albuquerque, New Mexico; Lakewood,
Colorado;  Provo,  Utah;  Lawrence,  Kansas; and Glendale, California for sales,
data  center  and  other  operations,  under various agreements, which expire at
various  times  over  the  next  year.  The  total  of  these lease payments are
approximately  $18,000  per  month.

ITEM 3.     LEGAL PROCEEDINGS

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

In  July  2004, LML Patent Corporation, a wholly-owned subsidiary of LML Payment
Systems,  Inc.  ("LML"),  filed  a  patent  infringement  claim  against us, our
subsidiary,  XPRESSCHEX,  Inc.  and  others, relating with respect to us and our
subsidiary,  to  the  alleged  infringement by our check conversion processes of
three patents held by LML. In September 2005, the patent infringement claims for
two  (2)  of  the  patents were dropped. The suit was filed in the U.S. District
Court  for  the  District  of Delaware. The discovery process and expert witness
reports  have been completed and claims construction briefs and summary judgment
briefs  have  been  filed  with the court in anticipation of a December 19, 2005
hearing  on  these  issues.  LML  seeks  an  undisclosed  amount  of  damages in
connection  with  the  alleged  infringement.

We were aware of the LML patents prior to LML's initiation of the claims and had
previously  obtained  competent  legal opinions from outside patent counsel that
neither  we  nor  any  of  our subsidiaries infringe on any valid or enforceable
patent rights of LML being asserted in the litigation.  No documents came out of
the  discovery  process  to  alter  our original belief, and we will continue to
vigorously  defend  our  position  against  the  remaining  claims  made.

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

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

No  matters were submitted to a vote of ECHO's shareholders in the quarter ended
September  30,  2005.


                                       14
<PAGE>
                                     PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
            AND ISSUER PURCHASES OF EQUITY SECURITIES

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

<TABLE>
<CAPTION>
                     FISCAL YEAR ENDED
                       SEPTEMBER 30      High    Low
                    ------------------  ------  -----
<S>                                     <C>     <C>
                           2005
                    ------------------
                     First Quarter      $ 9.65  $7.42
                     Second Quarter     $ 9.22  $7.99
                     Third Quarter      $10.35  $7.10
                     Fourth Quarter     $ 9.36  $8.00

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

The  prices  set  forth above are not necessarily indicative of liquidity of the
trading  market.  Trading  in  our  common  stock  is  limited  and sporadic, as
indicated by the average monthly trading volume of 307,639 shares for the period
from  October  2004  to  September  2005.  On  December  12,  2005,  the closing
representative  price  per  share of our common stock, as reported on the NASDAQ
Capital  Market,  was  $9.90.

HOLDERS  OF  COMMON  STOCK

As  of  December  12,  2005,  there were 822 record holders and 2,591 beneficial
holders  of  our  common stock, with 6,661,701 shares outstanding. The number of
holders  of  record  is  based on the actual number of holders registered on the
books  of  our  transfer agent and does not reflect holders of shares in "street
name"  or  persons,  partnerships,  associations, corporations or other entities
identified  in  security  position  listings  maintained  by  depository  trust
companies.

DIVIDEND  POLICY

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

EQUITY  COMPENSATION  PLAN  INFORMATION

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

PURCHASES  OF  EQUITY  SECURITIES

We have not repurchased, nor has any affiliated purchaser repurchased, shares of
our  common  stock.

ITEM 6.     SELECTED FINANCIAL DATA

The  following  table  sets  forth certain selected consolidated financial data,
which  should  be read in conjunction with the Consolidated Financial Statements
and  Management's  Discussion and Analysis of Financial Condition and Results of
Operations  included  in Items 7 and 8 below.  The following data, insofar as it
relates  to  each  of  the  five


                                       15
<PAGE>
years ended September 30, has been derived from our annual financial statements,
including  the  consolidated  balance sheets at September 30, 2005 and 2004, and
the  related  consolidated  statements  of  operations and of cash flows for the
three years ended September 30, 2005, 2004 and 2003, and notes thereto appearing
elsewhere  herein.

<TABLE>
<CAPTION>
                                                                          YEAR ENDED SEPTEMBER 30
                                               ------------------------------------------------------------------------
                                                    2005             2004          2003         2002          2001
                                               ---------------  --------------  -----------  -----------  -------------
                                                         ( ----  AMOUNTS IN THOUSANDS, EXCEPT PER SHARE  ---- )
STATEMENT OF OPERATIONS DATA:
-----------------------------
<S>                                            <C>              <C>             <C>          <C>          <C>
Revenue                                        $       55,551   $      48,320   $   41,149   $   33,291   $     29,943
Costs and expenses                                     53,872          44,863       38,724       36,960         29,380
                                               ---------------  --------------  -----------  -----------  -------------
Income (loss) from operations                           1,679           3,457        2,425       (3,669)           563
Interest income (expense), net                             23            (104)        (172)         (74)           106
Other income (expense), net                               -0-           1,319          -0-          -0-            350
                                               ---------------  --------------  -----------  -----------  -------------
Income (loss) before income tax
  (provision) benefit and cumulative
  effect of an accounting change                        1,702           4,672        2,253       (3,743)         1,019
(Provision) benefit for income taxes                     (669)         (1,823)        (925)       1,367           (585)
                                               ---------------  --------------  -----------  -----------  -------------
Income (loss) before cumulative
  effect of an accounting change                        1,033           2,849        1,328       (2,376)           434
Cumulative effect of an accounting
  change to adopt SFAS 142[1]                             -0-             -0-       (4,707)         -0-            -0-
                                               ---------------  --------------  -----------  -----------  -------------

Net income (loss)                              $        1,033   $       2,849   $   (3,379)  $   (2,376)  $        434
                                               ===============  ==============  ===========  ===========  =============


Earnings (loss) per share-basic                $         0.16   $        0.45   $    (0.58)  $    (0.41)  $       0.07
Earnings (loss) per share-diluted              $         0.15   $        0.41   $    (0.56)  $    (0.41)  $       0.07

Weighted average number of common
  shares and equivalents outstanding-basic              6,485           6,312        5,812        5,788          5,797

Weighted average number of common
  shares and equivalents outstanding-diluted            6,939           6,900        6,024        5,788          5,964

BALANCE SHEET DATA:
-------------------
Working capital                                $        8,037   $       8,004   $    3,201   $    3,234   $      5,821
Current assets                                         29,310          29,923        9,646        5,728          8,259
Total assets                                           40,817          39,428       18,775       18,191         18,921
Current liabilities                                    21,273          21,919        6,445        2,494          2,438
Long-term debt, and payables to
  stockholders and related parties,
  less current portion                                    705             704        1,961        2,159            744
Total stockholders' equity                     $       17,772   $      16,240   $   10,369   $   13,538   $     15,739
</TABLE>


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


                                       16
<PAGE>
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

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

We  organize  our  service  offerings  under  the  following  brand  names:

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

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

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

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

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

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

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


                                       17
<PAGE>
Revenue from check re-presentment is derived from fees charged to check writers.
Check re-presentment is a service that allows merchants to collect a paper check
through  the ACH network after a check has previously been presented to the bank
for  collection  unsuccessfully  at  least once.  The fees earned from the check
writer  are  recognized  when  collected,  as  collectibility  is not reasonably
assured  until  that  point.

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

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

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

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

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

-      RESEARCH AND DEVELOPMENT EXPENSE. Expenditures for activities relating to
product  development  and  improvement are charged to expense as incurred.  Such
expenditures amounted to $1,609,000 in fiscal year 2005 and $1,465,000 in fiscal
year  2004.

-      CUMULATIVE  EFFECT  OF CHANGE IN ACCOUNTING PRINCIPLE.  Effective October
1,  2002,  we adopted Statement of Financial Accounting Standards No. 142 ("SFAS
142"),  "Goodwill and Other Intangible Assets".  SFAS 142 requires that goodwill
no  longer  be amortized, but instead be tested for impairment at least annually
using  a  fair  value-based  approach.  SFAS  No.  142 required us to perform an
initial  assessment  of  our  reporting units to determine whether there was any
indication  that  the  goodwill  carrying  value was impaired. This transitional
assessment  was  made  by  comparing  the  fair value of each reporting unit, as
determined  in accordance with the new standard, to its book value.  In 2003, we
determined  that  all  of  our  goodwill  was  impaired  under  SFAS No. 142 and
accordingly  took  a  charge  to  write  down  the  amount  of  that impairment.

-      CAPITALIZATION  OF  SOFTWARE COSTS. The costs of purchased and internally
developed  software  used to provide services to customers or for the process of
internal  administration  are capitalized and amortized on a straight-line basis
over the lesser of three years or estimated useful life. Under the provisions of
Statement  of  Position  98-1,  "Accounting  for  the Costs of Computer Software
Developed  or  Obtained  for  Internal  Use,"  we  capitalize  software


                                       18
<PAGE>
costs  when  both  the preliminary project stage is completed and management has
authorized  further funding for the completion of the project. Capitalization of
costs  ceases  when  the  project  is substantially complete and the software is
ready  for its intended use.  Software developed or obtained for internal use is
tested  for impairment whenever events or changes in circumstances indicate that
its  carrying  amount  may  not  be  recoverable.

RESULTS  OF  OPERATIONS

FISCAL  YEARS  2005  AND  2004
------------------------------

Financial highlights for fiscal 2005 as compared to fiscal 2004 were as follows:

--   Total  revenue  increased  15.0%  to  $55.6  million

--   Gross  margin  from  processing  and transaction revenue decreased to 35.1%
     from  36.8%

--   Operating  income  decreased  from  $3.5  million  to  $1.7  million

--   Diluted  earnings  per  share  were  $0.15  as compared to $0.41 per share.

--   Bankcard  and  transaction  processing  revenue increased by 11.4% to $41.1
     Million

--   Bankcard  processing  volume  increased  12.7%  to  $1.2  billion

--   Check-related  revenue  increased  by  26.6%  to  $14.5  million

--   ACH  processing  volume  increased  24.6%  to  32.1  million  transactions

REVENUE.  Total  revenue  increased  15.0%  to $55,551,000 for fiscal 2005, from
$48,320,000 for fiscal 2004. The increase can be primarily attributable to 11.4%
growth  in bankcard and transaction processing revenue and 26.6% growth in check
services  revenue  year-over-year. This growth has occurred organically from our
existing  merchants  and  from  our  marketing  initiatives  during  the  year.

The bankcard and transaction processing revenue increase was mainly attributable
to  a  12.7%  increase in bankcard processing volume as compared to fiscal 2004.
This  increase  was  the  result  of  our organic growth and the growth from our
various  marketing  channels  such  as  the  Agent  Bank  Program  and  the
MerchantAmerica  marketing  program.

The  check-related  processing  revenue  increase  was  attributable  to a 41.8%
increase  in  ACH  services  revenue  and  a 6.4% increase in check verification
revenue.  The  high  growth  in  ACH  revenue  was  mainly due to wallet funding
activities  and  increases  in  overall  ACH  activities.

COST OF SALES.  Bankcard processing expenses are directly related to the changes
in  processing revenue. A majority of our bankcard processing expenses are fixed
costs  and  are  reflected  as  a  percentage  of  the total face amount of each
bankcard  transaction, and the remaining costs are based on a fixed rate applied
to the number of transactions processed. Processing-related expenses, consisting
of  bankcard  processing  expense  and transaction and check processing expense,
increased  18.1% for the year, from $30,370,000 in fiscal 2004 to $35,867,000 in
fiscal  2005.  The increase reflects the 15.0% increase in total revenue for the
year,  a  $449,000 increase in amortization expense and a $1,020,000 increase in
commission  expense.

Total gross margin from processing and transaction services decreased from 36.8%
in  fiscal  2004  to  35.1%  in  fiscal  2005.  Gross  margin  from bankcard and
transaction  processing  decreased  from 29.4% in fiscal 2004 to 27.2% in fiscal
2005.  The  decrease  in gross margin was primarily attributable to several high
volume  merchants  who  negotiated  lower than average discount rates due to the
size  of  their  accounts.  Additionally,  gross  margin  from  check processing
decreased  from 61.1% in fiscal 2004 to 57.6% in fiscal 2005. The check services
gross  margin  decrease  was  mainly  attributable  to an increase in commission
expense  and  amortization  expense.

EXPENSE.  Other operating costs such as personnel costs, telephone, depreciation
expenses  and outside services increased 9.1%, from $5,182,000 in fiscal 2004 to
$5,653,000 in fiscal 2005. This was primarily due to the 9% increase in salaries
to  support  the  15%  growth  in  fiscal  2005.


                                       19
<PAGE>
Research and development expenses increased 9.8%, from $1,465,000 in fiscal 2004
to $1,609,000 in fiscal 2005.  Research and development initiatives are critical
for  us to remain competitive with our peers. Several major development projects
were  completed  during  fiscal  year  2005.  However, given the rapid change in
technology in our industry, we plan to continue to invest in product development
in  both the bankcard processing business segment and the check-related products
segment  in  order  to  stay  ahead  of  our  competitors.

Selling,  general  and  administrative  (SG&A)  expenses  increased  36.9%  from
$7,846,000  in  fiscal  2004  to  $10,743,000  in fiscal 2005. This increase was
primarily  attributable  to:  1)  greater  personnel costs due to cost of living
adjustments;  2)  growth  in sales and marketing expenses to implement our sales
and  marketing  strategies; 3) a $1,141,000 increase in legal expenses to defend
several  lawsuits; and 4) $150,000 increase in legal settlement expenses.   Even
though  we were expecting legal expenses related to the LMLP lawsuit to decrease
in  the second half of 2005, legal expense continues to be higher than expected.

As  a  percentage of total revenue, SG&A expenses increased from 16.2% in fiscal
2004  to  19.3%  in  fiscal  2005.

OPERATING  INCOME.  Operating income decreased from $3,457,000 in fiscal 2004 to
$1,679,000  in  fiscal  2005,  a  decrease  of 51.4%.  The decrease in operating
income  was  primarily attributable to the 1.7% decrease in gross margin and the
increased  selling,  general  and  administrative  expenses  described  above.

INTEREST  EXPENSE.  Interest expense decreased to $113,000 for fiscal 2005, from
$175,000 for fiscal 2004. The decrease was due to the full repayment of one note
and  some  capital  leases  during  fiscal  2005. Interest income increased from
$71,000  in  fiscal  2004  to $136,000 in fiscal 2005 due to higher than average
cash  balances  on  hand  throughout  fiscal  year  2005.

GAIN  ON  SALE  OF  ASSETS.  Fiscal  2004  results  were favorably affected by a
pre-tax gain of $1,319,000 resulting from the sale of the building that formerly
held  the  Company's  principal  executive  offices.

EFFECTIVE  TAX  RATE.  The  income tax provision was $669,000 for fiscal 2005 as
compared  to  $1,823,000  for fiscal 2004.  Our effective tax rate was 39.3% for
fiscal  2005,  as  compared to 39.0% for fiscal 2004.  See Notes to Consolidated
Financial  Statements included elsewhere herein for a further explanation of the
income  tax  expense and a reconciliation of reported income taxes to the amount
utilizing  the  statutory  rate.

NET INCOME. Net income for fiscal 2005 was $1,033,000, as compared to $2,849,000
for  fiscal  2004.  This  decrease was primarily attributable to the gain on the
sale  of  assets  in  fiscal 2004 and the 36.9% increase in selling, general and
administrative  expenses  in  fiscal  2005.

SEGMENT RESULTS
Bankcard  and  Transaction  Processing.  For  the year ended September 30, 2005,
bankcard processing and transaction revenue accounted for approximately 74.0% of
our  revenue,  compared  to  76.4%  in  fiscal  2004.  Bankcard  processing  and
transaction  revenue  increased  11.4%,  from  $36,897,000  in  fiscal  2004  to
$41,093,000  in  fiscal  2005.  This increase was mainly attributable to a 12.7%
increase  in  bankcard processing volume as compared to fiscal 2004. We continue
to  increase  our  bankcard processing business primarily through organic growth
and  various  sales  and  marketing  programs.

In  fiscal  2005,  the  bankcard  and  transaction  processing segment generated
operating  income of $5,829,000, or 14.2% of the related revenue, as compared to
$5,977,000,  or  16.2%  of  the related revenue in fiscal 2004. This decrease in
operating  income  was  primarily  due  to  the lower gross margin combined with
higher  research  and  development  expenses  and  selling  G&A  expense.

We  purchased  a fully integrated, multi-modular bankcard processing system from
Oasis  Technologies  for  approximately  $1.6  million.  We  have  incurred  an
additional  $1.5  million of internal development costs thus far in implementing
this  system. The implementation of this system will give us greater flexibility
to  price our credit card processing services, allowing us to attract and retain
larger  merchants  as  well as the small and mid-market merchants that have been
our target market.  This project has experienced numerous implementation delays,
mainly  as  a result of vendor software delivery issues and the vigorous testing
required  prior  to  implementation.  Management  now  anticipates  the clearing
portions  of  the  Oasis  system to begin live customer deployment in the second
half  of  2006.


                                       20
<PAGE>
Check  Related  Products.  Check-related  revenue increased from $11,423,000 for
fiscal  2004  to  $14,458,000  for  fiscal  2005,  an  increase  of 26.6%. Check
verification  revenue  increased  6.4%  to  $3,645,000  for  fiscal  2005,  from
$3,425,000  for  fiscal  2004.  Check  conversion,  ACH  services  and  check
re-presentment  revenue  increased  41.8%  to  $8,251,000  for fiscal 2005, from
$5,820,000  for  fiscal  2004.  Additionally, check collection revenue increased
15.4%,  from  $1,816,000  in  fiscal 2004 to $2,096,000 in fiscal 2005. The high
growth  in  ACH  revenue  was  due to  wallet funding activities and the overall
increase  in  the  ACH  and conversion product. Total ACH transactions processed
during  fiscal  2005 were 32.1 million transactions, as compared to 25.8 million
transactions  processed  in  fiscal  2004,  an  increase  of  24.6%.

Check  services  revenue  made  up 26.0% of the total processing and transaction
revenue  for  fiscal  2005  as  compared to 23.6% in fiscal 2004.  Check-related
operating  income was $2,204,000 in fiscal 2005, as compared to operating income
of  $1,644,000  in  fiscal 2004, an increase of 34.1%. The increase in operating
income  was  mainly  due  to  the  26.6%  increase  in  check-related  revenue.

The Visa Program has not grown as much as we had expected in the past year. Even
though  we  are getting new merchants to sign up under the Visa Program, some of
the  larger  merchants  have  shown  a  rather  significant decline in the total
transactions  processed for fiscal 2005 as compared to fiscal 2004. We attribute
this  to the overall decline in check usage in the market. Additionally, certain
store  branded  credit  cards  from  one  of  our major Visa POS Check merchants
shifted  some  of  the  payment  transactions  away from check. We are currently
working with 16 Visa member banks that have signed up to participate in the Visa
Program.


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

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

--   Total  revenue  increased  17.4%  to  $48.3  million

--   Gross margin from processing and transaction revenue improved to 36.8% from
     33.5%

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

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

--   Bankcard  and  transaction  processing  revenue increased by 12.0% to $36.9
     million

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

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

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

REVENUE.  Total  revenue  increased  17.4%  to $48,320,000 for fiscal 2004, from
$41,149,000  for  fiscal  2003. The increase was primarily attributable to 12.0%
growth  in bankcard and transaction processing revenue and 39.4% growth in check
services  revenue  year-over-year.  This  growth  occurred  organically from our
existing merchants and from our marketing initiatives during fiscal 2004, and as
a  result  of  increasing  acceptance  of  our  check  services products and the
continued  growth  in  the  Visa  Program.

The bankcard and transaction processing revenue increase was mainly attributable
to  a  9.5%  increase  in bankcard processing volume as compared to fiscal 2003.
This  increase  was  the  result  of  our organic growth and the growth from our
various  marketing  channels  such  as  the  Agent  Bank  Program  and  the
MerchantAmerica  marketing  program.  The  increase  was partially offset by the
departure  of  several  high  volume  merchants  during  fiscal  2004.

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

COST  OF  SALES. Bankcard processing expenses are directly related to changes in
processing  revenue.  A  majority  of our bankcard processing expenses are fixed
costs  and  are  reflected  as  a  percentage  of  the  total  face


                                       21
<PAGE>
amount  of  each  bankcard  transaction,  and the remaining costs are based on a
fixed  rate  applied to the number of transactions processed. Processing-related
expenses,  consisting  of  bankcard processing expense and transaction and check
processing  expense, increased 11.8% for fiscal 2004, from $27,173,000 in fiscal
2003  to  $30,370,000 in fiscal 2004.  The increase reflected the 17.4% increase
in  processing  and  transaction  revenue  for  fiscal  2004.

Gross  margin  from  processing  and transaction services improved from 33.5% in
fiscal  2003  to  36.8%  in  fiscal  2004.  This improvement in gross margin was
mainly  due to: 1) check-related revenue, which has a higher gross margin, which
made  up  23.6%  of the total revenue in fiscal 2004 as compared to 19.9% of the
total  revenue  in  fiscal 2003; and 2) a rate adjustment was applied to a broad
base  of  bankcard  merchants  during  fiscal 2004 to offset increases in direct
bankcard  processing  expenses.

EXPENSE.  Other operating costs such as personnel costs, telephone, depreciation
expenses and outside services increased 18.5%, from $4,373,000 in fiscal 2003 to
$5,182,000 in fiscal 2004 primarily due to additional staff hired in fiscal 2004
to support our growth. Research and development expenses remained constant, from
$1,464,000  in fiscal 2003 to $1,465,000 in fiscal 2004. Almost all of our major
development  projects  were  in  the  coding  and testing phases in fiscal 2004.

Selling,  general  and  administrative  (SG&A)  expenses  increased  37.3%  from
$5,714,000  in  fiscal  2003  to  $7,846,000  in  fiscal 2004. This increase was
primarily  attributable  to:  1)  greater  personnel costs due to cost of living
adjustments  and  greater  employee benefits costs, such as health insurance and
worker's  compensation  insurance;  2) growth in sales and marketing expenses to
implement  our  sales  and  marketing  strategies;  3)  increased  legal  and
professional expenses to defend several lawsuits; 4) an increase in rent expense
due  to  our  corporate relocation in October 2003; and 5) a $300,000 litigation
accrual  related  to  an  ordinary  course  contract  dispute  with  one  of our
independent  sales  organizations.  The  accrual  represented  management's good
faith  evaluation of the dispute after consultation with its legal counsel. As a
percentage  of  total revenue, SG&A expenses increased from 13.9% in fiscal 2003
to  16.2%  in  fiscal  2004.

OPERATING  INCOME.  Operating income increased from $2,425,000 in fiscal 2003 to
$3,457,000  in  fiscal 2004, an increase of 42.6%.  The improvement in operating
income  was primarily attributable to the 17.4% increase in revenue and the 3.3%
improvement  in  gross  margin  described  above.

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

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

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

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

SEGMENT RESULTS
Bankcard  and  Transaction  Processing.  For  the year ended September 30, 2004,
bankcard processing and transaction revenue accounted for approximately 76.4% of
our  revenue,  compared  to  80.1%  in  fiscal  2003.  Bankcard  processing  and
transaction  revenue  increased  12.0%,  from  $32,957,000  in  fiscal  2003  to
$36,897,000  in  fiscal  2004.  This  increase was mainly attributable to a 9.5%
increase in bankcard processing volume as compared to fiscal 2003. This increase
was  partially  offset  by the departure of several high volume merchants.  To a
lesser  extent, the increase was positively impacted by a rate adjustment to our
bankcard  merchant  base  during  fiscal  2004. We continue to grow our bankcard
processing  business  primarily  through  organic  growth  and various sales and
marketing  programs.


                                       22
<PAGE>
In  fiscal  2004,  the  bankcard  and  transaction  processing segment generated
operating  income of $5,977,000, or 16.2% of the related revenue, as compared to
$4,303,000,  or  13.1%  of  the related revenue in fiscal 2003. This increase in
operating  income  was  reflective  of  the increase in revenue and higher gross
margins  resulting  from  the  broad-base rate adjustment to merchants to offset
higher  operating  costs.

In  fiscal  2001,  we  purchased  a  fully  integrated,  multi-modular  bankcard
processing  system  from  Oasis  Technologies for approximately $1.3 million. We
incurred  an additional $700,000 of internal development costs in fiscal 2004 in
implementing  this  system.

Check  Related  Products.  Check-related  revenue  increased from $8,192,000 for
fiscal  2003  to  $11,423,000  for  fiscal  2004,  an  increase  of 39.4%. Check
verification  revenue  increased  10.6%  to  $3,425,000  for  fiscal  2004, from
$3,097,000  for  fiscal  2003.  Check  conversion,  ACH  services  and  check
re-presentment  revenue  increased  101.2%  to  $5,820,000 for fiscal 2004, from
$2,892,000  for  fiscal  2003.  Additionally, check collection revenue increased
1.4%,  from  $1,791,000  in  fiscal  2003 to $1,816,000 in fiscal 2004. The high
growth  in the check conversion and ACH revenue was due to the increasing market
acceptance  of this product and to the transaction revenue generated by the Visa
Program.  Total  ACH transactions processed during fiscal 2004 were 25.8 million
transactions, as compared to 11.3 million transactions processed in fiscal 2003,
an  increase of 128.4%.  ACH transactions, like ACH revenue, increased primarily
from  the increasing market acceptance of the ACH services and the Visa Program.

Check  services  revenue  made  up 23.6% of the total processing and transaction
revenue  for  fiscal  2004  as  compared to 19.9% in fiscal 2003.  Check-related
operating  income was $1,644,000 in fiscal 2004, as compared to operating income
of  $591,000  in  fiscal  2003, an increase of 178.2%. The increase in operating
income  was  mainly  due  to  the  39.4%  increase  in  check-related  revenue.

One  of  the Visa acquiring banks, using us as the Third-Party Processor, rolled
out  this  Program  to  a  national  retailer  in  June 2003.  This one merchant
accounted  for  a  significant  percentage  of  revenue  generated from the Visa
Program  in  fiscal  2004  and  an  increased  volume of transactions processed.


LIQUIDITY  AND  CAPITAL  RESOURCES

As  of  September  30,  2005,  we  had  available  cash  and cash equivalents of
$6,732,000, restricted cash of $1,448,000 in reserve with our primary processing
banks  and  working  capital  of  $8,037,000.

Accounts  receivable,  net  of  allowance  for  doubtful  accounts, increased to
$2,421,000  at  September  30,  2005  from $1,943,000 at the end of fiscal 2004.
Allowance  for  doubtful accounts, which reflects chargeback losses decreased to
$92,000  at  the  end  of  fiscal 2005 from $111,000 at September 30, 2004.  The
increase  in  accounts  receivable  was  due  to  the  higher processing revenue
generated  in  fiscal  2005  and  therefore  higher  month-end  balances.

Net  cash provided by operating activities for the year ended September 30, 2005
was  $3,888,000  as  compared  to  net  cash provided by operating activities of
$5,325,000  for fiscal 2004. The $1,437,000 decrease in cash from operations was
primarily  attributable  to the $1,816,000 decrease in net income between fiscal
2005  and  2004.

Net  cash  used  in  investing  activities was $4,636,000 for the fiscal 2005 as
compared  to  $1,904,000  for  fiscal  year  2004.  During  fiscal 2005, we used
$4,640,000 for purchases of equipment and capitalized software costs as compared
to  $4,278,000  for  fiscal  2004.

Net cash used by financing activities was $96,000 for the current fiscal year as
compared  to  net cash provided by financing activities of $1,247,000 for fiscal
year  2004.  We  paid  off  $438,000  in  notes  payable,  used $452,000 for the
repayment  of  capitalized  leases  and  received  $394,000 from the exercise of
employee  stock  options.  During  fiscal  2004,  we  received  net  proceeds of
$2,693,000  from  a  private  placement.

As of September 2005, we have a $2,000,000 equipment lease line and a $3,000,000
credit line with Bank of the West for working capital needs. As of September 30,
2005,  we  have  drawn  down $1,000,000 of the equipment lease line but have not
used  the  $3,000,000  credit  line.


                                       23
<PAGE>
At  September,  2005,  we  had  the  following  cash  commitments:

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

     Contractual                       Less than                           More Than
     Obligations             Total       1 year    1-3 years   3-5 years    5 years
     --------------------  ----------  ----------  ----------  ----------  ----------
<S>                        <C>         <C>         <C>         <C>         <C>
     Long-term debt
       including interest  $1,038,000  $  339,000  $  570,000  $  129,000  $      -0-
     Capital lease
       obligations            229,000     160,000      69,000         -0-         -0-
     Operating leases       1,535,000     537,000     998,000         -0-         -0-
                           ----------  ----------  ----------  ----------  ----------
     Total contractual
       cash obligations    $2,802,000  $1,036,000  $1,637,000  $  129,000  $      -0-
                           ==========  ==========  ==========  ==========  ==========
</TABLE>

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

OFF-BALANCE  SHEET  ARRANGEMENTS

At  September  30,  2005,  we  did  not have any off-balance sheet arrangements.

NEW  ACCOUNTING  PRONOUNCEMENT

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


RISK  FACTORS

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

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

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

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


                                       24
<PAGE>
other  adverse circumstances.  If a volume restriction is placed on us, it could
materially  adversely  affect our business operations by restricting our ability
to  process  credit  card  transactions  and  receive  the related revenue.  Our
relationships  with our customers and merchants would also be adversely affected
by  our  inability  to  process  these  transactions.

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

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

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

We  have  implemented  systems  and software for the electronic surveillance and
monitoring  of  fraudulent  bankcard  and ACH use.  As of September 30, 2005, we
maintained  a  dedicated  chargeback  reserve  of  $776,000  at our primary bank
specifically  earmarked for such activity.  Additionally, through our sponsoring
bank,  as of September 30, 2005, we had access to approximately $13.7 million in
merchant  deposits  to  cover  any  potential chargeback losses.  Despite a long
history  of  managing  such  risk,  we  cannot guarantee that these systems will
prevent  fraudulent  transactions from being submitted and processed or that the
funds set aside to address such activity will be adequate to cover all potential
situations  that might occur.  We do not have insurance to protect us from these
losses.  There  is  no assurance that our chargeback reserve will be adequate to
offset  against  any  unauthorized  or  fraudulent processing losses that we may
incur.  Depending on the size of such losses, our results of operations could be
immediately  and  materially  adversely  affected.

EXCESSIVE CHARGEBACK LOSSES COULD SIGNIFICANTLY AFFECT OUR RESULTS OF OPERATIONS
AND  LIQUIDITY.

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

A  cardholder,  through its issuing bank, generally has until the later of up to
four  months  after  the  date a transaction is processed or the delivery of the
product  or  service  to  present  a  chargeback  to  our sponsoring bank as the
merchant  processor.  Therefore,  management believes that the maximum potential
exposure  for  the chargebacks would not exceed the total amount of transactions
processed  through  Visa  and  MasterCard  for  the  last  four months and other
unresolved  chargebacks  in the process of resolution.  For the last four months
through  September  30, 2005, this potential exposure totaled approximately $443
million.  At  September  30,  2005,  we,  through  our  sponsoring  banks,  had
approximately  $106,000  of  unresolved  chargebacks that were in the process of
resolution.  At September 30, 2005, we, through our sponsoring banks, had access
to  $13.7  million  belonging to our merchants. This money has been deposited at
the  sponsoring  bank by the merchants to cover any potential chargeback losses.


                                       25
<PAGE>
For  the  fiscal  years 2005 and 2004, we processed approximately $1,186 million
and  $1,053  million,  respectively,  of Visa and MasterCard transactions, which
resulted  in  $7.1  million  in  gross chargeback activities for the fiscal year
ended 2005 and $7.6 million for the fiscal year ended 2004. Substantially all of
these  chargebacks  were  recovered  from  the  merchants.

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

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

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

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

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

THE INABILITY OF THIRD-PARTY SOFTWARE VENDORS TO CONTINUE TO SUPPORT AND PROVIDE
MAINTENANCE  SERVICES  WITH  RESPECT  TO  THEIR  PRODUCTS  COULD  SIGNIFICANTLY
ADVERSELY  AFFECT  OUR  RESULTS  OF  OPERATIONS  AND  FINANCIAL  CONDITION.

We utilize various third-party software applications and depend on the providers
of such software applications to provide support and maintenance services to us.
In the event that a third-party software vendor fails to continue to support and
maintain  its  software  application, or fails to do so in a timely manner, this
could  significantly  affect  our results of operations and financial condition.

Our  inability  to  ultimately  implement,  or  a  determination  to  cease  the
implementation  of  various  of  our  software  technology  initiatives  will
significantly  adversely  affect  our  results  of  operations  and  financial
condition.

We  have  spent  significant  time  and  monetary resources implementing several
software  technologies,  which resulted in significant cost being capitalized by
us  as  non-current  software  assets.  The implementation of these technologies
will  provide  us with substantial operational advantages that would allow us to
attract  and  retain  larger  merchants,  as  well  as  the small and mid-market
merchants  that  have  been  our  target  market.  Management  believes that the
implementation  of these software technologies, and the technologies themselves,
continues  to  be in the best interests of, and the most viable alternative for,
the Company.  However, the inability to ultimately implement, or a determination
to  cease  the  implementation  of these software technologies would cause these
assets  to become impaired, and the corresponding impairment would significantly
adversely  affect  our  results  of  operations  and  financial  condition.

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

We  are  in  the  business  of processing payment transactions and designing and
implementing  integrated  systems  for our customers so that they can better use
our  services.  This  business  is  highly  competitive  and  is


                                       26
<PAGE>
characterized  by  rapid  technological  change,  rapid  rates  of  product
obsolescence,  and rapid rates of new product introduction.  Our market share is
relatively  small  as  compared  to  most  of  our competitors and most of these
competitors  have  substantially  more  financial and marketing resources to run
their  businesses.  While  we  believe our small size provides us the ability to
move  quickly  in  some areas, our competitors' greater resources enable them to
investigate  and  embrace  new  and emerging technologies, to quickly respond to
changes in customers needs, and to devote more resources to product and services
development  and marketing.  We may face increased competition in the future and
there  is no assurance that current or new competition will allow us to keep our
customers.  If  we  lose  customers,  our  business operations may be materially
adversely  affected,  which  could cause us to cease our business or curtail our
business  to  a point where we are no longer able to generate sufficient revenue
to  fund  operations.  There  is  no  assurance  that  our  current products and
services  will stay competitive with those of our competitors or that we will be
able  to  introduce  new  products  and  services to compete successfully in the
future.

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

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

WE  INCUR  FINANCIAL  RISK  FROM OUR CHECK GUARANTEE SERVICE.

The  check  guarantee  business  is  essentially a risk management business. Any
limitation  of  a  risk  management system could result in financial obligations
being  incurred by ECHO relative to our check guarantee activity. While ECHO has
provided  check  guarantee services for several years, there can be no assurance
that  our  current  risk  management  systems are adequate to assure against any
financial  loss  relating to check guarantee. ECHO is enhancing its current risk
management  systems  and  it is being conservative with reference to the type of
merchants  to  which it offers guarantee services in order to minimize this risk
but  no  assurance  can be given that such measures will be adequate. During the
year  ended  September 30, 2005, we incurred $258,000 in losses from uncollected
guaranteed  checks.

SECURITY  BREACHES  COULD  IMPACT  OUR  CONTINUED  OPERATIONS.

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

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

Our  business  industry involves rapidly changing technology.  Recently, we have
observed  rapid  changes  in  technology  as  evidenced  by  the  Internet  and
Internet-related  services and applications, new and better software, and faster
computers and modems.  As technology changes, ECHO's customers desire and expect
better products and services.  Our success depends on our ability to improve our
existing  products  and  services  and  to  develop  and market new products and
services.  The  costs  and  expenses  associated  with  such  an effort could be


                                       27
<PAGE>
significant to us.  There is no assurance that we will be able to find the funds
necessary  to  keep  up  with new technology or that if such funds are available
that  we  can  successfully  improve  our  existing  products  and  services  or
successfully develop new products and services.  Our failure to provide improved
products  and  services to our customers or any delay in providing such products
and  services  could  cause  us  to  lose customers to our competitors.  Loss of
customers  could  have  a  material  adverse  effect  on  ECHO.

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

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

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

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

Because  technology  in the payment processing industry evolves rapidly, we need
to  continue  to  invest  in  research  and  development  in  both  the bankcard
processing  business  segment and the check-related products segment in order to
remain  competitive. Research and development expenses increased from $1,465,000
in  fiscal  2004  to  $1,609,000 in fiscal 2005. Most of our development project
costs  were  capitalized  once  we  entered  into  coding and testing phases. We
continue to evaluate projects, which we believe will assist us in our efforts to
stay competitive. Although we believe that our investment in these projects will
ultimately  increase  earnings, there is no assurance as to when or if these new
products will show profitability or if we will ever be able to recover the costs
invested  in  these  projects.  Additionally,  if  we  fail  to  commit adequate
resources  to  grow  our technology on pace with market growth, we could quickly
lose  our  competitive  position,  including  the  loss of our merchant and bank
customers.

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

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


                                       28
<PAGE>
WHILE  WE  MAINTAIN INSURANCE PROTECTION AGAINST CLAIMS RELATED TO OUR SERVICES,
THERE  IS  NO ASSURANCE THAT SUCH PROTECTION WILL BE ADEQUATE TO COVER POTENTIAL
CLAIMS  AND  OUR INABILITY TO OTHERWISE PAY SUCH CLAIMS COULD HARM OUR BUSINESS.

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

INVOLVEMENT  IN  LITIGATION  COULD  HARM  OUR  BUSINESS.

We  are involved in various lawsuits arising in the ordinary course of business.
Although we believe that the claims asserted in such lawsuits are without merit,
the  cost  to  us for the fees and expenses to defend such lawsuits could have a
material  adverse  effect  on  our financial condition, results of operations or
cash flow.  In addition, there can be no assurance that we will not at some time
in  the  future experience significant liability in connection with such claims.
As  of  September 30, 2005, we have spent approximately $1,420,000 in legal fees
and  expenses  defending  these  claims.

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

We currently maintain two data centers: one in Camarillo, California, and one in
Albuquerque,  New  Mexico.  Should  a  natural  disaster  occur  in  any  of the
locations,  it  is  possible  that  ECHO would not be able to fully recover full
functionality  at  one  of  its  data  centers.  To  minimize  this  risk,  ECHO
centralized  its  data  processing functionality in Camarillo during fiscal 2005
and  will  make  Albuquerque  a fully redundant site.  Prior to that time, it is
possible a natural disaster could limit or completely disable a specific service
offered  by  ECHO  until  such  time that the specific location could resume its
functionality.  Our  inability  to  provide  such  service could have a material
adverse  effect  on  our  business  and  results  of  operations.

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

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

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

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

Our  business  strategy  may  include  expansion  through  internal  growth,  by
acquiring  complementary  businesses  or by establishing strategic relationships
with  targeted customers and suppliers.  In order to do so, or to fund our other
activities,  we  may  issue  additional  equity securities that could dilute our
stockholders'  stock  ownership.  We  may  also assume additional debt and incur
impairment  losses  related  to goodwill and other tangible assets if we acquire
another  company and this could negatively impact our results of operations.  As
of  the  date of this report, management has no plan to raise additional capital
through  the  sale of securities and believes that our cash flow from operations
together  with  cash on hand and our established line of credit with Bank of the
West  will  be  sufficient  to  meet  our working capital and other commitments.


                                       29
<PAGE>
WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE PRICE OF
OUR  COMMON  STOCK.

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

OUR STOCK PRICE HAS BEEN VOLATILE.

Our  common  stock  is  quoted  on  the  NASDAQ Capital Market, and there can be
substantial volatility in the market price of our common stock.  Over the course
of  the  quarter  ended September 30, 2005, the market price of our common stock
has  been  as high as $9.36, and as low as $8.00.  Additionally, over the course
of  the  year ended September 30, 2005, the market price of our common stock has
been  as  high  as  $10.35  and as low as $7.10.  The market price of our common
stock  has  been,  and  is  likely  to  continue  to  be, subject to significant
fluctuations  due  to  a  variety  of factors, including quarterly variations in
operating  results,  operating  results  which  vary  from  the  expectations of
securities  analysts  and  investors, changes in financial estimates, changes in
market  valuations  of  competitors, announcements by us or our competitors of a
material  nature,  loss of one or more customers, additions or departures of key
personnel,  future  sales  of  common  stock  and  stock market price and volume
fluctuations.  In  addition, general political and economic conditions such as a
recession,  or  interest rate or currency rate fluctuations may adversely affect
the  market  price  of  our  common  stock.

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

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

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  Financial  Statements  and  Supplementary  Data  are listed under "Item 15.
Exhibits,  Financial  Statement  Schedules".

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

None.

ITEM 9A.    CONTROLS AND PROCEDURES

As  of  September  30, 2005, the end of the period covered by this report, under
the  supervision  and  with the participation of management, including our Chief
Executive  Officer  and  our  Chief  Financial  Officer,  we  have evaluated the
effectiveness  of  the  design  and  operation  of  our  disclosure controls and
procedures  pursuant  to  Exchange Act Rules 13a-15 and 15d-15.  Based upon that
evaluation,  our  Chief  Executive  Officer and our Chief Financial Officer have
concluded  that  our disclosure controls and procedures are effective in causing
material  information  to be recorded, processed, summarized and reported by our
management  on  a  timely  basis  and  to


                                       30
<PAGE>
ensure  that  the quality and timeliness of our public disclosures complies with
our  Securities  and  Exchange  Commission  disclosure  obligations.  During the
quarter  ended  September  30, 2005, there was no change in our internal control
over  financial  reporting that materially affects, or that is reasonably likely
to  materially  affect,  our  internal  control  over  financial  reporting.

ITEM 9B.    OTHER INFORMATION

None.

                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  officers  and  directors  of  ECHO  are:

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

            Charles J. Harris        Director, President, COO                 2005

            Alice L. Cheung          Chief Financial Officer,                 1996
                                     Treasurer

            Sharat Shankar           Senior Vice President                    2003

            Patricia M. Williams     Senior Vice President                    1997

            Jack Wilson              Senior Vice President                    1994

            Kris Winckler            Senior Vice President                    1999

            Steve Hoofring           Senior Vice President                    2003

            Rick Slater              Vice President, CTO                      1998

            Arnold Feinberg          Vice President                           2000

            Jesse Fong               Vice President                           1994

            David Griffin            Vice President                           1990

            Robert Hare              Vice President                           1999

            Donna L. Rehman          Corporate Secretary                      1990

            Herbert L. Lucas, Jr.    Director                                 1991

            Aristides W. Georgantas  Director                                 1999

            Carl R. Terzian          Director                                 2002

            Richard D. Field         Director                                 2004

            H. Eugene Lockhart       Director                                 2005
</TABLE>


                                       31
<PAGE>
JOEL M. BARRY, age 55, has been a Director of ECHO since July 1986, and Chairman
of  the  Board since December 1986.  Mr. Barry served as Chief Financial Officer
from  May  1987  to June 1990, and Executive Vice President from October 1987 to
June  1990, when he was designated Chief Executive Officer of ECHO. Mr. Barry is
also  a  Director  and  Chief  Executive  Officer  of  the  MerchantAmerica  and
XPRESSCHEX,  Inc. wholly owned subsidiaries.  From August 1983 to June 1991, Mr.
Barry  was a lecturer and investment counselor for Basics Financial Planning and
Investments,  a firm he founded in 1983.  From 1981 to 1983, Mr. Barry owned and
operated  Dynamic  Seminars,  a  marketing  company  for  Financial  Dynamics, a
financial  planning  firm  located in Covina, California. From 1975 to 1981, Mr.
Barry  was manager of Quality Assurance and In-House Customer Service at Science
Dynamics  Corporation,  a  medical data processing firm.  From 1972 to 1974, Mr.
Barry  owned  and operated a gospel music recording business located in Anaheim,
California.

CHARLES  J.  HARRIS,  age  43, joined ECHO in September 2005 as President, Chief
Operating  Officer  and  a  Director to serve on the Board of Directors of ECHO.
Prior  to  joining  the Company, Mr. Harris served in executive, operational and
sales  leadership  positions at prominent organizations including Paymentech and
Electronic Data Systems.  His last position was as President of Merchant Link, a
wholly-owned  subsidiary  of  Paymentech,  which  supplies  electronic  payment
technologies  and  outsourced  services  to  the  point-of-sale  market.

ALICE  L.  CHEUNG,  age  48, has served as Treasurer and Chief Financial Officer
since  July 1996.  Ms. Cheung  became a Certified Public Accountant in May 1982.
From  February  1988  to  January  1996,  Ms. Cheung was the Treasurer and Chief
Financial  Officer  of  American  Mobile  Systems  (AMS). AMS merged with Nextel
Communications,  Inc.  in  1995.  Ms. Cheung is an active member of the American
Institute  of  Certified  Public  Accountants and Financial Executive Institute.

SHARAT  SHANKAR,  age  35,  joined  ECHO  in  June  2003  as Vice President Risk
Management  and  Business  Intelligence and in December 2003, he was promoted to
Senior  Vice  President.  In  April  2005, Mr. Shankar was appointed to hold the
position  of  General Manager Check Services. Prior to joining ECHO, Mr. Shankar
worked  at  TeleCheck  for  approximately eight years where he held a variety of
positions  leading  up to Vice President of Risk Management. Prior to TeleCheck,
Mr.  Shankar  held  positions at MetLife as well as Hong Kong and Shanghai Bank,
Madras,  India.

PATRICIA M. WILLIAMS, age 40, joined ECHO in September 1996, serving as Director
of  Program  Management.  Ms.  Williams  was  appointed Vice President Corporate
Program Management in October 1997 and Vice President  Check Services in October
2001.  In  June  of  2003,  Ms.  Williams  was appointed to the position of Vice
President  Sales and Marketing and in December 2003, was promoted to Senior Vice
President.  In  April  2005  Ms.  Williams was appointed to hold the position of
General Manager of Credit Card Services. Prior to joining ECHO, Ms. Williams was
an  Operations Manager for Bank of America Systems Engineering in San Francisco.
Ms.  Williams  has  also  served as a Senior Program manager for the Los Angeles
office  of LANSystems, Inc., a nationwide systems integrator as well as a Senior
Project  Manager and Systems Engineer for Bank of America Systems Engineering in
Los  Angeles.

JACK  WILSON,  age  61,  has served as Vice President of Merchant Services since
June  1994  and  was  Director  of Bankcard Relations for ECHO from October 1992
until  May  1994.  In  December  2003,  he was promoted to Senior Vice President
Merchant  Services and in April 2005, he was appointed to the position of Senior
Vice  President  Credit  Card  Services. 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.

KRIS  WINCKLER,  age 40, joined ECHO in April, 1999, as Vice President of ECHO's
XPRESSCHEX  subsidiary.  In  December  2003,  he  was  promoted  to  Senior Vice
President  Product and Strategic Planning and in April 2005, he was appointed to
the position of Senior Vice President Check Services. Prior to joining ECHO, Mr.
Winckler  was  a  consultant  at  Andersen Consulting and the President of Magic
Software,  a  company  specializing  in  check verification, conversion, and ACH
software.  Mr. Winckler has been active in the check and collection industry for
over  ten  years  and has been a member of the Electronic Check Council of NACHA
since  1998.  Mr. Winckler is an Accredited ACH Professional (AAP) and Certified
Treasury  Professional  (CTP).

STEVE  HOOFRING,  age  45, joined ECHO in October 2001 as Implementation Manager
for the Check Services group and was appointed Vice President Visa POS Check and
Client  Services  in October 2003 and Senior Vice President Operations in August
2005.  Mr. Hoofring was President of Running Dog Software, Inc., which developed
'Enterprise'  software  for small to medium size businesses.  Prior to this, Mr.
Hoofring  held  several  management positions with Emerson Power Transmission, a
subsidiary  of  Emerson  Electric,  Inc.


                                       32
<PAGE>
RICK SLATER, age 45, joined ECHO in May 1995 as Vice President of Computer Based
Controls,  Inc.  ("CBC").  Mr. Slater was appointed President of CBC in December
1995,  Vice  President  of ECHO in November 1998 and Chief Technology Officer in
October  1999.  Prior  to  joining  ECHO,  Mr.  Slater  was  President of Slater
Research,  which provided contract engineering services to various institutions.
During  this  time,  Mr.  Slater  directly  participated in the U.S. Coast Guard
COMSTA upgrade project including site surveys, systems design and system upgrade
integration  in  a  number of sites within the U.S.  Prior to this position, Mr.
Slater  served  as  a  group  leader  at  Aiken  Advanced  Systems.

ARNOLD FEINBERG, age 56, joined ECHO in January 2000 as Vice President of Sales.
Prior  to  joining  ECHO,  Mr.  Feinberg was an independent sales consultant for
Rocky  Mountain  Retail  Systems,  a  company  that provided check authorization
software  and  transaction processing services and was acquired by ECHO in 2000.
From  1986  to  1993,  Mr.  Feinberg was employed by Lawrence Data Service, Inc.
where  he  developed  the franchise division for regional check verification and
collection  under  National  Check  Association.

JESSE  FONG,  age  54, has served as Vice President of Information Systems since
September 1994.  Mr. Fong joined ECHO in 1984 and has served as programmer, Data
Processing  manager  and  MIS  director.  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 57, has served as Vice President of Major Accounts since June
2003.  Previous  to this capacity, he was Vice President of Check Guarantee from
October  2001  to June 2003, Vice President of Check Services for ECHO from June
1990  to  October  2001 and Vice President of Operations from January 1986 until
September  1989,  at which time he became a consultant to ECHO.  Mr. Griffin has
served  as  Senior Vice President and General Manager for TeleCheck, Los Angeles
and  TeleCheck,  San  Diego,  from  May  1983  to  August  1985.  Prior to these
appointments,  he  was  Regional  Manager of TeleCheck Services, a franchiser of
check  guarantee  services,  a  division  of  Tymshare  Corporation,  which  was
subsequently  acquired  by  McDonnell  Douglas  Corporation.

ROBERT  HARE, age 40, joined ECHO in April 1999 through the acquisition of Magic
Software  Development,  a  company  he  co-founded  in  1991  to  provide  check
verification,  conversion  and  ACH  software.  Prior to founding Magic Software
Development, Mr. Hare was a software developer with Titan Business Systems and a
systems  analyst  with  the  University  of  New  Mexico.

DONNA  L.  REHMAN,  age  56,  joined  ECHO  in  1988 and has served as Corporate
Secretary  since  1990.  For three years prior thereto, she was self-employed in
Woodland  Hills,  California in educational books and toys.  She was employed as
an  administrative assistant in Chicago for 4 years and Los Angeles for 5 years.

HERBERT  L.  LUCAS,  JR.,  age  79, has been a Director since 1991. He served as
President  from  1972 to 1981 of Carnation International in Los Angeles and as a
member of the Board of Directors of the Carnation Company. Since 1982, Mr. Lucas
has  managed  his  family  investment  business.  He  has served on the Board of
Directors  of  various  financial and business institutions including Wellington
Trust  Company,  Arctic  Alaska Fisheries, Inc., Scolr Pharma, Inc. and Sunworld
International  Airways,  Inc.  Mr.  Lucas has served as a Trustee of The J. Paul
Getty  Trust, the Los Angeles County Museum of Art, The Morgan Library, National
Association  of Independent Schools and Winrock International. He was formerly a
member  of  the  Board  of  Trustees  of  Princeton  University.

ARISTIDES  W.  GEORGANTAS, age 61, has served as a Director since February 1999.
Mr.  Georgantas, prior to his retirement, was Executive Vice President and Chief
Operating  Officer  at  Chase  Manhattan  Bank's Global Asset Management/Private
Banking  Division.  He serves as a director of Horizon Blue Cross Blue Shield of
New Jersey, the Glenmede Corporation, the Glenmede Trust Company, the Foundation
for Public Broadcasting in New Jersey, Mathematica Policy Research, Inc. and the
Rita  Allen  Foundation.

CARL  R.  TERZIAN,  age  70,  has  served  as  a  Director since December, 2002.
Following  his  education,  Mr.  Terzian  served  as  an international good will
ambassador  for  President Eisenhower and Secretary of State John Foster Dulles;
director  of  public  and  church relations for the Lutheran Hospital Society of
Southern California; civic affairs consultant to the California savings and loan
industry;  and  dean  and  professor  of  government  and  speech  at  Woodbury
University.  In  1965,  Mr.  Terzian  joined  Charles  Luckman  Associates,  an
architectural  firm, to handle its public relations throughout the United States
and  worldwide  and  began  his  own  public  relations  firm,  Carl  Terzian


                                       33
<PAGE>
Associates,  in 1969. Mr. Terzian currently serves as a director on the board of
Transamerica  Investors,  Inc.,  National  Mercantile  Bancorp  and  Mercantile
National  Bank  along  with  various  non-profit  boards,  commissions, advisory
groups,  and  task  forces.

RICHARD  D. FIELD, age 65, became a Director of ECHO in July 2004. Mr. Field has
worked  in  the financial services industry for over 35 years as an executive of
the  Bank  of  New  York,  Chase,  and  Citigroup,  and a director of Mastercard
International  and  Chairman  of  its U.S. Board.  Since retiring from full time
employment in 1997, he has continued his career in the specialty financial areas
as  a  co-founder  and  director  of LendingTree, Inc. as well as serving on the
boards  of  Providian  Financial  Corporation  and  HPSC,  Inc.

H.  EUGENE  LOCKHART,  age  56,  was  appointed  as  a member of ECHO's Board of
Directors  in  May  2005.  Mr. Lockhart is a Venture Partner with Oak Investment
Partners  responsible  for  the  development  and  management of Oak's Financial
Services Technology Portfolio.  Mr. Lockhart was previously President and CEO of
MasterCard  International,  President  of  the  Global  Retail Bank, Senior Vice
Chairman of BankAmerica Corporation, and President of Consumer Services at AT&T.
Mr.  Lockhart  currently  sits  on  various  public  boards  such as RJR/Nabisco
Holdings,  RadioShack  Corporation, Dun & Bradstreet, Inc., IMS Health, Inc. and
Asset  Acceptance  Capital  Corporation.

All  directors  are  to  be  elected to three year terms by the stockholders and
serve  until  their  respective  terms  have  expired.  The  Annual  Meeting  of
Stockholders  was  held  on  February 7, 2005, and the election of directors was
held  at  that  time.  All  officers  serve  at  the  pleasure  of  our Board of
Directors.

CODE  OF  ETHICAL  CONDUCT

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

AUDIT  COMMITTEE  FINANCIAL  EXPERT

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

IDENTIFICATION  OF  AUDIT  COMMITTEE

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

SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

Section  16(a)  of the Securities Exchange Act of 1934, as amended, requires our
directors  and  executive  officers and the holders of 10% or more of our Common
Stock  to  file  with  the Securities and Exchange Commission initial reports of
ownership  and  reports of changes in ownership of our equity securities.  Based
solely  on  our  review  of  the  copies of the forms received by us and written
representations  from certain reporting persons that they have complied with the
relevant  filing  requirements, we believe that, during the year ended September
30,  2005,  all  of  our executive officers, directors and the holders of 10% or
more  of  our  Common Stock complied with all Section 16(a) filing requirements,
except  for  Steven  Smith,  our  former  Chief Information Officer, who did not
timely  file  a  Form  3.


                                       34
<PAGE>
ITEM 11.     EXECUTIVE COMPENSATION

The  following  table  sets  forth the total compensation paid and stock options
offered  by  us  during the fiscal years ended September 30, 2005, September 30,
2004  and  September 30, 2003, to our Chief Executive Officer and to each of our
five  most highly compensated executive officers, other than the Chief Executive
Officer  (collectively  with  the  Chief Executive Officer, the "Named Executive
Officers"),  whose  compensation  exceeded $100,000 during the fiscal year ended
September  30,  2005.

SUMMARY  COMPENSATION  TABLE

<TABLE>
<CAPTION>
                                                         Annual        Long Term
                                                      Compensation    Compensation
                                                   -----------------  ------------
                                                                       Securities
                        Capacities in                                  Underlying
Name                     Which Served      Year     Salary    Bonus    Options[2]   Other[3]
--------------------  ------------------  -------  --------  -------  ------------  ---------
<S>                   <C>                 <C>      <C>       <C>      <C>           <C>

Joel M. Barry[1]      Chairman/Chief         2005  $261,875  $50,000        30,000  $     -0-
                      Executive Officer      2004   241,500   50,000        60,000        -0-
                                             2003   223,125      -0-        40,000        -0-

Sharat Shankar        Sr. Vice President     2005  $143,750  $56,000        21,000  $   5,855
                                             2004   131,430   47,500        35,000      2,343
                                             2003    46,333    5,000        50,000        -0-

Arnold Feinberg       Vice President         2005  $143,870  $50,000        14,000  $   5,465
                                             2004   120,200   50,000        20,000      4,616
                                             2003    99,333   50,000        10,000      3,014

Alice Cheung          Chief Financial        2005  $147,500  $42,000        30,000  $   5,390
                      Officer/Treasurer      2004   138,000   40,000        35,000      4,940
                                             2003   125,500   15,000        15,000      4,175

Patricia M. Williams  Sr. Vice President     2005  $136,250  $31,000        21,000  $     -0-
                                             2004   123,000   35,000        35,000        -0-
                                             2003   111,190   15,000        15,000        -0-

Jack Wilson[1]        Sr. Vice President     2005  $136,250  $31,000        21,000  $   5,141
                                             2004   123,000   35,000        35,000      4,412
                                             2003   111,190   15,000        15,000      2,998
</TABLE>

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

[1]  We  provide  Mr. Barry and Mr. Wilson with an automobile. There has been no
     compensation  paid  other  than  that  indicated  in  the  above  table.
[2]  Mr.  Feinberg  exercised  4,000  shares  of his options at $1.30 per share,
     granted  in fiscal 2003; Ms. Williams exercised 6,000 shares of her options
     at  $1.30  per  share,  granted  in  fiscal  2003.
[3]  Represents our match of contributions to our 401(k) Plan. We contribute 50%
     of  the  first  6%  of  each  employee's  contribution  to the 401(k) Plan.


                                       35
<PAGE>
FISCAL  2005  OPTION  GRANTS  TABLE

The  following table sets forth the stock options granted to our Chief Executive
Officer  and  each  of the other Named Executive Officers during the fiscal year
ended  September  30, 2005.  Under applicable Securities and Exchange Commission
regulations,  companies  are  required to project an estimate of appreciation of
the  underlying  shares  of  stock  during  the  option term.  We have chosen to
project  this  estimate  using  the potential realizable value at assumed annual
rates  of  stock  price  appreciation  for  the  option term at assumed rates of
appreciation  of  5%  and 10%.  However, the ultimate value will depend upon the
market  value  of our stock at a future date, which may or may not correspond to
the  following  projections.

<TABLE>
<CAPTION>
                                                                             Potential Realization
                                                                               Value at Assumed
                                                                                Annual Rates of
                                                                                 Stock Price
                                   Percent of                                   Appreciation for
                                 Total Granted     Exercise                      Option Term
                     Options    to Employees in     Price     Expiration  --------------------------
Name                Granted[1]    Fiscal Year     per share      Date         5%            10%
------------------  ----------  ----------------  ----------  ----------  -----------  -------------
<S>                 <C>         <C>               <C>         <C>         <C>          <C>
Joel M. Barry           30,000            11.54%  $     7.60    11/15/14  $   93,000   $    216,000
Sharat Shankar          21,000             8.08%  $     7.60    11/15/14  $   65,000   $    151,000
Arnold Feinberg         14,000             5.38%  $     7.60    11/15/14  $   43,000   $    101,000
Alice Cheung            30,000            11.54%  $     7.60    11/15/14  $   93,000   $    216,000
Patricia M. Williams    21,000             8.08%  $     7.60    11/15/14  $   65,000   $    151,000
Jack Wilson             21,000             8.08%  $     7.60    11/15/14  $   65,000   $    151,000
</TABLE>

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

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

AGGREGATED  OPTION/SAR  EXERCISES  AND  FISCAL-YEAR  OPTION/SAR  VALUE  TABLE

The  following  table  sets  forth  information concerning the exercise of stock
options  during  the  fiscal  year ended September 30, 2005 by each of our Named
Executive  Officers and the number and value of unexercised options held by each
of  our Named Executive Officers as of the fiscal year ended September 30, 2005.

<TABLE>
<CAPTION>
                                                              Value of
                                               Number of     unexercised
                        Shares                unexercised   in-the-money
                      acquired on    Value    options/SARS  Options/SARS
       Name            exercise    realized    at FY-end    at FY-end[1]
--------------------  -----------  ---------  ------------  -------------
<S>                   <C>          <C>        <C>           <C>
Joel M. Barry              15,000  $     -0-       265,000  $   1,221,225
Sharat Shankar                -0-  $     -0-       106,000  $     418,650
Arnold Feinberg             4,000  $  28,340        69,000  $     147,200
Alice Cheung                8,500  $  36,357       106,500  $     401,425
Patricia M. Williams       18,000  $  79,536        92,000  $     331,830
Jack Wilson                   -0-  $     -0-        92,500  $     353,725
</TABLE>

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

[1]  Based  on the closing sales price of the Common Stock on September 30, 2005
     of  $9.25  per  share,  less  the  option  exercise  price.


                                       36
<PAGE>
EQUITY  COMPENSATION  PLAN  INFORMATION

The following table sets forth information concerning our equity compensation
plans as of September 30, 2005.

<TABLE>
<CAPTION>
                                                                 (c) Number of securities
                        (a) Number of                             remaining available for
                      securities to be                             future issuance under
                         issued upon      (b) Weighted-average      equity compensation
                         exercise of        exercise price of      (excluding securities
Plan Category        outstanding options   outstanding options   reflected in column (a))
-------------------  -------------------  ---------------------  -------------------------
<S>                  <C>                  <C>                    <C>
Equity compensation
plans approved by
security holders[1]            1,116,125              $5.51                        285,600
</TABLE>

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

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


COMPENSATION  COMMITTEE  INTERLOCKS  AND  INSIDER  PARTICIPATION

The  Compensation  Committee  of our Board of Directors is currently composed of
Richard D. Field, Aristides W. Georgantas, H. Eugene Lockhart, Herbert L. Lucas,
Jr.,  who  serves  as  the  Chairman  of the Committee, and Carl R. Terzian.  No
interlocking  relationship  exists  between our Board of Directors, Compensation
Committee  or  executive  officers  and  the  board  of  directors, compensation
committee  or  executive  officers  of  any  other  company.

DIRECTOR  COMPENSATION

In fiscal 2005, Messrs. Georgantas, Lucas and Field each received $55,000.00 and
Mr. Terzian received $52,500.00. Mr. Lockhart, appointed on May 5, 2005, to fill
a  vacancy  on  the Board of Directors, received $8,333.34 in fiscal 2005.  Each
outside director received $48,250 in fiscal 2004 and $28,000 and 3,031 shares of
Common  Stock  in  fiscal  2003.  Directors  are  compensated for all reasonable
expenses  and  are  not  compensated  for  special  meetings  other than regular
meetings.

EMPLOYMENT  AGREEMENTS

None.

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

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

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

We  have  a  contributory  401(K)  Retirement  Pension  Plan,  which  covers all
employees  who  are qualified under the plan provisions. In fiscal 2005, we also
adopted  a  non-qualified  deferred  compensation  plan  that  provides


                                       37
<PAGE>
additional  retirement  investment  alternatives  for  eligible  employees  and
directors  and  is  complementary  to our contributory 401(K) Retirement Pension
Plan.

STOCK  OPTION  PLANS

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

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

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

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

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

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

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


ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
             RELATED STOCKHOLDER  MATTERS

As  of  December  12,  2005,  there  were  6,661,701  shares of our Common Stock
outstanding.  Based  on  our  review  of  Schedules  13D  and 13G filed with the
Securities  and  Exchange  Commission  on the dates noted, the following persons
have  beneficial  ownership or control over 5% or more of our outstanding Common
Stock:

<TABLE>
<CAPTION>
                                              Amount and         Percentage of
                                         Nature of Beneficial  Outstanding Stock
Name and Address                              Ownership           At 12/12/05
---------------------------------------  --------------------  ------------------
<S>                                      <C>                   <C>

Melvin Laufer                                  519,839               7.80%
136 Beach 140th Street
Far Rockaway, NY 11694
Schedule 13D/A filed September 3, 2004

William Blair and Company LLC                  771,507               11.58%
222 W. Adams Street
Chicago, IL 60606
Schedule 13G/A filed June 30, 2005


                                       38
<PAGE>
Discovery Equity Partners LP; Discovery        736,919               11.06%
Group I LLC; Daniel J. Donoghue;
Michael R. Murphy
71 South Wacker Drive
Chicago, IL 60606
Schedule 13G filed May 13, 2005
</TABLE>

The following table sets forth the number of shares of Common Stock owned
beneficially by our (i) directors, (ii) the Named Executive Officers (as defined
below), and (iii) the executive officers and directors as a group, as of
December 12, 2005.  Such figures are based upon information furnished by the
persons named.

<TABLE>
<CAPTION>
                                  Amount and           Percentage of
                             Nature of Beneficial  Outstanding Stock[1]
Name and Address                  Ownership             At 12/12/05
---------------------------  --------------------  ---------------------
<S>                          <C>                   <C>
Joel M. Barry                       294,619[2]                     4.32%
730 Paseo Camarillo
Camarillo, CA 93010

Alice L. Cheung                      65,500[2]                     0.98%
730 Paseo Camarillo
Camarillo, CA 93010

Arnold Feinberg                      39,800[2]                     0.59%
15638 54th
Oskaloosa, KS  66066

Richard Field                       203,696[3]                     3.06%
49 Locust Avenue
New Canaan, CT 06840

Aristides W. Georgantas              16,521                        0.25%
180 Springdale Road
Princeton, NJ  08540

Herbert L. Lucas, Jr.                57,880[4]                     0.87%
12011 San Vicente Blvd.
Los Angeles, CA 90049

Sharat Shankar                       38,200[2]                     0.57%
730 Paseo Camarillo
Camarillo, CA 93010

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

Patricia M. Williams                 51,875[2]                     0.77%
730 Paseo Camarillo
Camarillo, CA 93010

Jack Wilson                          52,275[2][5]                  0.78%
730 Paseo Camarillo
Camarillo, CA 93010

All officers and directors
as a group (19 persons)           1,116,011[6]                    15.62%
</TABLE>


                                       39
<PAGE>
     ------------------------------

[1]  Under  Rule 13d-3, certain shares may be deemed to be beneficially owned by
     more  than  one person (if, for example, persons share the power to vote or
     the  power  to dispose of the shares). In addition, shares are deemed to be
     beneficially  owned  by a person if the person has the right to acquire the
     shares (for example, upon exercise of an option) within 60 days of the date
     as  of  which  the  information  is  provided.  In computing the percentage
     ownership  of  any  person,  the  amount of shares outstanding is deemed to
     include  the  amount  of shares beneficially owned by such person (and only
     such  person)  by  reason  of  these  acquisition  rights. As a result, the
     percentage  of outstanding shares of any person as shown in this table does
     not  necessarily reflect the person's actual ownership or voting power with
     respect  to  the  number  of shares of Common Stock actually outstanding at
     December  12,  2005.
[2]  Includes  stock  options  according  to  the  terms of the Officers and Key
     Employees  Incentive  Stock Option Plan and the 2003 Incentive Stock Option
     Plan,  which  for  the  following  number  of  shares and for the following
     individuals  could be acquired within 60 days through the exercise of stock
     options: Joel M. Barry, 164,000 shares; Alice Cheung, 53,500 shares; Arnold
     Feinberg,  39,800 shares; Sharat Shankar, 38,200 shares; Patricia Williams,
     46,200  shares;  and  Jack  Wilson  46,700  shares.
[3]  Includes  103,400  shares  which are in an IRA account in Mr. Field's name.
[4]  Includes  17,972  shares  indirectly owned by Mr. Lucas through a trust for
     his  wife.
[5]  Includes  530  shares  indirectly  owned  by  Mr.  Wilson through his wife.
[6]  Includes  shares  and  stock options according to the terms of the Officers
     and  Key Employees Incentive Stock Option Plan and the 2003 Incentive Stock
     Option Plan, which for the following number of shares and for the following
     individuals  could be acquired within 60 days through the exercise of stock
     options:  Jesse  Fong,  15,154 shares; David Griffin, 20,786 shares; Robert
     Hare, 54,991 shares; Charles Harris; 50,000 shares; Steven Hoofring, 25,500
     shares;  Donna  Rehman,  4,900 shares; Rick Slater, 36,400 shares; and Kris
     Winckler,  83,532  shares.

CHANGES IN CONTROL

We do not have any arrangements which may at a subsequent date result in a
change in control.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no related-party transactions since the beginning of fiscal 2005.

ITEM 14.     PRINCIPAL ACCOUNTING FEES AND SERVICES

AUDIT FEES
PricewaterhouseCoopers,  LLP,  our  independent  accountants
("PricewaterhouseCoopers")  billed us an aggregate of approximately $190,000 and
$135,000  in fees for professional services rendered for the audit of our annual
financial statements for the fiscal years ended September 30, 2005 and September
30,  2004, respectively, and the reviews of the financial statements included in
our  Form  10-Q's  for  fiscal  2005  and  2004.

AUDIT-RELATED FEES
PricewaterhouseCoopers  billed  us  an  aggregate  of  approximately  $5,000 and
$50,000  in  fees for assurance and related services related to the audit of our
annual  financial  statements  for the fiscal years ended September 30, 2005 and
September  30,  2004,  respectively.

Our  Audit  Committee is directly responsible for interviewing and retaining our
independent  accountant,  considering  the  accounting  firm's  independence and
effectiveness,  and  pre-approving the engagement fees and other compensation to
be  paid  to,  and  the services to be conducted by, the independent accountant.
The Audit Committee does not delegate these responsibilities. During each of the
fiscal  years  ended  September  30,  2005  and  2004,  respectively,  our Audit
Committee  pre-approved  100%  of  the  services  described  above.


                                       40
<PAGE>
                                     PART IV


ITEM 15.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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

    (1)  Consolidated Financial Statements

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

        Consolidated Balance Sheets at September 30, 2005 and 2004 . . . . . . . .  F-2

        Consolidated Statements of Operations for each of the three years
        in the period ended September 30, 2005 . . . . . . . . . . . . . . . . . .  F-3

        Consolidated Statements of Changes in Stockholders' Equity
        for each of the three years in the period ended September 30, 2005 . . . .  F-4

        Consolidated Statements of Cash Flows for each of the three years
        in the period ended September 30, 2005 . . . . . . . . . . . . . . . . . .  F-5

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

    (2) Financial Statement Schedule:

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

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

Exhibits:

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

  2.1    Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Magic Software Development, Inc., dated April 20, 1999.[4]
  2.2    Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Rocky Mountain Retail Systems, Inc., dated January 4, 2000.[5]
  3.1    Articles of Incorporation of Bio Recovery Technology, Inc., filed with the Nevada Secretary of State on
         December 11, 1981.[1]
  3.1.1  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on June 21, 1990.
  3.1.2  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on September 27, 1991.
  3.1.3  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on August 5, 1993.
  3.1.4  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on April 7, 1995.
  3.1.5  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on April 7, 1997.
  3.1.6  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on March 13, 1998.
  3.1.7  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on June 21, 1999.


                                       41
<PAGE>
  3.1.8  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on September 6, 2001.
  3.2    By-Laws of Bio Recovery Technology, Inc.[1]
  3.2.1  Amendment to the By-Laws of Electronic Clearing House, Inc., dated April 25, 2005.
  3.2.2  Amendment to the By-Laws of Electronic Clearing House, Inc., dated September 9, 2005.
  4.1    Amended and Restated Rights Agreement between Electronic Clearing House, Inc. and OTR, Inc.,
         dated January 29, 2003.[11]
  4.1.1  Amendment Number One to Amended and Restated Rights Agreement dated September 27, 2004.[12]
  4.2    Specimen Common Stock Certificate. [2]
  4.3    Amended and Restated 2003 Incentive Stock Option Plan.[13]
  4.4    Amended and Restated Officers and Key Employees Incentive Stock Option Plan.[14]
  10.35  Copy of Merchant Marketing and Processing Services Agreement between Electronic Clearing House,
         Inc. and First Regional Bank, dated June 24, 1997. [3]
  10.42  Copy of Addendum to Agreement between Electronic Clearing House, Inc. and U-Haul International,
         dated January 1, 2000.[5]
  10.46  Copy of Amended and Restated Merchant Marketing and Processing Services Agreement between
         Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[5]
  10.47  Copy of Addendum to Amended and Restated Merchant Marketing and Processing Services
         Agreement between Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[5]
  10.48  Copy of POS Check Third-Party Services Agreement between Visa U.S.A., Inc. and Electronic Clearing
         House, Inc., dated December 12, 2000.[6]
  10.49  Copy of Asset Purchase Agreement between National Check Network, Inc. and Electronic Clearing
         House, Inc., dated April 19, 2001. [6]
  10.50  Copy of Addendum to Agreement between U-Haul International and Electronic Clearing House, Inc.,
         dated October 1, 2001. [6]
  10.51  Copy of First Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., Inc.
         and Electronic Clearing House, Inc. dated December 12, 2000. [7]
  10.52  Copy of Second Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A.,
         and Electronic Clearing House, Inc. dated December 12, 2000. [7]
  10.53  Copy of Third Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A.,
         and Electronic Clearing House, Inc. dated December 12, 2000. [7]
  10.54  Form of Securities Purchase Agreement by and among the Registrant and the Purchasers identified
         therein. [8]
  10.55  Form of Registration Rights Agreement by and among the Registrant and the Purchasers identified
         therein. [8]
  10.56  Office Lease dated May 21, 2003, by and between the Registrant and the 1989 Sheehan Family Trust
         dated October 24, 1989, with respect to principal executive offices located at 730 Paseo Camarillo,
         Camarillo, California 93010.[9]
  10.57  First Amendment to Lease dated July 10, 2003, by and between the Registrant and the 1989 Sheehan
         Family Trust dated October 24, 1989, with respect to principal executive offices located at 730 Paseo
         Camarillo, Camarillo, California 93010.
  10.58  Addendum to Office Lease dated July 7, 2004, by and between the Registrant and the 1989 Sheehan
         Family Trust dated October 24, 1989, with respect to principal executive offices located at 730 Paseo
         Camarillo, Camarillo, California 93010. [10]
  11.1   Statement re computation of per share earnings, incorporated herein by reference to Note 10 of the
         Notes to Consolidated Financial Statements.
  21.0   Subsidiaries of Registrant as of September 30, 2005.
  23.1   Consent of PricewaterhouseCoopers LLP
  24.1   Power of Attorney [15]
  31.1   Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
  31.2   Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
  32.1   Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
  32.2   Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
</TABLE>


                                       42
<PAGE>
---------------------

     [1]  Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal  year  ended  September  30,  1988  and  incorporated herein by
          reference.
     [2]  Filed  as  an  Exhibit  to  Registrant's  Form  S-1,  Amendment No. 3,
          effective  November  13,  1990  and  incorporated herein by reference.
     [3]  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.
     [4]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  1999  and  incorporated herein by
          reference.
     [5]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2000  and  incorporated herein by
          reference.
     [6]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2001  and  incorporated herein by
          reference.
     [7]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2002  and  incorporated herein by
          reference.
     [8]  Filed  as  an Exhibit to Registrant's Current Report on Form 8-K dated
          October  30,  2003  and  incorporated  herein  by  reference.
     [9]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2003  and  incorporated herein by
          reference.
     [10] Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2004  and  incorporated herein by
          reference.
     [11] Filed  as  an Exhibit to Registrant's Form 8-A dated February 10, 2003
          and  incorporated  herein  by  reference.
     [12] Filed  as an Exhibit to Registrant's Form 8-K dated September 30, 2004
          and  incorporated  herein  by  reference.
     [13] Filed  as  an  Exhibit  to  Registrant's  Notice  of Annual Meeting of
          Shareholders  dated  February  7,  2005  and  incorporated  herein  by
          reference.
     [14] Filed  as  an  Exhibit  to  Registrant's  Notice  of Annual Meeting of
          Shareholders  dated  February  4,  1999  and  incorporated  herein  by
          reference.
     [15] Included  on  signature  page.


                                       43
<PAGE>
                                   SIGNATURES

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

          ELECTRONIC CLEARING HOUSE, INC.

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

                                POWER OF ATTORNEY

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

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

<TABLE>
<CAPTION>
<S>                                    <C>                                  <C>
        SIGNATURE                            TITLE                                 DATE
        ---------                            -----                                 ----

     /s/  Joel M. Barry               Chairman of the Board           )     December  21, 2005
     ------------------               and Chief Executive Officer     )
          Joel M. Barry                                               )
                                                                      )
     /s/  Charles J. Harris           Director, President and         )
     ----------------------           Chief Operating Officer         )
          Charles J. Harris                                           )
                                                                      )
     /s/  Aristides W. Georgantas     Director                        )
     ----------------------------                                     )
          Aristides W. Georgantas                                     )
                                                                      )
     /s/  Herbert L. Lucas, Jr.       Director                        )
     --------------------------                                       )
          Herbert L. Lucas, Jr.                                       )
                                                                      )
     /s/  Carl R. Terzian             Director                        )
     --------------------                                             )
          Carl R. Terzian                                             )
                                                                      )
     /s/  Richard D. Field            Director                        )
     ----------------------                                           )
          Richard D. Field                                            )
                                                                      )
     /s/  H.Eugene Lockhart           Director                        )
     --------------------                                             )
          H. Eugene Lockhart                                          )
                                                                      )
     /s/  Alice L. Cheung             Chief Financial Officer         )
     --------------------             and Treasurer                   )
          Alice L. Cheung                                             )
                                                                      )
     /s/  Marjan Hewson               Controller                      )
     -----------------                                                )
          Marjan Hewson                                               )
</TABLE>


                                       44
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and shareholders:



In  our  opinion,  the  consolidated  financial  statements  listed in the index
appearing  under  Item  15(a)(1)  present  fairly, in all material respects, the
financial  position  of  Electronic Clearing House, Inc. and its subsidiaries at
September  30, 2005 and 2004, and the results of their operations and their cash
flows  for  each  of  the  three years in the period ended September 30, 2005 in
conformity with accounting principles generally accepted in the United States of
America.  In  addition,  in our opinion, the financial statement schedule listed
in  the  index  appearing  under  Item 15(a)(2) presents fairly, in all material
respects,  the  information  set forth therein when read in conjunction with the
related  consolidated  financial  statements.  These  financial  statements  and
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is  to express an opinion on these financial statements and
financial  statement  schedule  based on our audits.  We conducted our audits of
these  statements  in accordance with standards of the Public Company Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements  are free of material misstatement. An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements,  assessing  the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.

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


/s/ PricewaterhouseCoopers LLP


PRICEWATERHOUSECOOPERS LLP
LOS ANGELES, CALIFORNIA
DECEMBER 7, 2005


                                       F1
<PAGE>
<TABLE>
<CAPTION>
                                ELECTRONIC CLEARING HOUSE, INC.
                                  CONSOLIDATED BALANCE SHEETS
                                  ---------------------------

                                                                           September 30,
                                                                    --------------------------
                                                                        2005          2004
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
                                          ASSETS
                                          ------
Current assets:
    Cash and cash equivalents                                       $ 6,732,000   $ 7,576,000
    Restricted cash                                                   1,448,000     1,024,000
    Settlement deposits                                              17,094,000    18,282,000
    Settlement receivables less allowance of $25,000 and $22,000        981,000       451,000
    Accounts receivable less allowance of $92,000 and $111,000        2,421,000     1,943,000
    Prepaid expenses and other assets                                   385,000       368,000
    Deferred tax asset                                                  249,000       279,000
                                                                    ------------  ------------

Total current assets                                                 29,310,000    29,923,000

Noncurrent assets:
  Property and equipment, net                                         2,337,000     2,293,000
  Software, net                                                       8,876,000     6,844,000
  Other assets, net                                                     294,000       368,000
                                                                    ------------  ------------

        Total assets                                                $40,817,000   $39,428,000
                                                                    ============  ============

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

Current liabilities:
  Short-term borrowings and current portion of
    long-term debt                                                  $   426,000   $   878,000
  Accounts payable                                                      305,000       305,000
  Settlement payable                                                 18,075,000    18,733,000
  Accrued expenses                                                    2,467,000     2,003,000
                                                                    ------------  ------------

Total current liabilities                                            21,273,000    21,919,000

Noncurrent liabilities:
  Long-term debt                                                        705,000       704,000
  Deferred tax liability                                              1,067,000       565,000
                                                                    ------------  ------------

        Total liabilities                                            23,045,000    23,188,000
                                                                    ------------  ------------

Commitments and contingencies

Stockholders' equity:
  Common stock, $.01 par value, 36,000,000 shares authorized;
    6,620,531 and 6,451,331 shares issued; 6,582,262 and 6,413,062
    shares outstanding                                                   66,000        64,000
Additional paid-in capital                                           25,574,000    24,658,000
Accumulated deficit                                                  (6,983,000)   (8,016,000)
Less treasury stock at cost, 38,269 and 38,269 common shares           (466,000)     (466,000)
Less unearned stock compensation                                       (419,000)          -0-
                                                                    ------------  ------------

        Total stockholders' equity                                   17,772,000    16,240,000
                                                                    ------------  ------------

        Total liabilities and stockholders' equity                  $40,817,000   $39,428,000
                                                                    ============  ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F2
<PAGE>
<TABLE>
<CAPTION>
                                    ELECTRONIC CLEARING HOUSE, INC.
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                 -------------------------------------

                                                                      Year ended September 30,
                                                              ----------------------------------------
                                                                  2005          2004          2003
                                                              ------------  ------------  ------------
<S>                                                           <C>           <C>           <C>
REVENUES                                                      $55,551,000   $48,320,000   $41,149,000
                                                              ------------  ------------  ------------

COSTS AND EXPENSES:
    Processing and transaction expense                         35,867,000    30,370,000    27,173,000
    Other operating costs                                       5,653,000     5,182,000     4,373,000
    Research and development expense                            1,609,000     1,465,000     1,464,000
    Selling, general and administrative expenses               10,743,000     7,846,000     5,714,000
                                                              ------------  ------------  ------------

                                                               53,872,000    44,863,000    38,724,000
                                                              ------------  ------------  ------------

Income from operations                                          1,679,000     3,457,000     2,425,000

Interest income                                                   136,000        71,000        28,000
Interest expense                                                 (113,000)     (175,000)     (200,000)
Gain on sale of building                                              -0-     1,319,000           -0-
                                                              ------------  ------------  ------------

Income before provision for income taxes
and cumulative effect of an accounting change                   1,702,000     4,672,000     2,253,000


Provision for income taxes                                       (669,000)   (1,823,000)     (925,000)
                                                              ------------  ------------  ------------

Income before cumulative effect of an accounting change         1,033,000     2,849,000     1,328,000
Cumulative effect of an accounting change to adopt SFAS 142           -0-           -0-    (4,707,000)
                                                              ------------  ------------  ------------

Net income (loss)                                             $ 1,033,000   $ 2,849,000   $(3,379,000)
                                                              ============  ============  ============

Basic net earnings (loss) per share
    Before cumulative effect of accounting change             $      0.16   $      0.45   $      0.23
    Cumulative effect of accounting change                            -0-           -0-         (0.81)
                                                              ------------  ------------  ------------
    Basic net earnings (loss) per share                       $      0.16   $      0.45   $     (0.58)
                                                              ============  ============  ============

Diluted net earnings (loss) per share
    Before cumulative effect of accounting change             $      0.15   $      0.41   $      0.22
    Cumulative effect of accounting change                            -0-           -0-         (0.78)
                                                              ------------  ------------  ------------
    Diluted net earnings (loss) per share                     $      0.15   $      0.41   $     (0.56)
                                                              ============  ============  ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F3
<PAGE>
<TABLE>
<CAPTION>
                                                ELECTRONIC CLEARING HOUSE, INC.
                                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                  ----------------------------------------------------------

                                  Stock                   Additional                  Unearned
                           --------------------  Common     Paid-in     Treasury       Stock        Accumulated
                           Treasury    Common     Stock     Capital      Stock      Compensation      Deficit        Total
                           ---------  ---------  -------  -----------  ----------  --------------  -------------  ------------
<S>                        <C>        <C>        <C>      <C>          <C>         <C>             <C>            <C>
Balance at
  September 30, 2002         39,269   5,835,331  $58,000  $21,435,000  $(469,000)           $-0-    $(7,486,000)  $13,538,000

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

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

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

Balance at
  September 30, 2004         38,269   6,451,331   64,000   24,658,000   (466,000)            -0-     (8,016,000)   16,240,000

Exercise of stock options               119,200    1,000      393,000                                                 394,000
Issuance of restricted
  stock                                  50,000    1,000      424,000                   (419,000)                       6,000
Expense related to stock
  option issuance                                               8,000                                                   8,000
Tax benefit from stock
  exercise                                                     91,000                                                  91,000
Net income                                                                                            1,033,000     1,033,000
                           ---------  ---------  -------  -----------  ----------  --------------  -------------  ------------

Balance at
  September 30, 2005         38,269   6,620,531  $66,000  $25,574,000  $(466,000)  $    (419,000)  $ (6,983,000)  $17,772,000
                           =========  =========  =======  ===========  ==========  ==============  =============  ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F4
<PAGE>
<TABLE>
<CAPTION>
                                    ELECTRONIC CLEARING HOUSE, INC.
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 -------------------------------------

                                                                      Year ended September 30,
                                                             -----------------------------------------
                                                                 2005          2004           2003
                                                             ------------  -------------  ------------
<S>                                                          <C>           <C>            <C>
Cash flows from operating activities:
  Net income (loss)                                          $ 1,033,000   $  2,849,000   $(3,379,000)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
  (Gain) loss on sale of building                                    -0-     (1,319,000)       16,000
  Cumulative effect of an accounting change                          -0-            -0-     4,707,000
  Depreciation                                                   776,000        634,000       512,000
  Amortization of software                                     1,865,000      1,350,000     1,081,000
  Provisions for losses on accounts and notes receivable          43,000         92,000        67,000
  Provision for obsolete inventory                                10,000         46,000       110,000
  Write-down of real estate                                          -0-            -0-        55,000
  Fair value of stock issued in connection
    with director's compensation                                     -0-            -0-        21,000
  Deferred income taxes                                          532,000      1,628,000       942,000
  Stock option compensation                                       14,000         33,000        28,000
  Tax benefit from exercise of stock option                       91,000         75,000           -0-
Changes in assets and liabilities:
  Restricted cash                                               (424,000)       (47,000)      (71,000)
  Settlement deposits                                          1,188,000    (15,549,000)   (2,133,000)
  Accounts receivable                                           (518,000)       (95,000)     (389,000)
  Settlement receivables                                        (533,000)       244,000      (569,000)
  Accounts payable                                                   -0-       (474,000)      578,000
  Settlement payables                                           (658,000)    15,304,000     2,700,000
  Accrued expenses                                               464,000        661,000       349,000
  Prepaid expenses                                                 5,000       (107,000)      (76,000)
                                                             ------------  -------------  ------------
  Net cash provided by operating activities                    3,888,000      5,325,000     4,549,000
                                                             ------------  -------------  ------------
Cash flows from investing activities:
  Other assets                                                     4,000        141,000       (51,000)
  Purchase of equipment                                         (781,000)      (744,000)     (664,000)
  Purchased and capitalized software                          (3,859,000)    (3,534,000)   (2,627,000)
  Proceeds from sale of building                                     -0-      2,233,000        71,000
                                                             ------------  -------------  ------------
  Net cash used in investing activities                       (4,636,000)    (1,904,000)   (3,271,000)
                                                             ------------  -------------  ------------
Cash flows from financing activities:
  Proceeds from issuance of notes payable                        400,000        811,000       292,000
  Repayment of notes payable                                    (438,000)    (1,916,000)     (177,000)
  Repayment of capitalized leases                               (452,000)      (562,000)     (452,000)
  Proceeds from private placement                                    -0-      2,693,000           -0-
  Proceeds from exercise of stock options                        394,000        221,000       158,000
                                                             ------------  -------------  ------------

  Net cash (used in) provided by financing activities            (96,000)     1,247,000      (179,000)
                                                             ------------  -------------  ------------

Net (decrease) increase in cash                                 (844,000)     4,668,000     1,099,000
Cash and cash equivalents at beginning of period               7,576,000      2,908,000     1,809,000
                                                             ------------  -------------  ------------

Cash and cash equivalents at end of period                   $ 6,732,000   $  7,576,000   $ 2,908,000
                                                             ============  =============  ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F5
<PAGE>
                         ELECTRONIC CLEARING HOUSE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

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

The  following  comments  describe  the  more  significant  accounting policies.

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

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

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

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

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

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

Chargeback  Losses
------------------

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

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

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

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

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


                                       F6
<PAGE>
Note  1:  (Continued)
-------


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


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

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

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

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

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

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

When  circumstances  warrant,  the  Company  reviews  its  long-lived assets for
impairment  using  estimated undiscounted future cash flows associated with such
assets.  An  impairment  loss  would be determined as the difference between the
fair values and the carrying amounts of the assets.  Management believes no such
impairment  has  occurred  as  of  September  30,  2005.

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

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

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


                                       F7
<PAGE>
NOTE  1:  (Continued)
-------

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

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

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

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

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

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

The  Company accounts for income taxes in accordance with Statement of Financial
Accounting  Standards No. 109, "Accounting for Income Taxes" (FAS 109).  FAS 109
requires the recognition of deferred tax liabilities and assets for the expected
future  tax  consequences  of temporary differences between the carrying amounts
and  the  tax  bases  of  assets  and  liabilities.  A  valuation  allowance  is
established,  when  necessary,  to  reduce  deferred  tax  assets  to the amount
expected  to  be  realized.

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

Earnings  (loss)  per  share  are based on the weighted average number of common
shares and dilutive common equivalent shares outstanding during the period.  The
shares  issuable  upon conversion of preferred stock and exercise of options and
warrants are included in the weighted average for the calculation of diluted net
income  per  share  except  where  it  would  be  anti-dilutive.

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

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

The  Company  measures  compensation  expense  for  its  employee  stock-based
compensation  under  APB  25.  The Company provides pro-forma disclosures of net
income  and  earnings per share as if a fair value method had been applied using
the  Black  Scholes  option pricing model. Compensation expense is recognized in
association  with  the


                                       F8
<PAGE>
NOTE  1:  (Continued)
-------

issuance  of stock options for the difference, if any, between the trading price
of  the  stock at the time of issuance and the price to be paid by the optionee.
Compensation expense is recorded over the vesting period. Pro forma compensation
costs  for employee stock and stock option awards are amortized over the related
service  periods  using  the  straight-line  method.

The  weighted  average fair value of the options granted during the fiscal years
ended  September  30,  2005,  2004  and  2003  were  $5.20,  $4.93  and  $1.66,
respectively.  For  options  granted in fiscal 2005, the risk free interest rate
was approximately 3%, the expected life was 6 years, the expected volatility was
approximately 76.6%, and the expected dividend yield was 0%, all calculated on a
weighted  average  basis.  For  options  granted  in  fiscal 2004, the risk free
interest  rate was approximately 3%, the expected life was 7 years, the expected
volatility  was approximately 84.0%, and the expected dividend yield was 0%, all
calculated on a weighted average basis.  For options granted in fiscal 2003, the
risk free interest rate was approximately 3%, the expected life was 5 years, the
expected volatility was approximately 90.8%, and the expected dividend yield was
0%,  all  calculated  on  a  weighted  average  basis.

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

<TABLE>
<CAPTION>
                                                       For the Fiscal Years Ended
                                                             September 30,
                                                    2005         2004          2003
                                                 -----------  -----------  ------------
<S>                                              <C>          <C>          <C>
Net income (loss)
        As reported                              $1,033,000   $2,849,000   $(3,379,000)

        Add: stock-based employee
        compensation expense included
        in reported net income, net of
        tax effect                                    5,000       20,000           -0-

        Deduct: total stock-based employee
        compensation expense determined
        under fair value-based method for
        all awards, net of related tax effects     (529,000)    (395,000)     (212,000)
                                                 -----------  -----------  ------------

Pro forma net income (loss)                      $  509,000   $2,474,000   $(3,591,000)
                                                 ===========  ===========  ============

Basic earnings (loss) per share:
        As reported                              $     0.16   $     0.45   $     (0.58)
        Pro forma                                $     0.08   $     0.39   $     (0.62)

Diluted earnings (loss) per share:
        As reported                              $     0.15   $     0.41   $     (0.56)
        Pro forma                                $     0.07   $     0.36   $     (0.60)
</TABLE>


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

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


                                       F9
<PAGE>
NOTE  1:  (Continued)
-------

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

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

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

Certain  amounts  in  the  September  30,  2004  and 2003 consolidated financial
statements  have  been reclassified to conform to the current year presentation.

Beginning  with the first fiscal quarter of 2005, the Company revised the way it
classifies  certain commission expenses paid to its independent sales agents who
sell  the  Company's  bankcard  processing  services  to  merchants.  The  gross
commissions  paid  are now recorded as processing and transaction expense in the
consolidated  statements of operations.  Previously, the commissions paid to the
independent  sales  agents were recorded as a reduction to the revenue earned on
the  transaction.

For  the presentation of the 2004 and 2003 financial statements, the Company has
revised  amounts  previously  reported to conform to the revised classification.
None  of the classification changes has an impact on the gross margin, operating
income,  net  income, net cash flow or any element of the Company's consolidated
balance  sheets  for  all  periods presented.  The Company does not consider the
effect  of  these  revisions  in  classification  in  2004  or in prior periods,
individually  or  in  the  aggregate,  to  be  material.

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

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

NOTE  2  -  STATEMENT  OF  CASH  FLOWS:
---------------------------------------

<TABLE>
<CAPTION>
                        September 30
                ----------------------------
                  2005      2004      2003
                --------  --------  --------
<S>             <C>       <C>       <C>
Cash paid for:
  Interest      $113,000  $175,000  $200,000
  Income taxes   154,000     8,000     1,000
</TABLE>


Significant  non-cash  transactions  for  fiscal  2005  are  as  follows:

     -    A  note  was issued for $39,000 for the purchase of capital equipment.

     -    Restricted  stock valued at $425,000 was issued to an executive of the
          company.

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

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


                                      F10
<PAGE>
NOTE  2:  (Continued)
-------

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

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


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

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

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

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

Property  and  equipment  are  comprised  of  the  following:

<TABLE>
<CAPTION>
                                                          September 30
                                                  --------------------------
                                                      2005          2004
                                                  ------------  ------------
<S>                                               <C>           <C>
Computer equipment                                $ 4,231,000   $ 3,630,000
Furniture, fixtures and equipment                   1,051,000       897,000
Building improvements                                 119,000        76,000
Auto                                                   56,000        34,000
                                                  ------------  ------------
Cost                                                5,457,000     4,637,000

Less:  accumulated depreciation and amortization   (3,120,000)   (2,344,000)
                                                  ------------  ------------

Net book value                                    $ 2,337,000   $ 2,293,000
                                                  ============  ============
</TABLE>

Included  in  property  and equipment are assets under capital lease of $627,000
and  $1,062,000  at  September  30,  2005  and  2004,  with  related accumulated
depreciation  of  $276,000  and  $372,000, respectively.  Amortization of assets
recorded  under  capital  leases  is  included  with  depreciation  expense.

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


                                      F11
<PAGE>
NOTE  5  -  SOFTWARE
--------------------

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

<TABLE>
<CAPTION>
                                       September 30
                                --------------------------
                                    2005          2004
                                ------------  ------------
<S>                             <C>           <C>

Software                        $14,864,000   $11,005,000

Less: accumulated amortization   (5,988,000)   (4,161,000)
                                ------------  ------------

Net book value                  $ 8,876,000   $ 6,844,000
                                ============  ============
</TABLE>


Included in software cost are assets under capital lease of $26,000 and $508,000
at  September 30, 2005 and 2004, and related accumulated amortization of $13,000
and  $132,000,  respectively.

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

Other  assets  consist  of  the  following  at  September  30,  2005:

<TABLE>
<CAPTION>
                       Accumulated       Net
              Cost    Amortization   Book Value
            --------  -------------  -----------
<S>         <C>       <C>            <C>

Patents     $173,000  $      88,000  $    85,000
Trademarks   280,000        115,000      165,000
Other        163,000        119,000       44,000
            --------  -------------  -----------

            $616,000  $     322,000  $   294,000
            ========  =============  ===========
</TABLE>


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

<TABLE>
<CAPTION>
                       Accumulated       Net
              Cost    Amortization   Book Value
            --------  -------------  -----------
<S>         <C>       <C>            <C>

Patents     $173,000  $      78,000  $    95,000
Trademarks   280,000         87,000      193,000
Other        199,000        119,000       80,000
            --------  -------------  -----------

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


Amortization expense for the years ended September 30, 2005 and 2004 was $38,000
and  $115,000,  respectively.  Based  on the current amount of intangible assets
subject to amortization, the estimated amortization expense for each of the five
succeeding  years  is  $38,000.


                                      F12
<PAGE>
NOTE 7 - INCOME TAXES
---------------------

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

<TABLE>
<CAPTION>
                                                          September 30
                                              ------------------------------------
                                                 2005         2004         2003
                                              ----------  ------------  ----------
<S>                                           <C>         <C>           <C>
Current federal taxes                         $     -0-   $   (19,000)  $     -0-
Current state taxes                              (5,000)      (87,000)     (5,000)
Deferred taxes                                 (664,000)   (1,717,000)   (920,000)
                                              ----------  ------------  ----------

  Total (provision) benefit for income taxes  $(669,000)  $(1,823,000)  $(925,000)
                                              ==========  ============  ==========
</TABLE>


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

<TABLE>
<CAPTION>
                                       September 30
                                 -------------------------
                                  2005    2004      2003
                                 ------  -------  --------
<S>                              <C>     <C>      <C>
U.S. Federal statutory tax rate  34.00%   34.00%  (34.00%)
Add (deduct):
Non-deductible goodwill            -0-      -0-    65.00%
State and local taxes             5.12%    5.10%    4.50%
All other                         0.18%  (0.10%)    2.20%
                                 ------  -------  --------

Effective tax rate               39.30%   39.00%   37.70%
                                 ======  =======  ========
</TABLE>


Components  of  the  deferred  tax  asset  (liabilities)  include:

<TABLE>
<CAPTION>
                                                 September 30
                                         --------------------------
                                             2005          2004
                                         ------------  ------------
<S>                                      <C>           <C>
Deferred tax assets (liabilities):
  Capitalized software                   $(2,714,000)  $(1,727,000)
  Reserve for bad debts                       72,000        60,000
  Accrued bonus                               94,000           -0-
  Reserve on legal settlement                    -0-       125,000
  State tax expense                          129,000       103,000
  Stock option exercise                       83,000        94,000
  Net operating loss carryforward          1,316,000       861,000
  Business tax credit                        113,000       113,000
  AMT credit                                  89,000        85,000
                                         ------------  ------------
Total deferred tax assets (liabilities)  $  (818,000)  $  (286,000)
                                         ============  ============
</TABLE>

The  Company  has a federal net operating loss carryforward of $3,370,000, which
expires in 2021 through 2024. The Company has not recorded a valuation allowance
against  deferred tax assets because it expects to have future taxable income to
recognize  these  assets.


                                      F13
<PAGE>
NOTE  8  -  SHORT-TERM  BORROWINGS  AND  LONG-TERM  DEBT:
--------------------------------------------------------

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

<TABLE>
<CAPTION>
                                                                        September 30
                                                                  ------------------------
                                                                     2005         2004
                                                                  -----------  -----------
<S>                                                               <C>          <C>
Term loan, collateralized by equipment, bearing
  interest at prime rate, repaid during 2005                             -0-       26,000

Term loan, collateralized by various assets of the Company, due
  2006, bearing interest at prime rate plus 1%, 7.50%
  at September 30, 2005                                               26,000      269,000

Term loan, collateralized by various assets of the Company,
  due October 2008, interest at prime rate plus .50%,
  7.25% at September 30, 2005                                        462,000      600,000

Term loan, collateralized by an asset of the Company,
  due March 2010, interest at 2%                                      36,000          -0-

Equipment lease line, collateralized by various assets of the
  Company, interest at prime rate plus .50%, 7.25% at
  September 30, 2005                                                 400,000          -0-

Capital leases                                                       207,000      687,000
                                                                  -----------  -----------

                                                                   1,131,000    1,582,000
Less:  current portion                                              (426,000)    (878,000)
                                                                  -----------  -----------

                                                                  $  705,000   $  704,000
                                                                  ===========  ===========
</TABLE>

The  weighted  average interest rate on the prime rate term loans for the period
they  were  outstanding  during  the  year  ended  September 30, 2005 was 5.58%.

One  of  the  term  loans contains restrictive debt covenants consisting of debt
service  coverage ratio and tangible net worth requirements. As of September 30,
2005,  the  Company  is in compliance with all such covenants. The Company has a
$3,000,000  credit  line  with a bank, which was unused during fiscal year 2005.

The Company has a $2 million equipment lease line with Bank of the West which we
have  drawn  down  $1,000,000  as  of  September  30,  2005.

Future  maturities  of  debt  are  as  follows:

<TABLE>
<CAPTION>
     Fiscal year ended September 30
     ------------------------------
<S>                                  <C>
               2006                  $  426,000
               2007                     290,000
               2008                     290,000
               2009                     120,000
               2010                       5,000
               thereafter                   -0-
                                     ----------
                                     $1,131,000
                                     ==========
</TABLE>


                                      F14
<PAGE>
NOTE 9 - ACCRUED EXPENSES:
-------------------------

<TABLE>
<CAPTION>
                                                        September 30
                                                  ----------------------
Accrued expenses are comprised of the following:     2005        2004
                                                  ----------  ----------
<S>                                               <C>         <C>
Accrued bankcard fees                             $  293,000  $  235,000
Accrued compensation and payroll taxes               881,000     700,000
Accrued communication costs                          124,000     138,000
Accrued professional fees                            498,000     212,000
Accrued commission                                   310,000     220,000
Accrued litigation expense                               -0-     300,000
Other                                                361,000     198,000
                                                  ----------  ----------
                                                  $2,467,000  $2,003,000
                                                  ==========  ==========
</TABLE>


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

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

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

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

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

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


                                      F15
<PAGE>
NOTE  10:  (Continued)
--------


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

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

<TABLE>
<CAPTION>
                                                            September 30
                                                 ------------------------------------
                                                    2005        2004         2003
                                                 ----------  ----------  ------------
<S>                                              <C>         <C>         <C>
Numerator:
  Income before cumulative effect of
    an accounting change                         $1,033,000  $2,849,000  $ 1,328,000
  Cumulative effect of an accounting change
    to adopt SFAS 142                                   -0-         -0-   (4,707,000)
                                                 ----------  ----------  ------------

      Net income (loss):                         $1,033,000  $2,849,000  $(3,379,000)
                                                 ==========  ==========  ============

Denominator:
  Weighted average shares outstanding for basic
    earnings (loss) per share                     6,485,125   6,311,643    5,812,005
  Effect of dilutive stock options                  454,256     588,608      212,035
                                                 ----------  ----------  ------------

  Adjusted weighted average shares outstanding
    for diluted earnings (loss) per share         6,939,381   6,900,251    6,024,040
                                                 ==========  ==========  ============


Basic net earnings (loss) per share:
  Before cumulative effect of accounting change  $     0.16  $     0.45  $      0.23
  Cumulative effect of accounting change                -0-         -0-        (0.81)
                                                 ----------  ----------  ------------
  Basic net earnings (loss) per share            $     0.16  $     0.45  $     (0.58)
                                                 ==========  ==========  ============

Diluted net earnings (loss) per share:
  Before cumulative effect of accounting change  $     0.15  $     0.41  $      0.22
  Cumulative effect of accounting change                -0-         -0-        (0.78)
                                                 ----------  ----------  ------------
  Diluted net earnings (loss) per share          $     0.15  $     0.41  $     (0.56)
                                                 ==========  ==========  ============
</TABLE>

For  the  years  ended  September 30, 2005, 2004 and 2003, approximately 72,500,
77,500,  and  270,000  shares,  respectively,  attributable  to  the exercise of
outstanding  options  were  excluded from the calculation of diluted EPS because
the  effect  was  antidilutive.

NOTE  11  -  COMMON  STOCK  OPTIONS  AND  RESTRICTED  STOCK:
-----------------------------------------------------------

The  Company  had  a  1992  Incentive Stock Option Plan (the "1992 Plan"), which
provided for the issuance of up to 1,343,750 stock options, each to purchase one
share  of  the common stock at a price not less than 100% of the market price at
the date of grant. In May 2002, the 1992 Plan expired.  The 2003 Incentive Stock
Option  Plan  was approved at the Annual Shareholders' Meeting in February 2003.
The  2003  Incentive  Stock Option Plan has similar provisions as the 1992 Plan.
In  February 2005, the shareholders approved an amendment and restatement of the
2003  Incentive  Stock  Option  Plan  to,  among other matters, (i) increase the
number  of  shares  to be issued under the 2003 Incentive Stock Option Plan from
900,000  shares  to  1,150,000  shares,  and (ii) permit the grant of restricted
stock  under  the  plan.


                                      F16
<PAGE>
NOTE  11:  (Continued)
--------

Stock  option  and  restricted stock activity during 2005, 2004, and 2003 was as
follows:

<TABLE>
<CAPTION>
                                                                   Exercise
                                                                    Price
                                               -----------------  ------------------
<S>                                            <C>                <C>
     Options outstanding September 30, 2002             712,584   $ 1.29  -  $16.48
                                               =================

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

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

       Granted                                          260,000     7.60  -    9.16
       Forfeited                                       (158,600)    1.29  -    9.56
       Exercised                                       (119,200)    1.30  -    7.00
                                               -----------------
     Options outstanding September 30, 2005           1,116,125   $ 1.30  -   16.48
                                               =================

     Options exercisable at September 30, 2003          321,000   $ 1.29  -  $16.48
                                               =================
     Options exercisable at September 30, 2004          355,035   $ 1.29  -  $16.48
                                               =================
     Options exercisable at September 30, 2005          440,500   $ 1.30  -  $16.48
                                               =================

     Restricted stock granted in fiscal 2005             50,000
                                               =================

     Authorized shares available for grant
       at September 30, 2003                            614,500
                                               =================
     Authorized shares available for grant
       at September 30, 2004                            193,000
                                               =================
     Authorized shares available for grant
       at September 30, 2005                            285,600
                                               =================
</TABLE>

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

The  following  table  summarizes information about stock options outstanding at
September  30,  2005:

<TABLE>
<CAPTION>
                                  Options Outstanding               Options Exercisable
                         --------------------------------------  -------------------------
                                          Weighted
                                           Average    Weighted                   Weighted
                             Number       Remaining    Average       Number       Average
           Range of      Outstanding at  Contractual  Exercise   Exercisable at  Exercise
       Exercise Prices   Sept. 30, 2005     Life        Price    Sept. 30, 2005    Price
       ----------------  --------------  -----------  ---------  --------------  ---------
<S>                      <C>             <C>          <C>        <C>             <C>
       $ 1.30  -  $2.00         102,750         6.38  $    1.39          48,850  $    1.48
       $ 2.15  -  $3.50         263,625         6.48  $    2.60         136,100  $    2.56
       $ 4.00  -  $5.88         102,250         2.95  $    4.19         102,250  $    4.19
       $ 6.85  - $16.48         647,500         8.00  $    7.55         153,300  $    8.27
                         --------------  -----------  ---------  --------------  ---------
                              1,116,125         7.03  $    5.51         440,500  $    4.81
                         ==============  ===========  =========  ==============  =========
</TABLE>

                                      F17
<PAGE>
NOTE  12  -  COMMITMENTS,  CONTINGENT  LIABILITIES,  AND  GUARANTEES:
---------------------------------------------------------------------

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

A  cardholder,  through its issuing bank, generally has until the later of up to
four  months  after  the  date a transaction is processed or the delivery of the
product  or  service to present a chargeback to the Company's sponsoring bank as
the  merchant  processor.  Therefore,  management  believes  that  the  maximum
potential  exposure  for  the  chargebacks  would not exceed the total amount of
transactions  processed through Visa and MasterCard for the last four months and
other  unresolved  chargebacks  in the process of resolution.  For the last four
months through September 30, 2005, this potential exposure totaled approximately
$443 million.  At September 30, 2005, the Company, through its sponsoring banks,
had approximately $106,000 of unresolved chargebacks that were in the process of
resolution.  At  September  30, 2005, the Company, through its sponsoring banks,
had  access  to  $13.7  million belonging to our merchants.  This money has been
deposited  at  the  sponsoring  bank  by  the  merchants  to cover any potential
chargeback  losses.

For  the  fiscal years 2005 and 2004, the Company processed approximately $1,186
million  (2005)  and  $1,053 million (2004) of Visa and MasterCard transactions,
which  resulted  in  $7.1  million in gross chargeback activities for the fiscal
year  ended  2005 and $7.6 million for the fiscal year ended 2004. Substantially
all  of  these  chargebacks  were  recovered  from  the  merchants.

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

In  accordance  with  SFAS  No.  5,  "Accounting for Contingencies", the Company
records  a  reserve  for  chargeback  losses  based on its processing volume and
historical  trends  and  data.  As of September 30, 2005 and 2004, the allowance
for  chargeback  losses, which is classified as a component of the allowance for
uncollectible  accounts  receivable, was $29,000 and $46,000, respectively.  The
expense  associated  with the chargeback allowance is included in processing and
transaction  expense in the accompanying consolidated statements of income.  The
Company expensed $13,000, $50,000, and $44,000 for the years ended September 30,
2005,  2004  and  2003,  respectively for bankcard processing chargeback losses.

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


                                      F18
<PAGE>
NOTE  12:  (Continued)
--------

maximum potential exposure for dishonored checks at any given balance sheet date
would not exceed the total amount of checks guaranteed in the last 10 days prior
to  the balance sheet date. As of September 30, 2005, the Company estimates that
its  maximum  potential  dishonored check exposure was approximately $1,239,000.

For  the  fiscal years ended 2005 and 2004, the Company guaranteed approximately
$40,413,000  (2005) and $19,382,000 (2004) of merchant checks, which resulted in
$279,000  (2005)  and  $139,000  (2004)  of  dishonored  checks presented to the
Company  for  payments.  The Company has the right to collect the full amount of
the  check  from  the  check writer.  The Company establishes a reserve for this
activity  based  on  historical  and  projected  loss  experience.  The  expense
associated  with  the  guarantee costs is included in processing and transaction
expense  in  the  accompanying  consolidated  statements  of  income.

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

The Company leases equipment and real property under agreements, which expire at
various  times  over  the  next five years.  The Company's future minimum rental
payments  for capital and operating leases at September 30, 2005 are as follows:

<TABLE>
<CAPTION>
                 Fiscal Year             Capital Leases   Operating Leases
       -------------------------------  ----------------  -----------------
<S>    <C>                              <C>               <C>
       2006                             $       160,000   $         536,000
       2007                                      36,000             499,000
       2008                                      33,000             499,000
       2009                                         -0-                 -0-
       2010                                         -0-                 -0-
                                        ----------------  -----------------

       Total minimum lease payments     $       229,000   $       1,534,000
                                                          =================

       Less: imputed interest of 7.10%     (     22,000)
                                        ----------------
       Present value of net
         minimum lease payment          $       207,000
                                        ================
</TABLE>


Rent  expense  for  the  years  ended September 30, 2005, 2004, and 2003 totaled
$663,000,  $572,000  and  $299,000,  respectively. Certain operating leases have
renewal options at the end of the lease term solely at the Company's discretion.
In  May  2003,  the  Company  leased  new  corporate  office space in Camarillo,
California.  The  lease  is for a period of five years at a current monthly rate
of  $38,000.

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

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

In  July  2004, LML Patent Corporation, a wholly-owned subsidiary of LML Payment
Systems,  Inc.  ("LML"),  filed a patent infringement claim against the Company,
its  subsidiary,  XPRESSCHEX,  Inc.  and  others,  relating  with respect to the
Company  and its subsidiary, to the alleged infringement by our check conversion
processes  of  three  patents  held  by  LML.  In  September  2005,  the  patent
infringement claims for two (2) of the patents were dropped.  The suit was filed
in  the U.S. District Court for the District of Delaware.  The discovery process
and  expert  witness  reports have been completed and claims construction briefs
and  summary judgment briefs have been filed with the court in anticipation of a
December  19, 2005 hearing on these issues.   LML seeks an undisclosed amount of
damages  in  connection  with  the  alleged  infringement.

The Company was aware of the LML patents prior to LML's initiation of the claims
and had previously obtained competent legal opinions from outside patent counsel
that  neither  the  Company nor any of its subsidiaries infringe on any valid or
enforceable  patent rights of LML being asserted in the litigation. No documents
came  out  of  the


                                      F19
<PAGE>
NOTE  13:  (Continued)
--------

discovery  process to alter the Company's original belief that none of its check
conversion  processes  infringe  upon  any valid or enforceable patent rights of
LML, and the Company will continue to vigorously defend its position against the
remaining  claims  made.

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

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

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

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

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

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

<TABLE>
<CAPTION>
                                                      September 30,
                                        ----------------------------------------
Business Segments                           2005          2004          2003
-----------------                       ------------  ------------  ------------
<S>                                     <C>           <C>           <C>
Revenues:
  Bankcard and Transaction Processing   $41,093,000   $36,897,000   $32,957,000
  Check Related Products                 14,458,000    11,423,000     8,192,000
                                        ------------  ------------  ------------
                                        $55,551,000   $48,320,000   $41,149,000
                                        ============  ============  ============

Operating Income:
  Bankcard and Transaction Processing   $ 5,829,000   $ 5,977,000   $ 4,303,000
  Check Related Products                  2,204,000     1,644,000       591,000
  Other - Corporate Expenses             (6,354,000)   (4,164,000)   (2,469,000)
                                        ------------  ------------  ------------
                                        $ 1,679,000   $ 3,457,000   $ 2,425,000
                                        ============  ============  ============

Depreciation and Amortization:
  Bankcard and Transaction Processing   $   954,000   $   966,000   $   867,000
  Check Related Products                  1,702,000     1,255,000       727,000
                                        ------------  ------------  ------------
                                        $ 2,656,000   $ 2,221,000   $ 1,594,000
                                        ============  ============  ============


                                      F20
<PAGE>
NOTE 14: (Continued)
--------

Capital Expenditures:
  Bankcard and Transaction Processing   $ 2,167,000   $ 2,258,000   $ 2,479,000
  Check Related Products                  2,505,000     2,513,000     1,365,000
                                        ------------  ------------  ------------
                                        $ 4,672,000   $ 4,771,000   $ 3,844,000
                                        ============  ============  ============

Total Assets:
  Bankcard and Transaction Processing   $ 9,452,000   $ 8,014,000   $ 7,051,000
  Check Related Products                 24,719,000    23,933,000     6,794,000
  Other                                   6,646,000     7,481,000     4,930,000
                                        ------------  ------------  ------------
                                        $40,817,000   $39,428,000   $18,775,000
                                        ============  ============  ============
</TABLE>


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

The  following summarizes the quarterly financial results of the Company for the
fiscal  years  ended  September  30,  2005 and September 30, 2004 (in thousands,
except  share  data):

<TABLE>
<CAPTION>
                                  Year Ended September 30, 2005
                              ---------------------------------------
                               First     Second     Third     Fourth
                              Quarter   Quarter    Quarter   Quarter
                              --------  --------  ---------  --------
<S>                           <C>       <C>       <C>        <C>
Net revenues                  $ 12,760  $ 13,321  $  14,281  $ 15,189
Gross profit                     4,469     4,688      5,164     5,075
Profit from operations              87       238        703       651
Net income                          52       144        433       404
Earnings per share - basic    $   0.01  $   0.02  $    0.07  $   0.06
Earnings per share - diluted  $   0.01  $   0.02  $    0.06  $   0.06
</TABLE>


<TABLE>
<CAPTION>
                                  Year Ended September 30, 2004
                              ---------------------------------------
                               First     Second     Third     Fourth
                              Quarter   Quarter    Quarter   Quarter
                              --------  --------  ---------  --------
<S>                           <C>       <C>       <C>        <C>
Net revenues                  $ 11,483  $ 11,983  $  12,356  $ 12,498
Gross profit                     4,394     4,243      4,484     4,582
Profit from operations           1,013       706      1,082       656
Net income                         589     1,206        651       403
Earnings per share - basic    $   0.10  $   0.19  $    0.10  $   0.06
Earnings per share - diluted  $   0.09  $   0.17  $    0.09  $   0.06
</TABLE>


                                      F21
<PAGE>
<TABLE>
<CAPTION>
                                  ELECTRONIC CLEARING HOUSE, INC. AND CONSOLIDATED SUBSIDIARIES
                                                     SCHEDULE II TO FORM 10K
                                    RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES



                                                 REDUCTION IN                             REDUCTION IN
                                                  RESERVE AND                              RESERVE AND
                       BALANCE AT   CHARGED TO     ACCOUNTS     BALANCE AT   CHARGED TO     ACCOUNTS     BALANCE AT   CHARGED TO
DESCRIPTION            09/30/2002     EXPENSE     RECEIVABLE    09/30/2003     EXPENSE     RECEIVABLE    09/30/2004     EXPENSE
---------------------  -----------  -----------  -------------  -----------  -----------  -------------  -----------  -----------
<S>                    <C>          <C>          <C>            <C>          <C>          <C>            <C>          <C>

Allowance for
 trade receivables/
 chargeback            $   431,000  $    67,000  $     407,000  $    91,000  $   218,000  $     176,000  $   133,000  $   295,000
 receivables

Allowance for
 obsolete inventories  $   300,000  $   110,000  $     410,000  $       -0-  $    46,000  $         -0-  $    46,000  $    10,000


                       REDUCTION IN
                        RESERVE AND
                         ACCOUNTS     BALANCE AT
DESCRIPTION             RECEIVABLE    09/30/2005
---------------------  -------------  -----------
<S>                    <C>            <C>

Allowance for
 trade receivables/
 chargeback            $     311,000  $   117,000
 receivables

Allowance for
 obsolete inventories  $      56,000  $       -0-
</TABLE>


                                       S1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number   Description of Document
-------  -------------------------------------------------------------------------------------------------------
<S>      <C>
  2.1    Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Magic Software Development, Inc., dated April 20, 1999.[4]
  2.2    Copy of Merger Agreement and Plan of Reorganization between Electronic Clearing House, Inc., ECHO
         Acquisition Corporation, and Rocky Mountain Retail Systems, Inc., dated January 4, 2000.[5]
  3.1    Articles of Incorporation of Bio Recovery Technology, Inc., filed with the Nevada Secretary of State on
         December 11, 1981.[1]
  3.1.1  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on June 21, 1990.
  3.1.2  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on September 27, 1991.
  3.1.3  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on August 5, 1993.
  3.1.4  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on April 7, 1995.
  3.1.5  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on April 7, 1997.
  3.1.6  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on March 13, 1998.
  3.1.7  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on June 21, 1999.
  3.1.8  Amendment to the Articles of Incorporation of Electronic Clearing House, Inc. filed with the Nevada
         Secretary of State on September 6, 2001.
  3.2    By-Laws of Bio Recovery Technology, Inc.[1]
  3.2.1  Amendment to the By-Laws of Electronic Clearing House, Inc., dated April 25, 2005.
  3.2.2  Amendment to the By-Laws of Electronic Clearing House, Inc., dated September 9, 2005.
  4.1    Amended and Restated Rights Agreement between Electronic Clearing House, Inc. and OTR, Inc.,
         dated January 29, 2003.[11]
  4.1.1  Amendment Number One to Amended and Restated Rights Agreement dated September 27, 2004.[12]
  4.2    Specimen Common Stock Certificate. [2]
  4.3    Amended and Restated 2003 Incentive Stock Option Plan.[13]
  4.4    Amended and Restated Officers and Key Employees Incentive Stock Option Plan.[14]
  10.35  Copy of Merchant Marketing and Processing Services Agreement between Electronic Clearing House,
         Inc. and First Regional Bank, dated June 24, 1997. [3]
  10.42  Copy of Addendum to Agreement between Electronic Clearing House, Inc. and U-Haul International,
         dated January 1, 2000.[5]
  10.46  Copy of Amended and Restated Merchant Marketing and Processing Services Agreement between
         Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[5]
  10.47  Copy of Addendum to Amended and Restated Merchant Marketing and Processing Services
         Agreement between Electronic Clearing House, Inc. and First Regional Bank, dated August 1, 2000.[5]
  10.48  Copy of POS Check Third-Party Services Agreement between Visa U.S.A., Inc. and Electronic Clearing
         House, Inc., dated December 12, 2000.[6]
  10.49  Copy of Asset Purchase Agreement between National Check Network, Inc. and Electronic Clearing
         House, Inc., dated April 19, 2001. [6]
  10.50  Copy of Addendum to Agreement between U-Haul International and Electronic Clearing House, Inc.,
         dated October 1, 2001. [6]
  10.51  Copy of First Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A., Inc.
         and Electronic Clearing House, Inc. dated December 12, 2000. [7]
  10.52  Copy of Second Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A.,
         and Electronic Clearing House, Inc. dated December 12, 2000. [7]
  10.53  Copy of Third Amendment to the POS Check Third-Party Servicer Agreement between Visa U.S.A.,
         and Electronic Clearing House, Inc. dated December 12, 2000. [7]
  10.54  Form of Securities Purchase Agreement by and among the Registrant and the Purchasers identified
         therein. [8]


<PAGE>
  10.55  Form of Registration Rights Agreement by and among the Registrant and the Purchasers identified
         therein. [8]
  10.56  Office Lease dated May 21, 2003, by and between the Registrant and the 1989 Sheehan Family Trust
         dated October 24, 1989, with respect to principal executive offices located at 730 Paseo Camarillo,
         Camarillo, California 93010.[9]
  10.57  First Amendment to Lease dated July 10, 2003, by and between the Registrant and the 1989 Sheehan
         Family Trust dated October 24, 1989, with respect to principal executive offices located at 730 Paseo
         Camarillo, Camarillo, California 93010.
  10.58  Addendum to Office Lease dated July 7, 2004, by and between the Registrant and the 1989 Sheehan
         Family Trust dated October 24, 1989, with respect to principal executive offices located at 730 Paseo
         Camarillo, Camarillo, California 93010. [10]
  11.1   Statement re computation of per share earnings, incorporated herein by reference to Note 10 of the
         Notes to Consolidated Financial Statements.
  21.0   Subsidiaries of Registrant as of September 30, 2005.
  23.1   Consent of PricewaterhouseCoopers LLP
  24.1   Power of Attorney [15]
  31.1   Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
  31.2   Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
  32.1   Certificate of Joel M. Barry, Chief Executive Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
  32.2   Certificate of Alice L. Cheung, Chief Financial Officer of Electronic Clearing House, Inc. pursuant to
         Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
</TABLE>

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

     [1]  Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal  year  ended  September  30,  1988  and  incorporated herein by
          reference.
     [2]  Filed  as  an  Exhibit  to  Registrant's  Form  S-1,  Amendment No. 3,
          effective  November  13,  1990  and  incorporated herein by reference.
     [3]  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.
     [4]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  1999  and  incorporated herein by
          reference.
     [5]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2000  and  incorporated herein by
          reference.
     [6]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2001  and  incorporated herein by
          reference.
     [7]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2002  and  incorporated herein by
          reference.
     [8]  Filed  as  an Exhibit to Registrant's Current Report on Form 8-K dated
          October  30,  2003  and  incorporated  herein  by  reference.
     [9]  Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2003  and  incorporated herein by
          reference.
     [10] Filed  as  an  Exhibit  to Registrant's Annual Report on Form 10-K for
          fiscal  year  ended  September  30,  2004  and  incorporated herein by
          reference.
     [11] Filed  as  an Exhibit to Registrant's Form 8-A dated February 10, 2003
          and  incorporated  herein  by  reference.
     [12] Filed  as an Exhibit to Registrant's Form 8-K dated September 30, 2004
          and  incorporated  herein  by  reference.
     [13] Filed  as  an  Exhibit  to  Registrant's  Notice  of Annual Meeting of
          Shareholders  dated  February  7,  2005  and  incorporated  herein  by
          reference.
     [14] Filed  as  an  Exhibit  to  Registrant's  Notice  of Annual Meeting of
          Shareholders  dated  February  4,  1999  and  incorporated  herein  by
          reference.
     [15] Included  on  signature  page.