Table of Contents

As filed with the Securities and Exchange Commission on November 20, 2006.

Registration No. 333-___________________





# SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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# POST EFFECTIVE AMENDMENT NO. 1
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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EAUTOCLAIMS, INC.
(Exact Name of Registrant as Specified in Its Charter)

|Nevada                          |  | 7373                         |  | 95-4583945          | 
|------------------------------- |  | ---------------------------- |  | ------------------- | 
|(State or Other Jurisdiction of |  | (Primary Standard Industrial |  | (I.R.S. Employer    | 
|Incorporation or Organization)  |  | Classification number)       |  | Identification No.) | 

110 E. Douglas Road
Oldsmar, Florida 34677
(813) 749-1020
(Address and telephone number of principal executive offices
and principal place of business)

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Eric Seidel, President and Chief Executive Officer
110 E. Douglas Road
Oldsmar, Florida 34677
(813) 749-1020
(Name, address and telephone number of agent for service)

# Copies of all communications to:

# Michael T. Cronin, Esq.
Johnson, Pope, Bokor, Ruppel & Burns, LLP
911 Chestnut Street
Clearwater, Florida 33756
Telephone:  (727) 461-1818
Facsimile: (727) 462-0365

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Approximate Date of
Commencement of Proposed Sale to the Public: As soon as practicable after the Registration Statement becomes effective.



If any of the securities being
registered on this form are to be offered on a delayed of continuous basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box.x



If this form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.o



If this form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.o



If this form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.o



# CALCULATION OF REGISTRATION FEE

|            
|------------
|
|            
|Common Stock
|            

(1)
        Estimated solely for the purpose of determining the registration fee, in accordance with Rule 457(c), based on the closing bid price of our Common Stock as reported on the OTC:BB on November 15, 2006.




(2)
        The shares of Common Stock being registered hereunder on behalf of the Selling Stockholders relate to (i) 28,884,049 shares of Common Stock which have been issued; (ii)18,664,864 shares issuable upon exercise of Common Stock Purchase Warrants; and (iii) up to 4,004,775 shares underlying placement agent warrants.




(3)
        Pursuant to Rule 416, there are also being registered such additional number of shares of Common Stock as may become issuable pursuant to the anti-dilution provisions of the warrants, convertible note and placement agent warrants registered herein.




(4)
        Registration Statement fees previously paid per Registration Statement 333-133329




The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further
amendment which specifically states that this registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.





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The information in this Prospectus is not complete and may
be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy those securities in
any state where the offer or sale is prohibited.

Subject to Completion, Dated November 20, 2006

# PROSPECTUS

# 51,553,688 Shares of Common Stock

# EAUTOCLAIMS, INC.

We are registering for resale an aggregate of
51,553,688 shares of Common Stock of eAutoclaims, Inc. (the Company, us or we) that have been
issued or may be issued to certain of our stockholders named in this Prospectus and their transferees (Selling
Stockholders).



We will not receive any proceeds from the sale of the
shares, but we may receive proceeds from the Selling Stockholders if they exercise their warrants. Our Common Stock is quoted on
the OTCBB under the symbol EACC. On November 15, 2006, the closing sales price of our Common Stock, as reported on the
OTCBB was $0.15 per share.



The shares of Common Stock may be sold from time to
time by the Selling Stockholders in one or more transactions at fixed prices, at market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. The Selling Stockholders and any broker-dealer who may participate
in the sale of the shares may use this Prospectus. See Plan of Distribution.



INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE
OF RISK. SEE RISK FACTORS BEGINNING ON PAGE 4.



Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these securities, or determined if this Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.





The date of this Prospectus is November__,
2006

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# TABLE OF CONTENTS

|                                                                                      | Page
|------------------------------------------------------------------------------------- | ----
|                                                                                      |     
|Part I                                                                               
|Prospectus Summary                                                                    |     
|Risk Factors                                                                          |     
|Special Note regarding Forward-Looking Statements                                     |     
|Use of Proceeds                                                                       |     
|Selling Stockholders                                                                  |     
|Plan of Distribution                                                                  |     
|Market Price of Common Stock                                                          |     
|Dividend Policy                                                                       |     
|Selected Financial Information and Other Data                                         |     
|Managements Discussion and Analysis of Financial Condition and Results of Operations |     
|Business                                                                              |     
|Management                                                                            |     
|Executive Compensation                                                                |     
|Certain Transactions                                                                  |     
|Principal Stockholders                                                                |     
|Description of Securities                                                             |     
|Shares Eligible for Future Sale                                                       |     
|Legal Matters                                                                         |     
|Experts                                                                               |     
|Where You Can Find Additional Information                                             |     
|Consolidated Financial Statements                                                     |     
|                                                                                     
|Part II                                                                              
|Information Not Required In Prospectus                                                |     

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# PART I

# PROSPECTUS SUMMARY

This Summary highlights information contained
elsewhere in this Prospectus. It does not contain all of the information that you should consider before investing in our Common
Stock. We encourage you to read the entire Prospectus carefully, including the section entitled Risk Factors and the
financial statements and the notes to those financial statements.



COMPANY OVERVIEW

eAutoclaims is a Nevada corporation which provides
Internet based vehicle collision claims services for insurance companies, managing general agents (MGA) and third party claims
administrators (TPA) and self-insured automobile fleet management companies. We accept assignment of claims from our customers,
and provide vehicle repairs through a network of repair shops. We also provide online systems to connect clients with service
providers of estimates, audits and claims administration services for claims for which we do not perform the repair.



Our business strategy is to use the Internet to
streamline and lower the overall costs of automobile repairs and the claims adjustment expenses of our clients. We believe that
our proprietary web-based software products and services make the management of collision repairs more efficient by controlling
the cost of the repair and by facilitating the gathering and distribution of information required in the automobile repair
process.



THE OFFERING

|Common Stock offered by the Selling Stockholders   |  | 51,553,688                                                                                  | 
|-------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | 
|                                                  
|Common Stock Outstanding Prior to the Offering (1) |  | 80,750,105                                                                                  | 
|                                                  
|Common Stock Outstanding after the Offering (2)    |  | 103,419,744                                                                                 | 
|                                                  
|Use of Proceeds                                    |  | We will not receive any proceeds from the sale of Common Stock by the Selling Stockholders. | 

|_________________
|-----------------
|(1)              
|                 
|(2)              

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RISK FACTORS



You should carefully consider the following factors and other information in this Prospectus before deciding to purchase our Common Stock.



Risks Related to Our Business



Our limited operating history makes evaluating our business and prospects difficult.



We have been involved in the Internet based automobile collision insurance claims business since January 2000. Our limited operating history in this industry makes an evaluation of our future prospects very difficult. If we do achieve profitability in any period, we cannot be certain that we will sustain or increase such profitability on a quarterly or annual basis. You should carefully consider our prospects in light of the risks and difficulties frequently encountered by early stage companies in new and rapidly evolving markets. There is a risk that we will not be able to accomplish our objectives. Failure to achieve any of our objectives could negatively affect our business, financial condition and results of operations.



We have all the risks of a principal in the
automobile repair process.



We receive revenue from insurance companies for
repairs completed by members of our network of repair shops. We approve all repair shops for inclusion in our network and
determine which repair shop will perform the repairs. We are responsible for collecting our revenue directly from the insurance
company. We therefore act as a principal in the transaction.



If the repairs are not completed correctly, and the
vehicle must be sent to another repair shop for repairs to be performed, we must pay for the repairs to be completed again. This
cost is not passed on to the insurance company but is a risk that we bear. We control this risk by monitoring work performed by
the repair shops, monitoring customer complaints, reviewing the repair shop history and actual site visits to repair shops. We add
or remove repair shops from our network based on our review of the repair shops performance. We eliminate repair shops that
we feel are not providing repair work up to its standards. Repairs are approved by customers upon retrieval of their vehicle. We
constantly review and revise our network to determine if repair shops included should be removed. We have the risks and rewards of
ownership such as the risk of loss for collection, delivery or returns.



All our fees are negotiated between us and the
insurance company, and the negotiation does not include any repair shop. We must pay the repair shop a fee negotiated between us
and the repair shop, and the negotiation does not include any insurance company. The amount owed to the repair shop is owed
directly by us and is not guaranteed, directly or indirectly, by any insurance company. We are not acting as an agent or broker
(including performing services, in substance, as an agent broker) with compensation on a commission or fee basis.



To date, additional repairs that our repair shops have
to provide after a vehicle has been returned to its user have not been material. We have not experienced any material bad debts or
collection difficulties from our customers. However, because we act as the principal in the automobile repair process, we are
subject to the risks of poor repair work and accounts receivable write-offs from our customers due to dissatisfaction with our
services.



We are dependent on only a few customers for a
substantial portion of our revenue.



During the year ended July 31,
2006, we derived 52% and 9% of our revenues from two customers. The contract with our largest customer automatically renewed for a
period of one year in April 2006. The business associated with this client has been sold by the client to a third party and we
subsequently assigned the agreement to this new entity. While we have been working with the new owner to create a new contract,
the client has begun working with us to migrate the data hosted by us to their proprietary in house system. We do not anticipate
any short term loss of business from this client. In fact, the client is evaluating using our services for their other existing
business, which would represent a material growth opportunity if attained. However, there is no commitment at this time and we
cannot guarantee that any new contract, if received, will be a long term contract representing significant business, or that any
new contract will be on more favorable terms.

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Our recent agreement with Audatex (formerly ADPClaimsServices Group) may not be profitable for us.



We may not be successful in commercially exploiting
the Audatex Agreement. Although we have achieved certain milestones and met certain conditions for the continuation of this
agreement, positive results of this program are not assured. There is no requirement that Audatex refer a minimum number of claims
to us under the Agreement. There is no assurance we will achieve the anticipated revenues, gross margins or profits anticipated
under this Agreement. Audatex has the ability to cancel this Agreement, which would adversely affect our business prospects. Our
Agreement with Audatex will result in a different revenue recognition model for claims processed through the Audatex system.
Because Audatex is the obligor to make the payments directly to the repair shops we will only recognize our portion of the net
revenues from sales under this agreement. Thus, our revenue will not grow as significantly as in the past, if and when we generate
more business with Audatex. However, our margins would grow significantly if and when we generate more business with
Audatex.



We depend upon independently owned and operatedrepairshops to provide services to our customers.



We have agreements with a network
of independently owned and operated vehicle repair facilities to provide services to our customers. Either the repair facility or
we can terminate our contracts at will. Our business could suffer if a significant number of these repair shops terminate their
agreements with us or fail to provide the quality of service expected by our customers.



We may not be indemnified for all losses resulting
from ourvehiclerepair business.



We require that all repair shops in our network
indemnify us from claims relating to their negligent acts or breach of their agreement with us, maintain a specified amount of
liability insurance coverage, and name us as an additional insured under their liability policy. This coverage may not, however,
cover all liabilities to which we may be subject, and our business could suffer if we need to draw significant funds from
operating revenue to pay claims that are not covered or that exceed the limits of our coverage.



The market for insurance auto collision claimsservicesis competitive.



Because the auto collision claims
service industry is highly competitive and has low barriers to entry, we cannot assure you that we will be able to compete
effectively. We are aware of two other companies that offer internet-based services similar to ours. These competitors provide
their services primarily to the fleet management and auto glass industries. All of these competitors have been in business longer
than we have and have significantly greater assets and financial resources than currently available to us. We expect competition
to intensify in the Internet-based segment of this industry as current non-Internet competitors expand their market into the
Internet and new competitors enter the market utilizing the Internet. We cannot assure you that we will be able to compete
successfully against current or future competitors. Competitive pressures could force us to reduce our prices and may make it more
difficult for us to attract new customers and retain current customers. The principal competitive factors for our services
are:




        turn around time for claims processing;



        quality of repair shop services;



        ability to offer nationwide access to repair facilities;



        claims processing fees and charges;



        ability to offer new services and incorporate technological change into existing services;



        24/7 access to status of claim;



        volume of repair claims a repair facility can expect to support discount amounts.




As competition in our industry
increases, it is likely that many of our competitors will have access to greater resources than are currently available to us,
including financial, employee, customer relations, technology, and expertise in developing and implementing new technologies as
the industry evolves. In addition, competitors may be able to develop services that are superior to our service, that achieve
greater customer acceptance or that significantly improves functionality as compared to our existing and future products and
services.



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The use of the Internet to provide collision
claims administration services is a recent development and the extent of customer acceptance is not yet
known.



Internet-based collision claims
administration is a relatively new and evolving industry. As such, there is no clearly defined business model that has a lengthy
history of customer acceptance and profitability. For the industry to be successful, insurance companies must be willing to obtain
collision administration services over the Internet. There is no way to be sure that a sufficient number of customers will utilize
our services to enable us to remain profitable.



We depend on key personnel and will need to recruit
new personnel as we grow.



Because we are a small company, we
are currently dependent on the efforts of a limited number of management personnel. We believe that given the development stage of
our business and the large amount of responsibility being placed on each member of our management team, the loss of the services
of any member of this team at the present time would harm our business. Each member of our management team supervises the
operation and growth of one or more integral parts of our business.



If we are successful in expanding
our customer base, we will need to add additional key personnel as we continue to grow. If we cannot attract and retain enough
qualified and skilled staff, the growth of our business may be limited. Our ability to provide services to clients and expand our
business depends, in part, on our ability to attract and retain staff with professional experiences that are relevant to
technology development and other functions we perform. Competition for personnel with these skills is intense. Some technical job
categories are under conditions of severe shortage in the United States. In addition, restrictive immigration quotas could prevent
us from recruiting skilled staff from outside the United States. We may not be able to recruit or retain the caliber of staff
required to carry out essential functions at the pace necessary to sustain or expand our business.



We believe our future
success will depend in part on the following:




        the continued employment and performance of our senior management,



        our ability to retain and motivate our officers and key employees, and



        our ability to identify, attract, hire, train, retain, and motivate other highly skilled technical, managerial, marketing, and customer service personnel.




Our business will suffer if our independent
automobile collision repair shops do not provide good service.



We currently have relationships with approximately
2,500 independently owned and operated body shops upon which we depend to perform quality repair services at a reasonable cost and
in a timely manner. Although we monitor the quality and timeliness of their services and can terminate our relationship with those
shops that do not meet our standards, we do not have meaningful control over the quality of their services. Poor workmanship or
service by any of these shops can adversely affect our relationships with customers and could cause them to stop dealing with us
or reduce the amount of business that they do with us. In addition, because we assume the responsibility for the quality of
repairs, poor workmanship and inferior work can negatively affect our financial position because of the additional costs we incur
in properly repairing an automobile.



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If we fail to adequately protect our trademarks and
proprietary rights, our business could be harmed. Our rights to our service marks are uncertain.



The steps we take to protect our proprietary rights
may be inadequate. We regard our copyrights, service marks, trademarks, trade secrets and similar intellectual property as
critical to our success. We rely on trademark and copyright law, trade secret protection and confidentiality or license agreements
with our employees, customers, partners and others to protect our proprietary rights. Although we were granted supplemental
registration rights for eAutoclaims.com®, our service mark applications for eAutoclaims.com and Bricks to Clicks on the
primary federal register were rejected, however this product is no longer in service and has been replaced by our latest product
eJusterSuite®, which we received a Federal Registration Certificate for on June 15, 2005. We have been involved in litigation
regarding the rights to use the name eAutoclaims.com. Effective trademark, service mark, copyright and trade secret protection may
not be available in every country in which we may in the future offer our products and services. Furthermore, the relationship
between regulations governing domain names and laws protecting trademarks and similar proprietary right is unclear. Therefore, we
may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the
value of our trademarks and other proprietary rights.



We may not be able to protect our proprietary
technology.

Despite any precautions we may take, a third party
may be able to copy or otherwise obtain and use our software or other proprietary information without authorization or develop
similar software independently. We cannot assure you that the steps we have taken or will take will prevent misappropriation of
our technology. Litigation may be necessary in the future to determine the validity and scope of the proprietary rights of others,
or defend against claims of infringement or invalidity. This litigation, whether successful or unsuccessful, could result in
substantial costs and diversions of resources, either of which could harm our business. If we are unable to protect our current or
future proprietary technology, our ability to compete effectively will be harmed.

If we are to remain competitive, we must be able
to keep pace with rapid technological change.

To remain competitive, we must continue to enhance
and improve the responsiveness, functionality and features of our website. The online commerce industry is characterized by rapid
technological change, changes in user and customer requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and practices that could render our business model and
proprietary technology and systems obsolete in comparison to systems competitors may implement. Our future success will depend, in
part, on our ability to develop or license leading technologies useful in our business, enhance the ease of use of our existing
services, develop new services and technologies that address the varied needs of our customers, and respond to technological
advances and emerging industry standards and practices on a cost-effective and timely basis. If we were unable, for technical,
legal, financial or other reasons, to incorporate new technology in new features or products, we may not be able to adapt in a
timely manner to changing market conditions or customer requirements.

We may infringe intellectual property rights of
third parties.

Litigation regarding intellectual property rights is
common in the software and technology industries. We may in the future be the subject of claims for infringement, invalidity, or
indemnification claims based on such claims of other parties proprietary rights. These claims, with or without merit, could
be time consuming and costly to defend or litigate, divert our attention and resources, or require us to enter into royalty or
licensing agreements. There is a risk that such licenses would not be available on reasonable terms, or at all. Although we
believe we have the ability to use our intellectual property to operate and market our existing services without incurring
liability to third parties, there is a risk that our products and services infringe the intellectual property rights of third
parties.

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Our products and technology depend on the continued availability of licensed technology from third parties.

We license and will continue to license certain technology and software from third parties. These licenses are integral to our business. If any of these relationships were terminated or if any of these third parties were to cease doing business, we would be forced to spend significant time and money to replace the licensed software. If we are not able to replace these licenses on commercially reasonable terms, it may be necessary for us to modify or discontinue some of our services that depend upon technology licensed from third parties. We cannot assure you that we would be able to replace these licenses.

Our information technology systems are subject to certain risks that we cannot control.

Our information systems, including our accounting systems, are dependent, to an extent, upon third-party software, global communications providers, telephone systems and other aspects of technology and Internet infrastructure that are susceptible to failure. Although we have implemented redundant systems and network security measures, our information technology remains susceptible to outages, computer viruses, break-ins and similar disruptions that may inhibit our ability to provide services to our customers and the ability of our customers to access our systems. In addition, because we are located in Florida we are susceptible to power disruptions and outages due to hurricanes and other weather events. This may result in the loss of customers or a reduction in demand for our services. If disruption occurs, our profitability and results of operations may suffer.

We are exposed to potential risks from recent legislation requiring companies to evaluate their internal control over financial reporting.

We are working diligently toward evaluating and documenting our internal control systems in order to allow management to report on, and our independent auditors to attest to, our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. This system for the purpose of complying with Sarbanes-Oxley Section 404 will require significant effort in a compressed timeframe, as well as result in our incurring costs to comply with Sarbanes-Oxley Section 404. There can be no assurances that the evaluation required by Sarbanes-Oxley Section 404 will not result in the identification of significant control deficiencies or that our auditors will be able to attest to the effectiveness of our internal control over financial reporting.

We have account payables that have long payment cycles due to the nature of the collision repair business.

Many of our contracts with customers provide for payment to us for vehicle repairs at the time the repair cost has been determined. Under these agreements, we bear all risks associated with the repair of the vehicle beginning with receipt of payment from our customer. Historically, approximately two percent (2%) of policyholders fail to have the vehicle repaired after filing a claim with their insurance carrier. Although we bear the risk of these repairs, it is not entirely clear as to when, or if, we are entitled to hold these payments. It is possible that other parties (i.e. the insurance carrier, the repair facility or the individual automobile owner) may claim that they are entitled to such funds. The policyholder often saves for the deductible portion of their claim, which can result in a long period of time between the time they file their claim and the time that the vehicle is repaired.
Because of the uncertainty as to if we may be required to make these payments, when we may be required to make them, and who we may be required to pay, we book such amounts as accounts payable in our financial statements. As of July 31, 2006, approximately $3,188,328 of our accounts payable consisted of advance payments. Although management believes we are entitled to hold such funds due to the risk we assume for repair of a vehicle, there is no assurance that customers will agree with our position. Should we be required to issue payment for all such amounts at one time, we may not be able to do so.

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Risks Related to the Internet

The Internet could become subject to regulations that affect our business.

Our business relies on the Internet and other electronic communications gateways. We intend to expand our use of these gateways. To date, the use of the Internet has been relatively free from regulatory restraints. However, legislation, regulations, or interpretations may be adopted in the future that constrain our own and our customers abilities to transact business through the Internet or other electronic communications gateways. Legislation or other attempts at regulating commerce over the Internet could impair the growth of commerce on the Internet or could impose licensing or other requirements that could increase our cost of providing Internet-based services.

We are vulnerable to the effects of natural disasters, computer viruses, and similar disruptions.

The continued and uninterrupted performance of our computer system is critical to our success. Our ability to successfully provide our applications and high-quality customer service largely depends on uninterrupted operation of our computer and communications hardware and software systems. We have taken measures to help assure that our systems are protected from unauthorized access. In addition, we maintain redundant systems for backup and disaster recovery. Despite these safeguards, we may be vulnerable to damage or interruption from hurricanes, fire, flood, power loss, telecommunications failure, break-ins, and similar events. In addition, we do not, and may not in the future, carry sufficient business interruption insurance to compensate us for losses that may occur. Despite our implementation of Internet security measures, our servers will be vulnerable to computer viruses, physical or
electronic break-ins, and similar disruptions which could lead to interruptions, delays, loss of data or the inability to process transactions.

Our future success will depend on the Internets ability to accommodate growth.

The recent growth in the use of the Internet has caused frequent periods of performance degradation. Any failure in performance or reliability of the Internet could adversely affect our ability to fulfill our obligations to customers in a timely manner and, consequently, hurt our operating results. To the extent that the Internet continues to experience increased numbers of users, frequency of use or increased bandwidth requirements of users, the Internet infrastructure may not be able to continue to support the demands placed on it and, as a result, the performance or reliability of the Internet may be adversely affected. Furthermore, the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure or otherwise. The relatively complex and unproven technology that makes up the Internet infrastructure poses a risk of material outages or
delays that could adversely affect the ability of our customers to use our trading systems. In addition, the Internet could lose its viability as a form of media due to delays in the development or adoption of new standards and protocols that can handle increased levels of activity. The infrastructure and complementary products and services necessary to maintain the Internet as a viable commercial medium may not be developed or maintained.











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We are dependent on the continued growth of online commerce.

Our future revenues and any future profits will be dependent upon the widespread acceptance and use of the Internet and other online services as an effective medium of commerce by consumers. No standards have yet been widely accepted for the measurement of the effectiveness of Internet sales, and there can be no assurance that such standards will develop sufficiently to support Internet sales as a purchasing medium. Rapid growth in the use of and interest in the Internet, and other online services is a recent phenomenon, and there can be no assurance that acceptance and use will continue to develop or that a sufficiently broad base of consumers will adopt, and continue to use, the Internet and other online services as a medium of commerce. Demand and market acceptance for recently introduced services and products over the Internet are subject to a high level of uncertainty and there exist few
proven services and products. We rely, and will continue to rely, on consumers who have historically used traditional means of commerce to purchase merchandise. For us to be successful, these consumers must accept and utilize novel ways of conducting business and exchanging information. There can be no assurance that our customers will accept the Internet as a means to purchase the Companys services or that our customers will adopt its systems as a means to purchase services.



Governmental regulation and taxation of the Internet is subject to change.



A number of legislative and regulatory proposals under consideration by federal, state, local and foreign governmental organizations may result in there being enacted laws concerning various aspects of the Internet, including online content, user privacy, access charges, liability for third-party activities, and jurisdictional issues. These laws could harm our business by increasing our cost of doing business or discouraging use of the Internet.



In addition, the tax treatment of the Internet and electronic commerce is currently unsettled. A number of proposals have been made that could result in Internet activities, including the sale of goods and services, being taxed. The U.S. Congress passed the Internet Tax Information Act, which places a three-year moratorium on new state and local taxes on Internet commerce. There may, however, be enacted in the future laws that change the federal, state or local tax treatment of the Internet in a way that is detrimental to our business.



Some local telephone carriers claim that the increasing popularity of the Internet has burdened the existing telecommunications infrastructure and that many areas with high Internet use are experiencing interruptions in telephone service. These carriers have petitioned the Federal Communications Commission to impose access fees on Internet service providers. If these access fees are imposed, the cost of communicating on the Internet could increase, and this could decrease the demand for our services and increase our cost of doing business.



Risks Related to Our Common Stock



Our Common Stock price may be volatile, which could result in substantial losses for individual stockholders.



The market price for our Common Stock is volatile and subject to wide fluctuations in response to factors including the following, some of which are beyond our control, which means our market price could be depressed and could impair our ability to raise capital:




        actual or anticipated variations in our quarterly operating results;


| |  | announcements of technological innovations or new products or services by us or our competitors;
| | - | ------------------------------------------------------------------------------------------------


        changes in financial estimates by securities analysts;



        conditions or trends in the Internet and/or online commerce industries;



        changes in the economic performance and/or market valuations of other Internet, online commerce      companies;



        additions or departures of key personnel.






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Our Certificate of Incorporation limits director liability thereby making it difficult to bring any action against them for breach of fiduciary duty.



As permitted by Nevada law, the Companys Certificate of Incorporation limits the liability of directors to the Company or its stockholders for monetary damages for breach of a directors fiduciary duty except for liability in certain instances. As a result of the Companys charter provision and Nevada law, stockholders may have limited rights to recover against directors for breach of fiduciary duty.

We may be unable to meet our future capital requirements.



We are substantially dependent on receipt of additional capital to effectively execute our business plan. If adequate funds are not available to us on favorable terms we will not be able to develop new services or enhance existing services in response to competitive pressures, which would affect our ability to continue as a going concern. We cannot be certain that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-related or debt securities, such securities may have rights, preferences or privileges senior to those of the rights of our Common Stock and our stockholders may experience additional dilution.

Penny stock regulations may impose certain restrictions on marketability of our stock.

The Securities and Exchange Commission (the Commission) has adopted regulations which generally define a penny stock to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our Common Stock is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchasers written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealers presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the penny stock rules may restrict the ability of broker-dealers to sell our securities.

We have never paid dividends on our Common Stock and do not expect to pay any in the foreseeable future.

A potential purchaser should not expect to receive a return on their investment in the form of dividends on our Common Stock. We have never paid cash dividends on our Common Stock and we do not expect to pay dividends in the foreseeable future.

Substantial sales of our Common Stock could cause our stock price to rapidly decline.



The market price of our Common Stock may fall rapidly and significantly due to sales of our Common Stock from other sources such as:




        The sale of shares of our Common Stock underlying the exercise of outstanding options and warrants.





        The sale of shares of our Common Stock, which are available for resale under Rule 144 or are otherwise freely tradable and which are not subject to lock-up restrictions.





        The sale of our securities pursuant to this prospectus.
 11  Table of Contents Any sale of a substantial amount of our Common Stock
in the public market, or the perception that these sales might occur, whether as a result of the exercise of outstanding warrants
or options or otherwise, could lower the market price of our Common Stock. Furthermore, substantial sales of our Common Stock by
such parties in a relatively short period of time could have the effect of depressing the market price of our Common Stock and
could impair our ability to raise capital through the sale of additional equity securities.   Anti-dilution rights granted to certain investors
may cause substantial dilution to our other stockholders.  Certain previous capital raises included the issuance
of warrants which contained full ratchet anti-dilution protection to avoid dilution of the equity interest represented
by the underlying shares upon the occurrence of certain events, including the issuance of equity securities if an issuance,
conversion or exercise price was less than $0.30. As a result of this provision, an equity raise in early 2005 where the offering
price was $0.16 triggered the re-pricing of these previously issued warrants to $0.16. In addition warrant holders from offerings
done in 2004 and 2005 are entitled to demand registration rights for a two year period and we are subject to liquidated damages if
we do not maintain the effectiveness of the subject registration statement. Our Common Stock currently trades at a price
approximating $0.16 per share. If we need to raise additional capital to meet current working capital requirements, this may
trigger the anti-dilution rights of previous investors, which may result in additional dilution to our current
shareholders.                12  Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS  The forward-looking statements safe harbor
does not apply to our company because we issue penny stock and are excluded from the safe harbor pursuant to Section
27A(b)(1)(C) of the Securities Act of 1933, as amended, and Section 21E(h)(1)(C) of the Securities Exchange Act of 1934, as
amended (the Exchange Act). Nevertheless, this Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act). Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not
historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases
such as anticipate, estimate, plans, projects, continuing,
ongoing, expects, management believes, we believe, we intend and
similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual
results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by
reference to the Risk Factors contained on pages 6 through 14 of this Prospectus.  Because the factors discussed in this Prospectus could
cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on
behalf of our company, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking
statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement
or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which will arise. In
addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements.           13  Table of Contents USE OF PROCEEDS  We will not receive any proceeds from the sale of shares by the Selling Stockholders. We may receive proceeds if warrants are exercised by Selling Stockholders. These proceeds, if any, will be used for working capital purposes or any other purpose approved by the Board of Directors.                 14  Table of Contents SELLING STOCKHOLDERS  The following table sets forth information as July 31,
2006 with respect to the beneficial ownership of our Common Stock both before and immediately following the offering by each of
the Selling Stockholders.  Calculation of the percent of outstanding shares owned
is based on shares of our Common Stock issued and outstanding as of July 31, 2006. Beneficial ownership is determined in
accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission, and generally includes voting or investment
power with respect to securities. Except as indicated in the footnotes to the table, we believe each holder possesses sole voting
and investment power with respect to all of the shares of Common Stock owned by that holder, subject to community property laws
where applicable. In computing the number of shares beneficially owned by a holder and the percentage ownership of that holder,
shares of Common Stock underlying options, warrants, debentures, notes or preferred stock by that holder that are currently
exercisable or convertible or are exercisable or convertible within 60 days after the date of the table are deemed outstanding.
Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person or
group.  Common Shares
Owned before the Offering
        Common Shares
Offered in the Offering
        Common Shares
Owned After OfferingName of Stockholder
        Number (7)
        Percentage(8)
        Number
        Percentage(8)
        Number (7)
        Percentage(8)Andrew Kunar (1)
        2,000,000
        2.5%
        2,000,000
        2.5%BDC, LLC (1)
        120,000
        *
        120,000
        *Brad Berk (1)
        468,750
        *
        468,750
        *Bucks International Ltd (1)
        1,875,000
        2.3%
        1,875,000
        2.3%C.S.L. Associates, L.P. (1)
        1,553,571
        1.9%
        1,553,571
        1.9%Carlton Dodge (1)
        100,000
        *
        50,000
        *
        50,000
        *Christopher Korge (1)
        7,412,616
        9.2%
        5,107,147
        6.3%
        2,305,469
        2.9%Credit Agricole Indosuez (1)
        1,786,000
        2.2%
        1,786,000
        2.2%David Lucas McDonough (1)
        817,500
        1.0%
        817,500
        1.0%Dori Rath (1)
        500,000
        *
        500,000
        *Douglas Gass (1)
        321,431
        *
        321,431
        *Engin Yesil (1)
        357,143
        *
        357,143
        *Entrade, Inc. (1) (3)
        2,387,108
        3.0%
        1,071,428
        1.3%
        1,315,680
        1.6%Fertilemind Capital (1)
        2,812,500
        3.5%
        2,812,500
        3.5%Graham Partners (1)
        232,143
        *
        232,143
        *Irving Liss (1)
        40,000
        *
        20,000
        *
        20,000
        *J. Wild Fund, LP (1)
        258,930
        *
        258,930
        *Reed Mattingly (5)
        674,808
        *
        192,308
        *
        482,500
        *Jay T Kelly (1)
        450,000
        *
        450,000
        *Jeffrey Powers (1)
        300,000
        *
        150,000
        *
        150,000
        *John J. Philips (1)
        142,857
        *
        142,857
        *Kinderhook Partners, LP (1)
        10,645,360
        13.2%
        10,645,360
        13.2%KJS Investments Corp (1)
        401,786
        *
        401,786
        *
        
        *Mark Pyms (1)
        322,365
        *
        150,000
        *
        172,365
        *Meadowbrook Opportunity Fund LLC (1)
        2,250,000
        2.8%
        2,250,000
        2.8%Michael P. McDonough Trust (1)
        570,000
        *
        570,000
        *Mike Solomon (2)
        160,000
        *
        160,000
        *Mosaic Partners Fund (1)
        517,857
        *
        517,857
        *Mosaic Partners Fund (U.S.) LP (1)
        468,750
        *
        468,750
        *Brian Wilkinson (4)
        37,500
        *
        37,500
        *MTB Investment Partners L.P. (1)
        1,500,005
        1.9%
        1,500,005
        1.9%Noble international Investments, Inc. (4)
        3,238,368
        4.0%
        3,238,368
        4.01%Noble Special Situation Fund (1)
        2,103,215
        2.6%
        2,103,215
        2.6%Rob McGrath (4)
        37,500
        *
        37,500
        *Radcliff Investment Partners (1)
        470,000
        *
        470,000
        *Resource Equities (2)
        200,000
        *
        200,000
        *Vincent A. Stone (1)
        142,857
        *
        142,857
        *Vinodray R. Shah MD 401K (1)
        345,004
        *
        345,004
        *William A. Lewis IV (1)
        9,412,210
        11.7%
        6,674,871
        8.3%
        2,737,339
        3.4%Jack Brimberg (4)
        153,750
        *
        153,750
        *Jay C Tomlinson (4)
        112,500
        *
        112,500
        *Brimberg & Company (4)
        87,657
        *
        87,657
        *Jeffrey Dickson (6)
        1,795,597
        2.2%
        1,000,000
        1.3%
        795,597
        1.0%
  _________________ * Less than 1%. 15  Table of Contents (1)
        Represent the common shares & warrants registered in previous filings and additional shares and warrants as more fully described below.
  (2)
        Represents shares underlying warrants that were issued in connection to the sale of our facility as more fully described below.
  (3)
        Entrade, Inc. also owns 1,315,680 shares of our Common Stock, which were acquired in October 2001, which are not being registered in this offering.
 (4)
        Noble International Investments, Inc. (Noble) and other associates acted as our placement agent in our recent Unit private placement offering, as described below under the caption Circumstances Under Which Selling Stockholders Acquire Securities. In connection with this Unit private offering, we agreed to issue Noble and other associates a cashless exercise warrant to purchase a number of Units equal to 15% of the total Units sold by Noble in this offering at an exercise price equal to the offering price per Unit ($.16) paid by the investors. These warrants have a five (5) year term and the same anti-dilution protection as the warrants in the offering. The shares comprising the Units and the shares underlying the warrants as part of the Units are being registered
hereunder.
 (5)
        Represents shares issued as a bonus payment in July 2005.
 (6)
        Represents shares, approved by the Board, issued to the Chairman of the Board as compensation for his past services and his role as Chairman.
  (7)
        Because the Selling Stockholders may sell all or some portion of the shares of Common Stock beneficially owned by them, only an estimate (assuming the Selling Stockholders sell all of the shares offered hereby) can be given as to the number of shares of Common Stock that will be beneficially owned by the Selling Stockholders after this offering. In addition, any selling stockholder may have sold, transferred or otherwise disposed or, or may sell, transfer or otherwise dispose of, at any time or from time to time since the dates on which they provided the information regarding the shares beneficially owned by them, all or a portion of the shares beneficially owned by them in transactions exempt from the registration requirements of the Securities Act of 1933.
  (8)
        Excludes 3,295,683 shares issuable pursuant to outstanding options and warrants not being registered hereunder.
   CIRCUMSTANCES UNDER WHICH SELLING STOCKHOLDERS ACQUIRED SECURITIES  Set forth below is a summary of the circumstances that
led to the issuance to the listed Selling Stockholders of shares of our Common Stock and the securities, which are exercisable
into shares of our Common Stock.  During March through May, 2004 we sold a total of
8,111,572 Units at an offering price of $.28 per Unit generating gross proceeds of $2,271,240. We netted $2,059,311 after payment
of placement agent fees and expenses. In addition, in June 2004 a Director that held $250,000 of convertible debentures, as
described below, and 892,857 warrants at $0.35 exchanged his debentures and warrants for 892,857 units. This brought the total
number of units to 9,004,436 with total gross proceeds of $2,521,240.  Each Unit consists of one (1) share of Common Stock
and one Common Stock purchase warrant exercisable at $.35 per share, subject to adjustment. The warrants are not callable during
their first year. After the first year, we have the right to call the warrants for nominal consideration at the average closing
per share for any 20 consecutive trading days exceeds the warrant exercise price by $.50 or more. The warrants contain full
ratchet anti-dilution protection to avoid dilution of the equity interest represented by the underlying shares upon the
occurrence of certain events, such as share dividends or stock splits or the issuance of equity securities with an issuance,
conversion or exercise price less than $.35. The warrant holders are entitled to demand registration rights for a two (2) year
period. 16  Table of Contents In connection with the offering of our Units described
above, we paid Noble International Investments, Inc. (Noble), as placement agent, cash compensation equal to $170,378,
$140,378 in commission and $30,000 as a non-accountable expense allowance. In addition, we issued Noble cashless exercise warrants
to purchase 790,200 Units, which equaled 15% of the total Units sold by Noble at an exercise price of $.28 per Unit. We agreed to
register the shares comprising the Units, including the shares underlying the warrants as part of the Units in this registration
statement.  The holders of these Units are entitled to additional
adjustment if we fail to process a sufficient number of claims with ADP by March 1, 2005 and August 1, 2005. We have targeted
9,000 ADP claims as of March 1, 2005 and 25,000 ADP claims as of August 1, 2005. In order to help resolve this open issue, in
December 2004 we offered the 2004 investors 50% of the total potential True up Units in exchange for releasing the Company from
the remaining target volume commitment. Investors representing 4,678,716 of these units accepted our offer. We therefore granted
2,339,358 units to the investors that agree to the True Up amendment.  The Company failed to meet the required claim volumes
as of the March 1, 2005 and August 1, 2005 dates. As a result, we granted a total of 4,325,720 units to the investors who did not
accept our December 2004 offer.  Christopher Korge, one of our directors, invested
$250,000 on April 23, 2004 in exchange for an eight percent (8%) convertible note. In connection with this investment, we also
agreed to issue Mr. Korge warrants to acquire 892,857shares of our Common Stock at an exercise price of $.35 per share. In
addition, we agreed to re-price warrants to acquire up to 1,000,000 shares of Common Stock held by Mr. Korge from an existing
exercise price of $.63 per share to an exercise price equal to $0.35 per share. We agreed to grant Mr. Korge registration
rights in connection with the shares underlying his note and warrants. In addition, Mr. Korge is entitled to full ratchet
anti-dilution protection. On November 8, 2005 the Board voted to adjust the strike price from $0.35 to $0.16 in order to match the
strike price of other investors warrants issued under the anti-dilution provisions of their agreements. Mr. Korge
subsequently exchanged the $250,000, 8%, convertible note along with the warrants to acquire 892,857 shares of common stock for
892,857 Units as described above.  During January through February, 2005 we sold a total
of 10,775,000 Units at an offering price of $.16 per Unit generating gross proceeds of $1,724,000. We netted $1,542,954 after
payment of placement agent fees and expenses.  Each Unit consists of one (1) share of Common Stock
and one-half (1⁄2) Common Stock purchase warrant exercisable at $.30 per share, subject to adjustment. The warrants are not
callable during their first year. After the first year, we have the right to call the warrants for nominal consideration at the
average closing per share for any 20 consecutive trading days exceeds the warrant exercise price by $.50 or more. The warrants
contain full ratchet anti-dilution protection to avoid dilution of the equity interest represented by the underlying
shares upon the occurrence of certain events, such as share dividends or stock splits or the issuance of equity securities with an
issuance, conversion or exercise price less than $.30. The warrant holders are entitled to registration rights for a two (2) year
period.  In connection with the offering of our Units described
above, we paid Noble International Investments, Inc. (Noble), as placement agent, cash compensation equal to $181,020,
$146,540 in commission and $34,480 as a non-accountable expense allowance. In addition, we issued Noble cashless exercise warrants
to purchase 1,616,250 Units, which equaled 15% of the total Units sold by Noble at an exercise price of $.16 per Unit. We agreed
to register the shares comprising the Units, including the shares underlying the warrants as part of the Units in this
registration statement.  As a result of the sale of the above equity securities
we have notified the holders of 9,004,429 common stock warrants issued as a result of the sale of equity securities in March
through May of 2004 that the exercise price of their common stock warrants have been reduced from $0.35 per share to $0.16 per
share. This adjustment was a requirement of the anti-dilution provisions of their warrant agreement. 17  Table of Contents In October 2005 we issued 200,000 warrants to an
investor for providing the company with bridge loan financing and an additional 250,000 warrants to two finders for helping to
facilitate the transaction. All of the warrants are exercisable at $.20 per share and are not callable during their first year.
After the first year, we have the right to call the warrants for nominal consideration if the average closing per share for any 20
consecutive trading days exceeds the warrant exercise price by $.50 or more. The warrants contain full ratchet
anti-dilution protection to avoid dilution of the equity interest represented by the underlying shares upon the occurrence of
certain events, such as share dividends or stock splits or the issuance of equity securities with an issuance, conversion or
exercise price less than $.20.  In July 2005 the Company issued 192,308 shares to an
officer as a bonus payment. The Company agreed to register the shares issued to this officer.  On November 8, 2005 the Board of Directors gave
approval for, and the Company subsequently issued, 1,000,000 shares of the Companys common stock to the Chairman of the
Board to compensate him for his past services and his role as Chairman. The Company agreed to register these shares.  During the year ended July 31, 2006 the Company issued
a total of 12,412,505 shares of common stock in connection with the exercise of a like number of outstanding common stock purchase
warrants with exercise prices ranging from $0.16 to $0.20 per share. Of this total, 11,341,076 shares were issued effective March
21, 2006 for warrants exercised. As a result of exercising these warrants, the Company received $1,749,475 after paying $18,435 in
legal fees and $50,662 for certain financial advisory and investment banking services in connection with the program. In addition,
the Company issued 8,200,359 new 3 year, $0.30 warrants to investors who exercised warrants. The new warrants have a term of three
(3) years and are callable if the closing price of our stock is at or above $.62 for ten (10) consecutive trading days. Issuing
these units resulted in the Company recording a stock dividend of $82,004. An additional 1,071,429 warrants at a $0.16 exercise
price were exercised during the nine months ended April 30, 2006 for which the Company received $171,429.  All of the securities identified above are referred to
as the registrable securities.         18  Table of Contents PLAN OF DISTRIBUTION  The Selling Stockholders and any of their pledgees,
assignees, transferees, donees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock
on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling
shares:  
        on the OTC electronic bulletin board (OTC:BB) or such other market on which the Common Stock may from time to time be trading;
 
        in privately-negotiated transactions;
 
        through the writing of options on the shares;
 
        exchange the securities for different securities;
 
        short sales; or
 
        any combination thereof;
  The sale price to the public may be:  
        the market price prevailing at the time of sale;
 
        a price related to such prevailing market price;
 
        at negotiated prices; or
 
        such other price as the selling stockholders determine from time to time.
  The shares may also be sold pursuant to Rule 144. The
Selling Stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if
they deem the purchase price to be unsatisfactory at any particular time.  The Selling Stockholders or their respective pledgees,
donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals or
broker-dealers acting as agents for themselves or their customers. These broker-dealers may be compensated with discounts,
concessions or commissions from the Selling Stockholders or the purchasers of shares for whom such broker-dealers may act as
agents or to whom they sell as principal or both. The compensation as to a particular broker-dealer might be greater than
customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own
risk. The Selling Stockholders may sell shares of Common Stock in block transactions to market makers or other purchases at a
price per share, which may be below the then market price. The Selling Stockholders cannot assure that all or any of the shares
offered in this prospectus will be issued to, or sold by, the Selling Stockholders. The Selling Stockholders and any brokers,
dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, may be deemed underwriters
as that term is defined under the Securities Act or the Securities Exchange Act of 1934 (or Exchange Act) or the rules and
regulations under such Acts.  The Selling Stockholders, alternatively, may sell all
or any part of the shares offered in this prospectus through an underwriter. No selling stockholder has entered into any agreement
with a prospective underwriter and there is no assurance that any such agreement will be entered into. If a Selling Stockholder
enters into such an agreement or agreements, the relevant details will be set forth in a supplement or revisions to this
prospectus.  The Selling Stockholders and any other persons
participating in the sale or distribution of shares will be subject to applicable provisions of the Exchange Act and the rules and
regulations under the Exchange Act, including, without limitation, Regulation M. These provisions may restrict certain activities
of, and limit the timing of purchases and sales of any of the shares but, the Selling Stockholders or any other such person.
Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in
market making and certain other activities with respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or exemptions. All of these limitations may affect the
marketability of the shares.   19  Table of Contents MARKET PRICES OF COMMON STOCK  Our Common Stock currently trades on the OTCBB under
the symbol EACC. Set forth below is the range of high and low information for our Common Stock as traded on the OTCBB
for the last two years. This information regarding trading on OTCBB represents prices between dealers and does not reflect retail
mark-up or markdown or commissions, and may not necessarily represent actual market transactions.  High Bid
        Low BidFiscal Year Ended July 31, 2005First Quarter (August 1, 2004 to October 31, 2004)
        0.37
        0.19Second Quarter (November 1, 2004 to January 31, 2005)
        0.29
        0.18Third Quarter (February 1, 2005 to April 30, 2005)
        0.29
        0.12Fourth Quarter (May 1, 2005 to July 31, 2005)
        0.20
        0.10Fiscal Year Ended July 31, 2006First Quarter (August 1, 2005 to October 31, 2005)
        0.22
        0.15Second Quarter (November 1, 2005 to January 31, 2006)
        0.36
        0.18Third Quarter (February 1, 2006 to April 30, 2006)
        0.34
        0.22Fourth Quarter (May 1, 2006 to July 31, 2006)
        0.27
        0.16
  As of November 15, 2006, our closing bid price was
$0.15 per share and there were approximately 1,600 shareholders of our outstanding Common Stock.            20  Table of Contents DIVIDEND POLICY  We do not anticipate the declaration or payment of any
dividends in the foreseeable future. We have never declared or paid cash dividends on our Common Stock and our Board of Directors
intends to continue its policy for the foreseeable future. Also, we will consider our earnings, financial condition, contractual
restrictions and other factors in deciding whether to issue dividends in the future.                      21  Table of Contents SELECTED FINANCIAL INFORMATION AND OTHER DATA  The selected financial information set forth below is
derived from, and should be read in conjunction with, the more detailed financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. See Financial Statements.    EAUTOCLAIMS, INC.

SUMMARY FINANCIAL DATAYear Ended July 31,
        
        
        2006
        
        
        2005
        
        
        2004
        
        
        2003
        
        
        2002Total revenue
        
        
        15,620,681
        
        
        14,651,232
        
        
        27,160,682
        
        
        34,061,072
        
        
        32,283,363Expenses:Claims processing charges
        
        
        10,178,094
        
        
        11,029,261
        
        
        22,130,634
        
        
        28,323,741
        
        
        27,293,568Selling, general and administrative
        
        
        6,595,442
        
        
        5,554,430
        
        
        6,417,316
        
        
        6,418,911
        
        
        8,114,580Depreciation and amortization
        
        
        459,133
        
        
        511,812
        
        
        515,813
        
        
        490,935
        
        
        530,618Amortization of beneficial conversion feature on convertible debentures and fair value of warrants issued in connection with debentures
        
        
        
        
        
        
        
        
        307,694
        
        
        11,738
        
        
        555,551Total expenses
        
        
        17,232,669
        
        
        17,095,503
        
        
        29,371,457
        
        
        35,245,325
        
        
        36,494,317Net loss
        
        $
        (1,611,988
        )
        $
        (2,444,271
        )
        $
        (2,210,775
        )
        $
        (1,184,253
        )
        $
        (4,210,954
        )Adjustment to net loss to compute loss per common share:Preferred stock dividends
        
        
        
        
        
        (50,655
        )
        
        (95,518
        )
        
        (101,296
        )
        
        (570,997
        )Dividend to unit holders
        
        
        (557,833
        )
        
        (986,623
        )Net loss applicable to common stock
        
        $
        (2,169,821
        )
        $
        (3,481,549
        )
        $
        (2,306,293
        )
        $
        (1,285,549
        )
        $
        (4,781,951
        )Loss per common share  basic and diluted
        
        $
        (0.03
        )
        $
        (0.08
        )
        $
        (0.09
        )
        $
        (0.06
        )
        $
        (0.32
        )Weighted-average number of common shares outstanding  basic and diluted
        
        
        70,822,785
        
        
        44,905,261
        
        
        26,308,434
        
        
        20,209,634
        
        
        14,813,549Balance Sheet Data:July 31, 2006
        
        
        July 31, 2005
        
        
        July 31, 2004
        
        
        July 31, 2003
        
        
        July 31, 2002Cash
        
        
        1,524,239
        
        
        306,280
        
        
        415,549
        
        
        226,161
        
        
        44,655Working capital (deficit)
        
        
        (2,316,995
        )
        
        (3,920,087
        )
        
        (3,190,515
        )
        
        (4,992,541
        )
        
        (4,483,740
        )Total assets
        
        
        3,962,455
        
        
        3,120,121
        
        
        3,482,149
        
        
        3,757,512
        
        
        3,403,826Debt and capital lease obligations
        
        
        22,237
        
        
        108,979
        
        
        495,621
        
        
        86,325Total stockholders equity (deficiency)
        
        
        (533,349
        )
        
        (2,051,983
        )
        
        (1,493,084
        )
        
        (2,910,932
        )
        
        (2,365,818
        )
 22  Table of Contents MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  INTRODUCTION  The following discussion and analysis should be read
in conjunction with our audited financial statements as of July 31, 2006, 2005, 2004, and the notes thereto, all of which
financial statements are included elsewhere in this prospectus. In addition to historical information, the following discussion
and other parts of this prospectus contain forward-looking information that involves risks and uncertainties. Our actual results
could differ materially from those anticipated by such forward-looking information due to factors discussed under
Description of Business and elsewhere in this prospectus.  The statements that are not historical constitute
forward-looking statements. Said forward-looking statements involve risks and uncertainties that may cause the actual
results, performance or achievements of the Company and its subsidiaries to be materially different from any future results,
performance or achievements, express or implied by such forward-looking statements. These forward-looking statements are
identified by their use of such terms and phrases as expects, intends, goals,
estimates, projects, plans, anticipates, should, future,
believes, and scheduled.  The variables which may cause differences include, but
are not limited to, the following: general economic and business conditions; competition; success of operating initiatives;
operating costs; advertising and promotional efforts; the existence or absence of adverse publicity; changes in business strategy
or development plans; the ability to retain management; availability, terms and deployment of capital; business abilities and
judgment of personnel; availability of qualified personnel; labor and employment benefit costs; availability and costs of raw
materials and supplies; and changes in, or failure to comply with various government regulations. Although the Company believes
that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this prospectus will prove to
be accurate.  In light of the significant uncertainties inherent in
the forward-looking statements included herein the inclusion of such information should not be regarded as a representation by the
Company or any person that the objectives and expectations of the Company will be achieved.  OVERVIEW  We are a business-to-business e-commerce company that
uses the Internet to streamline and lower the overall costs of automotive repair paid by insurance companies, managing general
agents (MGA) and third party claims administrators (TPA) and self-insured automobile fleet management companies. We are
establishing ourselves as the preeminent service provider for the automobile insurance industry, providing a seamless back-end
infrastructure that links thousands of collision repair shops and support facilities. We provide a proprietary, cost-effective and
highly advanced system for the processing and ultimate repair of claims for damaged vehicles filed by policyholders of our
insurance company clients. We receive revenues from insurance companies for repairs completed by members of our network of repair
shops. We approve all repair shops for inclusion in our network and determine which repair shop will ultimately perform the
repairs. We receive a discount, ranging from 10% to 15%, from repair facilities that are members of our provider network. The
revenues generated from the vehicle and glass repair through our provider network accounts for 78%, 85%, and 91% of the revenue
for the years ended July 31, 2006, 2005 and 2004, respectively. We are paid on a per claims basis from our insurance and fleet
company customers for each claim that we process through our system. These fees vary from $10 to $65 per claim depending upon the
level of service required. For the years ended July 31, 2006, 2005, and 2004, 18%, 15% and 9% of the revenue has been received
from claims processing fees and other income, respectively.       23  Table of Contents MANAGEMENTS OPERATING PLAN  Management has taken specific actions to ensure the
continued growth in the claims processing business that we experienced in fiscal year 2006, when we recorded a 27% increase in the
number of assignments going to our network of shops. However, with the revenue recognition on our channel partner sales being
recorded at net, the revenue growth is presented as a minimal gain over fiscal year 2005. We continue to focus much of our effort
in making the migration to the larger insurance company market. This is evident by our recent execution of a Letter Of Intent with
Firemens Fund Insurance Company and the expansion of services with CNA Insurance Company. We continue to work in this larger
market place and while there are no guarantees, we expect to see continued success in fiscal year 2007.  The transition of the channel partner relationship
from ADP Claims Services Group to Audatex resulted in less sales and revenue being produced in fiscal year 2006 than we had
anticipated. Although it created a reduced sales pipeline and caused us to maintain sales support staff in a less productive
capacity, we have completed recent meetings with the sales leadership of Audatex and have been given the forecasted revenue goals
for fiscal year 2007. We believe that these goals, if achieved, will have a material positive impact on the partners sales
revenues for fiscal year 2007.  As mentioned earlier, in May 2005, ADP Claims Services
Group was acquired by Solera, Inc. a privately held company and a new-co, Audatex, a Solera Company, was established as the
operating organization. When this transaction occurred, it triggered two provisions of our Co-Marketing Agreement with ADP. The
first one was our right to terminate the exclusivity clause and the second was the need for us to give consent to ADP for the
assignment of our Co-Marketing Agreement to another organization.  Since the closing of the transaction, the Audatex
organization has had a major restructuring of its personnel, including many of the key personnel associated with our program. As a
result of the aforementioned circumstances, on May 1, 2006, we chose to withhold the consent of assigning our agreement to Audatex
and elected to terminate the exclusivity clause with ADP Claims Services Group. These changes had a short-term negative effect on
our anticipated growth in new revenues. Since that time we have worked with Audatex to develop a forecast of anticipated sales for
the next 12-months. Our mutual expectation is to have significant growth with this channel partner in fiscal 2007 and we have no
plans to terminate the Co-Marketing Agreement, however we have maintained our right for a non-exclusive relationship.  Specifically, management is taking the following
actions that are expected to positively impact our financial position in fiscal 2007:  
        Direct Sales Channel.
  
        As previously mentioned, we have entered into a Letter Of intent with Firemens Fund Insurance Company (FFIC). FFIC is working in good faith to use our core services of our outsourced Guaranteed Repair Network and a full suite of ASP tools. While there is no guarantee and we must meet certain conditions set forth by FFIC, we expect this account will roll out before the end of the calendar year 2006.
  
        While we have focused
much of our efforts over the past two years on the building of clients through the ADP/Audatex Co-Marketing Agreement for our
Collision Management product, we continue to market our services to the insurance industry through our direct sales channel. We
continue to make sales progress in this area. One specific new client is a meaningful size carrier who entered into an annual
contract and is testing our product in a district office, utilizing our network of shops and traditional eJusterSuite product.
While this test is in its early stages and there are no guarantees the client will expand the program, the early test results have
been very positive. Should this test continue to yield such results, the client would likely roll the program out to all of its
district offices over the course of the calendar year 2007. The potential sales volume and the full revenues of our direct sales
channel model would make this accounts contribution to profit the most material of all current clients under contract,
including our clients from the ADP/Audatex Co-Marketing Agreement.
 24  Table of Contents 
        Expansion of Sales Staff
 We have recently expanded our direct sales staff and plan to further increase our sales force in the market place. With the
recent success of adding new larger clients and the improvement of our balance sheet, management believes we will have greater
success in the direct sales channel.
  
        Expansion of CNA
Insurance Companys business in the second quarter of fiscal year 2007. This Co-Marketing Account with Audatex was rolled out
during the past fiscal year. The account recently agreed to expand its business with us by adjusting the method by which our
outsourced services are offered. This change is expected allow the account to mature to its full potential with our expanded
service.
  
        Management is exploring
possible new or additional strategic partners in the industry who have a large client base and represent additional new sales with
a short sales cycle & acquisition cost.
  Since August 2004 the ADP/Audatex
Agreement has produced twenty signed pilot agreements with insurance companies or third party administrators, and has produced
seven annual agreements after the pilot periods were completed The company recently rolled out a new client with Audatex and has
seen the beginning of a new sales pipeline.  
        Rolling out Higher Margin
Product Lines  Management continues to make progress in building our operating margins by focusing on higher margin
products. The results have been an increase in gross margin to 32% for the fiscal year ending July 31, 2006 as compared to 25% for
the fiscal year ending July 31, 2005. While future reports on margin will be influenced by the revenue recognition related to the
Audatex Co-Marketing Agreement or with other possible partners, the greatest impact to the margin increase in fiscal 2006 was from
the sales of higher margin products. Management is leveraging internally developed ASP/technologies that will allow other
companies in related industries to significantly reduce labor costs and improve operating efficiencies, as is the case with our
recently announced new product Audit Pro, a programmatic electronic estimate auditing tool. Many of these technologies
have already been implemented in our operating processes and have shown themselves to be of significant value. By modifying the
interface to these technologies, we can produce significant click fee revenue without adding significant operating costs. The
target market for these technologies will include a wide range of organizations, including the largest (tier 1) insurance
companies. Our management believes this additional product line will result in a greater growth in high volume, high margin
revenues that will have a meaningful impact to our bottom-line. While there are no guarantees these transactions or that the new
business will mature, management believes this will be a growth market for us in the future.
  
        Expansion of Product
Offering  We are exploring new product lines to offer to existing and new clients that are congruent to our business model. We are
exploring partnering options to reduce market entrance expenses to ensure a quicker return on investment. This gives us the
opportunity to expand our relationship with existing clients by integrating new products into the current mix, thereby expanding
and adding revenue streams, while at the same time allowing us the opportunity of increasing the value of our customer
relationship.
  
        Reduction in Direct
Processing Expense  We have recently begun an initiative into automating additional parts of our processing business. We
expect the end result will be a net reduction in direct expense.
  
        Previously Increased
Working Capital  In March 2006, as part of a special warrant exchange program, a significant number of outstanding warrants
were exercised by current investors. This resulted in our receiving more than $1.7 million of additional capital. While we believe
that this will be sufficient for our working capital needs for the foreseeable future, we continue to explore all options in the
event additional financing becomes necessary.
 25  Table of Contents RESULTS OF OPERATIONS  Fiscal Year Ended July 31, 2006, Compared to Fiscal Year Ended 2005  REVENUE  Excluding the gain on the sale of the building of
$756,943, total revenue for the year ended July 31, 2006 was approximately $14.9 million, which consists of approximately $10.9
million in collision repair management for insurance companies, approximately $0.3 million in auto glass repairs, approximately
$0.9 million in fleet repairs and approximately $2.8 million in fees and other revenue. Total revenue for the year ended July 31,
2005 was approximately $14.6 million, which consists of approximately $11.2 million in collision repair management for insurance
companies, approximately $0.5 million in auto glass repairs, approximately $0.7 million in fleet repairs and approximately $2.2
million in fees and other revenue. Total revenues, excluding the gain on the sale of the building, increased approximately $0.2
million or 1.46% over the approximately $14.6 million for the year ended July 31, 2005. This increase is primarily the result of
increased fee revenues received in the year ended July 31, 2006. During the year ended July 31, 2006 we derived 52% and 9% of our
revenue from two customers. The contract with our largest customer automatically renewed for a period of one year in April 2006.
The business associated with this client has been sold by the client to a third party and we subsequently assigned the agreement
to this new entity. We have been working with the new owner to create a new contract. While we do not anticipate any short term
loss of business from this client and expect we will receive a new servicing contract, we cannot guarantee that the new agreement
will be a long term contract with the new client, or that any new contract will be on more favorable terms.  Collision repair management revenue decreased
approximately $300,000 to approximately $10.9 million for the year ended July 31, 2006 compared to approximately $11.2 million for
the year ended July 31, 2005. Included in these figures is revenue earned from repairs processed for clients acquired as a result
of the ADP/Audatex Co-Marketing Agreement. As previously disclosed, this revenue is recorded at net, which significantly reduces
the amount of gross revenue reported, although the overall gross margin is increased as a result of not having to pay the shops
for the work performed. In the year ended July 31, 2006, we earned approximately $711,000 in net revenue from clients acquired as
a result of the agreement with ADP/Audatex. This additional revenue resulted in the gross margin percent for collision management
to increase from 13% to 16% for the year ended July 31, 2006.  Fees and other revenue increased approximately
$600,000 from $2.2 million for the year ended July 31, 2005 to $2.8 million for the year ended July 31, 2006. This increase is
primarily a result of additional revenue earned from current clients by taking increased numbers of first notice loss reports as a
result of damages sustained by consumers due to the hurricanes of 2005. Total first notice of loss revenue was approximately
$407,000 higher in the year ended July 31, 2006 than for the previous year. We also experienced an increase in our click fee
revenue of approximately $118,000 in the year ended July 31, 2006 over the year ended July 31, 2005.This growth was primarily from our regular click fee assignments, however we also had increases in our Audit
Pro revenue as well as increases in revenue from assignments to our network of independent appraisers.  The glass repair revenue decreased by approximately
$200,000, from $.5 million in fiscal year 2005 to approximately $.3 million in fiscal year 2006. This decrease is due to the
reduction in claim volume for our existing customers. Our largest glass customer, who was recently acquired by a third party,
terminated their contract on June 1, 2006, due to their desire to consolidate their glass processing consistent with methods
currently in use by the acquiring entity. We continue to pursue additional glass customers as the glass repair business
complements our core business and allows our customers to use a single source for all their repair needs. Fleet repair revenue increased approximately
$200,000, from approximately $718,000 in fiscal 2005 to approximately $916,000 in fiscal 2006. This increase represents additional
business from our existing customers. 26  Table of Contents Our gross margin in fiscal year 2006, adjusted for the
revenue earned on the sale of the building, increased to 32% as compared to 25% in fiscal year 2005. This significant increase of
7% is partially the result of recognizing revenue at net for clients acquired as result of our Co-Marketing Agreement with
Audatex. The margin has also increased as a result of our success in selling additional products with higher margins to our
existing customers. EXPENSES  Claims processing charges include the costs of
collision, fleet and glass repairs paid to repair shops within our repair shop network, as well as the cost of the estimating
software sold to our network of shops. Claims processing charges for the fiscal year 2006 were approximately $10.2 million, or 65%
of total revenue, compared to $11.0 million, or 75% of total revenue in fiscal 2005. The decrease in claims processing charges as
a percentage of total revenue is a result of the change in the product mix with a higher percentage of higher margin products as
compared to lower margin products. This also includes the growth in click fees, which are fees charged when a client uses our
technology that has little to no associated cost of sale.  We currently have approximately 2,500 affiliated
repair facilities in our network for claims repairs. We electronically and manually audit individual claims processes to their
completion using remote digital photographs transmitted over the Internet. We are dependent upon these third party collision
repair shops for insurance claim repairs. If the number of shops or the quality of service provided by collision repair shops fall
below a satisfactory level leading to poor customer service, this could have a harmful effect on our business. We control our
service requirements by continually monitoring customer service levels and providing staff inspections of our network shops and,
if required, establish similar relationships with other collision repair shops.  Selling, general and administrative (SG&A)
expenses is mainly comprised of salaries and benefits, facilities related expenses, telephone charges, professional fees,
advertising costs and travel expenses. SG&A expenses for the year ended July 31, 2006 were approximately $6.6 million or 42%
of revenue compared to approximately $5.6 million or 38% of revenue for the year ended July 31, 2005. During the year ended July
31, 2006 and 2005 we incurred payroll related expenses of approximately $ 4.4 million and approximately $3.5 million,
respectively. Payroll expenses for fiscal 2006 include approximately $600,000 of non-cash compensation paid in accordance with
management employment agreements. Higher costs for benefits, recruiting expenses and increased payroll necessary to process higher
claim volumes account for an additional $300,000 of increased costs over fiscal 2005. In addition to payroll and benefit costs, we
incurred higher costs for telephone expense as well as higher rent associated with our new lease agreement. These costs were
approximately $100,000 higher in fiscal 2006 compared to fiscal 2005. We also incurred approximately $200,000 less expense in the
year ended July 31, 2006 for travel and consulting expenses as compared to the year ended July 31, 2005.  SG&A expenses for the year ended July 31, 2006
included non-cash of expenses of approximately $791,000. These non-cash charges include approximately $795,000 for stock issued to
directors for board services and stock issued in accordance with management employment agreements, approximately $34,000 for
expensing of stock options as required by FAS123R (revised 2004), and approximately $900 for stock issued in lieu of a cash
interest payment. There was also a reduction in the allowance for
doubtful accounts of $38,000. SG&A expenses included non-cash charges of approximately $290,000 for the year ended July 31,
2005. These non-cash charges include approximately $220,000 of stock issued for legal, board and professional services as well as
approximately $23,000 of stock issued in lieu of a cash interest payment. There was also an increase in the allowance for doubtful
accounts of $47,000. 27  Table of Contents Also included in the SG&A expense for fiscal year
2006 is interest expense related to a bridge loan and capital leases. This interest expense was approximately $43,000, of which
approximately $15,000 relates to interest on the bridge loan. Interest expense for fiscal 2005 was also approximately $43,000 for
a loan, capital leases and a convertible note payable. We earned approximately $9,000 in interest income on our cash reserves in
the year ended July 31, 2006 compared to no interest earned in the year ended July 31, 2005.  Depreciation of property and equipment of
approximately $459,000 was recognized in the year ended July 31, 2006. This was compared to approximately $512,000 of depreciation
in the year ended July 31, 2005. NET LOSS  We recognized a net loss of approximately $1.6 million
and $2.4 million for the years ended July 31, 2006 and 2005, respectively. Included in the net loss number for fiscal year 2006 is
a gain on the sale of the Oldsmar facility of approximately $757,000. Also included in these numbers are non-cash expenses of
approximately $1.2 million and $800,000 for the years ended July 31, 2006 and July 31, 2005, respectively. Fiscal Year Ended July 31, 2005, Compared to Fiscal Year Ended 2004  REVENUE  Total revenue for the year ended July 31, 2005 was approximately $14.7 million, which consists of approximately $11.2 million in collision repair management for insurance companies, approximately $0.5 million in auto glass repairs and approximately $2.9 million in fleet repair management and other repairs and fees. Total revenue for the year ended July 31, 2004 was approximately $27.1 million, which consists of approximately $22.7 million in collision repair management for insurance companies, approximately $1.2 million in auto glass repairs and approximately $3.2 million in fleet repair management and other repairs and fees. Total revenues decreased approximately $12.5 million or 46% compared to approximately $27.1 million for the year ended July 31, 2004. This decrease is primarily the result of the loss of revenues from our two largest clients. During the year ended July 31, 2005 we derived
55% and 8% of our revenue from two customers. In October 2003 our largest client announced they were selling one-half of their U.S. auto physical damage business to another insurance carrier. As a result of this, we have experienced approximately an $8.4 million or 51% decrease in the revenue from that customer between fiscal years ended July 31, 2004 and 2005. In August 2005 this same customer announced that they had sold the remaining half of their U.S. auto physical damage business to another U.S. insurance carrier. We have not experienced any revenue loss to date as a result of this transaction and do not anticipate any significant loss of business throughout the duration of our contract, which ends in April 2006. We are unsure whether we will continue to service this new carrier after the contract period concludes and, if so, at what volume level. However, the positive financial results experienced by the customer of the business in question create the possibility of obtaining
additional business from the purchaser. We also experienced a decrease in revenue from our second largest customer because of a change in their states legislation regarding a special type of insurance policy requiring a direct repair network. We experienced approximately a $2.6 million or 69% decrease in the revenue from that customer between fiscal years ended July 31, 2004 and 2005. The Company anticipates meaningful growth in new clients based on the early results of its co-marketing agreement with ADP Claims Services Group. However, because of the competitive nature of our business and the uncertainty of bringing on enough business to offset the loss of business, we were unable to replace revenues quickly enough to reach profitability.  Fees and other revenue decreased approximately $300,000 from $2.5 million for the year ended July 31, 2004 to $2.2 million for the year ended July 31, 2005. This decrease is mainly a result of a reduction in file handling fees from the reduced collision management revenue, and was partially offset by an increase in the click fee revenue as explained above in the management interim operating plan. 28  Table of Contents The glass revenue decreased by 61%, or approximately
$750,000, from $1.2 million in fiscal year 2004 to approximately $.5 million in fiscal year 2005. This decrease is primarily due
to the loss of our second and third largest glass customers. The Company continues to pursue additional glass customers as the
glass repair business complements our core business and allows our customers to use a single source for all repair needs.  The fleet revenue increased approximately $5,000, or
1% from approximately $713,000 in fiscal 2004 to approximately $718,000 in fiscal 2005. This reflects substantially no change in
the claims volume from our existing fleet customers in fiscal 2005 as compared to fiscal 2004.  Expense  Claims processing charges include the costs of
collision, fleet and glass repairs paid to repair shops within our repair shop network, as well as the cost of the estimating
software sold to the Companys network of shops. Claims processing charges for the fiscal year 2005 were approximately $11.0
million compared to $22.1 million in fiscal 2004. This is a decrease in total costs of 50% and a decrease in the percentage of
claims costs compared to total revenue from 81.5% in fiscal 2004 to 75.3% in fiscal 2005. This reduction in claims processing
charges as a percentage of total revenue is a result of the change in the percentage of revenue generated from higher margin
products as well as the increased emphasis on click fees. If revenues from customers generated by the ADP Co-marketing agreement
grow as management expects, the margins will continue to increase.  eAutoclaims currently has approximately 2,700
affiliated repair facilities in its network for claims repairs. We electronically and manually audit individual claims processes
to their completion using remote digital photographs transmitted over the Internet. We are dependent upon these third party
collision repair shops for insurance claim repairs. If the number of shops or the quality of service provided by collision repair
shops fall below a satisfactory level leading to poor customer service, this could have a harmful effect on our business. We
control our service requirements by continually monitoring customer service levels and providing staff inspections of our network
shops and, if required, establish similar relationships with other collision repair shops.  Selling, general and administrative (SG&A)
expenses is mainly comprised of salaries and benefits, facilities related expenses, telephone charges, professional fees,
advertising costs and travel expenses. SG&A expenses for the year ended July 31, 2005 were approximately $5.6 million or 38%
of revenue compared to approximately $6.4 million or 24% of revenue for the year ended July 31, 2004. During the year ended July
31, 2005 and 2004 we incurred payroll related expenses of approximately $ 3.5 million and approximately $4.6 million,
respectively. The 2004 figure includes a one time charge of approximately $869,000 for expensing employee stock options. The
actual decrease in payroll cost, after adjusting for the stock option expense, was approximately $200,000 in fiscal 2005 compared
to fiscal 2004. The decrease is primarily due to lower costs associated with reduced claims volume. We have maintained staff in
anticipation of significant new business expected to be generated by the ADP Co-marketing agreement.  SG&A expenses included non-cash charges of
approximately $290,000 for the year ended July 31, 2005. These non-cash charges include approximately $220,000 of stock issued for
legal, board and professional services as well as approximately $23,000 of stock issued in lieu of a cash interest payment. There
was also an increase in the allowance for doubtful accounts of $47,000. This is compared to approximately $1.0 million non-cash
charges included in SG&A expenses for the fiscal year ended July 31, 2004. These non-cash charges included a $77,000 write-off
of equipment that was replaced to keep pace with new technology, $869,000 of compensatory options issued to employees, and
approximately $165,000 of stock issued for consulting agreements for interest and legal, board and professional services as well
as $12,000 for interest. There was also an $81,000 credit in the allowance for doubtful accounts that partially offset these
charges.  Also included in the SG&A is interest expense
related to a loan from a shareholder, capital leases and a convertible note payable. This interest expense totals approximately
$43,000 in fiscal 2005 compared to approximately $57,000 for fiscal 2004. There was no interest income from cash reserves for the
year ended July 31, 2005 compared to approximately $2000 in interest income for the year ended July 31, 2004. 29  Table of Contents Depreciation of property and equipment of
approximately $512,000 was recognized in the year ended July 31, 2005. This was compared to approximately $516,000 of depreciation
in the year ended July 31, 2004. There was no charge for debenture amortization taken in the year ended July 31, 2005 compared to
approximately $308,000 of debenture amortization recorded in the year ended July 31, 2004.  Net Loss  We recognized a net loss of approximately $2.4 million
and $2.2 million for the years ended July 31, 2005 and 2004, respectively. The increase in net loss was primarily a result of the
reduction in revenue experienced in fiscal 2005 compared to fiscal 2004 and the retention of staff in anticipation of new business
expected to be generated by the ADP Co-marketing agreement that had not yet materialized as of the end of fiscal 2005.  LIQUIDITY AND CAPITAL RESOURCES  At July 31, 2006, we had cash of approximately $1.5
million compared to approximately $306,000 at July 31, 2005, an increase of approximately $1.2 million from last year. We had a
working capital deficiency of approximately $2.3 million as of July 31, 2006 compared to $3.9 million as of July 31, 2005, an
improvement in the deficit of approximately $1.6 million. Other than working capital generated from operations, our primary
sources of working capital during the fiscal year ended July 31, 2006, was from proceeds received from the sale of our building
and proceeds received from investors upon the exercise of outstanding warrants.  In December 2005 we completed a transaction where we
purchased our Oldsmar facility that we had been renting and immediately sold the facility to a third party buyer. As a result of
this transaction, we received approximately $860,000 which we used for working capital.  During the year ended July 31, 2006 we received
approximately $1.9 million from investors who exercised outstanding warrants. Of the total amount received, the largest warrant
exercise occurred in March 2006, when a significant number of outstanding warrants were exercised by current investors as part of
a special warrant exchange program. This program resulted in our receiving more $1.7 million after expenses.  We continue to analyze our operations and streamline
where appropriate. Our ability to make additional significant cost cuts is limited. Also, such cost cutting programs are
potentially counterproductive to our long term best interests because such cost cutting results in the loss of our valued
employees and could impair new product initiatives. If revenues grow it will provide its own working capital, but because revenue
growth is not guaranteed, we continue to analyze options for additional financing. We cannot assure you that we will be able to
raise such funds or that such funds will be available to us on favorable terms. If we raise additional funds through the issuance
of our securities, such securities may have rights, preferences or privileges senior to those of the rights of our common stock
and our stockholders may experience additional dilution.  We believe that cash generated from operations, the
sale of our Oldsmar facility, and proceeds from the sale of our securities will be sufficient to meet our working capital
requirements for the next 12 months. This estimate is a forward-looking statement that involves risks and uncertainties. The
actual time period may differ materially from that indicated as a result of a number of factors so that we cannot assure you that
our cash resources will be sufficient for anticipated or unanticipated working capital and capital expenditure requirements for
this period.  We remain optimistic about our long term business
prospects. However, we still face significant obstacles to achieve profitability. We anticipated that in fiscal 2006 we would
begin to roll out a substantial volume of repairs pursuant to our ADP/Audatex Co-Marketing Agreement. We have invested a
significant amount of our working capital, technical infrastructure and personnel time in preparing the Company for the
anticipated increased claims volume from the ADP/Audatex Co-Marketing Agreement. Our financial and personnel commitment to the
ADP/Audatex Co-Marketing Agreement combined with the prior loss of revenue from our largest customer due to the sale of part of
their business has created the working capital pressures we experienced during fiscal 2006 and will likely continue to experience
during at least the first half of fiscal 2007. 30  Table of Contents DEBT AND CONTRACTUAL OBLIGATIONS  Our commitments for debt and other contractual arrangements as of July 31, 2006 are summarized as follows:  Year ending July 31,2007
        2008
        2009
        2010
        2011
        Thereafter
        TotalProperty lease
        265,000
        273,000
        282,000
        290,000
        299,000
        411,000
        1,820,000Equipment lease
        100,000
        22,000
        
        
        
        
        122,000Employee compensation
        473,000
        170,000
        
        
        
        
        643,000838,000
        465,000
        282,000
        290,000
        299,000
        411,000
        2,585,000
  We lease equipment and facilities under non-cancelable
capital and operating leases expiring on various dates through 2012. The main operating lease consists of a 7-year lease for
30,000 square feet of a 62,000 square foot facility. In December 2005 we completed a transaction where we exercised our option to
purchase the entire facility and, as part of a simultaneous closing process, immediately sold the facility to a third party buyer.
As part of the transaction, we entered into a new 7-year lease with the new owner. Our rent, including applicable taxes, begins at
$21,694 per month in the first year and increases 3% each year through the remaining life of the lease.  In May 2005, we entered into a new two year employment agreement with our President and Chief Executive Officer. The agreement specifies an annual base salary of $170,000, representing a voluntary pay cut in base taken by the CEO. The CEO will also receive a $750 per month auto allowance and a $1,000 per month personal allowance.  The contract required us to issue the CEO 1,000,000 shares of the Companys common stock.  If the CEO is terminated for any reason other than for cause during the term of the agreement, he will receive a lump sum payment equal to two (2) times the current base salary. If we do not employ the CEO beyond the expiration term of the agreement, he will receive his monthly base salary for the next twelve months.  Also in May 2005 we entered into employment agreements ranging in length from eighteen to twenty-four months with all three of our current senior executives that range from $100,000 to $138,000 annually. This represents voluntary base pay cuts taken by all of the previously contracted executives. These executives also receive automobile allowances ranging from $400 to $700 per month and receive 10,000 shares of the Companys common stock each month, not to exceed 200,000 shares each. If their contracts are not renewed they receive severance packages of six months of their annual compensation.  Inflation  We believe that the impact of inflation and changing prices on our operations since the commencement of our operations has been negligible.  Seasonality  We typically experience a slow down in revenue during November and December each year because consumers tend to delay repairing their vehicles during the holidays. 31  Table of Contents CRITICAL ACCOUNTING POLICIES  Our discussion and analysis of our financial condition and the results of our operations are based upon our consolidated financial statements and the data used to prepare them. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. On an ongoing basis we re-evaluate our judgments and estimates including those related to revenues, bad debts, long-lived assets, and income taxes. We base our estimates and judgments on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies.  Revenue Recognition:  We derive revenue primarily from collision repairs, glass repairs and fleet repairs. Revenue is recognized when an agreement between us and our customer exists, the repair services have been completed, our revenue is fixed and determinable and collection is reasonably assured. Revenue is recorded at gross in the areas of collision and fleet repairs. It also records at gross in certain glass repair transactions. Revenue is recorded at gross in these areas when:  
        We are the primary obligor in the arrangements. We are responsible for the quality of the repair and must satisfy the customer if the body shop fails to repair the vehicle properly.
 
        We have latitude in establishing price. The price is established based on our audit of the repair estimate submitted by the repair facility. The repair facility cannot begin the repair until an agreed upon price is established between the facility and us.
 
        We control what is repaired with the contracted shops, as we audit the estimate submitted by the repair facility. We must agree that the repair is reasonable and necessary before the repair facility is allowed to proceed with the work being requested.
 
        We have discretion in supplier selection. Through the use of software, we prioritize which repair facility is used based on the efficiency and effectiveness of the repair facility, and
 
        We have credit risk. We are responsible to pay the repair facility even if the customer does not pay for the repair.
 We record revenue net of the repair costs in certain glass transactions when the supplier, not us, is the primary obligor in an arrangement, the amount we earn is fixed or the supplier has credit risk. This occurs when the repair has been performed before it is referred to us. When we receive notice of the transaction, we call the glass repair facility to ask them to become part of our network and to negotiate a better price on the repair. If we are able to negotiate a better price for the customer we keep a portion of the added discount. In that situation the revenue is recorded net of the repair costs even though we pay for the entire claim and is reimbursed by the insurance company, since we did not have the risk of loss and are not responsible for the repair. The revenue generated from the co-marketing agreement with Audatex is recorded net of the repair costs because in the agreement we are performing a fee for service. The insurance company is the customer of Audatex, who will be collecting the revenue and paying the shop. The first claims from this agreement were processed in the fiscal year ended July 31, 2005. We maintain an allowance for doubtful accounts for losses that we estimate will arise from the customers inability to make required payments. Collectibilty of the accounts receivable is estimated by analyzing historical bad debts, specific customer creditworthiness and current economic trends. At July 31, 2006 and July 31, 2005 the allowance for doubtful accounts was approximately $170,000 and $208,000 respectively.       32  Table of Contents Accounting for Income Taxes:  We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that we determine that we would be able to realize deferred tax assets in the future in excess of the net recorded amount an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. We have recorded valuation allowances against our deferred tax assets of
$10,499,000 at July 31, 2006 and $9,841,000 at July 31, 2005. The valuation allowance consists mainly of net operating losses previously realized and stock compensation currently not deductible. The valuation allowance is necessary because the use of these deductions is not reasonably assured since we have not yet returned to profitability.  Valuation of Long-lived Assets: We identify and record impairment on long-lived assets, including goodwill, when events and circumstances indicate that such assets have been impaired. We periodically evaluate the recoverability of our long-lived assets based on expected undiscounted cash flows, and recognize impairment, if any, based on expected discounted cash flows. Factors we consider important which could trigger an impairment review include the following:  
        Significant negative industry trends
 
        Significant underutilization of the assets
 
        Significant changes in how we use the assets of our plans for their use.
 At each balance sheet date, we evaluate the period of amortization of intangible assets. The factors used in evaluating the period of amortization include:  (i) current operating results, (ii) projected future operating results, and (iii) any other material factors that affect the continuity of the business. No charge for impairment of goodwill was deemed necessary as a result of that evaluation as of July 31, 2006.  RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS  In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position may be recognized only if it is more likely than not that the position is sustainable based on its technical merits. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. We do not expect FIN 48 will have a material effect on our consolidated financial condition or results of operations.         33  Table of Contents BUSINESS  GENERAL  eAutoclaims is a Nevada corporation which provides Internet based vehicle collision claims services for insurance companies, managing general agents (MGA) and third party claims administrators (TPA) and self-insured automobile fleet management companies. We accept assignment of claims from our customers, and provide vehicle repairs through a network of repair shops. We also provide online systems to connect clients with service providers of estimates, audits and claims administration services for claims for which we do not perform the repair.  Our business strategy is to use the Internet and our network of approximately 2,500 body shops to streamline and lower the overall costs of automobile repairs and the claims adjustment expenses of our clients. We believe that our proprietary web-based software products and services make the management of collision repairs more efficient by controlling the cost of the repair and by facilitating the gathering and distribution of information required in the automobile repair process.  We control the vehicle repair process from the reporting of the accident through the satisfactory repair of damage. We bring together and coordinate the activities of the insurance company, its insured, and the various parties involved in evaluating a claim, negotiating the cost of the repair, and performing necessary repair services. We have contracted with approximately 2,500 body shops throughout the United States to repair vehicles. These shops, referred to as our provider network, provide us 10% to 15% discount on the vehicle repair because of the volume of repairs we provide to them. Since we audit every line of every repair estimate and because we share a portion of the volume discount with our customer, we are able to lower the average cost being paid by our customer.  We derive our revenues by accepting assignments of auto repair claims from our customers and having the vehicle repaired through our network of contracted repair shops. Once we accept these claims, we also accept the risk that the repair will not be done properly. Additionally, we derive revenue from fees for processing and coordinating claims that do not go through our network of body shops.  In March 2004, we entered into a Co-Marketing Agreement with ADP Claims Service Group (ADP), pursuant to which ADP sells and markets our core Internet application and collision management services. The product is private labeled under the name ADP Managed Repair Solutions and utilizes us as the back room for processing the claim repairs and our network of repair facilities. As a result of this agreement, several new clients were obtained which contributed to our claims growth in fiscal 2006. In May 2006, ADP Claims Services Group was acquired by Solera, Inc, a privately held company, which established a new-co, Audatex, as the new operating organization. Although this transaction has had a short term negative impact on our anticipated growth in new revenues,  Audatex has provided us forecasted future revenues to suggest a possible material growth in revenues for the fiscal year
2007. We continue to believe that the Audatex Agreement has the potential to substantially increase the volume of claims processed by us, resulting in significant long-term benefit to us and our shareholders. However, there is no assurance we will be able to generate significant revenues under this agreement.          34  Table of Contents PRODUCTS AND SERVICES  Our eJusterSuite® product provides both outsourcing and ASP (application service provider) solutions. The outsourcing solution requires our personnel to audit and coordinate the vehicle repair. The ASP solution allows the customer to use our technology independent of our personnel; thereby, providing a solution for the largest insurance companies that already have the staff to process and control the claims process, while paying us a fee for every transaction that is run through our system. The ASP model will provide margin without the associated personnel and operating costs.  eJusterSuite® also builds in service partners that can provide the needed services such as independent adjustors, car rentals, tow trucks and accident reporting by merely clicking an Icon that is added to the screen of the customers desktop in the current system. The system automatically provides the service partner the information already in our system via the Internet. The service partner will be systematically provided the requested services and pay us a fee for each assignment they receive through our system. This process significantly reduces the customers time and cost to process claims as well as reducing the number of mistakes that occur in a manual process. Because there is no need to reenter the information, in most cases it also reduces the cost of the service partner to obtain and process the transaction, even after paying our transaction fee. This
added revenue provides us with additional margin without requiring significant additional personnel and other operating costs.  For our outsourcing customers, we approve all repair shops for inclusion in our network and determine which repair shop will ultimately perform the repairs on a particular vehicle. We receive a discount, ranging from 10% to 15%, from repair facilities that are members of our provider network. The revenues generated from the vehicle repair facilities through our provider network accounted for 78% of the revenue for the fiscal year ended July 31, 2006. We are paid on a per claim basis from all our customers for each claim that we process through our system. These fees vary from $10 to $65 per claim depending on the level of service required. For the fiscal year ended July 31, 2006, 18% of our revenue was received from claims processing fees and other income.  Outsourcing Solutions:  In our outsourcing solution we handle the entire collision repair function for our customers from the time of reporting of the accident through the vehicles satisfactory repair. Through our network of parts and repair service providers, we are frequently able to obtain parts and services at lower costs than otherwise available. We monitor and audit all repair work to help assure that the proper repair work is performed at the negotiated price. In most cases, digital photographs of the damaged vehicle are transmitted to us via the Internet to assist us in monitoring repairs.  We strive to provide our customers with ways to control costs associated with processing collision claims.   These services include:  1.
        Centralized accident reporting.
 2.
        Copies of accident reports.
 3.
        Identifying the appropriate network repair facility and directing the policyholder to such facility.
 4.
        Deliver repair estimates and photographs/digital images of damage to any location overnight or same day upload.
 5.
        Audit of every claim by our in-house physical damage experts.
 6.
        Assignment of independent field appraiser, when necessary.
 7.
        Expedited delivery of part and materials as needed.
 8.
        Computerized tracking and follow-up system to minimize repair time.
 9.
        Replacement rental vehicles.
 10.
        A lifetime guarantee from our network of repair shops (for as long as the insured owns the vehicle) on all physical damage body repairs and administration of manufacturer or installers warranty on replacement parts.
   35  Table of Contents We help our clients monitor their
automobile claims losses by providing the following: 
        Technology  We built one of the first customized web-based vehicle claim assignment and delivery systems for insurance companies and corporate fleets. We use state-of-the-art technology and security for the transmission of files and records. In addition, we utilize digital cameras, Internet communication, advanced data storage and scanners for auto repair shops that are not equipped with digital cameras, to create a defined audit trail and high capacity digital storage. We provide these applications to our clients with their own private label that includes their corporate colors and logos, which makes the claims process transparent to both insurance company personnel and the insured.
  
        Online, real time reporting  We provide our customers with online, real-time reports of the most critical information used in their operations. These reports include a comparison of their average paid losses (cost to repair a vehicle), cycle time (time to complete an estimate of the damage), and lost adjustment expense (cost of the repair estimate or appraisal) between the eAutoclaims network, independent appraisers and staff appraisers. This comparison allows them to see the cost saving they realize while using our outsourcing solution.
  
        Audit Trail  We audit every claim that comes into our network. This helps us deliver the lowest available audited cost to our clients on every repair.
  Our system produces financial
benefits for our customers as follows:  
        Our audit process reduces the average paid loss per vehicle.
  
        We share a portion of the discounts obtained from the body shops with our clients based on their submitted volume.
  
        With lower average paid losses, insurance companies are able to establish lower loss claims reserves. This, in turn, frees up capital and surplus allowing for lower premium rates.
  
        Technology efficiencies reduce their cost of processing each file.
  
        Our typically faster settlement time reduces the days of use and, therefore, the cost of rental cars and increases customer satisfaction because their repaired vehicle is typically returned to them in a shorter time.
  
        Our process of claims investigation helps reduces fraudulent claims.
  Application Service Provider (ASP):  eJusterSuite® provides insurance
companies with an ASP solution that fits into their current environment. Our ASP solution allows these insurance companies to
utilize our advanced technology while continuing to use their staff and network of body shops. We host the data on our servers
while their staff and body shop network processes the claims based on their current operating procedures and shop relationships.
Under this solution, the customer pays us a click fee for each transaction they process through our system.  AuditPro is a rules-based estimate auditing
application that has been well received by existing clients and prospects. Large carriers can use AuditPro as a stand-alone model
that can be integrated within their organization without the need for significant initial cost and without materially changing
their internal workflow. Based on the initial favorable acceptance, we believe this product, with its exceptional high margins,
will be a source of significant revenue growth in the future. 36  Table of Contents Additionally, the service partners described above
(rental car companies, towing, salvage, etc.) can also be plugged into the ASP solution, whereby we are paid a fee for each
referral made to the service partner that results in the use of their service.  Technology Provider:  The company has developed technologies that create
efficiencies for the automobile parts industry. One new product that we believe will have a significant impact on the
Companys net financial results is eDataTransfer. eDataTransfer significantly reduces the customers costs
by automating the part price lookup function when an automobile repair estimate is received from an outside party. Since the
function is done programmatically, the staff time necessary to assist customers is reduced.  CUSTOMERS  Our customers consist primarily of insurance companies, managing general agents (MGAs), third party administrators (TPAs) and managers of self-insured automobile fleets. The most recent addition is a category of customers, including ADP,  that service the insurance market. We have found interest from providers that have requested proposals from us to build an application to meet their unique needs or in some cases to allow them to transact business using the eJusterSuite® application. We have built several specialty applications for companies serving the insurance industry.  Contracts with existing clients are typically from one to five years. The first phase of the rollout with a new client starts with a 90-day pilot contract. This initial phase allows the customer to experience the reductions in appraisal expenses and realize the efficiencies offered by the eJusterSuite® application and utilization of the eAutoclaims Guaranteed Repair Network (GRN). Most of our customers are on a one to five-year contract. Pursuant to the contract we take responsibility for repairing the vehicle, and the liability to pay for the repairs performed in our network of body and glass repair providers. As a general rule, within seven days of the assignment of the vehicle to the body shop, our insurance and TPA customers pay us the completed audited repair price, before the shop discount, less the customers volume discount. Our fleet and glass customers generally pay us within
30 days of the repair. If a vehicle owner decides to have the vehicle repaired at a body shop that is not in the eAutoclaims network shop, we are paid a file-handling fee only.  Integration of service partners in the eJusterSuite® application continues. In addition to a larger offering of service partners our auto glass network administration services are also a value added service to our collision management clients.  Summary of our Co-Marketing Agreement with Audatex, a Solera Company, (formerly known as ADP Claims Solution Group)  On March 9, 2004, we entered into a Co-marketing agreement (the ADP Agreement) with ADP Claims Solution Group, Inc. (ADP). We granted ADP the non-transferable, non-assignable right to market and sell our web-based claims management system and related services that automates the administration, estimating, auditing, appraising and management of physical damage repair and claims processing for vehicles via a network of vendors and service partners. Pursuant to the ADP Agreement, we customize our products and private label our customized Internet applications to ADPs specifications for use in the United States and, at the option of ADP, Canada.  The ADP Agreement has an initial term of three years. After the initial term, the agreement automatically continues until terminated by either ADP or us upon 180 days prior notice to the other party.  For the first 100,000 claims processed by ADP pursuant to the ADP Agreement, we will be paid 60%, and ADP will retain 40%, of Semiweekly Recurring Revenues (as defined in the ADP Agreement) received by ADP from its clients. After claims processed under the ADP Agreement exceed 100,000, we will be paid 50% of such revenues. 37  Table of Contents ADPs responsibilities under the ADP Agreement include: (i) marketing and selling, at its discretion, the system; (ii) performing all billing and collections for its clients; (iii) allowing on-site visits at our option, no more frequently than once annually, to ADPs places of business upon prior written notice and during normal business hours and allow us to periodically examine books and records of ADP insofar as they relate specifically to the ADP Agreement; (iv) using reasonable efforts to keep us informed as to any material problems encountered with our products and any resolutions arrived at for those problems; (v) establishing sales incentives and commission policies for its sales personnel; (vi) working with us to develop a mutually acceptable periodic reporting mechanism; and (vii) providing us, at no cost, ADP products to assist us in our internal operations. There is no
minimum sales commitment by ADP under the agreement.  Our responsibilities under the ADP agreement include: (i) assisting ADP with development of marketing materials, sales training and ongoing support for ADP sales personnel; (ii) performing client implementation, set-up training and customer support for ADP clients; (iii) performing all product maintenance support; data center operation; and customer and technical support; as well as any other function normally performed by eAutoclaims in selling, implementing, training and supporting our products; (iv) providing ongoing samples of our product literature and online sales tools for the ADP sales team and to package the ADP products with the appropriate documentation (including, product reference guides and instructions); (v) allowing a reasonable number of on-site audits and visits at ADPs option to our places of business upon reasonable prior written notice and during normal business hours
and allow ADP and/or any ADP client to periodically examine our business practices, policies and procedures and make copies of our books and records insofar as they relate to the ADP Agreement; and (vi) integrate our product in the ADP Managed Network Solution with ADP products and work with ADP to develop, implement and maintain ADP proprietary software developed by us.  We have agreed to provide ADP with a favored Nation treatment, ensuring preferred pricing should the Company enter into another Co-Marketing Agreement with another organization. ADP originally had the right to terminate the Co-Marketing Agreement should we enter into a similar agreement with a direct competitor, however this provision of the agreement has been terminated since ADP CSG was sold to Audatex. The other terms of the agreement remain in-force.  ADP may terminate the ADP Agreement if ADP determines that our product is non-compliant with any federal, state or local laws, statues or regulations including, without limitation, claims licensing and handling regulations. Both parties have the right to terminate the agreement upon certain events of default, including the breach of significant provision of the ADP Agreement or insolvency of the other party.  In May 2006, ADP Claims Services Group was acquired by Solera, Inc. a privately held company and a new-co,Audatex, a Solera Company, was established as the operating organization. When this transaction occurred, it triggered two provisions of our Co-Marketing Agreement with ADP. The first one was our right to terminate the exclusivity clause and the second was the need for us to give consent to ADP for the assignment of our Co-Marketing Agreement to another organization.  We were not provided access to, nor were we requested to consent to, the ADP/Solera transaction prior to its closing. Thus we were unable to clearly identify how our Co-Marketing Agreement would be part of Audatexs strategic plans. Since the closing of the transaction, the Audatex organization has had a major restructuring of its personnel, including many of the key personnel associated with our program. As a result of the aforementioned circumstances, on May 1, 2006, we chose to withhold the consent of assigning our agreement to Audatex and elected to terminate the exclusivity clause with ADP Claims Services Group. These changes had and will have a short-term negative effect on our anticipated growth in new revenues. However, since this event, we have met with and had more meaningful discussions with Audatex and now have a clearer picture of the forecasted sales goals of Audatex and their
restructured sales force. Audatex has established a sales team that includes our product as part of their sales goals for the current fiscal year. We are hopeful the new growth will materialize during fiscal year 2007. While we have terminated our exclusivity with Audatex and there are no guarantees of future success, we plan to continue with the terms of the agreement and currently have no plans to terminate the Co-Marketing Agreement. 38  Table of Contents SALES AND MARKETING  Our Sales & Marketing strategy has evolved over the past year with a greater emphasis on expansion of our Direct Sales team while continuing the expansion of our channel partner relationships. Our former channel partner, ADP Claims Services Group, was acquired by Audatex, a Solera Company. Our agreement has remained as part of the change of control from ADP CSG to Audatex and the name or the new program is the Audatex Managed Repair Solution powered by eAutoclaims.  The transition subsequent to the acquisition of ADP Claims Services Group by Audatex had an adverse impact on the number of viable prospects in the sales pipeline as well as the number of accounts closed by our channel partner. The realignment of the Audatex sales division appears to be complete and we have begun to expand the pipeline with sizable prospects developed through the Audatex channel partnership. Audatex expects significant growth of the Managed Repair Solution business in the fiscal year 2007.  In addition to reselling managed collision repair services, the agreement with Audatex, a Solera Company, also allows us to market Audatex Shoplink, an estimating system used by collision repair shops to produce estimates. The agreement stipulates that we will market Shoplink to shops on our collision repair network. We have a dedicated unit within eAutoclaims to focus efforts on this initiative, which generates an attractive profit margin.  Over the past year our Direct Sales team has made significant progress to grow ASP sales revenue due to the relatively high margins generated by our ASP products. We market three ASP products including eJusterSuite®, AuditPro, and the Appraisal Management System. Each of the products can be used independently or may use other ASP modules, depending on client workflow and business needs.  Licensing of eJusterSuite® as an ASP has been another growth product that is used by carriers who rely on existing Staff Appraisers and those who manage an existing Direct Repair Program. eJusterSuite® allows carriers to manage appraisal assignments, monitor performance of appraisal sources through various metrics, and includes access to service partners for rental car procurement, assignment to salvage vendors, police report pick-up services, and several other service partners frequently used by Insurance Adjusters.  We are preparing to release a new module within eJusterSuite to assist carriers who use Staff Appraisers. The new module adds functionality currently not available in the industry. The innovation has been well received by existing clients who have been involved in the development of this technology. The new product is currently in beta testing and national release is expected in the first half of the fiscal year 2007.  Our direct sales team has made progress with regard to Managed Collision Repair sales.  Growth in the Top Insurance Company Market  Firemens Fund Insurance Company:  We have recently entered into a Letter Of Intent with Firemens Fund Insurance Company (FFIC) to provide FFIC with our outsourced Guaranteed Repair Network and a complete customized suite of ASP products. While there is no guaranty of a fully executed agreement and delivery of the subject services, we believe this will materialize before the end of the calendar year 2006. FFIC insisted on working directly with us as a condition to use our services, assuming we can meet or exceed certain financial requirements set by FFIC. We believe we will meet those requirements successfully.  CNA Insurance Company.  CNA Insurance is a joint client of eAutoclaims and Audatex. The account began rolling out this past fiscal year. The original type of service provided for CNA has been our Audatex Managed Repair Solution (our outsourced Guaranteed Repair Program), however the model has recently been expanded to include more of our services that will result in much higher usage of the managed repair network. We have just recently rolled out this expansion and expect it will produce a meaningful growth in the program. 39  Table of Contents New Opportunities: The company continues to work with other large carriers and expects to see continued growth in this larger tier marketplace.  Competition  The auto collision claims service industry is highly competitive and has low barriers to entry. We are aware of several other companies that offer Internet-based services similar to ours. Several of these competitors serve the insurance industry, although most focus on either the fleet or insurance segments of the market. We are aware of one competitor that offers collision repair services through a network of collision repair providers, online connectivity with those providers, and the estimate review service combined with a share of the volume discount with the customer that is provided by the repair facility.  Several of our competitors offer application services (Application Service Provider models) along with electronic auditing capabilities. Even though most of our competitors have either changed their targeted marketing efforts or narrowed their focus to the insurance arena, the majority of these competitors have been in business longer than we have. Several of these competitors have significantly greater assets and financial resources than currently available to us. We expect competition to continue to intensify in the on-line claims management segment of this industry as current non-Internet competitors expand their market into the Internet and new competitors enter the market utilizing the Internet.  We cannot assure you that we will be able to compete successfully against current or future competitors. Competitive pressures could force us to reduce our prices and may make it more difficult for us to attract new customers and retain current customers. As competition in our industry increases, it is likely that many of our competitors will have access to greater resources than are currently available to us, including financial, employee, customer relations, technology, and expertise in developing and implementing new technologies as the industry evolves.  The principal factors that help us to maintain and grow our market share are:  
        Continuous implementation of new technology to streamline the claims processing workflow for insurance adjusters;
  
        Maintain attractive processing cycle time for claims;
  
        Quality of repair shop services;
  
        Ability to offer nationwide access to repair facilities;
  
        Processing of claims/assignment fees and charges;
  
        Ability to offer new services and efficiencies while incorporating technological change into existing services;
  
        Access to claim status 24/7;
  
        The increase in the volume of vehicles that a repair facility can expect to repair as part of our network;
 40  Table of Contents Customer Service  Our continued growth will be dependent upon our ability to consistently deliver customer centered service at competitive prices. Our eJusterSuite® system is designed to ensure that the claims process flows smoothly and seamlessly. Our follow-up on claims assignments helps to ensure that all details of the claim will be verified to our quality standards.  We have implemented a Customer Service Professional certification as part of our Associate Development Program to ensure that our employees are fully trained in the latest in customer service techniques and to help us in attaining our objective of becoming known as one of the best customer service organizations in the industry.  Employees  As of July 31, 2006, we had 80 full-time employees. There is no union contract relating to any of our employees nor do we anticipate there to be unionization of our employees. We believe that our relationship with our employees is generally good.  INTELLECTUAL PROPERTY  We rely on various intellectual property laws and contractual restrictions to protect our proprietary rights in products and services. These include confidentiality, invention assignment and nondisclosure agreements with our employees, contractors, suppliers and strategic partners. The confidentiality and nondisclosure agreements with employees, contractors and suppliers are in perpetuity. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our intellectual property without our authorization. In addition, we intend to pursue the registration of our trademarks and service marks in the U.S.  During fiscal 2004 we changed our corporate name from eAutoclaims.com, Inc. to eAutoclaims, Inc. We have filed for and have been granted the fictitious name EAUTOCLAIMS in the State of Florida. We also own twenty-four (24) URL Internet domain names. We maintain a website located at www.eautoclaims.com. We are not incorporating by reference any information on our website and information on our website should not be considered part of this report.  There can be no assurance that other parties will not claim infringement by us with respect to our current or future technologies. We expect that participants in our markets will be increasingly subject to infringement claims as the number of services and competitors in our industry segment grows. Any such claim, with or without merit, could be time-consuming, result in costly litigation, cause service upgrade delays or require us to enter to royalty or licensing agreements. Such royalty or licensing agreements might not be available on terms acceptable to us, or at all. As a result, any such claim of infringement against us could have a material adverse effect upon our business, results of operations and financial condition.  OPERATIONS AND TECHNOLOGY  Overview  We have created several web-based applications that assist insurance adjusters, appraisal sources, and repair centers to efficiently and effectively conduct business. The web applications facilitate lower turn around times in settling claims through the use of digital technology integrated with the Internet. Lower average paid losses to insurance companies are achieved through extensive programmatic audits that are individually customized to the insurance companys auditing profile. Our customers see increased workflow efficiencies created by integrating core and customized software modules (First Notice Of Loss, System Integration to eliminate re-keying, Intelligent dispatch Systems, programmatic audit, proactive reporting, e.g.,) designed to compliment the customers existing business system and not replace it. 41  Table of Contents Each of our web-based products evolves through constructive feedback from our clients. We design new functionality requests in a modular approach so that any other customer can have that same functionality by a simple change in their profile. This evolution and modular integration of functionality allows us to have one of the most dynamic and versatile products in the marketplace for on line claims processing.  All products are web based and as such, are periodically updated by us online, eliminating the need to send disks containing updates to our customers. As changes are made to any application they are deployed and realized in our programs in real time. Our existing hardware and software requirements to use any of our products are Internet Explorer 5.5 SP2 or above and an adequate Internet connection.  Understanding the need for high reliability/availability of our customers data, we have a contract with a Co-Location Facility provider to install equipment in their facility. Data will be replicated between the Oldsmar, Florida, eAutoclaims Corporate Headquarters and the off site data centers. Redundancies have been built into the network topology. Real time replication exists between Oldsmar and the off site locations for all database information, photos, estimates, etc, via a secure encrypted VPN.  Products  eJustersuite®  Our eJustersuite® application is a one call contact center solution that provides insurance adjusters the ability to take the First Notice of Loss (FNOL) and dispatch the assignment to the appraisal source of their choice (Staff Appraiser, Repair Shop, Independent Appraiser, or Desk Estimator) through geographical proximity algorithms as well as provide assignment loading criteria for each appraisal source. An Insurance Adjuster can also make real time rental car reservations and tow truck pickup arrangements for the car while the customer is on the phone. The eJustersuite® product interfaces with a multitude of partners for scene investigation, police reports, salvage partners, etc.  eJustersuite® customers can use an innovative technology called CAsE (Customizable Assignment Entry). With CAsE the client can create their own forms based on a comprehensive collection of data elements based on the ACORD FNOL form. There are no limits on the number of forms a client can create and each form can be tailored to ensure that only the necessary information is obtained thus increasing efficiency when entering data.  AuditPro  Our AuditPro product is an extremely versatile estimate-auditing program. Auditpro allows an insurance company to create specific auditing guideline profiles based on state, county, zip, appraisal source and a multitude of other environmental elements. The audit results are given scores based on the weighted rules of the auditing profile and expressed as both points and dollars variance. Special routing to the appropriate reviewing source is possible through a routing profile. Potential total losses could be sent to a specific adjuster or department while light impact estimates could be sent to another.  With our alias technology within AuditPro we are able to minimize the amount of false positives and produce a highly accurate audit result that characterizes the estimate violations based on severity and cost variance. Auditpro also has the ability for the insurance company to modify the estimate on the fly and send the corrected estimate to the appraisal source.  Auditpro versions are available for shops and independent appraisers. Within those versions estimates can be verified against the auditing guidelines of the insurance company at the appraisal source level prior to being submitted to the insurance company.  42  Table of Contents Product Development  We finished a proof of concept project in the second quarter of fiscal year 2004 entitled Virtual Adjuster. Virtual Adjuster allows the appraisal source the ability to communicate in real time with the call center adjuster or appraiser where both parties could see the damage to the vehicle and collaborate on the estimate while capturing the necessary screenshots and documentation required for the claim. Technology has advanced and now with higher resolution cameras and higher speed wireless devices the product can be commercialized. Through video and audio streaming technology, claims could be settled in minutes. We anticipate a production release of this product in 2007.  We have already completed Phase 1 of our next generation eJustersuite. Rather than rewriting the application in Macromedia CFML (Current Platform) we have migrated the application to a Flash based application using Macromedia FLEX with Action Script which runs on a Java Engine. We are migrating to this technology to avoid complications with new Microsoft Internet Explorer versions with a tighter security model. The new generation application can run in any browser. The application has received complete restructuring from the Microsoft SQL Database backend to the graphical presentation layers. Abstraction between layers is accomplished using internally written CFML components (Objects).  Software Development  We are a rapid application development environment. We use a form of agile programming methodology called extreme programming (XP) to develop our products. This XP process facilitates us working closely with our customer to ensure successful completion of our common project objectives.  Approximately 95% of all products are written at our Oldsmar Corporate Office in Cold Fusion Markup Language (CFML) and the remaining 5% of code consist of Active Server Pages (ASP), .Net, or Visual Basic (VB). In order to reduce outside dependencies or influences on our product, we use very little code written by outside vendors.  We have standard schemas that are used for integration with other clients systems. This standardized interface is open and non-proprietary. We frequently make customized changes to our application to accommodate the business process needs of our customer, but each of those changes is modularized to minimize interaction with other code. Once modularized, the code is available for our entire customer base upon request.  Our production environment is segregated from our development environment. All code creation or modifications occur on the development platform. From development all code is migrated and tested on a staging server that is a replica of production. After successful testing the changes are scheduled for deployment to production. Our version control software monitors and track all changes to code. Changes can be deployed to all customers at the same time. Customers are always notified of changes through a flashing icon on their screens that details any changes in appearance or functionality of the application.  We are moving to a Service Oriented Architecture (SOA) with many of our new modifications. This SOA will allow for a myriad of functionality from the shop level to the insurance company level. These Web Services will allow for the addition and integration of new partners into our entire web based products. All services will have open Application Programmable Interfaces (APIs).  Network Infrastructure  We have a fiber connection to the Internet with
Synchronous Optical Network (SONET) technology. There are two ingress points of the fiber to the building and two egress points
for the fiber at the Oldsmar, Florida corporate headquarters. In each of the Peak 10 Co-Location facilities, Charlotte and Tampa,
we also have redundant SONET technology. SONET technology ensures a high availability telecommunication network is available for
our application servers and our call center. Our Oldsmar facility and the Peak 10 facilities all have diesel powered backup
generators that can sustain network operations indefinitely (with adequate refueling every 10 days) should a power outage occur.
All mission critical equipment has dedicated APC uninterruptible power supplies (UPS). All non-mission essential computer
equipment including workstations has either common UPS modules or small-dedicated units. These SONET rings carry both our voice
and data traffic. 43  Table of Contents Security and protection of customer data is also a paramount concern for our enterprise. We have in place 7/24/365 monitored Intrusion Detection Systems (IDS) that alert us to attempts to breach our security. We vigorously keep our operating systems updated with the most current security patches as well as keep our Antivirus software patterns updated and deployed to all systems within the organization.  Our web products can be used with Secure Socket Layer (SSL) technology to ensure sensitive data is encrypted between our servers and our clients or partners. We use F5s Security Appliances to perform encryption and decryption thus removing unnecessary overhead from servers. We also prefer to restrict access to customer web sites through the use of IP restrictions which limit access to a specific point of origin, such as the insurance companys corporate headquarters gateway or proxy server.  We use Dell PowerEdge Servers, PowerVault storage devices, PowerConnect Switches, Dimension workstations within eAutoclaims. All mission critical equipment has a 4-hour support contract on it. We also use Blade Server technology that allows redundancy and high availability of our services. Network Load Balancing (NLB) is performed at Layer 2 of the OSI model between all Blades. We use Cisco for our routers and Firewalls.  The use of Simple Network Management Protocol (SNMP) polls and traps to monitor over 300 services within our network enables the Information Technology staff to be immediately notified of an abnormal condition within the network. Restricted and secure remote administration allows for quick resolution of any issues should they occur outside of normal business hours.  Network support staff is available on site in the Oldsmar Headquarters from 7 am EST to 6 pm EST and 1 am EST to 8 am EST (Overlapping coverage) Monday through Friday.  Security  Intrusion Detection System (IDS)  An IDS is deployed and monitors all traffic to and from our servers. This system is monitored 7/24/365 through ProtectPoint Security services. ProtectPoint also has IDS systems installed for our equipment in Charlotte and Tampa. Regular security vulnerability penetration tests are performed each quarter to ensure effective shielding of our internal network.  Physical Security  Corporate headquarters Network Operations Center (NOC) has RFID secure door locks. Only authorized people can access the NOC. There is also a Cipher lock on the door entering the IT department. Access to the code is on a need to know basis. The building also has cipher locks that require unique PINs to enter. All user accounts including IT Personnel have restrictions based on job responsibility.  Each Co-Location facility has three factor authentication, PIN, Biometric Scan, and RFID tag restricting access to our remote located servers. Each rack of servers is also confined in a cage requiring a combination to enter the cage.  Our VPN uses two-factor authentication that include RSA tokens that restrict access to a very limited amount of users. Upon access to the VPN rights and privileges are restricted based on credentials.  All visitors must be recorded in a visitor log upon entering the facility. Visitor passes are provided that must be worn at all times. Contractors are also logged and given contractor badges that must be worn at all times. 44  Table of Contents Data Security  We take the following precautions to help assure continuous service in the event of catastrophic events such as fire, water intrusion or loss of power and the prevention of data loss:  All data and program code is backed up nightly to LTO tape. One month of historical data is maintained with the previous weeks backups stored in an off site Category 5 Shelter location. A Grandfather, Father, and Son scenario is used for tape backups so three generations of data are available at any one point in time.  We also have a real time replicated copy of all uploads to the servers in the Tampa Peak 10 facility. SQL Log shipping also ensures all data is stored remotely.  Taking redundancy to another level, we also have installed a TimeSpring SQL Monitoring server that enables us to access up to one weeks worth of data on a transaction-by-transaction level.  An additional copy of historical data is stored on a development server outside of the production server area nightly to provide further redundancy protection.  Our Network Operation Center is separately housed within the facility and has a dedicated electrical supply and redundant air-handling units. Security sensors detect unauthorized entry. Video Camera surveillance is in place in the NOC.  All units are on UPS (Uninterruptible Power Supplies) in the event of a momentary loss of power. Our fire suppression system is computer friendly.  We have a diesel powered backup generator that will keep us up and running for a minimum of seven and maximum of 12 days depending on electrical load in case the power were to fail for any reason. We have multiple contracts with local fuel companies to ensure we have access to additional diesel fuel to keep us running indefinitely.  We have redundant Internet circuits with separate fiber paths to our building.  Notwithstanding these precautions, a catastrophic event could interrupt our service for a substantial period of time, which would adversely affect our business prospects.  Prevention of Access to Data by Unauthorized Personnel  Our technology systems are designed to address important security concerns. Only personnel in our Information and Technology Department are allowed access to stored data. IP Restrictions, username and password, and SSL technology are used to restrict customer access to our servers.  Notwithstanding such safeguards and procedures, like with all online systems providers, a successful unauthorized access to sensitive data or a destructive virus attack on our infrastructure is possible. A malicious unauthorized access or effective virus could adversely affect our internal business processes and our customers access to our computer systems. With contingency planning using three redundant sources of operations we would anticipate the interruption to be minimal.  Risks Associated with Technology and Product Development  We anticipate that we will continue to devote significant resources to product development in the future as we add new features and functionality to our products and services. Rapidly changing technology, evolving industry standards, and changing customer demands characterize the market in which we compete. Accordingly, our future success will depend on our ability to:  
        Adapt to rapidly changing technologies
 
        Adapt our services to evolving industry standards
 
        Continually improve the performance, features and reliability of our service in response to competitive service and product offerings and evolving demands of the marketplace.
 45  Table of Contents Our failure to adapt to such changes would have a material adverse effect on our business, results of operations and financial condition. In addition, the widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require substantial expenditures by us to modify or adapt our services or infrastructure. This could have a material adverse effect on our business, results of operations and financial condition.  Governmental Regulation  From time to time we receive inquiries from state regulators relating to licensing and qualification requirements as insurance claims adjuster, appraiser or legality of a direct repair network under the laws of that particular jurisdiction. We also received inquiries regarding compliance with steering laws of certain jurisdictions. To date, we have been successful in demonstrating to the appropriate state regulators that we do not violate the jurisdiction laws, that qualification is not required.  Certain jurisdictions could adopt laws directed at the auto insurance industry, which could affect our business in an unforeseen and adverse manner. A couple of states have pending or proposed legislation that, if adopted, could adversely affect our business model. To date, industry trade associations have been successful in preventing the passage of unfavorable legislation.  It is possible that a number of laws and regulations may be adopted with respect to the Internet. These laws may cover issues such as user privacy, freedom of expression, pricing, content and quality of products and services, taxation, advertising, intellectual property rights and information security. Furthermore, the growth of electronic commerce may prompt calls for more stringent information gathered online or require online services to establish privacy policies. The Federal Trade Commission has also initiated actions against online service providers regarding the manner in which personal information is collected from users and provided to third parties. We do not currently provide personal information regarding our users to third parties. However, the adoption of such consumer protection laws could create uncertainty in Web usage and reduce the demand for our products and services.  We are not certain how our business may be affected by the application of existing laws governing issues such as property ownership, copyrights, encryption and other intellectual property issues, taxation, libel, obscenity and export or import matters. The vast majority of such laws were adopted prior to the advent of the Internet. As a result, they do not contemplate or address the unique issues of the Internet and related technologies. Changes in laws intended to address such issues could create uncertainty in the Internet market place. Such uncertainty could reduce demand for our services or increase the cost of doing business as a result of litigation costs or increased service delivery costs.  In addition, because our services are available over the Internet in multiple states and foreign countries, other jurisdictions may claim that we are required to qualify to do business in each such state or foreign country. We are incorporated in Nevada and are currently only required to be qualified as a foreign corporation authorized to do business in the State of Florida because our offices and employees are located in Oldsmar, Florida. Changes in the laws affecting the Internet or the automobile insurance repair industry may require us to qualify in additional jurisdictions. Our failure to qualify in a jurisdiction where we are required to do so could subject us to taxes and penalties. It could also hamper our ability to enforce contracts in such jurisdictions. The application of laws or regulations from jurisdictions whose laws do not currently apply to our business could have a material
adverse effect on our business, results of operations and financial condition.    46  Table of Contents PROPERTIES  Our main offices are located at 110 East Douglas
Road, Oldsmar, Florida 33467. In December 2005 we completed a transaction whereby we exercised our option to purchase the entire
facility and, as part of a simultaneous closing process, immediately sold the facility to a third party buyer. As part of the
transaction we entered into a new 7-year lease with the new owner. Our rent, including applicable taxes, begins at $21,694 per
month in the first year and increases 3% each year through the remaining life of the lease.  We believe that the facilities are well maintained,
are in substantial compliance with environmental laws and regulations, and are adequately covered by insurance. We also believe
that these leased facilities are not unique and could be replaced, if necessary, at the end of the term of the existing
lease.  LEGAL PROCEEDINGS  We are currently not involved in any legal proceedings
which are considered material.                    47  Table of Contents MANAGEMENT  DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES  The following table sets forth certain information with respect to our executive officers as of November 15, 2006:  Name
        Age
        PositionEric Seidel
        43
        Chief Executive Officer,President and DirectorLarry Colton
        57
        Chief Financial OfficerDave Mattingly
        48
        Chief Information OfficerJeffrey D. Dickson
        63
        Chairman of the Board of DirectorsChristopher Korge
        52
        DirectorNicholas D. Trbovich, Jr.
        46
        DirectorJohn K. Pennington
        51
        DirectorWilliam Austin Lew IV
        30
        Director
  Because we are a small company, we are currently
dependent on the efforts of a limited number of management personnel. We believe that, given the development stage of our business
and the large amount of responsibility being placed on each member of our management team, the loss of the services of any member
of this team at the present time would harm our business. Each member of our management team supervises the operation and growth
of one or more integral parts of our business.  The Chief Executive Officer/President is elected and
can be removed by the Board of Directors. Directors are elected at the annual meeting of shareholders to serve for their term and
until their respective successors are duly elected and qualify, or until their earlier resignation, removal from office, or death.
The remaining directors may fill any vacancy in the Board of Directors for an unexpired term.  Business Experience of Executive Officers and
Directors  Eric Seidel, Director,
President and Chief Executive Officer  Mr. Seidel has been a Director and our Chief Executive Officer and President
since June 1, 2000. From January 1, 2000 through May 31, 2000, Mr. Seidel was the Chief Executive Officer and President of
eAutoclaims, Inc., which was privately held Delaware corporation, which merged with us. From September 1997 through December 1999,
Mr. Seidel was employed as a senior executive officer of First American AMO. From August 1995 through June 1997,
Mr. Seidel was a senior executive at Salex Corporation; a fleet management company serving Fortune 500 companies, where,
among other responsibilities he was responsible for insurance company services. Mr. Seidel is a Past President of the U.S.
Junior Chamber of Commerce.  Larry Colton, Chief
Financial Officer. Mr. Colton became our Chief Financial Officer on May 1, 2005. Prior to becoming CFO, Mr. Colton was
the Controller of eAutoclaims since December 2000. He has over 25 years experience in accounting and finance, having held a
variety of positions in several industries. Between December 1997 and December 2000, prior to joining eAutoclaims, Mr. Colton
was Vice President of an asset management division of Sky Financial Group. He holds a bachelors degree from Elmhurst College
and a Masters of Business Administration degree from Northern Illinois University. 48  Table of Contents David Mattingly,Chief
Information Officer  David Mattingly began his career with eAutoclaims after our purchase of Premier Express Claims in 2000.
Mr. Mattingly was the MIS Director of Premier and joined the eAutoclaims staff as the VP IT. In June 2002 Mr. Mattingly
became the CIO and assumed the responsibility for developing new products and keeping the Companys technology on the
cutting edge. He oversees and manages all eAutoclaims technology projects, LAN and WAN infrastructure, Intranet and
Internet Programming Projects, and research and development endeavors. Mr. Mattingly has been in the Computer Technology
field for over 24 years. He earned a BS Degree in Electronic Engineering Technology from the State University of New York during
his seven-year tour with the United States Air Force. Mr. Mattingly has several other Computer Technology & Engineering
degrees as well as a MBA from Devry Universitys Keller Graduate School of Management. Mr. Mattingly plans on attending
Argosy University in 2006 for his Doctorate in Business Administration.  Jeffrey D. Dickson,Chairman of the Board  Mr. Dickson has been the Chairman of the Board of Directors since June 2000. From May 1997 through November 1999, Mr. Dickson was the President and Chief Executive Officer of First American AMO. From February 1995 through May 1997, Mr. Dickson was the president and chief operating officer of Salex Corporation. Mr. Dickson has served as an executive vice president of the American Bankers Insurance Group and president of Interloc Corp. Mr. Dickson was awarded a Masters of Business Administration degree from Harvard University in 1979.  Christopher Korge,Director  Mr. Korge has been a director since June 2000. He is the managing partner at the law firm of Korge & Korge, P.A. in Miami, Florida. He received his J.D. degree from Temple School of Law in 1981 and B.S. in Business Administration, from the University of Florida, in 1977. Mr. Korges firm represents numerous Fortune 500 corporations. Mr. Korge serves on numerous boards of directors and is a major shareholder in various companies including two housing development companies, and one E commerce company, Intune Group. He is Chairman of Intune. Mr. Korge is Finance Vice Chairman of the Democratic National Committee. He is past Co-Chair of the Democratic National Committee Business Council.  Nicholas D. Trbovich, Jr.,Director  Mr. Trbovich Jr. has been a director of eAutoclaims since June 2000. He is a director and vice president of AMEX-listed Servotronics, Inc., President of TSV ELMA, Inc. and TSV Franklinville, Inc. (Servotronics development subsidiaries), Chairman and CEO of Queen Cutlery and CEO and President of the Ontario Knife Company, (the U.S. Militarys largest supplier of bayonets and survival knives). He is founder and owner of Aero, Inc., A fabricator of hot forged metal products.  John K. Pennington,Director  has been a director of eAutoclaims since October 2004. He is founder, president and director since 2002 of Advantage Fund G.P. Limited, which acts as general partner of Canadian Advantage Limited Partnership and VC Advantage Limited Partnership, two large technology investment funds. He is also founder, president and director since 2001 of Canadian Equity Resources Corporation, a private investment firm. He holds a Bachelor of Arts (Economics) from Queens University, Kingston, Ontario, Canada and a Master of Business Administration from the University of Western Ontario, London, Ontario, Canada.  William Austin Lewis IVwas elected to the Board of Directors in May, 2006. Since 2004, Mr. Lewis has been the Chief Executive Officer of Lewis Asset Management Corporation, an investment management company headquartered in New York. Prior to 2004, Mr. Lewis was an Account Manager for an investment partnership focusing on technology and research in various investment banking situations. Mr. Lewis holds a Bachelor of Science in Finance and a Bachelor of Science in Financial Economics from James Madison University.      49  Table of Contents Other Key Employees  In addition to the individuals identified above as Executive Officers, the following individuals are considered key employees and certain information with respect to these key employees is described below:  John Prozinski,Vice
President Business Development. Mr. Prozinski has been employed with eAutoclaims since July 1998 and currently serves as the
Vice President of Business Development. His responsibility is the development of sales and integration opportunities across all
eAutoclaims product lines for Outsourcing, ASP and Specialty Markets. Included are the incorporation of service partners (Rental,
Salvage, Field Adjusting, Report Pick-up, Desk Review and Towing), independent appraisers, and corporate repair centers for both
eJusterSuite® and AuditPro platforms. Mr. Prozinski has served eAutoclaims as a Regional Sales Manager, National Vendor
Manager and Director of Consumer products. Prior to eAutoclaims, John was employed by both Ashland, Inc. and Betz Laboratories and
served in regional sales, marketing and product development roles. In 2000, John was elected and served as the 80th President
of the United States Junior Chamber of Commerce. He graduated from St. Johns University, Collegeville MN with a
Bachelor of Science Degree in 1987.  Marilyn Maginnes,Controller. Ms. Maginnes became eAutoclaims Controller in May 2005. Prior to becoming Controller, Ms. Maginnes had been with eAutoclaims as Assistant Controller since July 2001. She has over 25 years of accounting management experience. Prior to eAutoclaims and relocating from Long Island, New York to Florida, Ms. Maginnes was a Regional Accounting Manager for Petro Inc. of Stamford Connecticut. She managed Petros Long Island Region, which included their largest four branches. Ms Maginnes had obtained her accounting degree and then went on to obtaining public accounting experience before going into the private sector.  Election  Our Bylaws fix the size of the Board of Directors at no fewer than three and no more than nine members, to be elected annually by a plurality of the votes cast by the holders of Common Stock, and to serve until the next annual meeting of stockholders and until their successors have been elected or until their earlier resignation or removal. Currently there are two Committees of the Board of Directors.  Board of Directors Meetings  Our Board of Directors held six (6) meetings during the fiscal year ended July 31, 2006. Each of our directors attended all six meetings.  Audit Committee  The Audit Committee, which held four meetings during fiscal 2006 to review the three 10Qs and one 10K, acts on behalf of the Board to oversee all material aspects of the Companys reporting, control and audit functions. The Audit Committees role includes a particular focus on the qualitative aspects of financial reporting to shareholders and on Company processes for the management of the business/financial risk and for compliance with significant applicable legal, ethical and regulatory requirements. In addition, the Audit Committee reviews the adequacy of internal account, financial and operating controls and reviews the Companys financial reporting compliance procedures. From August 1, 2006 through February 12, 2006 Mr. Trbovich, Jr. was Chairman of the Audit Committee and served with Mr. Korge and Mr. Dickson.  From February 13, 2006 through the end of the
fiscal year Mr. Pennington was Chairman of the Audit Committee and served with Mr. Dickson and Mr. Korge. None of our Audit Committee members is a financial expert as defined under Item 401(h) of Regulations S-F. However, two Audit Committee members are not part of the Companys management. We are an OTC:BB issuer and, accordingly, are not currently required to have a financial expert on our board.          50  Table of Contents Compensation Committee The Compensation Committee, which held one meeting during fiscal 2006 to review compensation issues, sets policy for compensation of all senior management and directors. From August 1, 2005 through February 12, 2006 Mr. Korge served as the Chairman of the Compensation Committee and served with Mr. Dickson and  Mr. Trbovich, Jr. From February 13, 2006 through the end of the fiscal year Mr. Trbovich, Jr. was Chairman of the Compensation Committee and served with Mr. Dickson and Mr. Korge.   See Board Compensation Committee Report on Executive Compensation.  Nominating Committee We do not currently have a standing nominating committee of the Board of Directors. The entire board of directors acts as the nominating committee.  Director Compensation Our three outside Directors were paid an annual retainer of $25,000 each during the fiscal year ended July 31, 2006. Our Chairman of the Board, who was voted to receive regular director compensation in January 2006, was paid a prorated amount of $18,151, which is equal to the time he served during the fiscal year after becoming eligible for regular Director compensation. In May, 2006 a fourth outside Director was added to the Board. This Director did not receive any compensation as an annual retainer for fiscal 2006. All of the Directors receiving retainers were paid in Company Stock for these retainers.  In addition, each Director was entitled to $1,250 worth of Common Stock to be issued on a quarterly basis at the fair market value as of the end of each quarter. For the fiscal year ended July 31, 2006 we issued 92,109 shares to our outside directors and Chairman of the Board under this
arrangement. The outside Directors and Chairman of the Board also receive $6,000 per year for attending board meetings and $4,000 per year for attending committee meetings. The committee fee is raised from $4,000 to $8,000 per year, if they are the Chairperson of the committee. All of these fees were paid in Company Stock. If they dont attend one or more committee or board meetings, their compensation is reduced accordingly. The outside Directors and Chairman of the Board are also compensated with stock options at various points throughout the year. All these options have an exercise price set at the market value of the stock on the date of the granting of the option. The options vest after one year and have a term of five years. For the fiscal year ended July 31, 2006, the outside Directors and Chairman of the Board received 12,500 options each quarter, which were issued on October 31, 2005, January 31, 2006, April 30, 2006 and July 31, 2006 at exercise prices of $0.21, $0.30, $0.27 and $0.16, respectively, for a total of 50,000 options for three Directors, 37,500 for the fourth Director (for 3 quarters of service), 12,500 for a fifth Director (for 1 quarter of service) or 200,000 options in aggregate.  Code of Ethics  We have adopted a Code of Business Conduct and
Ethics that applies to all eAuto employees and Board of Directors, including our principal executive officer and principal
financial officer, or persons performing similar functions. A copy of our Code of Business Conduct and Ethics is attached as an
exhibit to this annual report on Form 10-K. We have posted the Code of Business Conduct and Ethics and related amendments or
waivers, if any, on our website at www.eautoclaims.com. Information contained on our website is not a part of this report.
Copies of our Code of Business Conduct and Ethics will be provided free of charge upon written request to eAutoclaims, Inc., 110
East Douglas Road, Oldsmar, Florida 34677, attention: Larry Colton.  Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of the Forms 3, 4 and 5
filed during fiscal 2006 the registrant reasonably believes, except as described below, that each person who, at any time during
thecurrent fiscal year, was a director, officer, or beneficial owner of more than
10% of our common stock filed the appropriate form on a timely basis with respect to changes in such owners beneficial
ownership of our common stock. Mr. Lewis was delinquent on filing his Form 3 relating to his becoming a 10% owner.
Mr. Lewis was also delinquent in his Form 4 filing regarding acquisition of 337,500 warrants to acquire common stock that
occurred on or about May 2, 2006. 51  Table of Contents EXECUTIVE COMPENSATION  Summary Compensation Table  The following table shows the compensation paid or accrued by us for the fiscal years ended July 31, 2006, 2005, and 2004 to or for the account of our Executive Officers that exceed $100,000. Long-Term CompensationAnnual Compensation
        Awards
        PayoutsName of Individual & Principal Position
        Fiscal
Year
        Salary
        Bonus
        Other
Annual
Compensation (1)
        Restricted
Stock
Awards
        Securities
Underlying
Options/SARs
        Long-Term
Incentive
Plan
Payouts
        All
Other
CompensationEric Seidel
President and
Chief Executive Officer

Reed Mattingly(2)
Executive Vice President


Larry Colton
Chief Financial Officer

Dave Mattingly
Chief Information Officer
        2004
2005
2006

2004
2005
2006

2006


2004
2005
2006
        $198,859
$182,250
$182,974

$121,320
$108,478
$135,309

$100,932


$108,808
$109,897
$134,952
        $19,752
$12,000
$322,000

$ 1,500
$25,000
$38,100

$38,100


$1,500
-0-
$72,100
        -0-
-0-
-0-

-0-
-0-
-0-

-0-


-0-
-0-
-0-
        -0-
-0-
-0-

-0-
-0-
-0-

-0-


-0-
-0-
-0-
        1,075,000
-0-
-0-

200,000
-0-
-0-

-0-


150,000
-0-
-0-
        -0-
-0-
-0-

-0-
-0-
-0-

-0-


-0-
-0-
-0-
        -0-
-0-
-0-

-0-
-0-
-0-

-0-


-0-
-0-
-0-
  The cost to us of personal benefits, including premiums for life insurance and any other perquisites, to such executives do not exceed 10% of such executives annual salary and bonus.  (1)
        Other annual compensation, including cell phones is less than 10% of the officers salaries and is therefore not disclosed above. (2)
        Mr. Mattingly resigned effective September 15, 2006.
   Option/SAR Grants in Last Fiscal Year   Name of Individual
        Number of
Securities
Underlying
Options/SARs
Granted (1)
        Percent of Total
Options/SARs
Granted
to Employees/
Directors
In Fiscal Year
        Exercise
or Base
Price
        Fair Market Value
At date of
Grant
        Expiration
DateEric Seidel

Reed Mattingly

Larry Colton

Dave Mattingly
        -0-

-0-

-0-

-0-
        -0-

-0-

-0-

-0-
        -0-

-0-

-0-

-0-
        -0-

-0-

-0-

-0-
 52  Table of Contents Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values  The following table provides information with respect to the named officer concerning exercised and unexercised options in fiscal year ended July 31, 2006.  Name of
Individual
        Shares
Acquired on
Exercise (#)
        Value
Realized (1)
        Number of Securities
Underlying Unexercised
Options/SARs
at Fiscal Year End (#) Exercisable/Unexercisable
        Value of Unexercised
In-The-Money
Options/SARs
at Fiscal Year End($)
Exercisable/Unexercisable (2)Eric Seidel
Reed Mattingly (3)
Larry Colton
Dave Mattingly
        650,000
100,000
-0-
150,000
        $145,500
$19,000
-0-
$25,500
        365,000/ 0
270,000/ 0
155,000 / 0
80,000/ 0
        $3,400/ $0
$15,300/ $0
$12,950 / $0
$300/ $0
 ________________ (1)
        Value Realized represents the market value of the underlying securities on the exercise date minus the exercise price of such options.
 (2)
        Value Realized represents the market value of the underlying securities on 7/31/05 minus the exercise price of such options.
 (3)
        Mr. Mattingly resigned effective September 15, 2006
  Employment Contracts and Other Arrangements  In May 2005, we entered into a new two year employment agreement with our President and Chief Executive Officer. The agreement specifies an annual base salary of $170,000, representing a voluntary pay cut in base taken by the CEO. The CEO will also receive a $750 per month auto allowance and a $1,000 per month personal allowance.  The contract required us to issue the CEO 1,000,000 shares of the Companys common stock.  If the CEO is terminated for any reason other than for cause during the term of the agreement, he will receive a lump sum payment equal to two (2) times the current base salary. If we do not employ the CEO beyond the expiration term of the agreement, he will receive his monthly base salary for the next twelve months.  Also in May 2005 we entered into employment agreements ranging in length from eighteen to twenty-four months with all three of our current senior executives that range from $100,000 to $138,000 annually. This represents voluntary base pay cuts taken by all of the previously contracted executives. These executives also receive automobile allowances ranging from $400 to $700 per month and receive 10,000 shares of the Companys common stock each month, not to exceed 200,000 shares each. If their contracts are not renewed they receive severance packages of six months of their annual compensation.  Change of Control Shares  On March 27, 2003, as part of an employee and board member retention program the Board of Directors voted to grant certain employees (Mr. Seidel is not entitled to participate in the employee retention program) a total of 2,000,000 shares of our Common Stock or equivalent consideration thereof and the current and future board members 1,000,000 common shares if there is a change in control of greater than 50% ownership of the Company or a sale of all or substantially all its assets. Only those employees and board members employed or on the board at the time of the change will participate in the compensation.  Board Compensation Committee Report on Executive Compensation  The Compensation Committee of the Board of Directors administers our Chief Executive Officers compensation package. The committee reviews, recommends and approves changes to our compensation policies and programs, makes recommendations to the Board of Directors as to the amount and form of executive officer compensation, and administers our stock option plans.  General Compensation Philosophy.Our compensation programs are designed to directly align compensation with individual performance and stockholder value.
These programs enable us to attract, retain and reward executives and employees needed to accomplish our goals. The committee
believes that executive pay should be linked to our overall performance. Therefore, we provide an executive compensation program,
which includes base pay, long-term incentive opportunities through the use of stock options, shares and, in some cases, cash
bonuses. 53  Table of Contents Base Salary. Base salary is designed primarily to be competitive with base salary levels in effect at high technology companies that area of comparable size and with which we compete for executive personnel. Base salary is set annually based on job-related experience, individual performance and pay levels of similar positions at comparable companies. Salaries for executive officers were generally determined on an individual basis by evaluating each executives scope of responsibility, performance, prior experience and salary history, as well as salaries for similar positions at comparable companies.  Cash Performance Awards.Management believes that cash performance awards, such as bonuses, should be tied to achievement of performance goals established by the committee. On June 2, 2003 the board approved a bonus plan based on achieve certain levels of profitability. If the management team achieves earnings per share of $0.01 to $0.10 per share then eight senior managers will split a total bonus pool ranging from $10,000 to $100,000 based on the level of profitability. The computation was tied to profitability to directly tie the employee bonuses to goals that will enhance shareholder value.  Stock Options. In order to link the interests of our stockholders and senior management, we issue stock options. We believe that the practice of granting stock options is critical to retaining and recruiting the key talent necessary at all employee levels to ensure our success. Stock options generally have value for executive officers only if the price of our Common Stock increases above the fair market value of a share of Common Stock on the grant date and the officer remains in our employ for the period required for the options granted to such person to vest.  The number of shares subject to stock options granted is within the discretion of the Compensation Committee. In determining the size of stock option grants, the Compensation Committee considers the officers responsibilities, the expected future contribution of the officer to the Companys performance and the number of shares, which continue to be subject to vesting under outstanding options. For 2003, options were granted to the executive officers based on their positions and a subjective assessment of individual performances. Stock options typically have been granted to executive officers when the executive first joins the Company. At the discretion of the Committee, executive officers may also be granted stock options to provide greater incentives to continue their employment with the Company and to strive to increase the value of the Companys Common Stock.  Compensation for the Chief Executive Officer.Mr. Seidels base salary for the year 2006 was determined by the employment agreement with Mr. Seidel which began in May 2005. The Compensation Committee believes that the employment agreement terms are in a manner consistent with the factors described above for all executive officers.  Internal Revenue Code Section 162(m) Limitation.Section 162(m) of the Internal Revenue Code imposes a limit, with certain exceptions, on the amount that a publicly held corporation may deduct in any year for the compensation paid or accrued with respect to its five most highly compensated executive officers. In general, it is the Committees policy to qualify, to the maximum extent possible, executives compensation for deductibility under applicable tax laws.  Stock Options  We established the 1998 Stock Option Plan (the 1998 Plan). The 1998 Plan is intended to provide the employees and directors of the Company with an added incentive to continue their services to the Company and to induce them to exert their maximum efforts toward the Companys success. The 1998 Plan provides for the grant of options to directors and employees (including officers) of the Company to purchase up to an aggregate of twenty percent (20%) of the number of shares of Common Stock in the capital of the Company issued and outstanding from time to time less any shares of Common Stock reserved, set aside and made available pursuant to the terms of the Companys employee share purchase plan (the Share Purchase Plan) and pursuant to any options for services rendered to the Company. The number of shares of Common Stock subject to options granted to any one person
under the Plan, the Share Purchase Plan and options for services rendered to the Company may not at any time exceed five percent
(5%) of the outstanding shares of Common Stock. The 1998 Plan is currently administered by the Board of Directors. The Board
determines, among other things, the persons to be granted options under the 1998 Plan, the number of shares subject to each option
and the option price. 54  Table of Contents The 1998 Plan allows the Company to grant
Non-Qualified Stock Options (NQSOs) not intended to qualify under Section 422(b) of the Internal Revenue Code of 1986,
as amended (the Code). The exercise price of NQSOs may not be less than the fair market value of the Common Stock on
the date of grant. Options may not have a term exceeding ten years. Options are not transferable, except upon the death of the
optionee.  During the fiscal year ended July 31, 2006 we issued
15,000 options to employees in accordance with the 1998 Plan. The Board members were issued 200,000 options in accordance with the
Board compensation plan. All of these options are subject to vesting and are exercised at the current market price of our stock as
of the date of issuance.  We have the right to increase the total amount of
options, which may be issued so long as total outstanding options do not exceed 15% of the number of our fully diluted outstanding
shares of Common Stock. Furthermore, in lieu of paying cash bonuses, the employees may be issued shares of our Common Stock at the
then fair market value in an amount not to exceed 50% of that employees base salary. All of the options we have issued are
subject to immediate vesting and are exercisable in the event of a change of control, which is defined as a sale of substantially
all of our assets or a merger in which we are not the surviving entity.  As of July 31, 2006, we have issued, or reserved for
issuance, 25,965,318 shares of our Common Stock relating to outstanding options and warrants which are categorized as
follows:  Options issued to Directors
        837,500
        (1)Options issued to Chief Executive Officer
        365,000
        (2)Options issued in connection with acquisition of PEC
        130,000
        (3)Options issued to Employees
        1,941,754
        (4)Options issued to Consultants
        21,429
        (5)Warrants relating to debentures
        1,150,000
        (6)Warrants relating to private placement
        17,514,860
        (7)Placement Agent warrants
        4,004,775
        (8)Total
        25,965,318
  (1)
        The options issued to our directors have strike prices ranging   from $0.01 to $0.73 and are exercisable through April 9, 2011. See Directors and Executive Officers-Directors Compensation.
  (2)
        Mr. Seidel currently owns the following options with the following terms:
  # of Options
        
        Strike
Price
        
        Vested
        
        Expiration Date50,000
        
        $0.69
        
        50,000
        
        09/18/0675,000
        
        $0.55
        
        75,000
        
        03/27/0740,000
        
        $0.15
        
        40,000
        
        12/21/0750,000
        
        $0.10
        
        50,000
        
        04/07/0825,000
        
        $0.21
        
        25,000
        
        05/16/0825,000
        
        $0.39
        
        25,000
        
        06/15/0825,000
        
        $0.52
        
        25,000
        
        07/25/0850,000
        
        $0.32
        
        50,000
        
        08/29/0825,000
        
        $0.35
        
        25,000
        
        11/01/08365,000
        
        
        
        365,000




During fiscal year ended July 31,
2006, Mr. Seidel exercised 650,000 options at a strike price of $.01, and 200,000 options with strike prices ranging between
$1.01 and $2.00 were canceled. See Executive Compensation and Directors and Executive Officers  Employment
Contracts and Other Matters.

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(3)
        65,000 options immediately exercisable at $2.00 per share were issued to each of Randall K. Wright and Reed Mattingly. See Executive Compensation  Employment Contracts and Other Matters.




(4)
        Represents options issued to our employees at exercise prices ranging from $0.01 to $0.69. 1,870,922 of these options are currently exercisable. The remaining options vest over a three-year term.




(5)
        21,429 options were given to a public relations consultant with an exercise price of $0.49 per share.




| | (6) | Represents warrants issued to the agents of the debenture investors, exercisable at a price range of $0.16 to $0.63 per share, with a term of 10 years.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Represents warrants issued to purchasers of commons stock with an exercise price of between $0.16 and $0.75 per share, with a term of between 3 and 5 years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | Represents 790,200 placement agent warrants to purchase a unit for $0.28. Each unit consists of one share of stock and one warrant to purchase another share of stock at $0.16. Also includes 1,616,250 placement agent warrants to purchase a unit for $0.16. Each unit consists of one share of stock and one-half warrant to purchase another share at $0.30.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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The following table sets forth information with respect to our common stock that may be issued upon the exercise of outstanding options, warrants, and rights to purchase shares of our common stock as of July 31, 2006.



Plan Category
        
        Number of Securities
To be Issued Upon
Exercised of
Outstanding Options,
Warrants, and Rights
        
        (b)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants, and Rights
        
        (c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plan
(Excluding Securities
Reflected in Column (a))Equity Compensation PlansApproved by Stockholders
        
        1,291,000
        
        $0.41
        
        10,821,516 (4)Equity Compensation PlansNot Approved by Stockholders (1) (2) (3)
        
        5,154,683
        
        $0.10
        
        N/ATotal
        
        6,445,683
        
        $0.16


__________________________

(1) Includes options issued to our Chairman of the Board at $.01, and options issued to employees.

(2) Includes 3,000,000 shares that may be issued in connection with a change of control, and 150,000 shares to be issued per management contracts.

(3) Exclude 22,669,635 warrants issued to investors in connection with capital raising transactions not approved by our stockholders.

(4) Based on a Board of Directors imposed limit of 15%, not the 20% shown in the approved plan.

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Table of Contents

CERTAIN TRANSACTIONS



We have an agreement with a firm, which our Chairman of the Board Mr. Dickson is associated with, to perform basically the same services as were being performed under the previous agreement. We pay an annual fee of $74,100, payable every two weeks, to this firm. The agreement with this firm will terminate in June, 2007 unless renewed by the Board of Directors.



On November 8, 2005 the Board of Directors gave approval for, and we subsequently issued, 1,000,000 shares of the Companys common stock to the Chairman of the Board, Mr. Dickson, to compensate him for his past services and his role as Chairman.  In addition, the Board also approved future compensation for the Chairman of the Board to include the same annual retainer to be paid in shares of the Companys common stock as well as the same quarterly stock compensation currently paid to non-employee directors.



On November 8, 2005 the Board voted to adjust the strike price from $0.35 to $0.16 on 1,000,000 warrants owned by Mr. Christopher Korge, a Director of the Company, in order to match the strike price of other investors warrants issued under the anti-dilution provisions of their agreements.



In March, 2006, the President and CEO, Mr. Seidel, was issued 750,000 shares of the Companys common stock in accordance with his employment agreement.



We have entered into employment agreements with all of our senior management. For description of these employment agreements and related rights to our stock options, see Executive Compensation  Employment Contracts and Other Arrangements.

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Table of Contents

PRINCIPAL STOCKHOLDERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The following table contains information with respect to the beneficial ownership of our Common Stock as of July 31, 2006, by:




        each person who we know beneficially owns more than 5% of our Common Stock;



        each of our directors and each individual who serve as our named executive officers individually; and



        all of our directors and executive officers as a group.




Name and Address of
Beneficial Owner (1)
        
        Amount and Nature of
Beneficial Ownership
        
        Percentage(2)Eric Seidel (3)
        
        2,824,017
        
        3.50%Reed Mattingly (4)
        
        674,808
        
        0.84%Larry Colton (5)
        
        267,500
        
        0.33%Dave Mattingly (6)
        
        102,500
        
        0.13%Jeffrey D. Dickson (7)
        
        1,758,097
        
        2.18%Nicholas D. Trbovich, Jr. (8)
        
        769,791
        
        0.95%Christopher Korge (9)
        
        7,362,616
        
        9.12%John K. Pennington (10)
        
        321,268
        
        0.40%Canadian Advantage Limited Partnership (11)
        
        3,221,454
        
        3.99%Advantage (Bermuda) Fund, Ltd. (12)
        
        1,191,497
        
        1.48%Kinderhook Partners, LP (13)
        
        10,645,360
        
        13.18%William Lewis (14)
        
        9,399,710
        
        11.64%Directors and officers
as a group (9 persons) (15)
        
        27,893,258
        
        34.54%


| | (1) | Unless otherwise noted,
the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. Unless otherwise noted, each such person is deemed to be the beneficial owner of shares
of Common Stock held by such person on July 31, 2006, and any shares of Common Stock which such person has the right to acquire
pursuant to securities exercisable or exchangeable for, or convertible into, Common Stock, within 60 days from such date. The
address of each beneficial owner is in care of the Company, 110 East Douglas Rd, Oldsmar, Florida 34677.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(2)
        Based on 80,750,105
shares of Common Stock outstanding at the close of business on July 31, 2006. Excludes: (i) shares currently issuable pursuant to
outstanding options issued under Stock Option Plan; (ii ) shares issuable upon exercise of other outstanding warrants; and (iii)
shares of our Common Stock issuable upon conversion of outstanding convertible notes. This amount excludes shares reserved for
outstanding options and warrants. 1,000,000 warrants issued to Mr. Korge were included (see note 9 below).




(3)
        Mr. Seidel was
issued (i) 400,000 shares of our Common Stock as founder shares, (ii) He acquired 12,341 in open market purchases and, (iii)
exercised 1,640,004 of options granted to him by the company, (iv)he subsequently gave up 104,753 in a divorce and sold another
300,000 shares,(v) The acquisition of 811,425 shares pursuant to the terms of his employment agreement, (vi)vested options to
acquire 365,000 common shares at exercise prices between $0.10 and $0.69 See Executive Compensation  Employment
Contracts and Other Matters.




(4)
        Mr. Reed
Mattinglys ownership consists of (i) 64,000 of our common shares issued to him in connection with the Premier Express
Claims, Inc. merger, (ii) the issuance of 125,701 shares in satisfaction of a promissory note plus interest related to the Premier
Express Claims, Inc. merger, (iii) the exercise of options to acquire 165,463 shares at an exercise price of $0.01 (iv) The sale
of 255,164 shares, (v) the issuance of 192,308 shares as payment of a bonus, (vi) options to acquire 100,000 common shares at an
exercise price of $.01, (vii) options to acquire up to 170,000 shares at exercise prices between $0.15 to $2.00 and, (viii)
112,500 shares acquired pursuant to the terms of his employment agreement. See Executive Compensation.




(5)
        Mr. Coltons
ownership represents, (i) 35,031 common shares acquired through exercising options at $.01 per share, and (ii) options to acquire
85,000 common shares at an exercise price of $.01, and (iii) vested options to acquire up to 70,000 common shares at an exercise
price between $0.15 and $0.69, (iv) the sale of 35,031 shares and (v) 112,500 shares acquired pursuant to the terms of his
employment agreement. See Executive Compensation  Employment Contracts and Other Matters.


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Table of Contents

(6)
        Mr. Dave
Mattinglys ownership consists of (i) 191,204 of our common shares issued to him when he exercised his options at $.01 per
share, (ii) 1,500 shares that he purchased on the open market, (iii) 312,500 shares acquired pursuant to the terms of his
employment agreeemnt (iv) The sale of 482,704 shares (v) vested options to acquire up to 80,000 shares at exercise prices between
$0.15 and $0.69. See Executive Compensation.




(7)
        Mr. Dicksons
ownership includes (i) 10,000 shares of our Common Stock issued as founder shares, (ii) 17,504 shares acquired in the open market,
(iii) 1,150,593 shares issued to him for his service on the board,, (iv) the sale of 320,000 shares (v) the exercise of options to
acquire 700,000 shares at an exercise price of $0.01and (vi) options to acquire up to 200,000 shares of our Common Stock at $0.01.
This amount excludes options to acquire up to 37,500 common shares at exercise prices of $0.16 to $0.30 that vest through July
2007. See Directors and Executive Officers  Director Compensation.




(8)
        Mr. Trbovich,
Jr.s ownership consists of (i) 557,711 shares issued to him for his service on the board, (ii) 2,080 shares that he
purchased on the open market, (iii) 10,000 shares owned by Mr. Trbovichs wife, of which he disclaims beneficial
ownership, and (iv) options to acquire up to 200,000 shares at exercise prices between $0.13 and $0.73. This amount excludes
unvested options to acquire up to 50,000 common shares at exercise prices of $0.16to $0.30, which vest through July 31, 2007. See
Directors and Executive Officers  Director Compensation.




(9)
        Mr. Korges
ownership consists of (i) 488,090 common shares relating to the conversion of $300,000 of our convertible debentures, which
matured on September 30, 2001 at a conversion price of $0.63, (ii) 551,997 shares issued to him for his service on the board,
(iii) 15,000 shares that he purchased on the open market, (iv) 107,527 shares purchased from the Company in August 2003, (v)
warrants to acquire up to 1,000,000 shares of our Common Stock at a conversion price of $0.16 in connection with the issuance of
our convertible debentures in 2001, (vi) 892,857 shares of our Common Stock issued in June 2004 in exchange of a convertible
debenture (vii) 892,858 shares of our Common Stock issued as a result of the Company not meeting certain claims volume targets in
March and August 2005, (viii) 1,785,715 shares of our Common Stock acquired as a result of the exercising of $0.16 warrants in
March 2006, (ix) 1,428,572 warrants to purchase shares of the Company Stock as part of a warrant exercise program. The warrants
are for three years and have a conversion price of $0.30; and (x) options to acquire 200,000 shares at exercise prices between
$0.13 and $0.73 for services as a director. This amount excludes unvested options to acquire up to 50,000 common shares at
exercise prices of $0.16 to $0.30, which vest through July 31, 2007. See  Directors and Executive Officers  Director
Compensation.




(10)
        Mr. Penningtons ownership represents (i) 283,768 shares issued to him for his service on the board and (ii) options to acquire 37,500 shares at exercise prices between $0.14 and $0.30. . This amount excludes unvested options to acquire up to 50,000 common shares at exercise prices of $0.16 to $0.30, which vest through July 31, 2007.   See Directors and Executive Officers  Director Compensation.




(11)
        Represents 2,991,504 shares and 229,950 warrants to acquire shares as reported on a Schedule 13D on or about July 31, 2006. John Pennington has investment decision-making authority for this entity.




(12)
        Represents 1,106,447 shares and 85,050 warrants to acquire shares  as reported on a Schedule 13D on or about July 31, 2006. John Pennington has investment decision-making authority for this entity.




(13)
        Represents (i) 1,298,215 shares issued as a result of the Company not meeting certain claims volume targets in  August 2005, (ii) 5,192,858 shares of our Common Stock acquired as a result of exercising $0.16 warrants in March, 2006 and (iii) 4,154,287 warrants to to purchase shares of the Company Stock as part of a warrant exercise program. The warrants are for three years and have a conversion price of $0.30.




(14)
        Mr. Lewis ownership consists of (i) 4,000,000 shares a purchased from the Company in January, 2005,  (ii) 1,548,600 shares purchased on the open market, (iii) 1,346,422 shares purchased from a third party investor of July, 2005 as a result of that investors conversion of their preferred stock, (iv) 17,188 shares issued to him for his service on the Companys Board of Directors, to which he was elected in May, 2006(v) warrants to acquire up to 2,000,000 shares of our Common Stock at a conversion price of $0.30 in connection with a capital raise in January, 2005. The warrants are for three years, (vi) warrants to acquire 150,000 shares of the Companys stock issued for his work in helping the Company to achieve financing in October, 2005. The warrants are for three years and have a conversion price of $0.20, (vii) 225,000
and 112,500 placement agent unit warrants issued in conjunction with a capital raise in May, 2004. The warrants are for three years and have exercise prices of $0.28 and $0.35 respectively. Excluded are options to purchase 12,500 shares at an exercise price of $0.16 issued in July, 2006 for his services as a director. These options will vest in July, 2007.   See  Directors and Executive Officers  Director Compensation




(15)
        Includes outstanding options and warrants to acquire up to 6,423,572 shares of our Common Stock issued to our officers and directors, which are currently exercisable. The total shares include 3,221,454 from Canadian Advantage Limited Partnership and 1,191,497 from Advantage (Bermuda) Fund Ltd for which Mr. Pennington has investment decision-making authority. Mr. Pennington disclaims beneficial ownership of these shares.


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DESCRIPTION OF SECURITIES



Our authorized capital stock consists of 150,000,000 shares of Common Stock, $.001 par value (Common Stock), and 5,000,000 of preferred stock, $.001 par value (Preferred Stock), issuable in series. The following description of our capital stock does not purport to be complete and is subject to and qualified in its entirety by our Certificate of Incorporation and Bylaws, amendments thereto, including the Certificates of Designation for our Series A Preferred Stock, and by the provisions of applicable Nevada law. Our transfer agent is Equity Transfer Services, Inc., 120 Adelaide West, Suite 420, Toronto, Ontario, M5H 4C3.



Common Stock



As of July 31, 2006, there were approximately 80,750,105 shares of our Common Stock outstanding. In addition, as of July 31, 2006, the authorized shares of common stock were subject to the following outstanding warrants:




        1,150,000 warrants at an exercise price of $0.16 to $0.63 per share, issued to the purchasers of our convertible debentures,



        3,357,001 warrants at an exercise price of $0.16 (repriced in January, 2005), issued to purchasers of units (one share of common stock and one warrant to purchase one share of common stock) between March and June of 2004,



        1,616,250 warrants to purchase one unit for $0.16. The units consist of one share of common stock and one half warrant to purchase another share of stock for $0.30,



        790,200 warrants to purchase one unit for $0.28. The units consist of one share of common stock and one warrant to purchase another share of stock for $0.16,



        13,587,863 warrants at an exercise of $0.30 issued between January 2005 and March 2006,



        350,000 warrants with an exercise price of $0.20 issued in conjunction with the securing of a bridge loan in October 2005,



        220,000 warrants at an exercise price of $0.75 per share, issued to the purchasers of common stock.




As of July 31, 2006, we have reserved 3,295,683 shares of our Common Stock underlying options issued to our directors, employees and consultants with exercise prices of between $.01 and $2.00. As of July 31, 2006, we had approximately 232 common shareholders of record.



Preferred Stock and Related Warrants



We have no outstanding Preferred Stock. Our Board of Directors has the authority, without further action by our stockholders, to issue up to 5,000,000 shares of our preferred stock, par value $0.001 per share, in one or more series and to fix the rights, preferences, privileges and restrictions thereof. In the future, our Board of Directors may issue additional shares of our Preferred Stock in series with rights, designations and preferences as determined by the Board of Directors. When any shares of our Preferred Stock are issued, certain rights of the holders of our Preferred Stock may affect the rights of the holders of Common Stock. The authority of the Board of Directors to issue shares of our Preferred Stock with characteristics which it determines (such as preferential voting, conversion, redemption and liquidation rights) may have a deterrent effect on persons who might wish to make a
takeover bid to purchase our shares at a price, which might be attractive to our shareholders. However, the Board of Directors must fulfill its fiduciary obligation to our shareholders in evaluating a takeover bid.



Anti-Takeover Effects of Certain Provisions of Our Articles of Incorporation and Bylaws



Certain provisions of our certificate of incorporation and bylaws, which are summarized below, may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.

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Special Meeting of Stockholders



Our bylaws provided that special meetings of our stockholders may only be called by (1) resolution of the Board or the president or (2) the president or the secretary upon the written request (stating the purpose of the meeting) of a majority of the directors then in office or the holders of a majority of the outstanding shares entitled to vote.



Authorized But Unissued Shares



The authorized but unissued shares of Common Stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including public or private offerings to raise capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of Common Stock and preferred stock could render more difficult or discourage an attempt to obtain control of us, by means of a proxy contest, tender offer, merger or otherwise.



Limitations on Liability and Indemnification Matters



Our Certificate of Incorporation provides that no director shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director except as limited by Nevada law. Our Bylaws provide that we shall indemnify to the full extent authorized by law each of our directors and officers against expenses incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the corporation.



Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling person based on the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy and is, therefore, unenforceable.



TRANSFER AGENT



The transfer agent for our Common Stock is Equity Transfer Services, Inc., 120 Adelaide West, Suite 420, Toronto, Ontario, M5H 4C3.

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SHARES ELIGIBLE FOR FUTURE SALE



As of July 31, 2006, there were approximately 80,750,105 shares of our Common Stock outstanding. If all of the 22,669,639 shares being registered in this Prospectus underlying common stock purchase warrants are issued, we will have 103,419,744 shares issued and outstanding. Of these shares, all of the 51,553,688 shares registered in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, unless such shares are purchased by affiliates as that term is defined in Rule 144 under the Securities Act of 1933. Shares that cannot be traded without restriction are referred to as restricted securities as that term is defined in Rule 144 under the Securities Act of 1933. As of July 31, 2006, approximately 78,225,403 shares are eligible for sale under Rule 144. Restricted securities may be sold in the public market only if
registered of if they qualify for an exemption from registration under Rule 144 of the Securities Act of 1933.



Rule 144



In general, under Rule 144 as currently in effect, a person (or group of person whose shares are aggregated), including affiliates of the Company, who have beneficially owned shares of our Common Stock for at least one year would be entitled to sell within any three-month period, an amount of restricted securities that does not exceed the greater of:




        1% of the number of shares of Common Stock then outstanding (approximately 807,501 shares) as of July 31, 2006; or





        the average weekly trading volume in the Common Stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.




Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.



Rule 144(K)



Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.



No prediction can be made as to the effect, if any that market sales of the Companys Common Stock, or the availability of the Common Stock for sale, will have on the market price of the Common Stock prevailing from time to time. Nevertheless, sales of a significant number of shares of the Companys Common Stock in the public market, or the perception that such sales could occur, could adversely affect the market price of the Common Stock and impair our future ability to raise capital through an offering of equity securities. See Risk Factors - Future sales of our Common Stock may depress our stock price.

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LEGAL MATTERS



The validity of the securities being offered hereby will be passed upon by Johnson, Pope, Bokor, Ruppel & Burns, LLP, 911 Chestnut Street, Clearwater, Florida 33756. Michael T. Cronin, a partner in this firm, currently owns 1,996,459 shares of our Common Stock.

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EXPERTS



Our financial statements for the years ended July 31, 2006, 2005, and 2004 appearing in this Prospectus and registration statement have been audited by Goldstein Golub Kessler LLP, as independent registered public accounting firm, as set forth in their report appearing elsewhere herein, and are included in reliance upon the report given on the authority of the firm as experts in accounting and auditing.

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WHERE YOU CAN FIND ADDITIONAL INFORMATION



We have filed with the Securities and Exchange Commission a registration statement on Form S-1 pursuant to the Securities Act of 1933, as amended, with respect to the offer, issuance and sale of 51,553,688 shares of our Common Stock. This Prospectus does not contain all of the information set forth in the registration statement. For further information with respect to us, and the shares of our Common Stock to be sold in this offering, we make reference to the registration statement.



You may read and copy all or any portion of the registration statement or any other information, which we filed at the SECs public reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois. The address for the SECs public reference room in Washington, D.C. is Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. You can request copies of these documents, upon payment of a duplicating filing fee, by writing to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to you free or charge at the SECs web site at http://www.sec.gov.

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EAUTOCLAIMS, INC.

FINANCIAL STATEMENTS



JULY 31, 2006





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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS









Report of Independent Registered Public Accounting Firm
        F - 2Financial Statements:Balance Sheets
        F - 3Statements of Operations
        F - 4Statements of Stockholders Deficiency
        F - 5Statements of Cash Flows
        F - 6Notes to Financial Statements
        F-7  F-21Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
        F-22Schedule II  Valuation and Qualifying Accounts






F-1



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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors

eAutoclaims, Inc.



We have audited the accompanying balance sheets of eAutoclaims, Inc. as of July 31, 2006 and 2005 and the related statements of operations, stockholders deficiency, and cash flows for each of the three years in the period ended July 31, 2006. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of eAutoclaims, Inc. as of July 31, 2006 and 2005 and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2006, in conformity with United States generally accepted accounting principles.



As disclosed in Note 1, the Company changed its method of accounting for stock-based compensation effective August 1, 2005.





GOLDSTEIN GOLUB KESSLER LLP

New York, New York



September 22, 2006







F-2



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Table of Contents

EAUTOCLAIMS, INC.BALANCE SHEETSJuly 31, 2006
        
        July 31, 2005ASSETSCurrent Assets:Cash and cash equivalents
        
        $
        1,524,239
        
        $
        306,280Accounts receivable, less allowance for doubtful accounts of $170,000 and $208,000 respectively
        
        
        561,703
        
        
        742,237Due from related parties
        
        
        
        
        
        6,231Prepaid expenses and other current assets
        
        
        70,630
        
        
        88,290Total current assets
        
        
        2,156,572
        
        
        1,143,038Property and Equipment, net of accumulated depreciation
        
        
        672,192
        
        
        857,440Goodwill
        
        
        1,093,843
        
        
        1,093,843Other Assets
        
        
        39,848
        
        
        25,800Deferred Income Tax Asset, net of valuation allowance of $10,499,000 and $9,841,000 respectively
        
        
        
        
        
        Total Assets
        
        $
        3,962,455
        
        $
        3,120,121LIABILITIES AND STOCKHOLDERS' DEFICIENCYCurrent Liabilities:Accounts payable, advanced payments and accrued expenses
        
        $
        4,373,163
        
        $
        4,701,483Current portion of capital lease obligation
        
        
        100,404
        
        
        86,642Convertible debenture
        
        
        
        
        
        275,000Total current liabilities
        
        
        4,473,567
        
        
        5,063,125Capital Lease Obligation, net of current portion
        
        
        22,237
        
        
        108,979Total Liabilities
        
        
        4,495,804
        
        
        5,172,104Stockholders' Deficiency:Convertible preferred stock - $.001 par value; authorized 5,000,000 shares,No shares outstandingCommon stock - $.001 par value; authorized 150,000,000 shares, issued and outstanding 80,750,105 shares and 59,488,026 shares respectively
        
        
        80,750
        
        
        59,488Additional paid-in capital
        
        
        28,789,176
        
        
        25,081,358Accumulated deficit
        
        
        (29,371,650
        )
        
        (27,192,829
        )Treasury Stock, at cost, 137,500 shares and 0 shares respectively
        
        
        (31,625
        )Stockholders' Deficiency
        
        
        (533,349
        )
        
        (2,051,983
        )Total Liabilities and Stockholders' Deficiency
        
        $
        3,962,455
        
        $
        3,120,121






F-3

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Table of Contents

EAUTOCLAIMS, INC.STATEMENTS OF OPERATIONSYear Ended July 31
        
        
        2006
        
        
        2005
        
        
        2004Revenue:Collision repairs management
        
        $
        10,934,990
        
        $
        11,248,882
        
        $
        22,718,284Glass repairs
        
        
        254,196
        
        
        487,723
        
        
        1,239,969Fleet repairs management
        
        
        916,741
        
        
        718,240
        
        
        713,303Fees and other revenue
        
        
        2,757,811
        
        
        2,196,387
        
        
        2,489,126Gain on sale of building
        
        
        756,943Total revenue
        
        
        15,620,681
        
        
        14,651,232
        
        
        27,160,682Expenses:Claims processing charges
        
        
        10,178,094
        
        
        11,029,261
        
        
        22,130,634Selling, general and administrative
        
        
        6,595,442
        
        
        5,554,430
        
        
        6,417,316Depreciation and amortization
        
        
        459,133
        
        
        511,812
        
        
        515,813Amortization of beneficial conversionfeature on convertible debentures andfair value of warrants issued inconnection with debentures
        
        
        
        
        
        
        
        
        307,694Total expenses
        
        
        17,232,669
        
        
        17,095,503
        
        
        29,371,457Net loss
        
        $
        (1,611,988
        )
        $
        (2,444,271
        )
        $
        (2,210,775
        )Adjustment to net loss to compute loss per common share:Preferred stock dividends
        
        
        
        
        
        (50,655
        )
        
        (95,518
        )Dividend to unit holders
        
        
        (557,833
        )
        
        (986,623
        )Net loss applicable to common stock
        
        $
        (2,169,821
        )
        $
        (3,481,549
        )
        $
        (2,306,293
        )Loss per common share - basic and diluted
        
        $
        (0.03
        )
        $
        (0.08
        )
        $
        (0.09
        )Weighted-average number of common shares outstanding - basic and diluted
        
        
        70,822,785
        
        
        44,905,261
        
        
        26,308,434






F-4

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EAUTOCLAIMS, INC.STATEMENT OF STOCKHOLDERS' DEFICIENCYYears ended July 31, 2006, 2005 and 2004




StockholdersEquity(Deficiency)Preferred Stock
        
        Common Stock
        
        AdditionalPaid-inCapital
        
        AccumulatedDeficit
        
        Treasury StockShares
        
        Amount
        
        Shares
        
        AmountBalance at July 31, 2003
        
        247
        
        1
        
        22,828,955
        
        22,829
        
        18,459,225
        
        (21,392,987
        )
        
        
        (2,910,932
        )Issuance of common stock for services
        
        
        
        
        
        436,419
        
        437
        
        164,599
        
        
        
        
        
        165,036Accrued dividends on preferred stock
        
        
        
        
        
        
        
        
        
        
        
        (95,518
        )
        
        
        (95,518
        )Issuance of common stock upon conversion of preferred stock
        
        (47
        )
        
        
        1,071,891
        
        1,072
        
        (1,072
        )
        
        
        
        
        Issuance of common stock for preferred stock dividends
        
        
        
        
        
        326,800
        
        327
        
        71,325
        
        
        
        
        
        71,652Issuance of compensatory stock options
        
        
        
        
        
        
        
        
        
        868,756
        
        
        
        
        
        868,756Fair value of warrants issued in conjunction with convertible debenture
        
        
        
        
        
        
        
        
        
        89,286
        
        
        
        
        
        89,286Recognition of beneficial conversion feature on convertible debenture
        
        
        
        
        
        
        
        
        
        89,286
        
        
        
        
        
        89,286Proceeds from sale of common stock and exercise of warrants, net of costs and common stock warrants liability
        
        
        
        
        
        8,737,429
        
        8,737
        
        2,169,388
        
        
        
        
        
        2,178,125Conversion of debt to equity
        
        
        
        
        
        892,857
        
        893
        
        249,107
        
        
        
        
        
        250,000Issuance of common stock for interest on convertible debt
        
        
        
        
        
        43,011
        
        43
        
        11,957
        
        
        
        
        
        12,000Net loss
        
        
        
        
        
        
        
        
        
        
        
        (2,210,775
        )
        
        
        (2,210,775
        )Balance at July 31, 2004
        
        200
        
        1
        
        34,337,362
        
        34,338
        
        22,171,857
        
        (23,699,280
        )
        
        
        (1,493,084
        )Issuance of common stock for services
        
        
        
        
        
        968,901
        
        969
        
        219,160
        
        
        
        
        
        220,129Accrued dividends on preferred stock
        
        
        
        
        
        
        
        
        
        
        
        (50,655
        )
        
        
        (50,655
        )Issuance of common stock upon conversion of preferred stock and preferred stock dividends
        
        (176
        )
        (1
        )
        6,774,319
        
        6,774
        
        273,951
        
        
        
        
        
        280,725Conversion of convertible debenture to equity
        
        
        
        
        
        89,606
        
        90
        
        24,910
        
        
        
        
        
        25,000Issuance of common stock for interest on convertible debt
        
        
        
        
        
        112,391
        
        112
        
        23,400
        
        
        
        
        
        23,512Redemption of preferred stock
        
        (24
        )
        
        
        
        
        
        
        (120,000
        )
        (12,000
        )
        
        
        (132,000
        )Proceeds from sale of common stock and exercise of warrants, net of costs and common stock warrants liability
        
        
        
        
        
        11,715,000
        
        11,715
        
        1,497,239
        
        
        
        
        
        1,508,954Dividends issued to unit holders in the form of shares and warrants
        
        
        
        
        
        4,502,218
        
        4,502
        
        982,121
        
        (986,623
        )
        
        
        0Issuance of common stock upon exercise of optionsNet loss
        
        
        
        
        
        
        
        
        
        
        
        (2,444,271
        )
        
        
        (2,444,271
        )Balance at July 31, 2005
        
        
        
        
        
        59,488,026
        
        59,488
        
        25,081,358
        
        (27,192,829
        )
        
        
        (2,051,983
        )Issuance of common stock upon exercise of options
        
        
        
        
        
        1,203,437
        
        1,202
        
        19,847
        
        
        
        
        
        21,049Issuance of common stock for interest
        
        
        
        
        
        5,651
        
        6
        
        898
        
        
        
        
        
        904Issuance of common stock for services
        
        
        
        
        
        3,358,876
        
        3,359
        
        791,190
        
        
        
        
        
        794,549Dividends issued to unit holders in the form of warrants and shares
        
        
        
        
        
        2,162,860
        
        2,163
        
        555,670
        
        (557,833
        )
        
        
        0Issuance of common stock upon exercise of warrants
        
        
        
        
        
        12,412,505
        
        12,413
        
        1,908,491
        
        0
        
        
        
        1,920,904Purchase of Treasury Stock
        
        
        
        
        
        
        
        
        
        
        
        
        
        (31,625
        )
        (31,625
        )Conversion of convertible note to equity
        
        
        
        
        
        1,718,750
        
        1,719
        
        273,281
        
        0
        
        
        
        275,000Issuance of warrants in conjunction with note payable
        
        
        
        
        
        
        
        
        
        9,000
        
        (9,000
        )
        
        
        0Issuance of common stock in conjunction with building transaction
        
        
        
        
        
        400,000
        
        400
        
        115,600
        
        
        
        
        
        116,000Vesting of options granted to employees
        
        
        
        
        
        
        
        
        
        33,841
        
        
        
        
        
        33,841Net loss
        
        
        
        
        
        
        
        
        
        
        
        (1,611,988
        )
        
        
        (1,611,988
        )Balance at July 31, 2006
        
        
        
        
        
        80,750,105
        
        80,750
        
        28,789,176
        
        (29,371,650
        )
        (31,625
        )
        (533,349
        )






F-5

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Table of Contents

EAUTOCLAIMS, INC.STATEMENTS OF CASH FLOWS






Year Ended July 31
        
        2006
        
        2005
        
        2004Cash flows from operating activities:Net loss
        
        $
        (1,611,988
        )
        $
        (2,444,271
        )
        $
        (2,210,775
        )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
        
        
        459,133
        
        
        511,812
        
        
        515,813Loss on disposal of property and equipment
        
        
        
        
        
        
        
        
        77,430Gain on sale of building
        
        
        (756,943
        )Amortization of discount on debentures
        
        
        
        
        
        
        
        
        307,694Common stock issued for services
        
        
        794,549
        
        
        220,129
        
        
        165,036Common stock issued for interest
        
        
        904
        
        
        23,512
        
        
        12,000Issuance of compensatory stock options
        
        
        
        
        
        
        
        
        868,756Bad debts
        
        
        (38,000
        )
        
        47,000
        
        
        (81,000
        )Vesting of options granted to employees
        
        
        33,841Changes in operating assets and liabilitiesAccounts receivable
        
        
        218,534
        
        
        (60,461
        )
        
        550,988Prepaid expenses and other current assets
        
        
        6,921
        
        
        (8,949
        )
        
        (23,119
        )Other assets
        
        
        
        
        
        
        
        
        14,740Accounts payable, advanced payments and accrued expenses
        
        
        (328,320
        )
        
        591,393
        
        
        (1,904,331
        )Net cash used in operating activities
        
        
        (1,221,369
        )
        
        (1,119,835
        )
        
        (1,706,768
        )Cash flows from investing activity:Purchases of property and equipment
        
        
        (254,318
        )
        
        (295,843
        )
        
        (463,725
        )Proceeds from sale of building
        
        
        869,634Payments from related parties
        
        
        6,231
        
        
        59,200
        
        
        43,000Principal payments on stockholder loansNet cash provided by (used in) investing activities
        
        
        621,547
        
        
        (236,643
        )
        
        (420,725
        )Cash flows from financing activities:Proceeds from exercise of warrants
        
        
        1,920,904Proceeds from exercise of options
        
        
        21,049
        
        
        9,707Proceeds from sale of common stock
        
        
        
        
        
        1,508,954
        
        
        2,178,125Principal payments on capital lease
        
        
        (92,547
        )
        
        (63,888
        )
        
        (30,117
        )Purchase of treasury stock
        
        
        (31,625
        )Payments on redemption of preferred stock
        
        
        
        
        
        (170,698
        )Proceeds from sale of convertible debentures
        
        
        
        
        
        
        
        
        250,000Principal payments on shareholder loans
        
        
        
        
        
        (36,866
        )
        
        (81,127
        )Net cash provided by financing activities
        
        
        1,817,781
        
        
        1,247,209
        
        
        2,316,881Net increase (decrease) in cash and cash equivalents
        
        
        1,217,959
        
        
        (109,269
        )
        
        189,388Cash at beginning of period
        
        
        306,280
        
        
        415,549
        
        
        226,161Cash and cash equivalents at end of period
        
        $
        1,524,239
        
        $
        306,280
        
        $
        415,549Supplemental disclosure of cash flow information:Cash paid during the period for interest
        
        $
        43,351
        
        $
        42,581
        
        $
        56,855Supplemental disclosure of noncash investing and financing activities:Conversion of debentures to common stock
        
        $
        275,000
        
        $
        25,000
        
        $
        250,000Issuance of common stock for preferred stock dividends
        
        
        
        
        $
        331,381
        
        
        71,652Accrued dividends on preferred stock
        
        
        
        
        
        
        
        
        95,518Gross proceeds from sale of equity
        
        
        
        
        $
        1,724,000
        
        $
        2,436,240Less costs paid to raise equity
        
        
        
        
        $
        (215,046
        )
        $
        (258,115
        )Net proceeds from sale of equity
        
        $
        
        
        $
        1,508,954
        
        $
        2,178,125Fair value of warrants issued in conjunction with convertible debenture
        
        
        
        
        
        
        
        $
        89,286Recognition of beneficial conversion feature on convertible debenture
        
        
        
        
        
        
        
        $
        89,286Shares and warrants issued to unit holders
        
        $
        557,833
        
        $
        986,623Equipment acquired by capital lease
        
        $
        19,567
        
        
        
        
        $
        169,376Fair value of warrants issued in conjunction with bridge loan
        
        $
        9,000






F-6

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





1.
        THE BUSINESS AND BASIS OF PRESENTATION




eAutoclaims.com, Inc. changed its name to eAutoclaims, Inc. (the Company) as of July 29, 2004. The Company is a Nevada corporation which provides Internet based vehicle collision claims services for insurance companies, Managing General Agents (MGA) and third party claims administrators (TPA) and self-insured automobile fleet management companies. The Company accepts assignment of claims from customers, and provides vehicle repairs through a network of repair shops. The Company also handles estimate, audit and claims administration services for claims for which the Company does not perform the repair.



The Company uses the Internet to streamline and lower the overall costs of automobile repairs and the claims adjustment expenses of its clients. Management believes that the proprietary web-based software products and services make the management of collision repairs more efficient by controlling the cost of the repair and by facilitating the gathering and distribution of information required in the automobile repair process.



2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




As shown in the financial statements, the Company has suffered recurring losses from operations, has a stockholders deficiency and a working capital deficiency. The Company has been able to raise additional funds from debt and equity offerings and management believes it can continue to do so in the future. During the year ending July 31, 2006 the Company realized an increased volume of claims from agreements signed in prior years. In addition, the Company has secured a non-cancellable line of equity from a shareholder in the amount of $2,000,000.



The accompanying financial statements include the accounts of the Company and SalvageConnection.com, Inc. (Salvage), which was merged into the Company in January 2004. All intra-company accounts and transactions have been eliminated.



The Company maintains cash in bank deposit accounts that exceed federally insured limits. The Company has not experienced any losses on these accounts.



The Company derives revenue primarily from collision repairs, glass repairs and fleet repairs. Revenue is recognized when an agreement between the Company and its customer exists, the repair services have been completed, the Companys revenue is fixed and determinable and collection is reasonably assured.



The Company records revenue gross for collision repairs. This occurs when the Company is the primary obligor in its arrangements, the Company has latitude in establishing price, the Company controls what services are provided and where the services will take place, the Company is involved in the determination of product or service specifications and the Company has credit risk.



The Company records revenue gross for fleet repairs. This occurs when the Company is the primary obligor in its arrangements, the Company has latitude in establishing price, the Company controls what services are provided and where the services will take place, the Company is involved in the determination of product or service specifications and the Company has credit risk.



F-7

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS







2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




The Company records revenue gross for certain glass repairs. This occurs when the Company is the primary obligor in its arrangements, the Company has latitude in establishing price, the Company controls what services are provided and where the services will take place, the Company has discretion in supplier selection, the Company is involved in the determination of product or service specifications and the Company has credit risk.



The Company records revenue net for certain glass repairs. Revenue is recorded at net when situations occur whereby the supplier (not the Company) is the primary obligor in an arrangement, the amount the Company earns is fixed or the supplier (and not the Company) has credit risk.



The Company records revenue generated from the co-marketing agreement with the Audatex net of the repair costs because in the agreement the Company is performing a fee for service. The insurance company is the customer of Audatex, who will be collecting the revenue and paying the shop.



The Company derives revenue from the sale of estimating software to shops within the Companys repair shop network. Since the Company only resells and does not service the estimating software, the revenue and cost of revenue from the transaction is recognized on the date of shipment.



Cash and cash equivalents represents cash and short term, highly liquid investments with original maturities of three months or less.



Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.



The Company provides a warranty on the repairs performed at our network shops and an accrual of $32,000 has been established as of July 31, 2006 for estimated future warranty costs. This accrual amount is reviewed periodically and adjusted as necessary based on factors including historical warranty expense and current economic trends.



Property and equipment are stated at cost. Additions and improvements to property and equipment are capitalized. Maintenance and repairs are expensed as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations. Depreciation is computed on the straight-line method over the estimated useful lives of the assets.



The Company identifies and records impairment on long-lived assets, including goodwill, when events and circumstances indicate that such assets have been impaired. The Company periodically evaluates the recoverability of its long-lived assets based on expected undiscounted cash flows, and recognizes impairment, if any, based on expected discounted cash flows. At July 31, 2006, no such impairment existed.



F-8

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS







Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123R (revised 2004), Share-Based Payment which superseded Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensationand supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS 123(R) addresses the accounting for share-based payment transactions with employees and other third parties, eliminates the ability to account for share-based compensation transactions using APB 25 and requires that the compensation costs relating to such transactions be recognized in the statement of operations. The revised statement has been implemented for the Company effective August 1, 2005, at the beginning of fiscal year 2006.



Prior to fiscal year 2006 the Company accounted for its employee incentive stock option plans using the intrinsic value method in accordance with the recognition and measurement principles of Accounting Principles Board Opinion No 25, Accounting for Stock Issued to Employees. Had the Company determined compensation expense based on the fair value at the grant dates for those awards consistent with the method of SFAS 123, the Companys net income (loss) per share would have been increased to the following pro forma amounts:





Year Ended July 31,2005
        
        
        2004Net loss as reported
        
        $
        (2,444,271
        )
        $
        (2,210,775
        )Add back intrinsic value of the optionsissued to employees and charged to operations
        
        
        
        
        
        868,756Deduct total stock based employeecompensation expense determined underfair value based methods for all awards
        
        
        (17,786
        )
        
        (905,006
        )Pro forma net
        
        $
        (2,462,057
        )
        $
        (2,247,025
        )Basic and diluted net loss per share as reported
        
        $
        (.08
        )
        $
        (.09
        )Pro forma basic and diluted loss per share
        
        $
        (.08
        )
        $
        (.09
        )




Effective August 1, 2005, the Company adopted SFAS No. 123R utilizing the modified prospective method. Under the modified prospective method, the measurement provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, measured under the original provisions of SFAS 123, Accounting for Stock Based Compensation, shall be recognized in net earnings in the periods after the date of adoption.



F-9

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





Stock based compensation consists primarily of stock options. Stock options are granted to employees at exercise prices equal to the fair market value of the Companys stock at the dates of grant. Stock options generally vest over three years and have a term of five or ten years. Compensation expense for stock options is recognized over the vesting period for each separately vesting portion of the stock option award.



The fair value for options issued prior to August 1, 2005 was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions for the years ended July 31, 2005 and 2004. The risk-free interest rate was derived from the U.S. Treasury yield curve in effect at the time of the grant and was assumed to be 3.87% and 4.68% for the fiscal years ended July 31, 2005 and 2004, respectively. The volatility factor was determined based on a study done on the Company by an independent securities valuation firm and the assumed market volatility was 45% and 170% for the fiscal years ended July 31, 2005 and 2004, respectively. The assumed dividend yield was 0% and an expected option life was five years for both years presented.



Assumptions for the year ending July 31, 2006 were as follows: volatility factor 45%, risk-free interest rate was 4.98%, the dividend yield was 0% and the expected option life was five years.



The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions including the expected stock price volatility. Because the Companys employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.



In accordance with Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or Services, the Company measures the fair value of the equity instruments using the stock price and other measurement assumptions as of the earlier of the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or the date at which the counterpartys performance is complete.



The costs of software developed for internal use, including web site development costs, incurred during the preliminary project stage are expensed as incurred. Direct costs incurred during the application development stage are capitalized. Costs incurred during the post implementation/operation stage are expensed as incurred. Capitalized software development costs are amortized on a straight-line basis over their estimated useful lives.



The carrying value of cash, accounts payable, and accrued expenses are reasonable estimates of their fair value because of short-term maturity. The fair value of the loans payable and convertible debentures approximates their principal amounts.



The Company believes that the concentration of credit risk in its trade receivables, with respect to its limited customer base, is substantially mitigated by its credit evaluation process. The Company does not require collateral.



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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





3.
        PER SHARE CALCULATIONS




Basic loss per share is computed as net loss available to common stockholders divided by the weighted- average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through stock-based compensation including stock options, restricted stock awards, warrants and convertible securities. As of July 31, 2006, 2005, and 2004, 25,965,318, 31,367,131, and 19,909,078 options and warrants, respectively, were excluded from the diluted loss per share computation, as their effect would be anti-dilutive. Additionally, as of July 31, 2006 there were no convertible securities outstanding. As of July 31, 2005, and 2004, 1,724,401, and 6,075,269 of shares respectively, that would be issuable upon conversion of convertible securities plus accrued interest were excluded from the dilutive loss per share
computation, as their effect would be anti-dilutive.



4.
        PROPERTY AND EQUIPMENT




At July 31, 2006 property and equipment, at cost, consists of the following:



2006
        
        2005
        
        EstimatedUseful LifeComputer Equipment
        
        $
        714,424
        
        
        656,183
        
        
        3 yearsSoftware
        
        
        1,320,860
        
        
        1,105,776
        
        
        3 yearsOffice equipment
        
        
        304,122
        
        
        303,563
        
        
        3 to 10 yearsLeasehold improvements
        
        
        247,550
        
        
        247,550
        
        
        Term of LeaseFurniture and fixtures
        
        
        88,421
        
        
        88,421
        
        
        7 to 10 years2,675,377
        
        
        2,401,493Less accumulated depreciation
        
        
        2,003,185
        
        
        1,544,053$
        672,192
        
        $
        857,440




Office equipment and software include amounts acquired under capital leases of approximately $279,000 at July 31, 2006 and 2005, with related accumulated depreciation of approximately $152,000 for the year ended July 31, 2006 and approximately $89,000 for the year ended July 31, 2005.



5.
        ACCOUNTS PAYABLE, ADVANCED PAYMENTS AND ACCRUED EXPENSES




Accounts payable, advanced payments and accrued expenses consist of the following:



July 312006
        
        2005Advanced payments from customers
        
        $
        3,188,328
        
        $
        2,957,330Accounts payable to repair facilities and other vendors
        
        $
        823,013
        
        $
        1,226,058Accrued payroll and vacation wages
        
        
        153,109
        
        
        181,706Other accrued liabilities (none in excess of 5% of current liabilities)
        
        
        208,713
        
        
        336,389$
        4,373,163
        
        $
        4,701,483






F-11

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





6.
        PURCHASE AND SALE OF BUILDING




On December 9, 2005 the Company completed a transaction in which it purchased its Oldsmar facility under a purchase agreement completed with the previous landlord, and immediately sold the facility to a third party. As part of the agreement to purchase the facility, the Company issued the previous landlord 400,000 shares of the Companys common stock. The net result of the purchase and sale transaction, after deducting applicable expenses, was a gain to the Company of $756,943. As part of the agreement to sell the facility, the Company signed a new 7-year lease with the new owner, which runs through December, 2012.



7.
        CONVERTIBLE NOTE AND DEBENTURES




In July of 2003 the Company entered into a $300,000, 8% convertible note payable with a term of 1 year. This note was convertible at the discretion of the creditor at a fixed rate of $0.279 per share. The interest was payable in either cash or common shares at the Companys discretion at the end of the loan. In July 2003, The Company recorded a discount to the note payable of $140,860 representing the beneficial conversion feature of the debentures. The discount was amortized to interest expense over the one-year term of the note.



On July 21, 2004, the holder of the convertible debenture extended the term of the 8% note to mature in August of 2005. No discount to the note payable was recorded in July of 2004 because the market price of the stock was materially the same as the $0.279 conversion rate in the extension. On August 24, 2004, the holder of the convertible debenture converted $25,000 of the principal into 89,606 shares of common stock.  On August 15, 2005 the holder of the Convertible debenture converted the remaining $275,000 into 1,718,750 shares of common stock. Interest on the note from the end of July 2005 until August 15, 2005 of $904 was paid to the holder of the note with 5,651 shares of the Companys common stock. Interest expense relating to these debentures amounted to approximately $24,000 and $22,000 for the years ended July 31, 2005 and 2004 respectively.



On April 23, 2004 the Company received $250,000 from a member of the Board of Directors in exchange for 8% convertible debentures due and payable on October 14, 2004 unless converted. The debentures were convertible into common stock at $0.28 per share. The Company also issued

892,857 three-year warrants with a strike price of $0.35 per share. These warrants were re-priced to $0.16 per share in January 2005 to comply with the anti-dilution provisions of the agreement and were triggered by a capital raise in January 2005. The Company also adjusted the strike price on 1,000,000 warrants that the investor owned prior to this investment from $0.63 to $0.16 per share. The initial value assigned to the warrants of $89,286, plus the value assigned to the debentures beneficial conversion feature of another $89,286 for a total of $178,572, was recorded as a discount to the debenture and was to be accreted to interest expense over the term of the debenture. In June of 2004 the Director converted his debentures into 892,857 shares of the Companys common stock, and the discount was expensed on the date of the conversion.



During the months June and July 2001 the Company issued $650,000 of debentures with interest at the rate of Libor (2.6%) plus 3% maturing on September 30, 2001. Upon the maturity date the debentures were converted into common stock at rates between $0.63 and $0.75 per share. In connection with the issuance of these convertible debentures 1,150,000 warrants were issued to purchase shares of common stock at $0.63 per share through June 30, 2011. The Company recorded a discount to the debentures of $260,600 representing the fair value of the warrants, and $389,400 representing the beneficial conversion feature of the debentures.



There was no charge to operations under these agreements for the years ended July 31, 2006 and 2005. For the year ended July 31, 2004 $307,694 was charged to operations under these agreements.



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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS







8.
        COMMITMENTS AND CONTINGENCIES




In May 2005 the Company entered into a new two year employment agreement with its President and Chief Executive Officer. The
agreement specifies an annual base salary of $170,000, representing a voluntary pay cut in base taken by the CEO. If the Company
generates positive cumulative EBITDA of greater than $50,000 for any three consecutive months, the base salary will be increased
to $200,000. The CEO will be entitled to receive a quarterly bonus equal to 3% of the Companys EBITDA, whose components are
computed under GAAP, which may be paid in cash or shares of the Companys common stock, at the election of the individual.
The CEO shall also be entitled to receive an option to purchase 25,000 shares of the Companys common stock, exercisable at
the fair market price, for each month the Company has net income before taxes and extraordinary items, as computed in accordance
with GAAP. These options vest over the remaining term of the employment agreement. The CEO is entitled to a $750 per month
automobile allowance and a $1000 per month personal allowance. The Company is required to issue the CEO 1,000,000 shares of its
common stock upon execution of the agreement and agreed to include the shares in an S-8 Registration Statement when filed by the
Company. If the CEO loses his position for any reason other than for cause during the term of the agreement, he will receive a
lump sum payment equal to two (2) times the current base salary. If the Company does not employ the individual beyond the
expiration term of the agreement, he will receive his monthly base salary for the next twelve months. At the election of the CEO,
any compensation including severance or termination payments, may be made one-half (1/2) in cash and one-half (1/2) in the
Companys shares valued at 75% of the average closing price over the 30 trading days preceding the termination date. Any
shares issued shall be registrable under a form S-8 and shall have piggyback registration rights.



In addition, in May 2005 the Company entered into employment agreements ranging in length from eighteen to twenty-four months with all three of the Companys current senior executives that range from $100,000 to $138,000 annually. This represents voluntary base pay cuts taken by all of the previously contracted executives. These executives also receive automobile allowances ranging from $400 to $700 per month and will receive 10,000 shares of the Companys common stock each month, not to exceed 200,000 shares each. If their contracts are not renewed they receive severance packages of six months of their annual compensation.



On March 27, 2003 the Board of Directors voted to grant certain key employees a total of 2,000,000 shares of our common stock or equivalent consideration thereof and the current and future board members 1,000,000 common shares if there is a change in control of greater than 50% ownership of the Company or a sale of all or substantially all its assets.



The Company leases equipment and facilities under non-cancelable capital and operating leases expiring on various dates through 2012. The main operating lease consists of a 7-year lease for 30,000 square feet of a 62,000 square foot facility. In December 2005 we completed a transaction where we exercised our option to purchase the entire facility and, as part of a simultaneous closing process, immediately sold the facility to a third party buyer. As part of the transaction, we entered into a new 7-year lease with the new owner. Our rent, including applicable taxes, begins at $21,694 per month in the first year and increases 3% each year through the remaining life of the lease Total rent expense under the operating leases for the years ended July 31, 2006, 2005 and 2004 totaled approximately $247,000, $219,000 and $212,000 respectively.



F-13

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





The approximate minimum future payments under this operating lease is payable as follows:



Year ending July 31,2007
        
        
        265,0002008
        
        
        273,0002009
        
        
        282,0002010
        
        
        290,0002011
        
        
        299,0002012
        
        
        308,0002013
        
        
        103,000$
        1,820,000




The Company leases equipment under non-cancelable capital leases expiring on various dates through fiscal 2008.



The approximate minimum future payments under these capital leases are payable as follows:



Year ending July 31,2007
        
        
        114,0002008
        
        
        23,000$
        137,000Less amount representing interest
        
        
        15,000$
        122,000Less current maturities
        
        
        100,000Long term debt less current maturities
        
        $
        22,000




Interest expense on capital leases for the years ended July 31, 2006, 2005 and 2004 amounted to approximately $30,000, $40,000 and $20,000, respectively.



F-14

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





9.
        STOCKHOLDERS EQUITY




On February 13, 2006, shareholders holding greater than 50% of the outstanding common stock of the Company consented to increase the Companys authorized shares of common stock from 100,000,000 to 150,000,000 shares.



The Company is authorized to issue 5,000,000 shares of $.001 par value, series A, preferred stock. As of July 31, 2006 there were no shares of preferred stock outstanding.



As part of the provisions of the sales of equities in March through May of 2004 there was a requirement to meet certain claims volume targets under the ADP Co-Marketing Agreement. If we failed to meet those targets, up to 100% of the original Units (as defined in that document) would have to be issued to those 2004 investors for no additional consideration (True up). In order to help resolve this open issue, in December 2004 we offered the 2004 investors 50% of the total potential True up Units in exchange for releasing the Company from the remaining target volume commitment.



On August 1, 2005, the Company evaluated the claims volume that it had received from customers generated by the ADP Claims Service Group Co-marketing Agreement as specified in the subscription agreements from the 2004 capital raise. In accordance with those agreements, the Company did not meet the minimum volume requirements and therefore had to issue 2,162,860 Units (one share of common stock and one, 3-year, $0.16 warrant to purchase a common share) to the investors who did not accept our December 2004 offer. Issuing these units resulted in the Company recording a stock dividend of $475,829.



During the year ended July 31, 2006 the Company issued a total of 12,412,505 shares of common stock in connection with the exercise of a like number of outstanding common stock purchase warrants with exercise prices ranging from $0.16 to $0.20 per share. Of this total, 11,341,076 shares were issued effective March 21, 2006 for warrants exercised. As a result of exercising these warrants, the Company received $1,749,475 after paying $18,435 in legal fees and $50,662 for certain financial advisory and investment banking services in connection with the program. In addition, the Company issued 8,200,359 new 3 year, $0.30 warrants to investors who exercised warrants. Issuing these units resulted in the Company recording a stock dividend of $82,004. An additional 1,071,429 warrants at a $0.16 exercise price were exercised during the nine months ended April 30, 2006 for which the Company received $171,429.



On August 15, 2005 the holder of the $275,000 convertible debenture converted the note into 1,718,750 shares of the Companys common stock. In addition, interest on the note from the end of July 2005 until August 15, 2005 of $904 was paid to the holder of the note with 5,651 shares of the Companys common stock.



F-15

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





During the year ended July 31, 2006 the Company issued a total of 3,358,876 shares of common stock in exchange for services. Of this total, 1,377,796 shares were issued to members of senior management in accordance with terms of their employment agreements. The Company recorded a charge to expense of $407,398, which was approximately equal to the fair market value of the shares at the time of issuance. In addition, 200,000 shares of stock were issued to an officer in October 2005 as a result of a modification to his employment contract. An expense of $30,000 was recorded for these shares, which was approximately equal to the fair market value of the shares at the time of issuance. On November 8, 2005 the Board of Directors gave approval for, and the Company subsequently issued, 1,000,000 shares of the Companys common stock to the Chairman of the Board to compensate him for his past
services and his role as Chairman. The Company expensed a total of $190,000 for these shares, which was equal to the fair market value of the shares at the grant date. In addition, the Board also approved future compensation for the Chairman of the Board to include the same annual retainer of $25,000 to be paid in shares of the Companys common stock as well as the same quarterly stock compensation currently paid to non-employee directors. The Company issued 781,080 shares of common stock to four non-employee directors and the Chairman of the Board in exchange for their services. Of this total, 443,576 shares were issued for services to be rendered for fiscal year 2006. These shares were expensed over the year as they were earned.  As of July 31, 2006 the Company expensed $93,151, which was approximately equal to the fair market value of these shares when they were issued. In addition, a total of 337,504 shares were issued to these same directors and the Chairman of the Board for
services rendered during the fiscal year ended July 31, 2006. A total of $74,000 was charged to expense during this time period, which was approximately equal to the fair market value of these shares when earned.



Also on November 8, 2005 the Board voted to adjust the strike price from $0.35 to $0.16 on 1,000,000 warrants owned by an investor, who is also a director, in order to match the strike price of other investors warrants issued under the anti-dilution provisions of their agreements.



On November 29, 2005 the Company issued 400,000 shares of common stock in the name of its landlord at that time as part of an agreement to facilitate the sale of the building (See Note 6: Purchase and Sale of Building). These shares were part of the building sale transaction and were delivered to the landlord at the December 9, 2005 closing.



During the year ended July 31, 2006 a total of 1,203,437 shares of the Companys common stock were issued as a result of the exercise of outstanding options. Of this total, 200,000 options were exercised by a director, 512,500 by an officer and director, 250,000 by two officers combined, 137,500 by two consultants and 44,104 by other employees, all with a strike price of $0.01. In addition, a consultant and two employees exercised a total of 59,333 options to purchase shares of the Companys common stock with exercise prices ranging from $0.13 to $0.15 per share. A total of 137,500 shares were sold back to the Company by an officer who delivered these shares to satisfy tax withholding requirements. These shares were valued at $31,625, which represents the fair value of the shares at the time of surrender.



In October 2005, the Company issued 200,000 warrants with a strike price of $0.20 to an investor for providing the Company with bridge loan financing and an additional 250,000 warrants with a strike price of $0.20 were issued to two finders for helping to facilitate the transaction. The Company valued these warrants at $0.02 each, utilizing a warrant valuation provided by an independent investment banker, and recorded a charge of $9,000 for these warrants in October 2005.



F-16

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





10.
        STOCK OPTIONS




The Company has an incentive stock option plan under which options to purchase shares of common stock may be granted to certain key employees. The exercise price is based on the fair market value of such shares as determined by the board of directors at the date of the grant of such options.



A summary of the status of the companys options as of July 31, 2006, 2005, and 2004 and changes during the years then ended is presented below:





July 31, 2006Number ofShares
        
        
        Weighted-AverageExercise PriceBalance at beginning of year
        
        5,197,042
        
        $
        0.37Granted
        
        215,000
        
        
        0.23Cancelled or Expired
        
        (934,351
        )
        
        0.90Exercised
        
        (1,203,437
        )
        
        0.22Outstanding at end of year
        
        3,274,254
        
        $
        0.32Options exercisable at end of year
        
        3,003,422
        
        $
        0.33Weighted Average fair value of options granted during the period
        
        
        
        $
        0.10






July 31, 2005
        
        July 31, 2004Number ofShares
        
        Weighted-AverageExercise Price
        
        Number ofShares
        
        Weighted-AverageExercise PriceBalance at beginning of year
        
        6,849,437
        
        $
        0.45
        
        4,672,722
        
        $
        0.80Granted
        
        208,500
        
        
        0.19
        
        2,635,267
        
        
        0.07Cancelled
        
        (890,166
        )
        
        1.34
        
        (458,552
        )
        
        1.89Exercised
        
        (970,729
        )
        
        0.15
        
        (0
        )
        
        0.00Outstanding at end of year
        
        5,197,042
        
        $
        0.37
        
        6,849,437
        
        $
        0.45Options exercisable at end of year
        
        4,706,206
        
        $
        0.39
        
        5,685,010
        
        $
        0.47Weighted Average fair value of options granted during the period
        
        
        
        $
        0.09
        
        
        
        $
        0.40




The following table summarizes information about fixed stock options outstanding at July 31, 2006:



Options Outstanding
        
        Options ExercisableRange ofExercise Price
        
        NumberOutstanding
        
        WeightedaverageRemainingContractual Life
        
        
        WeightedaverageExercisePrice
        
        NumberExercisable
        
        
        WeightedaverageExercisePrice$0.01
        
        1,015,754
        
        6.37
        
        $
        0.01
        
        1,015,754
        
        $
        0.01$0.10  $  .47
        
        1,364,000
        
        2.48
        
        
        0.24
        
        1,093,168
        
        
        0.23$  .51  $  .90
        
        764,500
        
        0.55
        
        
        0.59
        
        764,500
        
        
        0.59$1.01  $2.00
        
        130,000
        
        3.97
        
        
        2.00
        
        130,000
        
        
        2.00$0.01  $2.00
        
        3,274,254
        
        
        
        $
        .32
        
        3,003,422
        
        $
        0.33






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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





11.
        INCOME TAXES:




As of July 31, 2006, and 2005 the Company had deferred tax assets of approximately $10,499,000 and $9,841,000, respectively, resulting from temporary differences and net operating loss carry-forwards of approximately $23,800,000 and $21,891,000, respectively, which are available to offset future taxable income, if any, through 2024. However, as of July 31, 2002 approximately $10,452,000 of those losses is subject to an annual limitation of deducting $267,000 per year against future operating income. As utilization of the net operating loss carry-forwards and temporary differences is not assured, the deferred tax asset has been fully reserved through the recording of a 100% valuation allowance.





The tax effects of temporary differences, loss carry-forwards and the valuation allowance that give rise to deferred income tax assets were as follows:





July 31,2006
        
        2005Temporary differences:Allowance for doubtful accounts
        
        
        68,000
        
        
        83,000Accrued vacation
        
        
        28,000
        
        
        35,000Compensation not currently deductible
        
        
        882,000
        
        
        966,000Net operating losses
        
        
        9,521,000
        
        
        8,757,000Less valuation allowance
        
        
        10,499,000
        
        
        9,841,000Deferred tax assets
        
        $
        - 0 -
        
        $
        - 0 -






The reconciliation of the effective income tax rate to the federal statutory rate for the years ended July 31, 2006, 2005, and 2004 is as follows:



Federal income tax rate
        
        (34.0
        )%State income tax rate
        
        ( 6.0
        )%Change in valuation allowance on net operating carry-forwards
        
        40.0
        %Effective income tax rate
        
        - 0 -
        %




12.
        401K




The Company has a noncontributory defined contribution plan under Section 401 (k) of  the Code covering all qualified employees. An officer of the Company serves as trustee of the plan. The Company did not make a contribution to the plan for the years ended July 31, 2006, 2005, or 2004.



13.
        MAJOR CUSTOMERS




During the years ended July 31, 2006, 2005 and 2004 one customer accounted for 52%, 55% and 60% of total revenue respectively. During the years ended July 31, 2006, 2005 and 2004 a second customer accounted for approximately 9%, 8% and 13% of total revenue, respectively.



F-18

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS





14.
        RELATED PARTY TRANSACTIONS




The Chairman of the Board of the Company was provided a non-interest bearing loan prior to July 31, 2002, which totaled approximately $120,000. As of July 31, 2005 the loan balance was $6,231. In fiscal year ending July 31, 2006 this loan was paid in full by the Chairman by forgoing certain compensation approved by the Board of Directors.



15.
        SUBSEQUENT EVENTS




On August 3, 2006 three employees exercised a total of 149,375 options to purchase shares of the Companys common stock, all with an exercise price of $0.01. A total of 38,353 shares were sold back to the Company by two employees who delivered these shares to satisfy tax withholding requirements. These shares were valued at $5,753, which represents the fair value of the shares at the time of surrender.



On August 16, 2006 a total of 781,250 shares of common stock were issued to four outside Directors and the Chairman of the Board in exchange for their services on the Board of Directors for fiscal 2007. These shares will be expensed over the fiscal year 2007 as they are earned.



On August 31, 2006 the Company issued a total of 22,500 shares of common stock to three officers according to the terms of their employment agreements.



16.
        SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)




The following table presents unaudited quarterly operating results for each of the Companys last eight fiscal quarters. This information has been consistent with the Companys audited financial statements and includes all adjustments consisting only of normal recurring adjustments that the Company considers necessary for a fair presentation of the data.



F-19

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Table of Contents

EAUTOCLAIMS, INC.QUARTERLY RESULTS OF OPERATIONS




Three Months Ended
        
        July 31, 2006
        
        April 30, 2006
        
        January 31, 2006
        
        October 31, 2005(unaudited)
        
        (unaudited)
        
        (unaudited)
        
        (unauditedTotal revenue
        
        
        3,436,555
        
        
        3,991,081
        
        
        4,390,999
        
        
        3,802,046Expenses:Claims processing charges
        
        
        2,248,844
        
        
        2,783,315
        
        
        2,458,586
        
        
        2,687,349Selling, general and administrative
        
        
        1,380,344
        
        
        1,921,779
        
        
        1,814,826
        
        
        1,478,493Depreciation and amortization
        
        
        110,659
        
        
        112,323
        
        
        113,867
        
        
        122,284Total expenses
        
        
        3,739,847
        
        
        4,817,417
        
        
        4,387,279
        
        
        4,288,126Net loss
        
        $
        (303,292
        )
        $
        (826,336
        )
        $
        3,720
        
        $
        (486,080
        )Adjustment to net loss to computeloss per common share:Preferred stock dividendsDividends to unit holders
        
        
        
        
        
        (82,004
        )
        
        
        
        
        (475,829
        )Net loss applicable to common stock
        
        $
        (303,292
        )
        $
        (908,340
        )
        $
        3,720
        
        $
        (961,909
        )Loss per common share  basic and diluted
        
        $
        (0.03
        )
        $
        (0.01
        )
        $
        
        
        $
        (0.02
        )Weighted-average number of commonshares outstandingBasic
        
        
        80,522,696
        
        
        73,706,683
        
        
        65,794,075
        
        
        63,358,825Diluted
        
        
        80,522,696
        
        
        73,706,683
        
        
        75,292,746
        
        
        63,358,825






EAUTOCLAIMS, INC.QUARTERLY RESULTS OF OPERATIONS




Three Months Ended
        
        July 31, 2005
        
        April 30, 2005
        
        January 31, 2005
        
        October 31, 2004(unaudited)
        
        (unaudited)
        
        (unaudited)
        
        (unauditedTotal revenue
        
        
        3,453,669
        
        
        3,552,198
        
        
        3,525,569
        
        
        4,119,796Expenses:Claims processing charges
        
        
        2,465,088
        
        
        2,689,195
        
        
        2,674,492
        
        
        3,200,486Selling, general and administrative
        
        
        1,384,861
        
        
        1,512,695
        
        
        1,326,602
        
        
        1,330,271Depreciation and amortization
        
        
        120,144
        
        
        123,981
        
        
        133,104
        
        
        134,584Total expenses
        
        
        3,970,093
        
        
        4,325,871
        
        
        4,134,198
        
        
        4,665,341Net loss
        
        $
        (516,424
        )
        $
        (773,673
        )
        $
        (608,629
        )
        $
        (545,545
        )Adjustment to net loss to computeloss per common share:Preferred stock dividends
        
        
        (7,865
        )
        
        (15,273
        )
        
        (11,389
        )
        
        (16,128
        )Dividends to unit holders
        
        
        
        
        
        (432,572
        )
        
        (554,051
        )Net loss applicable to common stock
        
        $
        (524,289
        )
        $
        (1,221,518
        )
        $
        (1,174,069
        )
        $
        (561,673
        )Loss per common share - basic and diluted$
        (0.01
        )
        $
        (0.02
        )
        $
        (0.03
        )
        $
        (0.02Weighted-average number of commonshares outstanding - basic and diluted
        
        
        55,806,133
        
        
        51,529,115
        
        
        37,681,925
        
        
        35,361,541






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Table of Contents

ALLOWANCE FOR DOUBTFUL ACCOUNTS



Information relating to the allowance for doubtful accounts is as follows:



BeginningBalance
        
        Charges
        
        Deductions
        
        Balance At EndOf PeriodYear ended 7/31/2004
        
        242,000
        
        63,607
        
        144,607
        
        161,000Year ended 7/31/2005
        
        161,000
        
        89,675
        
        42,675
        
        208,000Year ended 7/31/2006
        
        208,000
        
        55,538
        
        93,538
        
        170,000






F-21

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Table of Contents

EAUTOCLAIMS, INC.



NOTES TO FINANCIAL STATEMENTS







Report of Independent Registered Public Accounting Firm on Financial Statement Schedule





To the Board of Directors

eAutoclaims, Inc.



The information included on Schedule II is the responsibility of management, and although not considered necessary for a fair presentation of financial position, results of operations, and cash flows is presented for additional analysis and has been subjected to the auditing procedures applied in the audit of the basic financial statements.  In our opinion, the information included on Schedule II relating to the years ended July 31, 2006, 2005 and , 2004 is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. Also, such schedule presents fairly the information set forth therein in compliance with the applicable accounting regulations of the Securities and Exchange Commission.



GOLDSTEIN GOLUB KESSLER LLP

New York, New York



September 22, 2006





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Table of Contents

PART II



INFORMATION NOT REQUIRED IN PROSPECTUS



ITEM 13.   OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.



The following table sets forth various expenses, which will be incurred in connection with the registration of our securities. Other than the SEC Registration Fee, the amounts set forth below are estimates: -



|SEC Registration Fee          |  |  | $ | 500    | 
|----------------------------- |  |  | - | ------ | 
|Printing & Engraving Expenses |  |  | $ | 5,000  | 
|Legal Fees and Expenses       |  |  | $ | 10,000 | 
|Accounting Fees and Expenses  |  |  | $ | 10,000 | 
|Transfer Agent Fees           |  |  | $ | 2,500  | 
|State Blue Sky filings        |  |  | $ | 2,000  | 
|                              |  | 
|                             
|TOTAL                         |  |  | $ | 30,000 | 
|                              |  | 

ITEM 14.   INDEMNIFICATION OF DIRECTORS AND OFFICERS



Our Certificate of Incorporation provides that no director shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director except as limited by Nevada law. Our Bylaws provide that we shall indemnify to the full extent authorized by law each of its directors and officers against expenses incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the corporation. We have entered into indemnity agreements with our officers and directors.



Insofar as indemnification for liabilities may be invoked to disclaim liability for damages arising under the Securities Act of 1933, as amended, or the Securities Act of 1934 (collectively, the Acts), as amended, it is the position of the Securities and Exchange Commission that such indemnification is against public policy as expressed in the Acts and are therefore, unenforceable.



ITEM 15.   RECENT SALES OF UNREGISTERED SECURITIES



In August of 2003, we sold 591,397 shares of common stock at $0.279 per share to five (5) investors. The funds raised totaled $165,000, less finders fees and legal fees of $1,750, resulting in net proceeds of $163,250.



During the year ended July 31, 2004, the Company issued 248,046 shares of common stock to two directors in exchange for their services. The Company charged operations $98,833, which was equal to the fair market value of the shares when earned.



During the year ended July 31, 2004, the Company issued options to purchase common stock, where the exercise price of the options are equal to or greater than the fair market value of the Companys common stock on the date of the grant, as follows:




        Options to purchase 75,000 shares of common stock to the President and CEO, in accordance with his contract.



        Options to purchase 100,000 shares of common stock to the Board of Directors in accordance with their compensation agreement.



        Options to purchase 367,500 shares of common stock to the employees of eAutoclaims, excluding senior management.




Additionally, options to purchase 458,552 shares of common stock were canceled.



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Table of Contents

On March 10, 2004 the board approved and the Company issued 2,020,000 options to the management team for executing an agreement with ADP Claims Services. On March 29, 2004, The Company issued 10,000 options to a consultant for services performed for the Company. On April 20, 2004, 72,767 options were issued to managers who took a pay cut as partial compensation for the pay cut. All three sets of options are exercisable at $0.01, immediately vested and have a term of ten years.



On October 23, 2003, the Company entered into an agreement to restructure the preferred stock terms with the existing preferred stockholders. The agreement provides the Company an opportunity to purchase a certain number of preferred shares each month should we choose to do so. If the Company does not purchase preferred shares in a month, and the holders elect to convert some preferred shares, the holders must give the Company four days notice to arrange a block trade in order to minimize the impact of the sale of converted shares in the open market. The agreement also sets a minimum conversion price of $0.20 per share for the conversion of preferred shares to common shares.



On February 2, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $17,293 were converted into 386,466 shares of common stock. On March 9, 2004, 11 shares of preferred stock with a face value of $55,000, plus dividends of $16,274 were converted into 274,659 shares of common stock. On June 4, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $18,898 were converted into 392,525 shares of common stock. On June 25, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $19,187 were converted into 345,041 shares of common stock. On August 2, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $15,966 were converted into 379,933 shares of common stock. On September 3, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $17,951 were converted into
389,753 shares of common stock. On October 6, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $18,398 were converted into 391,989 shares of common stock. On November 9, 2004, 12 shares of preferred stock with a face value of $60,000, plus dividends of $18,700 were converted into 393,501 shares of common stock. On January 27, 2005 and February 4, 2005 the Company bought back 8 and 16 share of preferred stock for $56,923 and $113,775, respectively.



In March through June 30, 2004 the Company raised $2,271,240 from the sale of 8,111,572 Units at $.28 per Unit to twenty-one (21) investors. Each Unit consists of one (1) share of common stock and one (1) common stock purchase warrant exercisable at $.35. The Company paid Noble International Investment, Inc. (Noble) total commissions and expenses of $170,378, one other individual $9,667 as a finders fee in connection with the issuance of these securities and incurred agent warrants to acquire 790,200 Units valued at $158,040 and issued the other finder 34,525 shares of our restricted common stock valued at $9,667.



On April 23, 2004 the Company received $250,000 in exchange for 8% convertible debentures due and payable on October 14, 2004 unless converted. The Company also issued 892,857 five-year warrants with a strike price of $0.35 per share. The Company also adjusted the strike price on 1,000,000 warrants that the investor owned prior to this investment from $0.63 to $0.35 per share. The Company agreed to register the shares underlying the warrants and the convertible debenture in this registration statement. In June 2004, the Director exchanged his convertible debentures and 892,857 warrants at $0.35 for 892,857 units as described in the previous paragraph. This resulted in a total of 9,004,429 units being sold.



On August 24, 2004, the holder of the Convertible debenture converted $25,000 of the principal for 89,606 shares of common stock. On September 29, 2004, the Company issued an additional 20,759 shares of common stock, for the first three-months interest payments on the convertible debenture.



In January and February 2005, the Company raised $1,724,000 from the sale of 10,775,000 Units at $0.16 per unit to 10 investors. Each Unit consists of one (1) share of common stock and one-half (1⁄2)  common stock purchase warrant exercisable at $.16. The Company paid Noble International Investment, Inc. (Noble) total commissions and expenses of $181,020 in connection with the issuance of these securities and incurred agent warrants to acquire 1,616,250 Units at $0.16 per Unit.



The Company paid Noble International Investment, Inc.
(Noble) total commissions and expenses of $185,520 in connection with the issuance of these securities and incurred
$29,526 of other expenses. Noble also earned placement agent warrants to purchase 1,616,250 Units at $0.16 per Unit. In addition,
as previously discussed above, the Board agreed to issue the Companys legal counsel 940,000 shares of the Companys
common stock as part of his fee for counsel and services rendered relating to the sale of these equity securities.



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Table of Contents

During the year ended July 31, 2005, the Company issued 455,305 shares of common stock to three directors in exchange for their services. These shares were expensed over the year as they were earned. During the year ended July 31, 2005, the Company expensed $124,678 which was approximately equal to the fair market value of the shares when earned.



During the year ended July 31, 2005, the Company issued 71,288 shares of common stock in exchange for $24,951 in legal services.  In addition, the Board agreed to issue the Companys legal counsel 940,000 shares of the Companys common stock, valued at $150,400 as part of his fee for counsel and services rendered relating to the sale of equity securities.



During the year ended July 31, 2005, the Company issued options to purchase 137,500 shares of common stock to three Board members for services rendered in accordance with an approved compensation plan. The Company also issued an option to purchase 71,000 shares of common stock to three employees under an approved compensation plan. All options issued had strike prices of $0.12 to $0.30 per share, which was the market price at the date of issuance.



On April 12, 2005 an officer/director and another director of the Company each exercised options to purchase 350,000 shares of the Companys common stock, for a total of 700,000 shares, with a strike price of .01 per share. On May 20, the director exercised an additional 150,000 options, with a strike price of $.01 per share. Options to purchase 17,500 shares of the Companys common stock with a strike price of $0.01 per share were exercised by a consultant on October 26, 2004. An additional 120,729 options to purchase common stock were exercised by employees.  Options to purchase 890,166 shares of common stock were canceled.



On February 22, 2005, the Company entered into a twelve month Investor Relations Consulting Agreement. The Consultant will provide various investor relations services for $6,500 per month plus 250,000 shares of the Companys common stock. Either party can terminate the agreement after five months.



As part of the provisions of the sales of equities in March through May of 2004 there was a requirement to meet certain claims volume targets under the ADP Co-Marketing Agreement. If we failed to meet those targets, up to 100% of the original Units (as defined in that document) would have to be issued to those 2004 investors for no additional consideration (True up). In order to help resolve this open issue, in December 2004 we offered the 2004 investors 50% of the total potential True up Units in exchange for releasing the Company from the remaining target volume commitment.



On August 1, 2005, the Company evaluated the claims volume that it had received from customers generated by the ADP Claims Service Group Co-marketing Agreement as specified in the subscription agreements from the 2004 capital raise. In accordance with those agreements, the Company did not meet the minimum volume requirements and therefore had to issue 2,162,860 Units (one share of common stock and one, 3-year, $0.16 warrant to purchase a common share) to the investors who did not accept our December 2004 offer. Issuing these units resulted in the Company recording a stock dividend of $475,829.



During the year ended July 31, 2006 the Company issued a total of 12,412,505 shares of common stock in connection with the exercise of a like number of outstanding common stock purchase warrants with exercise prices ranging from $0.16 to $0.20 per share. Of this total, 11,341,076 shares were issued effective March 21, 2006 for warrants exercised. As a result of exercising these warrants, the Company received $1,749,475 after paying $18,435 in legal fees and $50,662 for certain financial advisory and investment banking services in connection with the program. In addition, the Company issued 8,200,359 new 3 year, $0.30 warrants to investors who exercised warrants. Issuing these units resulted in the Company recording a stock dividend of $82,004. An additional 1,071,429 warrants at a $0.16 exercise price were exercised during the nine months ended April 30, 2006 for which the Company received $171,429.



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Table of Contents

On August 15, 2005 the holder of the $275,000 convertible debenture converted the note into 1,718,750 shares of the Companys common stock. In addition, interest on the note from the end of July 2005 until August 15, 2005 of $904 was paid to the holder of the note with 5,651 shares of the Companys common stock.



During the year ended July 31, 2006 the Company issued a total of 3,358,876 shares of common stock in exchange for services. Of this total, 1,377,796 shares were issued to members of senior management in accordance with terms of their employment agreements. The Company recorded a charge to expense of $407,398, which was approximately equal to the fair market value of the shares at the time of issuance. In addition, 200,000 shares of stock were issued to an officer in October 2005 as a result of a modification to his employment contract. An expense of $30,000 was recorded for these shares, which was approximately equal to the fair market value of the shares at the time of issuance. On November 8, 2005 the Board of Directors gave approval for, and the Company subsequently issued, 1,000,000 shares of the Companys common stock to the Chairman of the Board to compensate him for his past
services and his role as Chairman. The Company expensed a total of $190,000 for these shares, which was equal to the fair market value of the shares at the grant date. In addition, the Board also approved future compensation for the Chairman of the Board to include the same annual retainer of $25,000 to be paid in shares of the Companys common stock as well as the same quarterly stock compensation currently paid to non-employee directors. The Company issued 781,080 shares of common stock to four non-employee directors and the Chairman of the Board in exchange for their services. Of this total, 443,576 shares were issued for services to be rendered for fiscal year 2006. These shares were expensed over the year as they were earned.  As of July 31, 2006 the Company expensed $93,151, which was approximately equal to the fair market value of these shares when they were issued. In addition, a total of 337,504 shares were issued to these same directors and the Chairman of the Board for
services rendered during the fiscal year ended July 31, 2006. A total of $74,000 was charged to expense during this time period, which was approximately equal to the fair market value of these shares when earned.



Also on November 8, 2005 the Board voted to adjust the strike price from $0.35 to $0.16 on 1,000,000 warrants owned by an investor, who is also a director, in order to match the strike price of other investors warrants issued under the anti-dilution provisions of their agreements.



On November 29, 2005 the Company issued 400,000 shares of common stock in the name of its landlord at that time as part of an agreement to facilitate the sale of the building (See Note 6: Purchase and Sale of Building). These shares were part of the building sale transaction and were delivered to the landlord at the December 9, 2005 closing.



During the year ended July 31, 2006 a total of 1,203,437 shares of the Companys common stock were issued as a result of the exercise of outstanding options. Of this total, 200,000 options were exercised by a director, 512,500 by an officer and director, 250,000 by two officers combined, 137,500 by two consultants and 44,104 by other employees, all with a strike price of $0.01. In addition, a consultant and two employees exercised a total of 59,333 options to purchase shares of the Companys common stock with exercise prices ranging from $0.13 to $0.15 per share. A total of 137,500 shares were sold back to the Company by an officer who delivered these shares to satisfy tax withholding requirements. These shares were valued at $31,625, which represents the fair value of the shares at the time of surrender.



In October 2005, the Company issued 200,000 warrants with a strike price of $0.20 to an investor for providing the Company with bridge loan financing and an additional 250,000 warrants with a strike price of $0.20 were issued to two finders for helping to facilitate the transaction. The Company valued these warrants at $0.02 each, utilizing a warrant valuation provided by an independent investment banker, and recorded a charge of $9,000 for these warrants in October 2005.



Other than indicated above, no underwriter, broker dealer or finder participated in any of the sales discussed above, nor did the Registrant pay any commissions or fees with respect to these issuances. With regard to all such issuances, the Registrant relied on Section 4(2) of the Securities Act of 1933 (the Act) or Rule 506 of Regulation D for an exemption from the registration requirement of the Act. The purchasers had access to information concerning the Registrant, its financial condition, assets, management and proposed activities. Each purchaser represented that he had the ability to bear economically a total loss of his investment. The Registrant has impressed each certificate with a restrictive legend and will issue stop transfer instructions to the Registrants transfer agent upon completion of this offering.



II-4

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Table of Contents

Exhibit No.
        Description of Exhibit




1.1
        [Reserved]


1.2
        [Reserved]


3.1
        Articles of Incorporation of Samuel Hamann Graphix, Inc. (Nevada) as amended (1)


3.2
        Articles of Merger between Samuel Hamann Graphix, Inc. (Nevada) and Samuel Hamann Graphix, Inc. (California) (1)


3.3
        By-laws of Transformation Processing Inc. (Nevada).(1)


3.4
        Articles of Merger between of TPI (Ontario) and TPI (Nevada) (1)


3.5
        Agreement and Plan of Merger by and between Transformation Processing, Inc. and eAutoclaims.com, Inc., dated April 26, 2000 (3)


3.6
        Articles of Merger of eAutoclaims.com, Inc., a Delaware corporation with and into Transformation Processing, Inc., a Nevada corporation (5)


3.7
        Agreement and Plan of Merger by and among eAutoclaims.com, Inc., a Nevada corporation, eAutoclaims.com Acquisition, a South Carolina corporation, Express Claims, Inc., a South Carolina corporation, and its stockholders, dated June 8, 2000 (2)


3.8
        First Amendment to Agreement and Plan of Merger with Premier Claims, Inc. dated June 27, 2000 (2)


3.9
        Articles of Merger or Share Exchange between Premier Express, Inc., as the surviving corporation and eAutoclaims.com Acquisition Corporation, filed July 20, 2000 with the Secretary of State of South Carolina (5)


3.10
        Promissory Note dated June 27, 2000 between eAutoclaims.com, Inc. and Randal K. Wright and S. Reed Mattingly (2)(9)


3.11
        Promissory Note dated June 16, 2000 between eAutoclaims.com, Inc. and Randal K. Wright (2)(9)


3.12
        Promissory Note dated June 16, 2000 between eAutoclaims.com, Inc. and S. Reed               Mattingly. (2)(9)


3.13
        Articles of Amendment to Articles of Incorporation increasing number of authorized                            shares from 50 million to 100 million and name modification. (12)


4.1
        Specimen of Common Stock Certificate (1)


4.2
        [Reserved]


4.3
        [Reserved]


4.4
        The Registrants 1998 Stock Option Plan (4)


4.5
        [Reserved]


4.6
        Form of Stock Option Agreement to Employees (6)


4.7
        Form of Directors Stock Option Agreement (6)


4.8
        Form of Non-Qualified Stock Option Agreement (6)


5.1
        Opinion of Johnson, Pope, Bokor, Ruppel & Burns, LLP as to legality of securities being issued.


10.1
        Employment Agreement between eAutoclaims.com, Inc. and Eric Seidel dated February 1, 2000 (5)(8)(9)


10.2
        Employment Agreement between eAutoclaims.com, Inc. and Randal K. Wright dated July 1, 2000 (2)(8)(9)


10.3
        Employment Agreement between eAutoclaims.com, Inc. and S. Reed Mattingly dated July 1, 2000 (2)(8)(9)


10.4
        Employment Agreement between eAutoclaims.com, Inc. and M. Scott Moore dated August 14, 2000 (5)(8)(9)


10.5
        Employment Agreement between eAutoclaims.com, Inc. and Gaver Powers dated April 13, 2000 (5)


10.6
        Consulting Agreement between eAutoclaims.com, Inc. and Jeffrey D. Dickson dated December 1, 1999 (5)


10.7
        Consulting Agreement between eAutoclaims.com, Inc. and Liviakis Financial Communications,  Inc. dated February 1, 2000 (5)(9)


10.8
        Amendment No. 1 to Consulting  Agreement between eAutoclaims.com,  Inc. and Liviakis Financial Communications, Inc. dated September 18, 2000 (5)(9)


10.9
        Lease Agreement between eAutoclaims.com, Inc. and KWPH, Inc., dated October 17, 2000 (5)(9)


10.10
        Service Agreement between eAutoclaims.com, Inc. and WE Securities, Inc. August 8, 2000 (5)(9)




II-5

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Table of Contents

10.11
        Business Consulting Agreement between eAutoclaims.com, Inc. and TTG LLC dated September 8, 2000 (5)(9)


10.12
        Commercial lease dated October 12, 1998 between Premier Express Claims, Inc. and Stephenson Park Associates Limited (5)(9)


10.13
        [Reserved]


10.14
        Certificate of Full Performance of Proposal - Form 46 filed by BDO Dunwoody Limited - Trustee dated May 8, 2000 (5)


10.15
        Order of the Superior Court of Justice in the Matter of the Proposal of Transformation Processing, Inc. dated November 25, 1999 (5)


10.16
        Proposal of Transformation Processing, Inc. - Court File No. 32-107046 filed in the Superior Court of Justice dated October 14, 1999. (5)


10.17
        Share Exchange Agreement between Transformation Processing, Inc. and certain of its securities holders dated April 30, 2000 (5)


10.18
        [Reserved]


10.19
        Securities Purchase Agreement effective June 27, 2000 between Thomson Kernaghan, as Agent and eAutoclaims.com, Inc. (5)(9)


10.20
        Certificate of Rights, Designations, Preferences and Limitations of Series A Convertible Preferred Stock (5)


10.21
        Security Agreement between Thomson Kernaghan, as Agent and eAutoclaims.com, Inc. (5) (9)


10.22
        Form of Purchasers Warrant (5)


10.23
        Form of Agents Warrant (5)


10.24
        Registration Rights Agreement (5)(9)


10.25
        eAutoclaims.com, Inc. Agreement with Certain Securities Holders effective May 31, 2000 (5)(9)


10.26
        eAutoclaims.com, Inc. Agreement with Sovereign Partners, Ltd. effective May 31, 2000 (5)(9)


10.27
        eAutoclaims.com, Inc. Agreement with Dominium Capital Fund (5)(9)


10.28
        Form of Master Modification Agreement with Certain Security Holders dated January 12, 2001(6)(9)


10.29
        Restated master Modification Agreement dated May 2001 (9)


10.30
        Modification agreement dated November 2001 superceding the original Modification Agreement dated January 12, 2001 and the Restated Modification Agreement dated May 2001 (9)


10.31
        Form of Bricks to Clicks Service and License Agreement (6)


10.32
        Form of Collision Repair Facility Agreement and Procedures (6)


10.33
        Form of Change of Control and Termination Agreement (6)


10.34
        Form of Officers/Directors Indemnification Agreement (6)


10.35
        Bricks to Clicks Service and Licensing  Agreement with Inspire Claims Management, Inc., dated November 1, 2000(6)(9)


10.36
        Lease Agreement for 110 East Douglas Road dated September 2001 (6)


10.37
        Form of Employee Confidentiality Agreement (6)


10.38
        Letter Agreement with Liviakis Financial Communications, Inc. (6)


10.39
        Letter Agreement with Former Liviakis Financial Communications, Inc. Employees (6)


10.40
        Claims Management Services and License Agreement with Royal Indemnity Company, dated April 24, 2001(6)


10.41
        Amended and Restated Employment Agreement with Eric Seidel effective May 21, 2001 (6)(8)


10.42
        Form of Amendment to Certificate of Designation, Rights and Preferences of Series A Preferred Stock effective May 21, 2002 (7)(10)


10.43
        Agreement between Parts.com, Inc. and the Registrant effective May 1, 2001(6)


10.44
        Form of Convertible Debenture (6)


10.45
        Form of Warrants issued in connection with Convertible Debentures (6)


10.46
        Form of Subscription Agreement for purchasers of Convertible Debentures (6)


10.47
        Amended and Restated Employment Agreement with Eric Seidel, dated March 27, 2003 (10)


10.48
        Employment Agreement with Scott Moore, effective April 25, 2003 (10)


10.49
        Employment Agreement with Reed Mattingly, effective May 1, 2003 (10)


10.50
        Employment Agreement with Dave Mattingly, effective May 1, 2003 (10)


10.51
        Employment Agreement with Stacy Adams, effective May 1, 2003 (10)


10.52
        Agreement by and between eAutoclaims.com, Inc. and Governors Road, LLC, effective October 23, 2003 (11)




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10.53
        Form of Amendment to Certificate of Rights, Designation and Preferences of Series A Preferred Stock, filed with the Nevada Secretary of State on November 20, 2003 (11)


10.54
        Letter Agreement with Noble International Investments, Inc., dated April 22, 2004 (11)


10.55
        Registration Rights Agreement relating to April/May 2004 Unit Offering (11)


10.56
        Form of Common Stock Purchase Warrant relating to April/May 2004 Unit Offering (11)


10.57
        $250,000 Convertible Note with Christopher Korge, dated May 2004 (11)


10.58
        Common Stock Purchase Warrant issued to Christopher Korge dated May 2004 (11)


10.59
        Agreement with ADP Claims Solution Group, Inc. dated March 9, 2004 (11)


10.60
        Confidential Private Offering Term Sheet  January 18, 2005 (15)


10.61
        Subscription Agreement (15)


10.62
        Warrant to Purchase Common Stock of eAutoclaims (15)


10.63
        Amendment to Subscription Agreement and Related Documents (15)


10.64
        Registration Rights Agreement (15)


10.65
        Employment Agreement with Eric Seidel, effective April 30, 2005 (16)


10.66
        Employment Agreement with Larry Colton, effective May 1, 2005 (16)


10.67
        Employment Agreement with Reed Mattingly, effective May 1, 2005 (16)


10.68
        Employment Agreement with Dave Mattingly, effective May 1, 2005 (16)


10.69
        Employment Agreement with Stacy Adams, effective May 1, 2005 (16)


10.70
        Agreement for conversion of Convertible Preferred Stock, dated July 21, 2005 (16)


10.71
        Building Lease (17)


10.72
        PEO Contract (17)


10.73
        Form of Warrant Exercise Term Sheet (18)


10.74
        Form of Subscription Agreement (18)


10.75
        Form of Registration Rights Agreement (18)


10.76
        Form of Common Stock Purchase Warrant (18)


10.77
        Letter Agreement with Noble International Investments, Inc (18)


10.78
        Letter Of Intent with Firemans Fund Insurance Company, dated October 16, 2006 (19)




21.1
        List of Subsidiaries (14)


23.1
        Consent of Goldstein Golub Kessler, LLP *


23.2
        Consent of Johnson, Pope, Bokor, Ruppel & Burns, LLP (included in Exhibit 5.1) *


* filed herewith

99.1
        Code of Ethics (10)




(1)
        Incorporated by reference from the Registrants Form 10-SB filed on March 12, 1998 and amended on August 31, 1998 and October 22, 1998


(2)
        Incorporated by reference from the Registrants Form 8-K filed on July 25, 2000


(3)
        Incorporated by reference from the Registrants Form 10-KSB for fiscal year ended July 31, 1999


(4)
        Incorporated by reference from the Registrants Form 10-KSB for fiscal year ended July 31, 1998


(5)
        Incorporated by reference from the Registrants Form 10-KSB for fiscal year ended July 31, 2000


(6)
        Incorporated by reference from the Registrants Form 10-KSB for fiscal year ended July 31, 2001


(7)
        Incorporated by reference from the Registrants Form 10-KSB for fiscal year ended July 31, 2002


(8)
        This Employment Agreement has been superseded by a new employment agreement filed as Exhibit (10)


(9)
        Terminated, no longer in effect


(10)
        Incorporated by reference from the Registrants Form 10-KSB for fiscal year ended July 31, 2003


(11)
        Incorporated by reference from the Registrants Form S-1 file June 8, 2004.


(12)
        Incorporated by reference from the Registrants Form 10-K for fiscal year ended July 31, 2004


(13)
        Incorporated by reference from the Registrants Form S-1 file November 24, 2004.


(14)
        None  no subsidiaries


(15)
        Incorporated by reference from the Registrants Form 8-K filed on February 4, 2005.


(16)
        Incorporated by reference from the Registrants Form 10-K for fiscal year ended July 31, 2005.


(17)
        Incorporated by reference from the Registrants Form 10-Q for period ending January 31, 2006


(18)
        Incorporated by reference from the Registrants Form 8-K filed on March 22, 2006


(19)
        Incorporated by reference from the Registrants Form 8-K filed on October 16, 2006


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ITEM 17.
        UNDERTAKINGS




The undersigned registrant hereby undertakes:



(1)           To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:



(i)
        Include any Prospectus required by Section 10(a)(3) of the Securities Act;




(ii)
        Reflect in the Prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the change in volume and price represents no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of the Registration Fee table in the effective registration statement; and




(iii)
        Include any additional or changed material information on the plan of distribution.




(2)           That, for the purpose of determining any liability under the Securities Act of 1933, as amended, treat each such post-effective amendment as a new registration statement relating to the securities offered therein, and the offering of the securities at that time to be the initial bona fide offering thereof.



(3)           To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.



(4)           Pursuant to Rule 430C that each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.



Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.



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SIGNATURES



Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Amendment No. 1 to Form S-1, to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Oldsmar, Florida, on November 20, 2006.



eAutoclaims, Inc.Dated  November 24, 2006
        By:
        /s/   Eric SeidelEric Seidel, Chief Executive Officer(Principal Executive Officer)By:
        /s/   Larry ColtonLarry Colton, Chief Financial Officer andPrincipal Accounting Officer


Pursuant to the requirements of
the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.



|NAME                                                     |  | TITLE                                          |  | DATE             
|-------------------------------------------------------- |  | ---------------------------------------------- |  | -----------------
|                                                        
|/s/   Eric SeidelEric Seidel                             |  | President, Chief ExecutiveOfficer and Director |  | November 20, 2006
|                                                        
|/s/   Jeffrey D. DicksonJeffrey D. Dickson               |  | Chairman                                       |  | November 20, 2006
|                                                        
|/s/   Nicholas D. Trbovich, Jr.Nicholas D. Trbovich, Jr. |  | Director                                       |  | November 20, 2006
|                                                        
|/s/   Christopher KorgeChristopher Korge                 |  | Director                                       |  | November 20, 2006
|                                                        
|/s/   John K. PenningtonJohn K. Pennington               |  | Director                                       |  | November 20, 2006
|                                                        
|/s/   William Austin Lewis IVWilliam Austin Lewis IV     |  | Director                                       |  | November 20, 2006

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INDEX TO EXHIBITS



Exhibit No.
        Description of Exhibit




5.1
        Opinion re: Legality of the Securities Being Registered (See Exhibit 32.12)




23.1
        Consent of Goldstein Golub and Kessler, LLP




23.2
        Consent of Johnson, Pope, Bokor, Ruppel & Burns, LLP (contained in Exhibit 5.1)


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