Table of Contents





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




FORM 10-KSB




xANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal
year ended July 31, 2008

oTRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-23903




|                                                  
|--------------------------------------------------
|eAUTOCLAIMS, INC.                                 
|                                                  
|(Exact name of registrant as specified in charter)

|                                          |                    
|----------------------------------------- | -------------------
|Nevada                                    | 95-4583945         
|                                          |                    
|(State or other
 jurisdiction             | (IRS Employer      
|of incorporation or
 organization)        | Identification No.)
|                                          |                    
|110 E.
Douglas Road, Oldsmar, Florida     | 34677              
|                                          |                    
|(Address of principal
 executive offices) | (Zip Code)         

Registrants telephone number, including area code:
(813) 749-1020

|                                                                      |                               
|--------------------------------------------------------------------- | ------------------------------
|Securities registered
 pursuant to Section 12(b) of the Exchange Act: | None                          
|Securities registered
 pursuant to Section 12(g) of the Exchange Act: | Common Stock, par value
 $.001



Check whether the issuer is
not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes oNox

Check whether the issuer (1)
has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes xNoo

Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form,, and no disclosure will be contained, to the best of
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB o

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). oYesxNo

Issuers revenues for the
most recent fiscal year: $5,780,080

Aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was sold, or the average bid
and asked price of such common equity as of October 31, 2008: $1,135,613

The number of shares
outstanding of the Issuers Common Stock, $.001 par value, as of October 31,
2008 was 114,479,334.

DOCUMENTS INCORPORATED BY REFERENCENone

Transitional Small Business Disclosure Format (check one): oYesxNo





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FORM 10KSB - Index

|         |                                                                                                                                        |  |     
|-------- | -------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |                                                                                                                                        |  | Page
|         |                                                                                                                                        |  |     
|         | PART I                                                                                                                                 | 
|         |                                                                                                                                        |  |     
|Item 1.  | Description
 of Business                                                                                                               |  | 2   
|         |                                                                                                                                        |  |     
|Item 2.  | Description
 of Property                                                                                                               |  | 15  
|         |                                                                                                                                        |  |     
|Item 3.  | Legal
 Proceedings                                                                                                                     |  | 15  
|         |                                                                                                                                        |  |     
|Item 4.  | Submission
 of Matters to a Vote of Security Holders                                                                                   |  | 16  
|         |                                                                                                                                        |  |     
|         | PART II                                                                                                                                |  |     
|         |                                                                                                                                        |  |     
|Item 5.  | Market for
 Common Equity, Related Stockholder Matters and Small Business Issuer
 Purchases of Equity Securities                       |  | 16  
|         |                                                                                                                                        |  |     
|Item 6   | Managements
 Discussion and Analysis or Plan of Operation                                                                             |  | 17  
|         |                                                                                                                                        |  |     
|Item 7.  | Financial Statements                                                                                                                   |  | 23  
|         |                                                                                                                                        |  |     
|Item 8.  | Changes in
 and Disagreements with Accountants on Accounting and Financial Disclosures                                                 |  | 23  
|         |                                                                                                                                        |  |     
|Item 8A  | Controls
 and Procedures                                                                                                               |  | 24  
|         |                                                                                                                                        |  |     
|Item 8B  | Other
 Information                                                                                                                     |  | 24  
|         |                                                                                                                                        |  |     
|         | PART III                                                                                                                               |  |     
|         |                                                                                                                                        |  |     
|Item 9   | Directors,
 Executive Officers, Promoters, Control Persons and Corporate Governance;
 ComplianceWith Section 16(a) of the Exchange Act |  | 25  
|         |                                                                                                                                        |  |     
|Item 10. | Executive
 Compensation                                                                                                                |  | 27  
|         |                                                                                                                                        |  |     
|Item 11. | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters                                       |  | 32  
|         |                                                                                                                                        |  |     
|Item 12. | Certain
 Relationships and Related Transactions, and Director Independence                                                             |  | 33  
|         |                                                                                                                                        |  |     
|Item 13. | Exhibits                                                                                                                               |  | 33  
|         |                                                                                                                                        |  |     
|Item 14. | Principal
 Accountant Fees and Services                                                                                                |  | 36  
|         |                                                                                                                                        |  |     
|         | PART IV                                                                                                                                | 
|         |                                                                                                                                        |  |     
|         | Signatures                                                                                                                             |  | 37  
|         |                                                                                                                                        |  |     
|         | Certifications                                                                                                                         |  |     

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Table of Contents

This Annual
Report on Form 10-KSB and the documents incorporated herein by reference
contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about our industry, managements beliefs, and assumptions made by
management. Words such as anticipates, expects, intends, plans,
believes, seeks, estimates, variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to predict; therefore,
actual results and outcomes may differ materially from what is expressed or
forecasted in any such forward-looking statements.

PART I

|        |                        
|------- | -----------------------
|ITEM 1. | DESCRIPTION OF BUSINESS

General

eAutoclaims
is a Nevada corporation, formed in 1999, 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, their 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 a 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. This transaction had a short term
negative impact on our anticipated growth in new revenues. After several
attempts to fashion a new co-marketing agreement it became clear that there was
no benefit in creating a new long term agreement as the strategic initiative of
Solera was not in concurrence with eAutoclaims market strategy. At the end of
fiscal 2008 there were no accounts active under the original agreement.

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Products and Services

We
develop customized internet technology solutions for insurance companies,
financial services companies, and companies with fleets of vehicles and heavy
equipment. These products provide for both a business process outsource and/or
application service provider (ASP) solution aligned with current industry
standards. The outsourcing solution provides customers with a complete internet
based managed claims solution from first notice of loss through the completion
of the repair cycle leveraging our vendor and partner networks. The ASP
solution allows the customer to use our internet technology solutions
independent of our personnel, enabling them to reduce their costs associated
with developing, supporting, and maintaining a proprietary technology solution.
Both solutions have proven successful in driving down customer operating costs,
indemnity costs and loss adjustment expenses through automation leveraging our
customized technology solutions and leveraging our network of vendors and
partners.

Our
network of vendors and partners can provide services such as independent
adjustors, car rentals, tow trucks, accident reporting and auto repair centers
all available through our technology solutions. The ASP solution enables
customers with their own network of vendors and partners to be seamlessly
integrated into our technology solutions providing for greater flexibility
while maintaining transparency in managing these partners.

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. 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.

As
insurance companies continue to centralize claims operations we continue to
shift focus from the fully managed business process outsourcing (BPO)
operations to a more programmatic approach in claims handling. We do this by
rewriting our code base and tools to provide web services that will allow
companies to centralize yet still use the technology solutions and tools we
build without having to change their proprietary systems already in place.

We help our
clients manage their vehicle claims losses by providing the following:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Technology  We build customized web-based vehicle claim assignment
 and delivery systems for insurance companies and corporate fleets.
 Additionally we build asset recovery and remarketing web services,
 applications, and tools for the financial services institutional sector. We
 use state-of-the-art technology and security for the transmission of files
 and records. In addition, we utilize digital cameras, smart phones,
 Internet communication, advanced data storage, transmission 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
 customized applications to our clients with their own private label that
 includes their corporate colors and logos, which makes the claims, recovery
 and remarketing process transparent to both insurance company personnel and
 the insured.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 insurance customers as follows:

| |   |                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our audit
 process reduces the average paid loss per vehicle.                                                                                                                                                              
| |   |                                                                                                                                                                                                                            
| |  | 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 reduce fraudulent claims.                                                                                                                                                       

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 near term.

We
have added technology solutions for the financial services industry relevant to
repossessed collateral disposal and lease turn-ins. eAuto Recovery Services is
a full repossession solution that provides a live portal for automobile loan
originators to take non-performing loans that go into the default phase. The
solution is expanding into total loss and salvage vehicles too. The Recovery
program will accomplish the following.

| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Provide an input screen (portal) to place
 the defaulted loan into the process by initiating the repossession process.                                        
| | 2. | Dispatch vehicle information to a
 repossession agent in the network.                                                                                         
| | 3. | Repo agent will repossess the vehicle and
 provide a condition report via hand held device and take the vehicle to the
 auction lot designated by the program.
| | 4. | Auction lot will store the vehicle for
 the compliance period and then move the vehicle into a branded lane for sale.                                         
| | 5. | During the compliance period the repo
 title will be transferred so that the vehicle once sold at auction will be
 available with title.                      
| | 6. | Settlement with the financial intuition
 will then take place.                                                                                                

CUSTOMERS

Our
customers consist primarily of insurance companies, financial institutions,
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 Mitchell International, that service the insurance market.
Our two largest customers, Vision and Firemans Fund Insurance, provided a
total of 32% of our revenues in fiscal 2008.

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Contracts
with existing clients are typically from one to five years. 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 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.

Financial
institution customers consist of banks, credit unions, captive finance
companies and independent finance companies inclusive of sub-prime lenders who
originate automobile paper. Every aspect of the repossession portal through
settlement process are delivered through our application via web services.

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.

Over
the past year eAutoclaims has completely rewritten and converted our
eJusterSuite application to a platform that is focused on service oriented
architecture. The eJusterSuite Enterprise addition is highly scalable and will
provide functionality and connectivity to Insurance Companies that handle
homeowners and automobile claims. Combining these platforms will allow
eAutoclaims to provide a complete claims management solution to tier one
insurance companies.

In
addition, we have developed a complete repossession and remarketing solution that assigns vehicles
to agents, and tracks the progress of vehicles from repossession to completion
of sale. Repossession Agents access eAuto Remarketings secure web application
to view and update assignments, enter repossession details, and fill out
inspection reports. eAuto Remarketing secure web applications allow financial
institutions the ability to manage auto portfolios. Our Best Venue Solution
will programmatically assist the end user to assign vehicles to auctions that
are providing the highest yield for each specific make and model of vehicle.
eAuto Remarketing provides data analysis tools to identify, benchmark, and
streamline logistical processes.

Our
Direct Sales team has made progress to grow ASP sales revenue due to the
relatively high margins generated by our ASP products. We market three ASP
products including eJusterSuite Enterprise ®, AuditPro Enterprise and eAuto
Remarketing. Our service oriented architecture can be used independently or may
use other ASP modules, depending on client workflow and business needs.

Licensing
of eJusterSuite Enterprise ® 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 network of Appraisers. eJusterSuite® allows carriers to manage
appraisal assignments, monitor performance of appraisal sources through various
metrics, and includes access to service partners for homeowner claims and
automobile partners such as rental car procurement, assignment to salvage
vendors, police report pick-up services, and several other service partners
frequently used by Insurance Adjusters.

New Opportunities:

The company
continues to work with other large carriers, credit unions and financial
institutions 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.

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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. 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; 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.

Employees

As
of July 31, 2008, we had 36 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 into 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.

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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 internet technology. 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.

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 enabling transparent upgrades, which reduce potential
customer impact.

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 insurance industry
accepted first notice of loss 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. In the first quarter of calendar 2008 we released AuditPro
Stand Alone which is a total stand alone rules based auditing tool that can be
integrated with any policy management system, claims system, or as a stand
alone for the physical damage book of business of any size insurance company
insuring that peril. This product will have a second release as AuditPro
Enterprise in the first quarter of calendar 2009.

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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.

Risks

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.

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.

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Risks Related to Our Business

The risks
and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us may also adversely impact our
business operations. If any of the following risks actually occur, our
business, financial condition, or operating results could be negatively
affected.

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.

Our
independent auditors have issued a going concern opinion.

Our
auditors have included an explanatory paragraph in their opinion that
accompanies our audited financial statements as of and for the year ended July
31, 2008, indicating that our recurring losses from operations, stockholders
deficiency, and working capital deficiency raise substantial doubt about our
ability to continue as a going concern. The accompanying financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

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, 2008, we derived 18% and 14% of our revenues from two
customers. Although we continue
to solicit new customers, we cannot guarantee that we will contract any new
customers, or that revenues from any future contracts will represent
significant business

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We depend upon
independently owned and operated repair shops 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 our vehicle repair 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
claims services is 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.

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 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.

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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.

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. We
have previously 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 rights 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.

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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.

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, 2008, approximately
$1,079,577 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.

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.

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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.                                                                  

Our Certificate of Incorporation limits
director liabilitythereby 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.

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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.

The forward-looking information in this Form
10-KSB may prove inaccurate.

This Form
10-KSB contains forward-looking statements and information that are based on
managements beliefs as well as assumptions made by, and information currently
available to, management. When used in this report, words such as anticipate,
believe, estimate, expect, and, depending on the context, will and
similar expressions, are intended to identify forward-looking statements. Such
statements reflect our current views with respect to future events and are
subject to certain risks, uncertainties and assumptions, including the specific
risk factors described above. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, believed, estimated
or expected. We do not intend to update these forward-looking statements and
information.

|         |                         
|-------- | ------------------------
|ITEM
 2. | DESCRIPTION
 OF PROPERTY

Our main
offices are located at 110 East Douglas Road, Oldsmar, Florida 33467. We
currently lease these facilities under lease terms that expire in December
2012. Our rent at July 31, 2008, including applicable taxes, was $23,005 per
month and increases 3% at the beginning of each calendar 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.

|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

In
December 2007, Mr. Eric Seidel, former President and CEO, filed a complaint,
case number 07013596CT, in the Circuit Court of the Sixth Judicial Circuit for
the State of Florida, County of Pinellas Civil Division, in which Mr. Seidel
alleged we breached certain provisions of his employment agreement regarding
severance payments Mr. Seidel alleged are due him under the terms of his
agreement. He was seeking a judgment of $91,580 plus reasonable attorney fees and
court costs. We filed an answer to this complaint denying all allegations and
filed a counter-claim alleging Mr. Seidel was not entitled to severance
payments according to the terms of his departure and was erroneously paid for a
period of approximately six months. At Mr. Seidels request we entered into a
mediation which was held on April 3, 2008. We reached a settlement with Mr.
Seidel for $10,000, agreed to lift the legend on all his remaining common stock
holdings and an agreement for mutual non-disparagement.

We
are currently not involved in any legal proceedings that are considered
material.

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

None
during the fourth quarter of the fiscal year ended July 31, 2008.

PART II

|        |                                                                                                                
|------- | ---------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR COMMON EQUITY, RELATED
 STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Market Value

Our
Common Stock is traded on the OTCBB under the symbol EACC.OB. The following
table sets forth, the high and low bid prices of the Common Stock for the
periods shown as reported by the National Quotation Bureau. The bid prices
quoted on the OTCBB reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not represent actual transactions.

|                                                       |  |          |      |         |   |      | 
|------------------------------------------------------ |  | -------- | ---- | ------- | - | ---- | 
|                                                       |  | High Bid |      | Low Bid |  
|                                                       |  |          |      |         |  
|Fiscal Year Ended July 31, 2008                        |  |          |      |         |   |      | 
|First
 Quarter (August 1, 2007 to October 31, 2007)    |  | $        | 0.15 |         | $ | 0.10 | 
|Second
 Quarter (November 1, 2007 to January 31, 2008) |  |          | 0.11 |         |   | 0.05 | 
|Third
 Quarter (February 1, 2008 to April 30, 2008)    |  |          | 0.05 |         |   | 0.02 | 
|Fourth
 Quarter (May 1, 2008 to July 31, 2008)         |  |          | 0.04 |         |   | 0.01 | 
|                                                       |  |          |      |         |   |      | 
|Fiscal Year Ended July 31, 2007                        |  |          |      |         |   |      | 
|First
 Quarter (August 1, 2006 to October 31, 2006)    |  |          | 0.17 |         |   | 0.13 | 
|Second
 Quarter (November 1, 2006 to January 31, 2007) |  |          | 0.17 |         |   | 0.12 | 
|Third
 Quarter (February 1, 2007 to April 30, 2007)    |  |          | 0.19 |         |   | 0.12 | 
|Fourth
 Quarter (May 1, 2007 to July 31, 2007)         |  |          | 0.15 |         |   | 0.11 | 

During
the quarter ended July 31, 2008 we issued 1,166,667 shares of common stock to
members of the Board of Directors for consulting services and other services
rendered in accordance with the approved Board compensation plan. Also, during
the quarter ended July 31, 2008 we issued a total of 5,714,285 shares of common
stock to our Chairman of the Board for conversion of his outstanding notes to
equity. We also issued 11,428,571 shares of common stock to an investor, the
Chairman of the Board, for cash used for working capital purposes.

Holders

As
of July 31, 2008, we had approximately 231 common shareholders of record.

Dividends

We have not
paid any cash dividends on our common or preferred stock and do not anticipate
paying any such cash dividends in the foreseeable future. Earnings, if any,
will be retained to finance future growth.

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Securities Authorized for Issuance Under
Equity Compensation Plans

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, 2008.

|                                                                   |  |                                                                                              |           |                                                                                  |   |                                                                                                                                                |  |  |            |    
|------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------- | --------- | -------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------- | ---
|Plan
Category                                                      |  | Number of Securities
To be Issued Upon
Exercise 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 Plans Approved by
Stockholders                 |  |                                                                                              | 416,500   |                                                                                  | $ | 0.25                                                                                                                                           |  |  | 16,755,400 | (4)
|                                                                   |  |                                                                                              |           |                                                                                  |   |                                                                                                                                                |  |  |            |    
|Equity Compensation Plans Not Approved by
Stockholders (1) (2) (3) |  |                                                                                              | 7,933,274 |                                                                                  | $ | 0.05                                                                                                                                           |  |  | N/A        |    
|                                                                   |  |                                                                                              |           |                                                                                  |   |                                                                                                                                                |  |  |            |    
|                                                                   |  |                                                                                              |           |                                                                                  |   |                                                                                                                                                |  |  |            |    
|Total                                                              |  |                                                                                              | 8,349,774 |                                                                                  | $ | 0.06                                                                                                                                           |  |  |            |    
|                                                                   |  |                                                                                              |           |                                                                                  |   |                                                                                                                                                |  |  |            |    

| |     |                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (1) | Includes options issued to employees.                                                                                                                                                           
| | (2) | Includes 3,000,000 shares that may be issued in
 connection with a change of control, and 4,050,000 shares that may be issued
 in the event of default of repayment of outstanding notes payable
| | (3) | Excludes 20,606,112 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.                                                                                                    

|        |                                                            
|------- | -----------------------------------------------------------
|ITEM 6. | MANAGEMENTS DISCUSSION AND
 ANALYSIS OR PLAN OF OPERATIONS

IMPORTANT NOTE ABOUT FORWARD-LOOKING
STATEMENTS

The
following discussion and analysis should be read in conjunction with our
audited financial statements as of and for the year ended July 31, 2008 and the
notes thereto, all of which financial statements are included elsewhere in this
Form 10-KSB. In addition to historical information, the following discussion and
other parts of this Form 10-KSB 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 Form 10-KSB.

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.

17

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Table of Contents

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 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 Form
10-KSB 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), 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 from repair facilities
that are members of our provider network. The revenues generated from the
vehicle and glass repair through our provider network account for 69% and 84%
of the revenue for the years ended July 31, 2008 and 2007, 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 are dependent upon
the level of service required. For the years ended July 31, 2008, and 2007, 31%
and 16% of the revenue has been received from claims processing fees and other
income, respectively.

MANAGEMENTS OPERATING PLAN

Specifically,
management is taking the following actions that are expected to positively
impact our financial position in fiscal 2009:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Grow direct sales channel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Grow the number of Tier One Insurance providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Expand offerings into the Financial Services sector                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Reprice legacy pricing models to bring them into current cost/benefit
 ratios                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Expand our offerings of newly enhanced applications and tools to our
 existing client base on an ASP transactional basis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Explore 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Convert our core application to a more scalable program language with
 a universal interface                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Roll out higher margin product lines. Management continues to make
 progress in building our operating margins by focusing on higher margin
 products and 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 Audit Pro, a
 programmatic electronic estimate auditing tool. We will release AuditPro
 Enterprise in the first quarter of calendar 2009 as a stand alone rules
 based application that can be bolted on any existing policy management
 software or integrated with newly developed claims modules. 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.

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| |   |                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Develop and
 deploy specialized niche programs that will require us to manage loss
 reserves on fleet generated risks.                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                          
| |  | Expand
 market driven offerings. We are exploring new product lines to offer our shop
 network to the general public. We intend to put up a B2C product by December
 of this year which will allow the general public to enroll their vehicles
 into a program offering repairs on damaged vehicles at a discounted rate.
| |   |                                                                                                                                                                                                                                                                                                                          
| |  | Reduce direct processing expense. We will continue an initiative into
 automating additional parts of our processing business. We expect the end
 result will be a net reduction in direct expense.                                                                                                                      

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 of America.
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 is
recorded 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 are reimbursed by
the insurance company, since we did not have the risk of loss and are not
responsible for the repair.

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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. This Co-Marketing Agreement will not be in effect for fiscal 2009.

We maintain an allowance for doubtful
accounts for losses that we estimate will arise from the customers inability
to make required payments. Collectibility of the accounts receivable is
estimated by analyzing historical bad debts, specific customer creditworthiness
and current economic trends. At July 31, 2008 the allowance for doubtful
accounts was approximately $48,000.

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 $11,582,000 at July 31, 2008. The valuation
allowance relates mainly to 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 are
reporting losses.

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 or our plans for their
 use.

At each balance sheet date, we evaluate
the valuation of intangible assets. The factors used in this evaluation
include: (i) current operating results, (ii) projected future operating results,
and (iii) any other material factors that affect the continuity of the
business. During the year ended July 31, 2008 we recorded $17,000 of expense
for impairment of goodwill of $5,000 and the write-off of software of $12,000
that was no longer in use.

RESULTS OF OPERATIONS

Fiscal Year Ended July 31, 2008, Compared to
Fiscal Year Ended July 31, 2007

REVENUE

Total
revenue for the year ended July 31, 2008 was approximately $5.8 million, which
consists of approximately $3.3 million in glass and collision repair management
for insurance companies, approximately $0.7 million in fleet repairs and
approximately $1.8 million in fees and other revenue. Total revenue for the
year ended July 31, 2007 was approximately $11.8 million, which consists of approximately
$9.0 million in glass and collision repair management for insurance companies,
approximately $0.9 million in fleet repairs and approximately $1.9 million in
fees and other revenue. Total revenues decreased approximately $6 million or
51% as compared to the approximately $11.8 million for the year ended July 31,
2007. The decrease in total revenue is primarily due to the fact that our
largest client, from whom we received 38% of our business in the year ended
July 31, 2007, completed their business migration off of our platform, thus
ending our contractual relationship. We also experienced a reduction in
business associated with clients obtained as a result of our Co-Marketing
Agreement as well as reductions from certain other current clients. This
reduction was mitigated by increases in our license fee revenue of
approximately $496,000.

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Table of Contents

Collision
repair management revenue decreased approximately $5.9 million to approximately
$4.0 million for the year ended July 31, 2008 compared to approximately $9.9
million for the year ended July 31, 2007. The decrease in collision management
revenue is almost entirely due to the result of the loss of our largest client,
which is described above. Included in the total collision management revenue is
revenue earned from repairs processed for clients acquired as a result of our
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, 2008, we earned
approximately $394,000 in net revenue from clients acquired as a result of the
Co-Marketing Agreement. This additional revenue resulted in the gross margin
percent for collision management, exclusive of fees, to increase from 14% to
20% for the year ended July 31, 2008.

Fleet
repair revenue was approximately $702,000 for the year ended July 31, 2008 as
compared to approximately $902,000 for the year ended July 31, 2007. This
decrease represents the loss of a small fleet client as well as normal business
fluctuations from our existing customers.

Fees and
other revenue decreased approximately $.1 million from $1.9 million for the
year ended July 31, 2007 to $1.8 million for the year ended July 31, 2008. This
decrease is primarily the result of earning less revenue this year from current
clients for taking first notice of loss reports, decreased estimatic sales revenue
and less transaction fee revenue. In the year ended July 31, 2008 we lost our
three largest first notice of loss (FNOL) clients. This resulted in a reduction
in revenue of approximately $192,000. This loss was mitigated by approximately
$98,000 of additional revenue earned from taking FNOL losses on a temporary
contract basis for a previous client. The sales of estimatic software also
decreased by approximately $210,000 for the year ended July 31, 2008 as
compared to the year ended July 31, 2007. This decrease is due in part to lower
unit sales, but a significant portion of the decrease is a result of a change
in our method of selling the estimatic units, which was implemented in the
fourth quarter of fiscal 2007. Under the new method, we will receive a sales
commission for the units sold which will reduce the amount of gross revenue per
unit that will be reported in the future. Transaction and file handling fee
revenue decreased by approximately $134,000 for the year ended July 31, 2008 as
compared to the year ended July 31, 2007. This was primarily the result of the
loss of business from our largest customer, as described above.

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 2008 were approximately $3.1 million, or 54% of total revenue,
compared to $8.1 million, or 69% of total revenue in fiscal 2007. Claims
processing charges, as compared to collision revenue, were 79% in fiscal 2008
and 82% in fiscal 2007. The reduction in claims processing charges in fiscal
year 2008 as compared to fiscal year 2007 is consistent with the reduction in
collision revenue for the same periods as previously reported.

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, 2008 were approximately $3.9 million or 68% of revenue compared to
approximately $5.5 million or 47% of revenue for the year ended July 31, 2007.
Included in this total, during the year ended July 31, 2008 and 2007 we
incurred payroll related expenses of approximately $ 2.5 million and
approximately $3.5 million, respectively. The decrease in payroll expenses in
fiscal 2008 as compared to fiscal 2007 was due to staff reductions implemented
in the fourth quarter of fiscal 2007 and in fiscal 2008 as a response to the
reduction in our revenue. The payroll expenses incurred in fiscal 2007 also
included one time costs of approximately $263,000 in expenses associated with
the termination of certain management contracts as part of the staff
reductions. In fiscal year 2008 we also recorded approximately $377,000 less
expense for consulting and professional fees as compared to fiscal 2007. We
also recorded lesser expenses in fiscal 2008 as compared to 2007 in the areas
of insurance, travel, postage and other miscellaneous expenses.

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SG&A
expenses for the year ended July 31, 2008 included non-cash expenses, excluding
charges for depreciation and changes to the bad debt reserve, of approximately
$106,000. These non-cash charges include approximately $139,000 for stock
issued to directors for board services and stock issued in accordance with
management employment agreements, approximately $27,000 for expensing of stock
options as required by SFAS123R (revised 2004), approximately $26,000 for the
issuance of warrants in conjunction with an equity investment, approximately
$5,000 for the amortization of the discount on the notes payable and
approximately $17,000 of impairment expense. We also realized a reduction to
non-cash expense of approximately $108,000 as a result of recognizing the gain
on our building sale-leaseback transaction. SG&A expenses for the year
ended July 31, 2007 included non-cash expenses, excluding charges for
depreciation and changes to the bad debt reserve, of approximately $379,000.
These non-cash charges include approximately $420,000 for stock issued to
directors for board services and stock issued in accordance with management
employment agreements, approximately $19,000 for expensing of stock options as
required by SFAS123R (revised 2004), approximately $46,000 for the issuance of
new warrants in connection with a warrant exercise program and approximately
$1,500 for amortization of the discount on the notes payable. We also realized
a reduction to non-cash expense of approximately $108,000 as a result of
recognizing the gain on our building sale-leaseback transaction

Also
included in the SG&A expense for the year ended July 31, 2008, was interest
expense of approximately $25,000 and $69,000 which was recorded for capital
leases and outstanding notes payable, respectively. In the year ended July 31,
2007 interest expense was approximately $50,000, of which approximately $21,000
relates to interest on notes payable, and approximately $29,000 for interest
expense relating to capital leases. We earned approximately $27,000 in interest
income on our cash reserves in the year ended July 31, 2008 compared to
approximately $35,000 interest income earned in the year ended July 31, 2007.

Depreciation
of property and equipment of approximately $433,000 was recognized in the year
ended July 31, 2008. This was compared to approximately $455,000 of
depreciation in the year ended July 31, 2007.

NET LOSS

We
recognized a net loss of approximately $1.7 million and approximately $379,000
for the years ended July 31, 2008 and 2007, respectively. The fiscal year 2007
loss includes approximately $1.9 million of gain which represents previously
reserved advance payments that are deemed no longer valid due to age and
releases obtained on terminated contracts. The net loss for each year also
includes approximately $108,000 of gain recognized on our building
sale-leaseback transaction. Also included in the net loss number are non-cash
expenses of approximately $537,000 and $713,000 for the years ended July 31,
2008 and July 31, 2007, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At July 31,
2008, we had cash of approximately $260,000 compared to approximately $800,000
at July 31, 2007, a decrease of approximately $540,000 from last year. We had a
working capital deficiency of approximately $2.3 million as of July 31, 2008
compared to $1.7 million as of July 31, 2007, an increase in the deficiency of
approximately $.6 million. Other than working capital generated from
operations, our primary source of working capital during the fiscal year ended
July 31, 2008, was from proceeds received from the issuance of notes and from
the sale of equity securities. During the year ended July 31, 2008 we received
$200,000 from the issuance of notes to our Chairman of the Board, which were
subsequently converted into common stock. We also received approximately
$375,000, net of expenses, as a result of the sale of our common stock to the
Chairman.

We have
invested considerable time and resources in the development of our application
for the financial services business sector and we expect to receive cash from
operations as we deploy this product throughout fiscal 2009. If revenues grow
they will provide working capital, but because revenue growth is not
guaranteed, we continue to analyze options for additional financing, including
the exercise of outstanding warrants, issuance of additional debt, and issuance
of additional equity securities. 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. If we are unable to generate sufficient revenue from operations or
obtain additional funding when required, we could be forced to curtail or
possibly cease operations. 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.

22

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Table of Contents

DEBT AND CONTRACTUAL OBLIGATIONS

Our
commitments for debt and other contractual arrangements as of July 31, 2008 are
summarized as follows:

|                      |  |                       |           |      |   |         |  |      |         |      |   |         |  |   |         |  |   |           | 
|--------------------- |  | --------------------- | --------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- |  | - | --------- | 
|                      |  | Years ending July 31, |          
|                      |  |                       |          
|                      |  | 2009                  |           | 2010 |   | 2011    |  | 2012 |         | 2013 |   | Total   | 
|                      |  |                       |           |      |   |         |  |      |         |      |   |         | 
|                      |  |                       |           |      |   |         |  |      |         |      |   |         |  |   |         |  |   |           | 
|Property lease        |  | $                     | 316,000   |      | $ | 290,000 |  | $    | 299,000 |      | $ | 308,000 |  | $ | 103,000 |  | $ | 1,316,000 | 
|Equipment lease       |  |                       | 101,000   |      |   | 92,000  |  |      | 6,000   |      |   |         |  |   |         |  |   | 199,000   | 
|Notes payable         |  |                       | 250,000   |      |   | 200,000 |  |      |         |      |   |         |  |   |         |  |   | 450,000   | 
|Employee compensation |  |                       | 549,000   |      |   | 148,000 |  |      |        |      |   |         |  |   |         |  |   | 697,000   | 
|                      |  |                       |           |      |   |         |  |      |         |      |   |         |  |   |         |  |   |           | 
|                      |  | $                     | 1,216,000 |      | $ | 730,000 |  | $    | 305,000 |      | $ | 308,000 |  | $ | 103,000 |  | $ | 2,662,000 | 
|                      |  |                       |           |      |   |         |  |      |         |      |   |         |  |   |         |  |   |           | 

We lease
equipment and facilities under non-cancelable capital and operating leases
expiring on various dates through December 2012. The main operating lease
consists of a 7-year lease for 30,000 square feet of a 62,000 square foot
facility. Our rent, including applicable taxes, in fiscal year 2008 was $23,005
per month and increases 3% each year through the remaining life of the lease.
During the fourth quarter of fiscal 2008, we reached an agreement with our
landlord whereby we deferred payment of $11,500 per month of our monthly rental
until November, 2009. A total of $34,500, representing three months of deferred
rent, is included in the schedule above.

In April
2007, we entered into a new eighteen month employment agreement with our
President and Chief Executive Officer. The agreement specifies an annual base
salary of $150,000. The CEO will also receive a $750 per month auto allowance
and a $1,000 per month personal allowance. If the CEO is terminated for any
reason other than for cause or change of control during the term of the
agreement, he will receive a lump sum payment equal to one (1) times the
current base salary.

In January
and March 2007 the Company entered into employment agreements ranging in length
from twenty-four to twenty-seven months with both of the Companys current
officers that range from $125,000 to $132,000 annually. These executives also
receive automobile allowances of $400 per month. If their contracts are not
renewed they receive severance packages of between six and nine 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.

|        |                     
|------- | --------------------
|ITEM 7. | FINANCIAL STATEMENTS

The
financial statements to be provided pursuant to this Item 7 begin on page F-1
of this Report, following Part III hereof.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH
 ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

23

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Table of Contents

|           |                        
|---------- | -----------------------
|ITEM 8A(T) | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under
the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operations of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as of July 31, 2008. Based on this evaluation,
our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
(SEC) reports is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms relating to eAutoclaims, Inc., and was
made known to them by others within those entities, particularly during the
period when this report was being prepared.

Managements Report on Internal Control Over Financial Reporting

Our
management is responsible for establishing and maintaining adequate control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.

Our
management, including the principal executive officer and principal financial
officer, does not expect that our disclosure controls and procedures will
prevent all error and fraud. A control system, no matter how well conceived and
operated, can only provide reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, collusion of two or
more people, or by management override of the control. The design of any system
of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.

Management
assessed the effectiveness of the Companys internal control over financial
reporting as of July 31, 2008. In making the assessment, management used the
criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. Based on its
assessment, management concluded that, as of July 31, 2008, our internal
control over financial reporting was effective to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.

This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only managements report in this annual
report.

Changes in
Internal Control Over Financial Reporting

There
have been no changes in our internal controls over financial reporting that occurred
during our most recent fiscal quarter, which ended July 31, 2008, that have
materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.

|        |                  
|------- | -----------------
|ITEM 8B | OTHER INFORMATION

None

24

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Table of Contents

PART
III

|        |                                                                                                                                        
|------- | ---------------------------------------------------------------------------------------------------------------------------------------
|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS,
 PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION
 16(a) OF THE EXCHANGE ACT

The names,
ages and respective positions of the Executive Officers and Directors of the
Company are as follows:

|                         |  |    |     |                                                  |  |          | 
|------------------------ |  | -- | --- | ------------------------------------------------ |  | -------- | 
|Name                     |  |    | Age |                                                  |  | Position | 
|                         |  |    |     |                                                  |  |          | 
|                         |  |    |     |                                                 
|Jeffrey D. Dickson       |  | 65 |     | Chief Executive Officer,
 President and Director
|                         |  |    |     |                                                 
|Larry Colton             |  | 59 |     | Chief Financial Officer and Director            
|                         |  |    |     |                                                 
|Donald Thomas            |  | 42 |     | Chief Information Officer                       
|                         |  |    |     |                                                 
|William
 Austin Lewis IV |  | 32 |     | Chairman of
 the Board of Directors             
|                         |  |    |     |                                                 
|Christopher Korge        |  | 54 |     | Director                                        
|                         |  |    |     |                                                 
|John K.
 Pennington      |  | 53 |     | 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

Jeffrey
D. Dickson has
been President and Chief Executive Officer and director since January, 2007.
Prior to that time Mr. Dickson served as our 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
has a BA in History from University of Colorado and is a graduate of the PMD
program of the Harvard Graduate School of Business

Larry
Colton, Chief Financial Officer.Mr. Colton became our Chief Financial Officer on May 1, 2005 and a Director in
December 2007. 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.

Donald
Thomas, Chief Information Officer.
Mr. Thomas joined eAutoclaims, Inc. on January 8, 2007. Prior to that Mr.
Thomas spent the previous nine years at Fidelity National Information Services
where he held a variety of positions in the Information Technology field, the
most recent being Assistant Vice President of Technology. Mr. Thomas earned a
BS in Computer Science from UCLA.

William
Austin Lewis IV
was elected Chairman of the Board of Directors in January, 2007 and has been a
Director since 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.

25

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Table of Contents

Christopher
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, of which he is Chairman. Mr. Korge is
Finance Vice Chairman of the Democratic National Committee. He is past Co-Chair
of the Democratic National Committee Business Council.

John
K Pennington
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.

Election and Number of Directors

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 five (5) meetings during the fiscal year ended July 31,
2008. Each of our directors attended all five meetings.

Audit
Committee

The Audit
Committee, which held four meetings during fiscal 2008 to review the three
10QSBs and one 10-KSB, 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. Mr. Pennington is Chairman of the Audit
Committee and serves with Mr. Lewis and Mr. Korge. None of our Audit Committee
members is a financial expert as defined under Item 401(h) of Regulation S-B.
However, currently all 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.

Compensation
Committee

The
Compensation Committee, which held no meetings during fiscal 2008, sets policy
for compensation of all senior management and directors. Mr. Korge is Chairman
of the Compensation Committee and serves with Mr. Lewis and Mr. Pennington. 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.

Code of Ethics

We
have adopted a Code of Business Conduct and Ethics that applies to all
eAutoclaims employees and Board of Directors, including our principal executive
officer and principal financial officer, or persons performing similar
functions. 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.

26

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Table of Contents

Section 16(a) Beneficial Ownership Reporting
Compliance

Based
solely upon a review of the Forms 3, 4 and 5 filed during fiscal 2008 the
registrant reasonably believes, except as described below, that each person
who, at any time during the current 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 in his Form 4 filing
regarding the open market purchase of 265,000 shares of common stock that
occurred on or about September 21, 2007. Mr. Lewis was delinquent in his Form 4
filing regarding the acquisition of 366,667 shares and 12,500 options awarded
through the approved Board Compensation Plan that occurred on or about July 31,
2008. Mr. Korge and Mr. Pennington were delinquent in their Form 4 filings
regarding their acquisition of 400,000 shares and 12,500 options each which
were awarded through the approved Board Compensation Plan that occurred on or
about July 31, 2008.

|         |                       
|-------- | ----------------------
|ITEM 10. | EXECUTIVE COMPENSATION

The
following table shows the compensation paid or accrued by us for the fiscal
years ended July 31, 2008 and 2007 to or for the account of: a) our Chief
Executive Officer, b) each of our two (if applicable) most highly compensated
executive officers who were serving as executive officers at the end of the
most recently completed fiscal year and whose salary and bonus exceeded
$100,000 per year or c) any additional individuals for whom disclosure would
have been provided under (b) but for the fact that the individual was not
serving as an executive officer of our company at the end of the most recently
completed fiscal year (collectively, the Named Executive Officers).

SUMMARY COMPENSATION TABLE

|                               |  |      |      |           |  |          |  |                  |   |                       |  |                                          |  |          |      |  |  |        |  |  |         | 
|------------------------------ |  | ---- | ---- | --------- |  | -------- |  | ---------------- | - | --------------------- |  | ---------------------------------------- |  | -------- | ---- |  |  | ------ |  |  | ------- | 
|Name
 and Principal 
 Position |  | Year |      | Salary($) |  | Bonus($) |  | Stock
 Awards($) |   | Option
 Awards($) (2) |  | All
 Other Compensation Compensation ($) |  | Total($) |     
|                              
|                               |  |      |      |           |  |          |  |                  |   |                       |  |                                          |  |          |      |  |  |        |  |  |         | 
|Jeffrey D. Dickson (1)         |  |      | 2008 |           |  | 156,367  |  |                  |  |                       |  |                                          |  |          |      |  |  | 21,000 |  |  | 177,367 | 
|President and CEO              |  |      | 2007 |           |  | 119,297  |  |                  |  |                       |  | 29,750-                                  |  |          | 468- |  |  | 6,250- |  |  | 155,765 | 
|                               |  |      |      |           |  |          |  |                  |   |                       |  |                                          |  |          |      |  |  |        |  |  |         | 
|Larry Colton (3) (4)           |  |      | 2008 |           |  | 129,569  |  |                  |  |                       |  |                                          |  |          |     |  |  | 4,800  |  |  | 134,369 | 
|CFO                            |  |      | 2007 |           |  | 122,328  |  |                  |  |                       |  | 7,800                                    |  |          |     |  |  | 4,800  |  |  | 134,928 | 
|                               |  |      |      |           |  |          |  |                  |   |                       |  |                                          |  |          |      |  |  |        |  |  |         | 
|Don Thomas (3)                 |  |      | 2008 |           |  | 131,250  |  |                  |   |                       |  |                                          |  |          |      |  |  | 4,800  |  |  | 136,050 | 
|CIO                            |  |      |      |           |  |          |  |                  |   |                       |  |                                          |  |          |      |  |  |        |  |  |         | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Mr. Dickson became CEO in
 January, 2007. From August 2006 until January 2007, he was Chairman of the
 Board. The Stock Award of $29,750 and the Option Award of $468 in 2007 were
 compensation Mr. Dickson received while serving in the capacity of Chairman
 of the Board. All Other Compensation represents a monthly $750 auto allowance
 and a monthly $1,000 personal allowance paid to him after becoming CEO.
| | (2) | Represents the stock-based
 compensation recognized in fiscal 2007 in accordance with SFAS No. 123(R).
 Option awards are valued at the fair value on the grant date using the
 Black-Scholes model. Assumptions made in the valuation of options are
 discussed in Note 2 to the financial statements.                                                                                                                
| | (3) | All Other Compensation
 represents a $400 monthly auto allowance                                                                                                                                                                                                                                                                                                                                                       
| | (4) | Stock awards for Mr. Colton
 were paid in accordance with his employment agreement                                                                                                                                                                                                                                                                                                                                     

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
TABLE

The following
table presents information regarding outstanding options held by our named
executive officers as of the end of our fiscal year ended July 31, 2008.

27

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Table of Contents

|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                    |  |  |   |  |  |   |  |  |   | 
|---------- |  | --------------------------------------------------------- | ------ | --------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | ---------------------------- | - | ------------------------ |  | ------------------------------------------------------------- |  | ------------------------------------------------------------------- | ---------- | ---------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | - |  |  | - |  |  | - | 
|           |  | Option 
 Awards                                           |        | Stock 
 Awards                                            | 
|           |  |                                                           |        |                                                           | 
|           |  |                                                           |        |                                                           |  | Equity
 Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
 Options
 (#) |  | Option
 Exercise
 Price
 ($) |   | Option
 Expiration
 Date |  | Number of
 Shares or Units of Stock That Have Not Vested
 (#) |  | Market
 Value of Shares or Units of Stock That Have Not Vested
 ($) |            | Equity
 Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That
 Have Not Vested
 (#) |  | Equity 
 Incentive 
 Plan 
 Awards: 
 Market or 
 Payout 
 Value of 
 Unearned 
 Shares, 
 Units or 
 Other 
 Rights 
 That Have 
 Not Vested
 ($) | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                              
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                              
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                              
|           |  | Number of
 Securities Underlying Unexercised Options
 (#) |        | Number of
 Securities Underlying Unexercised Options
 (#) |  |                                                                                                   |  |                              |   |                          |  |                                                              
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                              
|Name       |  | Exercisable                                               |        | Unexercisable                                             |  |                                                                                                   |  |                              |   |                          |  |                                                              
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                    | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                    |  |  |   |  |  |   |  |  |   | 
|J.
Dickson |  |                                                           | 12,500 |                                                           |  |                                                                                                  |  |                              |  |                          |  | 0.30                                                          |  |                                                                     | 1/31/2011  |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|           |  |                                                           | 12,500 |                                                           |  |                                                                                                  |  |                              |  |                          |  | 0.27                                                          |  |                                                                     | 4/28/2011  |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|           |  |                                                           | 12,500 |                                                           |  |                                                                                                  |  |                              |  |                          |  | 0.16                                                          |  |                                                                     | 7/31/2011  |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|           |  |                                                           | 12,500 |                                                           |  |                                                                                                  |  |                              |  |                          |  | 0.15                                                          |  |                                                                     | 10/31/2011 |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                    |  |  |   |  |  |   |  |  |   | 
|L.
Colton  |  |                                                           | None   |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                    |  |  |   |  |  |   |  |  |   | 
|D.
Thomas  |  |                                                           | None   |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|           |  |                                                           |        |                                                           |  |                                                                                                   |  |                              |   |                          |  |                                                               |  |                                                                     |            |                                                                                                            |  |                                                                                                                                                   |  |  |  |  |  |  |  |  |  | 

DIRECTOR COMPENSATION

The following table presents information regarding compensation paid to
our non-employee directors for our fiscal year ended July 31, 2008.

|                         |  |                                       |  |                   |  |                        |  |                                                |       |                                                                               |  |                                 |  |          |  |  |  |  |  |  |        | 
|------------------------ |  | ------------------------------------- |  | ----------------- |  | ---------------------- |  | ---------------------------------------------- | ----- | ----------------------------------------------------------------------------- |  | ------------------------------- |  | -------- |  |  |  |  |  |  | ------ | 
|Name                     |  | Fees 
 Earned or 
 Paid in 
 Cash ($) |  | Stock 
 Awards($) |  | Option 
 Awards($) (4) |  | Non-Equity
 
 Incentive Plan 
 Compensation($) |       | Change
 in 
 Pension Value 
 and Non-
 Qualified 
 Compensation 
 Earnings($) |  | All
 Other 
 Compensation 
 ($) |  | Total($) | 
|                        
|                        
|William Austin Lewis (1) |  |                                       |  |                   |  | 44,000                 |  |                                                | 1,108 |                                                                               |  |                                 |  |          |  |  |  |  |  |  | 45,108 | 
|                         |  |                                       |  |                   |  |                        |  |                                                |       |                                                                               |  |                                 |  |          |  |  |  |  |  |  |        | 
|Christopher Korge (2)    |  |                                       |  |                   |  | 46,000                 |  |                                                | 1,108 |                                                                               |  |                                 |  |          |  |  |  |  |  |  | 47,108 | 
|                         |  |                                       |  |                   |  |                        |  |                                                |       |                                                                               |  |                                 |  |          |  |  |  |  |  |  |        | 
|John Pennington (3)      |  |                                       |  |                   |  | 46,000                 |  |                                                | 1,108 |                                                                               |  |                                 |  |          |  |  |  |  |  |  | 47,108 | 

| |     |                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Mr. Lewis had 112,500
 outstanding options as of July 31, 2008                                                                                                                                                                                                                                          
| | (2) | Mr. Korge had 250,000
 outstanding options as of July 31, 2008                                                                                                                                                                                                                                          
| | (3) | Mr. Pennington had 187,500
 outstanding options as of July 31, 2008                                                                                                                                                                                                                                     
| | (4) | Option awards are the
 amount recognized in fiscal year 2008 as computed in accordance with
 SFAS123(R). Option awards are valued at the fair value on the grant date
 using the Black-Scholes model. Assumptions made in the valuation of options
 are discussed in Note 2 to the financial statements.

28

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Table of Contents

NARRATIVE DISCLOSURE TO DIRECTOR COMPENSATION
TABLE

Our
outside Directors were paid an annual retainer of $25,000 each during the
fiscal year ended July 31, 2008. All of the Directors receiving retainers were
paid in our common 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. 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 our common stock. If the Directors do
not 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 fair 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, 2008, the outside Directors and Chairman of the
Board received 12,500 options each quarter, which were issued on October 31,
2007, January 31, 2008, April 30, 2008 and July 31, 2008 at exercise prices of
$0.11, $0.06, $0.03 and $0.03, respectively.

Employment Contracts
and Other Arrangements

In April
2007 the Company entered into a new eighteen month employment agreement with
its President and Chief Executive Officer. The agreement specifies an annual
base salary of $150,000, and, 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
quarterly bonus compensation in an amount approved by the Companys Board of
Directors based upon the performance criteria as may be established by the
Compensation Committee from time to time. Such bonuses, which at no time may be
less than 3% of the Companys EBITDA as computed under GAAP, may be paid in
cash or issued in shares of the Companys common stock as elected by the CEO.
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 of a minimum of $10,000 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. If the CEOs employment is
terminated for any reason other than cause, the CEO will receive a lump sum
payment equal to one (1) times the current base salary. If the CEOs employment
is terminated by the Company after a Change of Control, the CEO will receive a
lump-sum payment equal to 2.99 times the current base salary.

In March
2007 the Company entered into a twenty-four month employment agreement with its
Chief Financial Officer, Mr. Larry Colton. Mr. Colton currently receives a base
salary of $125,000 and a $400 monthly automobile allowance. If his contract is
not renewed he will receive a severance package equal to nine months of his
annual compensation.

In January
2007 the Company entered into a twenty-seven month employment agreement with
its Chief Information Officer, Mr. Don Thomas. Mr. Thomas currently receives a
base salary of $132,000 and a $400 monthly automobile allowance. If his
contract is not renewed Mr. Thomas will receive a severance package equal to
six months of his 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 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
its 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.

29

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Table of Contents

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.

Base
Salary. Base
salary is designed primarily to be competitive with base salary levels in
effect at high technology companies that are 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 achieving
certain levels of profitability. If the management team achieves earnings per
share of $0.01 to $0.10 per share then current senior management 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.
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. Dicksons base salary for the fiscal year 2008 was determined by
the employment agreement with Mr. Dickson which began in April 2007. The
Compensation Committee believes that the employment agreement terms are
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.

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 NQSOs 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.

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During the
fiscal year ended July 31, 2008 we did not issue any options to employees in
accordance with the 1998 Plan. The Board members were issued 150,000 options in
accordance with the Board compensation plan. All of these options are subject
to vesting and are exercisable 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, 2008, we have issued, or reserved for issuance, 21,905,886 shares of our Common Stock relating to
outstanding options and warrants which are categorized as follows:

| |                                                       |  |  |            |    
| | ----------------------------------------------------- |  |  | ---------- | ---
| | Options
 issued to Directors                          |  |  | 550,000    | (1)
| |                                                       |  |  |            |    
| | Options
 issued to Chief Executive Officer            |  |  | 50,000     | (2)
| |                                                       |  |  |            |    
| | Options
 issued in connection with acquisition of PEC |  |  | 130,000    | (3)
| |                                                       |  |  |            |    
| | Options
 issued to Employees                          |  |  | 569,774    | (4)
| |                                                       |  |  |            |    
| | Warrants
 relating to debentures                      |  |  | 1,150,000  | (5)
| |                                                       |  |  |            |    
| | Warrants
 relating to private placement               |  |  | 17,369,237 | (6)
| |                                                       |  |  |            |    
| | Placement
 Agent warrants                             |  |  | 2,086,875  | (7)
| |                                                       |  |  |            |    
| |                                                       |  |  |            |    
| | Total                                                 |  |  | 21,905,886 |    
| |                                                       |  |  |            |    

| |     |                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| | (1) | The
 options issued to our directors have strike prices ranging from $0.03 to
 $0.38 and are exercisable through July 31, 2013.
| |     |                                                                                                                                
| | (2) | Mr.
 Dickson currently owns the following options with the following terms:                                                    

|             |        |              |   |          |  |                 |        |  |  |          | 
|------------ | ------ | ------------ | - | -------- |  | --------------- | ------ |  |  | -------- | 
|# of Options |        | Strike
Price |   | #
Vested |  | Expiration Date |       
|             |        |              |   |          |  |                 |       
|             |        |              |   |          |  |                 |        |  |  |          | 
|             | 12,500 |              | $ | 0.30     |  |                 | 12,500 |  |  | 01/31/11 | 
|             | 12,500 |              | $ | 0.27     |  |                 | 12,500 |  |  | 04/28/11 | 
|             | 12,500 |              | $ | 0.16     |  |                 | 12,500 |  |  | 07/31/11 | 
|             | 12,500 |              | $ | 0.15     |  |                 | 12,500 |  |  | 10/31/11 | 
|             |        |              |   |          |  |                 |        |  |  |          | 
|             |        |              |   |          |  |                 |        |  |  |          | 
|             | 50,000 |              |   |          |  |                 | 50,000 |  |  |          | 
|             |        |              |   |          |  |                 |        |  |  |          | 

| |     |                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |     | During
 fiscal year ended July 31, 2008, Mr. Dickson exercised 200,000 options with
 an exercise price of $.01. No options were canceled or expired.
| |     |                                                                                                                                                     
| | (3) | 65,000
 options immediately exercisable at $2.00 per share were issued to each of
 Randall K. Wright and Reed Mattingly.                            
| |     |                                                                                                                                                     
| | (4) | Represents
 options issued to our employees at exercise prices ranging from $0.01 to
 $0.32. All of these options are currently exercisable.        

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| |     |                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | 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.                                
| |     |                                                                                                                                                                                          
| | (6) | Represents
 warrants issued to purchasers of common stock with an exercise price of
 between $0.035 and $0.30 per share, with a term of between 2 and 3 years.                           
| |     |                                                                                                                                                                                          
| | (7) | Represents
 1,391,250 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
 of stock at $0.30.

|         |                                                                                                
|-------- | -----------------------------------------------------------------------------------------------
|ITEM 11. | SECURITY OWNERSHIP OF CERTAIN
 BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

| |                                                                                                                                  |                                                                                                         
| | -------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------
| | The
 following table contains information with respect to the beneficial ownership
 of our Common Stock as of July 31, 2008, by:
| |                                                                                                                                  |                                                                                                         
| |                                                                                                                                 | each
 person who we know beneficially owns more than 5% of our Common Stock;                            
| |                                                                                                                                 | each
 of our directors and each individual who serves 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) | 
|                                                    |  |                                            |            |  |               | 
|                                                   
|Jeffrey D
 Dickson (4)                              |  |                                            | 1,996,013  |  |               |  | 1.74  | % | 
|Larry Colton
 (3)                                   |  |                                            | 115,017    |  |               |  | 0.10  | % | 
|Christopher
 Korge (5)                              |  |                                            | 8,261,029  |  |               |  | 7.22  | % | 
|John K.
 Pennington (6)                             |  |                                            | 1,788,431  |  |               |  | 1.56  | % | 
|Canadian
 Advantage Limited Partnership (7)         |  |                                            | 2,991,504  |  |               |  | 2.61  | % | 
|Advantage
 (Bermuda) Fund, Ltd. (8)                 |  |                                            | 1,106,447  |  |               |  | 0.97  | % | 
|William
 Lewis (9)                                  |  |                                            | 55,354,197 |  |               |  | 48.35 | % | 
|                                                   
|Directors
 and officers as a group (5 persons) (10) |  |                                            | 71,612,638 |  |               |  | 62.56 | % | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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, 2008, 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 114,479,334 shares of Common Stock
 outstanding at the close of business on July 31, 2008. 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 note5 below).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (3) | Mr. Coltons ownership represents, (i) 62,517
 common shares acquired through exercising options at $.01 per share, and (ii)
 52,500 shares acquired pursuant to the terms of a prior employment agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (4) | Mr.
 Dicksons ownership includes (i) 10,000 shares of our Common Stockissued as
 founder shares, (ii) 17,504shares acquired in the open market, (iii)
 1,338,509 shares issued to him for his service on the board, (iv) the sale of
 320,000 shares (v) the exercise of options to acquire 900,000 shares at an
 exercise price of $0.01; (vi)options to acquire50,000 shares
 at exercise prices between $0.15 and $0.30.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (5) | 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) 1,919,160 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) 625,000 shares acquired as a result of
 exercising warrants; (x) 22,322 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; (xi) 312,500 warrants to purchase
 shares of the Company stock as a part of a warrant exercise program. The
 warrants are for three years and have a conversion price of $0.16 and (xii)
 options to acquire 200,000 sharesat exercise prices between
 $0.13 and $0.38for services as a director.This amount
 excludes unvested options to acquire up to 50,000 common shares at exercise
 prices of $0.03 to $0.11, which vest through July 31, 2009.

32

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| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6)  | Mr.
 Penningtons ownership represents (i) 1,650,931 shares issued to him for his
 service on the board and (ii) options to acquire 137,500 shares at exercise
 prices between $0.13 and $0.30. This amount excludes
 unvested options to acquire up to 50,000 common shares at exercise prices of
 $0.03 to $0.11, which vest through July 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (7)  | Represents
 2,991,504 shares as reported on a Schedule 13D on or about July 31, 2008.
 John Pennington has investment decision-making authority for this entity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (8)  | Represents
 1,106,447 shares as reported on a Schedule 13D on or about July 31, 2008.
 John Pennington has investment decision-making authority for this entity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (9)  | Mr. Lewis ownership consists of (i) 4,000,000 shares purchased
 from the Company in January, 2005, (ii) 9,961,815 shares purchased on the
 open market, (iii) 1,346,422 shares purchased from a third party investor in
 July, 2005 as a result of that investors conversion of their preferred
 stock, (iv) 1,463,967 shares issued to him for his service on the Companys
 Board of Directors, to which he was elected in May, 2006 (v) 1,875,000 shares
 acquired as a result of exercising warrants on April 30, 2007, (vi) 534,420
 shares issued to him for consulting services provided to the Company in June
 2007 (vii) 5,615,358 shares acquired as a result of exercising warrants in
 June 2007 as part of a warrant exercise program (viii) 3,557,680 warrants
 acquired as part of a June 2007 warrant exercise program. The warrants are
 for 2 years and have an exercise price of $0.16, (ix) 1,222,751 shares
 acquired in May 2008 through a private purchase transactions, (xi) 5,714,285
 shares acquired in May 2008 as a result of the conversion of notes, (xii)
 11,428,571 shares and 8,571,428 warrants to purchase common shares acquired
 in May 2008 for an investment in the Company. The warrants are for 3 years and
 have an exercise price of $0.035, (xii) options to acquire 62,500 shares at
 exercise price of between $0.13 and $0.16 for services as a director. This
 amount excludes unvested options to acquire up to 50,000 common shares at
 exercise prices of $0.03 to $0.11, which vest through July 2009.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (10) | Includes
 outstanding options and warrants to acquire up to 14,213,930 shares of our
 Common Stock issued to our officers and directors, which are currently
 exercisable. The total shares include 2,991,504 from Canadian Advantage
 Limited Partnership and 1,106,447 from Advantage (Bermuda) Fund Ltd for which
 Mr. Pennington has investment decision-making authority. Mr. Pennington
 disclaims beneficial ownership of these shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED
 TRANSACTIONS, AND DIRECTOR INDEPENDENCE

In
January and February of 2008 the Company received a total of $200,000 from the
Chairman of the Board for working capital purposes. The $200,000 was in the
form of non-interest bearing notes which were to be repaid in full eighteen
months from the date of issuance. In May, 2008 the Chairman agreed to convert
the entire $200,000 in outstanding notes into shares of the Companys common
stock at the then current fair market value. See Note 11 in Notes to Financial
Statements.

Board
of Director Independence

Our Board
currently consists of five members, three of whom (Mr. Lewis, Mr. Korge and Mr.
Pennington) are non-employee members that the Board has determined satisfies
applicable Nasdaq standards for independence. Reference is made to Item 9 of
Part III of this Report on Form 10-KSB for additional information about our
Board and Board Committees.

|         |         
|-------- | --------
|ITEM 13. | EXHIBITS

|    |         
|--- | --------
|(a) | Exhibits

|            |  |                                                                                                                                                                                                                                                              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                              
|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, Premier Express Claims, Inc., a South Carolina corporation, and
 its stockholders, dated June 8, 2000 (2)

33

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Table of Contents

|      |  |                                                                                                                                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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)                                                                                                    
|3.11  |  | Promissory Note dated June 16, 2000 between eAutoclaims.com, Inc. and
 Randal K. Wright (2)                                                                                                                          
|3.12  |  | Promissory Note dated June 16, 2000 between eAutoclaims.com, Inc. and
 S. Reed Mattingly. (2)                                                                                                                        
|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   |  | [Reserved]                                                                                                                                                                                                           
|10.1  |  | Employment Agreement between eAutoclaims.com, Inc. and Eric Seidel
 dated February 1, 2000 (5)(9)                                                                                                                    
|10.2  |  | Employment Agreement between eAutoclaims.com, Inc. and Randal K.
 Wright dated July 1, 2000 (2)(9)                                                                                                                   
|10.3  |  | Employment Agreement between eAutoclaims.com, Inc. and S. Reed
 Mattingly dated July 1, 2000 (2)(9)                                                                                                                  
|10.4  |  | Employment Agreement between eAutoclaims.com, Inc. and M. Scott Moore
 dated August 14, 2000 (5)(9)                                                                                                                  
|10.5  |  | Employment Agreement between eAutoclaims.com, Inc. and Gaver Powers
 dated April 13, 2000 (5) (9)                                                                                                                    
|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. dated August 8, 2000 (5)(9)                                                                                                                 
|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)                                                                                             
|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)                                                                                                                                
|10.22 |  | Form of Purchasers Warrant (5)                                                                                                                                                                                       
|10.23 |  | Form of Agents Warrant (5)                                                                                                                                                                                           
|10.24 |  | Registration Rights Agreement (5)                                                                                                                                                                                    
|10.25 |  | eAutoclaims.com, Inc. Agreement with Certain Securities Holders
 effective May 31, 2000 (5)                                                                                                                          
|10.26 |  | eAutoclaims.com, Inc. Agreement with Sovereign Partners, Ltd. effective
 May 31, 2000 (5)                                                                                                                            
|10.27 |  | eAutoclaims.com, Inc. Agreement with Dominium Capital Fund (5)                                                                                                                                                       
|10.28 |  | Form of Master Modification Agreement with Certain Security Holders
 dated January 12, 2001(6)                                                                                                                       
|10.29 |  | Restated master Modification Agreement dated May 2001                                                                                                                                                                
|10.30 |  | Modification agreement dated November 2001 superseding the original
 Modification Agreement dated January 12, 2001 and the Restated Modification
 Agreement dated May 2001                                           

34

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Table of Contents

|      |  |                                                                                                                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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)(9)                                                                                
|10.42 |  | Form of Amendment to Certificate of Designation, Rights and
 Preferences of Series A Preferred Stock effective May 21, 2002 (7)                                          
|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 (9)                                                                                    
|10.48 |  | Employment Agreement with
 Scott Moore, effective April 25, 2003 (10)                                                                                                    
|10.49 |  | Employment Agreement with
 Reed Mattingly, effective May 1, 2003 (9)                                                                                                     
|10.50 |  | Employment Agreement with
 Dave Mattingly, effective May 1, 2003 (9)                                                                                                     
|10.51 |  | Employment Agreement with
 Stacy Adams, effective May 1, 2003 (9)                                                                                                        
|10.52 |  | Agreement by and between
 eAutoclaims.com, Inc. and Governors Road, LLC, effective October 23, 2003
 (11)                                                               
|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 |  | Form of $250,000
 Convertible Note and Related Matters with Christopher Korge, dated May ----,
 2004 (11)                                                                
|10.58 |  | Form of 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 |  | Employment Agreement with
 Eric Seidel, effective April 30, 2005 (13)                                                                                                    
|10.61 |  | Employment Agreement with
 Larry Colton, effective May 1, 2005 (10)                                                                                                      
|10.62 |  | Employment Agreement with
 Reed Mattingly, effective May 1, 2005 (10)                                                                                                    
|10.63 |  | Employment Agreement with
 Dave Mattingly, effective May 1, 2005 (13)                                                                                                    
|10.64 |  | Employment Agreement with
 Stacy Adams, effective May 1, 2005 (10)                                                                                                       
|10.65 |  | Agreement for conversion
 of Convertible Preferred Stock, dated July 21, 2005 (13)                                                                                       
|10.66 |  | Building Lease (14)                                                                                                                                                      
|10.67 |  | PEO Contract (14)                                                                                                                                                        
|10.68 |  | Form of Warrant Exercise
 Term Sheet (15)                                                                                                                                
|10.69 |  | Form of Subscription
 Agreement (15)                                                                                                                                     
|10.70 |  | Form of Registration
 Rights Agreement (15)                                                                                                                              
|10.71 |  | Form of Common Stock
 Purchase Warrant (15)                                                                                                                              
|10.72 |  | Letter Agreement with
 Noble International Investments, Inc (15)                                                                                                         
|10.73 |  | Letter Of Intent with
 Firemans Fund Insurance Company, dated October 16, 2006 (16)                                                                                     
|10.74 |  | Employment Agreement with
 Jeffrey Dickson, effective April 1, 2007 (17)                                                                                                 
|10.75 |  | Employment Agreement with
 Larry Colton, effective March 1, 2007 (17)                                                                                                    
|10.76 |  | Employment Agreement with
 Don Thomas, effective January 8, 2007 (17)                                                                                                    
|10.77 |  | Securities Purchase
 Agreement (18)                                                                                                                                      
|31    |  | Certificates of the Chief
 Executive Officer and Chief Financial Officer pursuant to Rule
 13a-14(a)/15d-14(a)*                                                          
|32    |  | Certificates pursuant to
 Section 1350 pursuant to Section 906 of Sarbanes-Oxley Note of 2002. *                                                                         
|99.1  |  | Code of Ethics (12)                                                                                                                                                      

35

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Table of Contents

|     |                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------
|(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)  | Incorporated by reference from the Registrants Form 10-KSB for
 fiscal year ended July 31, 2003                                       
|(9)  | This Employment Agreement has been superseded by a new employment
 agreement filed herewith. See (10)                                  
|(10) | Terminated, no longer in effect                                                                                                        
|(11) | Incorporated by reference from the Registrants Form S-1 Registration
 Statement File No. 333-122975                                   
|(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 10-K for fiscal
 year ended July 31, 2005                                         
|(14) | Incorporated by reference from the Registrants Form S-1 Registration
 Statement File No. 333-133329                                   
|(15) | Incorporated by reference from the Registrants Form 8-K filed on
 March 22, 2006                                                      
|(16) | Incorporated by reference from the Registrants Form 8-K filed on
 October 16, 2006                                                    
|(17) | Incorporated by reference from the Registrants Form 8-K filed on
 April 24, 2007                                                      
|(18) | Incorporated by reference from the Registrants 10-QSB filed on June
 12, 2007                                                         
|*    | Filed herewith                                                                                                                         

|         |                                         
|-------- | ----------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANTS FEES AND
 SERVICES

The
firm of Goldstein Golub Kessler LLP (GGK) acted as our principal accountant
for the year ended July 31, 2007. GGK had a continuing relationship with RSM McGladrey,
Inc. (RSM), from which it leases auditing staff who are full time, permanent
employees of RSM and through which its partners provided non-audit services.
GGK has no full time employees and therefore, none of the audit services
performed were provided by permanent full-time employees of GGK. GGK managed
and supervised the audit and audit staff, and was exclusively responsible for
the opinion rendered in connection with the examination. On November 26, 2007,
we were notified that certain partners of GGK became partners of
McGladrey & Pullen, LLP pursuant to the terms of a limited asset
purchase agreement and that, as a result thereof, GGK has resigned as our
independent registered public accounting firm. McGladrey & Pullen, LLP
was subsequently engaged as our new independent registered public accounting
firm.

Accordingly,
the Company was billed for professional services rendered by GGK and M&P

The
following table sets forth the fees billed by our independent accountants for
each of our last two fiscal years for the categories of services indicated.

|                                 |  |      |         |      |   |        | 
|-------------------------------- |  | ---- | ------- | ---- | - | ------ | 
|                                 |  | 2008 |         | 2007 |  
|                                 |  |      |         |      |  
|Audit
 fees (1)                  |  | $    | 101,000 |      | $ | 96,500 | 
|Audit-related
 fees (2)          |  |      | 0       |      |   | 2,682  | 
|All
 other fees - Sarbanes Oxley |  |      | 0       |      |   | 0      | 
|Taxes                            |  |      | 0       |      |   | 0      | 
|                                 |  |      |         |      |   |        | 
|                                 |  |      |         |      |   |        | 
|                                 |  | $    | 101,000 |      | $ | 99,182 | 

|    |                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists
 of fees billed for the audit of our annual financial statements, review of
 financial statements included in our Quarterly Reports on Form 10-QSB and
 services that are normally provided by the accountant in connection with
 statutory and regulatory filings or engagements.
|(2) | Audit
 related fees include the review of Form S-1 related to the Companys
 registration and related offerings and accounting advice                                                                                                                                                      

36

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Table of Contents

SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Oldsmar, State of
Florida, on the 19th day of December 2008.

| |                    |  |                                       
| | ------------------ |  | --------------------------------------
| | EAUTOCLAIMS,
 INC.
| |                   
| | BY:                |  | /s/ Jeffrey
 Dickson                  
| |                    |  |                                       
| |                    |  | Jeffrey
 Dickson                      
| |                    |  | President
 and Chief Executive Officer
| |                    |  |                                       
| |                    |  | /s/ Larry
 Colton                     
| |                    |  |                                       
| |                    |  | Larry Colton                          
| |                    |  | Chief
 Financial Officer and          
| |                    |  | Principal
 Accounting Officer         

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

|                             |  |                             |  |                   
|---------------------------- |  | --------------------------- |  | ------------------
|NAME                         |  | TITLE                       |  | DATE              
|                             |  |                             |  |                   
|                             |  |                             |  |                   
|/s/ Jeffrey
 Dickson         |  | President,
 Chief Executive |  | December 19,
 2008
|                             |  |                             |  |                   
|Jeffrey
 Dickson             |  | Officer and
 Director       |  |                   
|                             |  |                             |  |                   
|/s/ William
 Austin Lewis IV |  | Chairman                    |  | December 19,
 2008
|                             |  |                             |  |                   
|William
 Austin Lewis IV     |  |                             |  |                   
|                             |  |                             |  |                   
|/s/ Larry
 Colton            |  | Chief
 Financial Officer    |  | December 19,
 2008
|                             |  |                             |  |                   
|Larry Colton                 |  | and Director                |  |                   
|                             |  |                             |  |                   
|/s/ John K.
 Pennington      |  | Director                    |  | December 19,
 2008
|                             |  |                             |  |                   
|John K.
 Pennington          |  |                             |  |                   
|                             |  |                             |  |                   
|/s/ Christopher
 Korge       |  | Director                    |  | December 19,
 2008
|                             |  |                             |  |                   
|Christopher
 Korge           |  |                             |  |                   

37

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eAUTOCLAIMS, INC. 
FINANCIAL STATEMENTS

JULY 31, 2008

---



Table of Contents

|                                                           |  |           
|---------------------------------------------------------- |  | ----------
|Reports of Independent Registered Public
 Accounting Firms |  | F-2  F-3 
|                                                           |  |           
|Financial Statements:                                      |  |           
|                                                           |  |           
|Balance Sheet                                              |  | F-4       
|Statements of Operations                                   |  | F-5       
|Statements of Stockholders Equity (Deficiency)            |  | F-6       
|Statements of Cash Flows                                   |  | F-7       
|Notes to Financial Statements                              |  | F-8  F-21

---



Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors
and Shareholders
eAutoclaims, Inc.

We have audited the
accompanying balance sheet of eAutoclaims Inc. (the Company) as of July 31,
2008, and the related statements of operations, stockholders equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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, 2008, and
the results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States.

The accompanying financial
statements have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 1 to the financial statements, the Company
has suffered recurring losses from operations, and has a stockholders
deficiency and working capital deficiency at July 31, 2008. These conditions
raise substantial doubt about the Companys ability to continue as a going
concern. Managements plans in regard to these matters are also described in
Note 1. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

We were not engaged to
examine managements assertion of the effectiveness of eAutoclaims Inc.s
internal control over financial reporting as of July 31, 2008, included in the
accompanying Managements Report on Internal Control over Financial Reporting
and, accordingly, we do not express an opinion thereon.

MCGLADREY & PULLEN, LLPNew York, New York
December 18, 2008

F-2

---



Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
eAutoclaims, Inc.

We have audited the
accompanying statements of operations, stockholders equity, and cash flows of
eAutoclaims, Inc. for the year ended July 31, 2007. 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 audit.

We conducted our audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the
financial statements referred to above present fairly, in all material
respects, the results of operations and cash flows of eAutoclaims, Inc. for the
year ended July 31, 2007, in conformity with accounting principles generally
accepted in the United States.

GOLDSTEIN GOLUB KESSLER LLPNew York, New York
November 6, 2007

F-3

---



Table of Contents

|                 
|-----------------
|eAUTOCLAIMS, INC.
|                 
|BALANCE SHEET    
|                 

|                                                                                                          |  |               |             |  
|--------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | -
|                                                                                                          |  | July 31, 2008 |            
|                                                                                                          |  |               |             |  
|ASSETS                                                                                                    |  |               |             |  
|                                                                                                          |  |               |             |  
|Current Assets:                                                                                           |  |               |             |  
|Cash and cash equivalents                                                                                 |  | $             | 260,053     |  
|Accounts receivable, less allowance for
 doubtful accounts of $48,000                                     |  |               | 142,644     |  
|Prepaid expenses and other current assets                                                                 |  |               | 88,997      |  
|                                                                                                          |  |               |             |  
|Total current assets                                                                                      |  |               | 491,694     |  
|                                                                                                          |  |               |             |  
|Property and equipment, net of accumulated
 depreciation                                                  |  |               | 672,923     |  
|Restricted cash                                                                                           |  |               | 420,000     |  
|Goodwill                                                                                                  |  |               | 1,081,843   |  
|                                                                                                          |  |               |             |  
|Other assets                                                                                              |  |               | 30,800      |  
|                                                                                                          |  |               |             |  
|Deferred income tax asset, net of valuation
 allowance of $11,761,000                                     |  |               |             |  
|                                                                                                          |  |               |             |  
|                                                                                                          |  |               |             |  
|Total Assets                                                                                              |  | $             | 2,697,260   |  
|                                                                                                          |  |               |             |  
|                                                                                                          |  |               |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIENCY                                                                  |  |               |             |  
|                                                                                                          |  |               |             |  
|Current Liabilities:                                                                                      |  |               |             |  
|Accounts payable, advanced payments and
 accrued expenses                                                 |  | $             | 2,167,473   |  
|Notes payable, net of unamortized discount                                                                |  |               | 450,000     |  
|Current portion of capital lease obligation                                                               |  |               | 101,028     |  
|Current portion of deferred gain on
 building sale                                                        |  |               | 108,135     |  
|                                                                                                          |  |               |             |  
|Total current liabilities                                                                                 |  |               | 2,826,636   |  
|                                                                                                          |  |               |             |  
|Deferred gain on building sale, net of
 current portion                                                   |  |               | 369,467     |  
|Capital lease obligation                                                                                  |  |               | 97,346      |  
|                                                                                                          |  |               |             |  
|Total liabilities                                                                                         |  |               | 3,293,449   |  
|                                                                                                          |  |               |             |  
|Stockholders Deficiency:                                                                                 |  |               |             |  
|                                                                                                          |  |               |             |  
|Convertible preferred stock - $.001 par
 value; authorized 5,000,000 shares No shares outstanding         |  |               |             |  
|Common stock - $.001 par value; authorized
 150,000,000 shares, issued and outstanding 114,479,334 shares |  |               | 114,479     |  
|Additional paid-in capital                                                                                |  |               | 31,488,689  |  
|Accumulated deficit                                                                                       |  |               | (32,152,175 | )
|Treasury Stock, at cost, 238,536 shares                                                                   |  |               | (47,182     | )
|                                                                                                          |  |               |             |  
|Stockholders Deficiency                                                                                  |  |               | (596,189    | )
|                                                                                                          |  |               |             |  
|Total Liabilities and Stockholders
 Deficiency                                                           |  | $             | 2,697,260   |  
|                                                                                                          |  |               |             |  

F-4

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Table of Contents

|                        
|------------------------
|eAUTOCLAIMS, INC.       
|                        
|STATEMENTS OF OPERATIONS
|                        

|                                                                        |  |      |            |      |   |            |  
|----------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|Year Ended
 July 31                                                     |  | 2008 |            | 2007 |  
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  
|Revenue:                                                                |  |      |            |      |   |            |  
|Collision repairs management                                            |  | $    | 3,291,606  |      | $ | 9,017,872  |  
|Fleet repairs management                                                |  |      | 701,570    |      |   | 901,643    |  
|Fees and other revenue                                                  |  |      | 1,786,904  |      |   | 1,871,478  |  
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  
|Total revenue                                                           |  |      | 5,780,080  |      |   | 11,790,993 |  
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  
|Expenses:                                                               |  |      |            |      |   |            |  
|Claims processing charges                                               |  |      | 3,139,101  |      |   | 8,115,161  |  
|Selling, general and administrative                                     |  |      | 3,916,189  |      |   | 5,544,234  |  
|Depreciation and amortization                                           |  |      | 432,914    |      |   | 454,772    |  
|                                                                        |  |      |            |      |   |            |  
|Total expenses                                                          |  |      | 7,488,204  |      |   | 14,114,167 |  
|                                                                        |  |      |            |      |   |            |  
|Gain on contract termination                                            |  |      |            |      |   | 1,944,637  |  
|                                                                        |  |      |            |      |   |            |  
|Net loss                                                                |  | $    | (1,708,124 | )    | $ | (378,537   | )
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  
|Loss per common share-basic and diluted                                 |  | $    | (0.02      | )    | $ | (0.00      | )
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  
|Weighted-average number of common shares
 outstanding Basic and diluted |  |      | 97,748,408 |      |   | 83,713,683 |  
|                                                                        |  |      |            |      |   |            |  
|                                                                        |  |      |            |      |   |            |  

F-5

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Table of Contents

|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|------------------------------------------------------------------ |  | ------------ | ----------- | ------ | ------------------ | ------- |  | ------------------------ | ---------- | -------------------------------- | - | ----------- | - | - | ------- | - | - | ---------- | -
|eAUTOCLAIMS, INC.                                                 
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|STATEMENT OF STOCKHOLDERS
 EQUITY (DEFICIENCY)                   
|                                                                  
|Year ended July 31, 2008                                           |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |           
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|                                                                   |  |              |             |        |                    |         |  | AdditionalPaid-inCapital |            |                                  |   |             |   |   |         |   |   |           
|                                                                   |  | Common Stock |             |        | AccumulatedDeficit |         |  |                          |            | StockholdersEquity (Deficiency) |  
|                                                                   |  | Shares       |             | Amount |                    |         |  | Treasury Stock           |            |                                 
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Balance at July 31, 2006                                           |  |              | 80,750,105  |        |                    | 80,750  |  |                          | 28,789,176 |                                  |   | (30,065,514 | ) |   | (31,625 | ) |   | (1,227,213 | )
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Issuance of common stock upon exercise of
 options                 |  |              | 344,370     |        |                    | 344     |  |                          | 4,110      |                                  |   |             |   |   |         |   |   | 4,454      |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Issuance of common stock upon exercise of
 warrants                |  |              | 9,895,488   |        |                    | 9,896   |  |                          | 1,458,561  |                                  |   |             |   |   |         |   |   | 1,468,457  |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Warrants issued on exercise program                                |  |              |             |        |                    |         |  |                          | 45,889     |                                  |   |             |   |   |         |   |   | 45,889     |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Warrants issued with note payable                                  |  |              |             |        |                    |         |  |                          | 5,156      |                                  |   |             |   |   |         |   |   | 5,156      |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Purchase of Treasury Stock                                         |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   | (15,557 | ) |   | (15,557    | )
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Issuance of common stock to related parties
 for services          |  |              | 2,746,108   |        |                    | 2,746   |  |                          | 417,634    |                                  |   |             |   |   |         |   |   | 420,380    |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Vesting of options granted to employees                            |  |              |             |        |                    |         |  |                          | 18,762     |                                  |   |             |   |   |         |   |   | 18,762     |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Net loss                                                           |  |              |             |        |                    |         |  |                          |            |                                  |   | (378,537    | ) |   |         |   |   | (378,537   | )
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Balance at July 31, 2007                                           |  |              | 93,736,071  |        | $                  | 93,736  |  | $                        | 30,739,288 |                                  | $ | (30,444,051 | ) | $ | (47,182 | ) | $ | 341,791    |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Issuance of common stock upon exercise of
 options                 |  |              | 367,074     |        |                    | 367     |  |                          | 3,304      |                                  |   |             |   |   |         |   |   | 3,671      |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Issuance of common stock to related parties
 for services          |  |              | 3,233,333   |        |                    | 3,234   |  |                          | 136,266    |                                  |   |             |   |   |         |   |   | 139,500    |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Vesting of options granted to employees                            |  |              |             |        |                    |         |  |                          | 26,909     |                                  |   |             |   |   |         |   |   | 26,909     |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Conversion of related party debt to equity                         |  |              | 5,714,285   |        |                    | 5,714   |  |                          | 194,286    |                                  |   |             |   |   |         |   |   | 200,000    |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Proceeds from sale of common stock to
 related party, net of costs |  |              | 11,428,571  |        |                    | 11,428  |  |                          | 362,922    |                                  |   |             |   |   |         |   |   | 374,350    |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Warrants issued on stock sale to related
 party                    |  |              |             |        |                    |         |  |                          | 25,714     |                                  |   |             |   |   |         |   |   | 25,714     |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Net loss                                                           |  |              |             |        |                    |         |  |                          |            |                                  |   | (1,708,124  | ) |   |         |   |   | (1,708,124 | )
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  
|Balance at July 31, 2008                                           |  |              | 114,479,334 |        | $                  | 114,479 |  | $                        | 31,488,689 |                                  | $ | (32,152,175 | ) | $ | (47,182 | ) | $ | (596,189   | )
|                                                                   |  |              |             |        |                    |         |  |                          |            |                                  |   |             |   |   |         |   |   |            |  

F-6

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Table of Contents

|                        
|------------------------
|eAUTOCLAIMS, INC.       
|                        
|STATEMENTS OF CASH FLOWS
|                        

|                                                                             |  |      |            |      |   |            |  
|---------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|Year Ended
 July 31                                                          |  | 2008 |            | 2007 |  
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Cash flows from operating activities:                                        |  |      |            |      |   |            |  
|Net loss                                                                     |  | $    | (1,708,124 | )    | $ | (378,537   | )
|Adjustments to reconcile net loss to net
 cash used in operating activities: |  |      |            |      |   |            |  
|Depreciation and amortization                                                |  |      | 432,914    |      |   | 454,772    |  
|Non-cash compensation expense                                                |  |      | 165,214    |      |   | 466,269    |  
|Impairment expense                                                           |  |      | 17,000     |      |   |            |  
|Recognition of deferred gain on building
 sale                               |  |      | (108,132   | )    |   | (108,130   | )
|Bad debts                                                                    |  |      | (2,000     | )    |   | (120,000   | )
|Gain on contract termination                                                 |  |      |           |      |   | (1,944,637 | )
|Amortization of debt discount                                                |  |      | 5,156      |      |   | 1,445      |  
|Vesting of options granted to employees                                      |  |      | 26,909     |      |   | 18,762     |  
|Changes in operating assets and liabilities                                  |  |      |            |      |   |            |  
|Accounts receivable                                                          |  |      | 118,697    |      |   | 422,362    |  
|Prepaid expenses and other assets                                            |  |      | (582       | )    |   | (13,737    | )
|Accounts payable, advance payments and
 accrued expenses                     |  |      | 104,968    |      |   | (367,466   | )
|                                                                             |  |      |            |      |   |            |  
|Net cash used in operating activities                                        |  |      | (947,980   | )    |   | (1,568,897 | )
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Cash flows from investing activities:                                        |  |      |            |      |   |            |  
|Purchases of property and equipment                                          |  |      | (241,153   | )    |   | (325,408   | )
|Change in restricted cash                                                    |  |      | 310,000    |      |   | (730,000   | )
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Net cash provided by (used in) investing
 activities                         |  |      | 68,847     |      |   | (1,055,408 | )
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Cash flows from financing activities:                                        |  |      |            |      |   |            |  
|Proceeds from exercise of warrants                                           |  |      |            |      |   | 1,468,457  |  
|Proceeds from notes payable                                                  |  |      |            |      |   | 550,000    |  
|Proceeds from exercise of options                                            |  |      | 3,671      |      |   | 4,454      |  
|Proceeds from note payable related party                                     |  |      | 200,000    |      |   |            |  
|Principal payment on note payable                                            |  |      | (100,000   | )    |   |            |  
|Proceeds from sale of stock                                                  |  |      | 374,350    |      |   |            |  
|Purchase of treasury stock                                                   |  |      |            |      |   | (15,557    | )
|Principal payments on capital lease                                          |  |      | (133,882   | )    |   | (112,241   | )
|                                                                             |  |      |            |      |   |            |  
|Net cash provided by financing activities                                    |  |      | 344,139    |      |   | 1,895,113  |  
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Net decrease in cash and cash equivalents                                    |  |      | (534,994   | )    |   | (729,192   | )
|                                                                             |  |      |            |      |   |            |  
|Cash and cash equivalents at beginning of year                               |  |      | 795,047    |      |   | 1,524,239  |  
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Cash and cash equivalents at end of year                                     |  | $    | 260,053    |      | $ | 795,047    |  
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Supplemental disclosure of cash flow
 information:                           |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Cash paid during the year for interest                                       |  | $    | 93,723     |      | $ | 49,519     |  
|                                                                             |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Supplemental disclosure of noncash
 investing and financing activities:      |  |      |            |      |   |            |  
|                                                                             |  |      |            |      |   |            |  
|Equipment acquired by capital lease                                          |  | $    | 18,344     |      | $ | 303,512    |  
|                                                                             |  |      |            |      |   |            |  
|Discount on notes payable relating to
 warrants                              |  |      |            |      | $ | 5,156      |  
|                                                                             |  |      |            |      |   |            |  
|Conversion of note payable related party to
 equity                          |  | $    | 200,000    |      |   |            |  
|                                                                             |  |      |            |      |   |            |  

F-7

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Table of Contents

eAUTOCLAIMS, INC.

NOTES
TO FINANCIAL STATEMENTS

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | THE BUSINESS AND BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | eAutoclaims,
 Inc. (the Company) is a Nevada corporation which provides Internet based
 vehicle collision claims services for insurance companies, Managing General
 Agents (MGA), 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Cash flows generated from
 operations, cash received from the issuance of notes and cash received as a
 result of the issuance of equity securities were sufficient to meet the
 Companys working capital requirements for the year ended July 31, 2008. As
 shown in the financial statements, the Company has suffered recurring losses
 from operations including $1,708,124 for the year ended July 31, 2008, and
 has a stockholders deficiency of $596,189 and a working capital deficiency
 of $2,334,942 at July 31, 2008. These conditions raise substantial doubt
 about the Companys ability to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The accompanying financial
 statements have been prepared on a going concern basis which contemplates the
 realization of assets and the satisfaction of liabilities in the normal
 course of business. The financial statements do not include any adjustments
 relating to the recoverability of assets and the satisfaction of liabilities
 that might be necessary should the Company be unable to continue as a going
 concern.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Companys plan and
 ability to continue as a going concern is primarily dependent upon the
 ability to grow revenue through existing and new lines of business and
 attract additional capital through debt or equity financing. There can be no
 assurance that the Company will be able to grow revenues or secure sufficient
 additional financing to meet future obligations.                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | 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 and fleet repairs and 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.                                                                                                                                             

F-8

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Table of Contents

eAUTOCLAIMS, INC.

NOTES
TO FINANCIAL STATEMENTS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
 records revenue net of repair costs for certain glass repairs. Revenue is
 recorded 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 a co-marketing agreement net of the repair
 costs because in the agreement the Company is performing a fee for service.
 The party to the agreement sells and markets the Companys services to the
 insurance companies, who are its customers and it collects the revenue and
 pays the repair 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Cash and cash equivalents
 represent cash and short-term, highly liquid investments with original
 maturities of three months or less. The Company places its temporary cash
 investments with high credit quality financial institutions. At times such
 investments may be in excess of the Federal Deposit Insurance Corporation
 (FDIC) insurance limit.                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Accounts Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Fair Value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The carrying
 value of accounts receivable, accounts payable and accrued expenses are
 reasonable estimates of their fair value because of short-term maturity. The
 fair values of the notes payable are approximately equal to their principal
 amount.                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Warranty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Company
 provides a warranty on the repairs performed at its network shops and an
 accrual of $10,000 has been established as of July 31, 2008 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. As a result of the review conducted as of July
 31, 2008, the Company determined, based on warranty expenses actually
 incurred and anticipated future claims volume, that the warranty reserve
 should be reduced from $20,000 to $10,000.                                                         

F-9

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Table of Contents

eAUTOCLAIMS, INC.

NOTES
TO FINANCIAL STATEMENTS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Advertising Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The Company
 expenses costs for advertising as they are incurred. For the years ended July
 31, 2008 and 2007 a total of $2,430 and $5,253, respectively, was expensed
 for advertising.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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 or the
 lease term.                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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.                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Impairment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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. During the year ended July
 31, 2008 the Company recorded $17,000 of expense for impairment of goodwill
 of $5,000 and the write-off of software of $12,000 that was no longer in use
 as part of selling, general and administrative expenses.                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Deferred
 income tax assets and liabilities are recognized for the estimated future tax
 consequences attributable to differences between the financial statement
 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. A
 valuation allowance is established when necessary to reduce deferred tax
 assets to the amount expected to be realized.                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In July 2006, the
 Financial Accounting Standards Board (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 Company adopted the provisions of FIN 48
 effective August 1, 2007. The adoption of FIN 48 did not have a material
 effect on the Companys consolidated financial condition or results of
 operations
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The Company
 recognizes interest and penalties, if any, related to uncertain tax positions
 in selling, general and administrative expenses. No interest and penalties
 related to uncertain tax positions were accrued at July 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-10

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Table of Contents

eAUTOCLAIMS, INC.

NOTES
TO FINANCIAL STATEMENTS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Use of
 Estimates in Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 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 the financial statements and the reported amounts of revenue and expenses
 during the reporting period. Actual results could differ from those
 estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In September 2006, the
 FASB issued Statement of Financial Accounting Standards No. 157, Fair Value
 Measurements, or SFAS No. 157. SFAS 157 defines fair value, establishes a
 framework for measuring fair value in generally accepted accounting
 principles and expands disclosures about fair value measurements. The
 provisions of this statement are effective for financial statements issued
 for fiscal years beginning after November 15, 2007 and interim periods within
 those fiscal years. The Company is currently evaluating the effect that the
 adoption of SFAS No. 157 will have on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In February 2007 the FASB
 issued Statement of Financial Accounting Standards No. 159, The Fair Value
 Option for Financial Assets and Financial Liabilities, or SFAS No. 159. SFAS
 No. 159 permits entities to choose to measure many financial instruments and
 certain other items at fair value. SFAS No. 159 is effective for fiscal years
 beginning after November 15, 2007. The Company is currently evaluating the
 effects, if any, that SFAS No. 159 will have on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In December 2007, the FASB
 issued Statement of Financial Accounting Standards No. 141(R), Business
 Combinations, or SFAS No. 141(R). This statement establishes principles and
 requirements for how the acquirer of a business recognizes and measures in
 its financial statements the identifiable assets acquired, the liabilities
 assumed, and any non-controlling interest in the acquiree. SFAS No. 141(R)
 also provides guidance for recognizing and measuring the goodwill acquired in
 the business combination and determines what information to disclose to
 enable users of the financial statements to evaluate the nature and financial
 effects of the business combination. The provisions of SFAS No. 141(R) apply
 prospectively to business combinations for which the acquisition date is on
 or after the beginning of the first annual reporting period beginning on or
 after December 15, 2008. The Company will adopt this statement, as
 applicable, in its fiscal year beginning August 1, 2009.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In December 2007, the FASB
 issued Statement of Financial Accounting Standards No. 160, Non-controlling
 Interests in Consolidated Financial Statements-An Amendment to Accounting
 Research Bulletin (ARB) No. 51, or SFAS No. 160. This statement amends ARB
 No. 51, Consolidated Financial Statements, to establish accounting and
 reporting standards for the non-controlling interest in a subsidiary and for
 the deconsolidation of a subsidiary. This statement also amends certain of
 ARB No. 51s consolidation procedures for consistency with the requirements
 of SFAS No. 141(R). In addition, SFAS No. 160 also includes expanded
 disclosure requirements regarding interests of the parent and its
 non-controlling interest. The provisions of SFAS No. 160 are effective for
 financial statements issued for fiscal years beginning after December 15,
 2008. The Company will adopt this statement, as applicable, in its fiscal
 year beginning August 1, 2009.                                     

F-11

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Table of Contents

eAUTOCLAIMS, INC.

NOTES
TO FINANCIAL STATEMENTS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In March 2008, the FASB
 issued Statement of Financial Accounting Standards No. 161, Disclosures
 about Derivative Instruments and Hedging Activities, an amendment of FASB
 Statement No. 133, or SFAS 161. This statement is intended to improve
 transparency in financial reporting by requiring enhanced disclosures of an
 entitys derivative instruments and hedging activities and their effects on
 the entitys financial position, financial performance, and cash flows. SFAS
 161 applies to all derivative instruments within the scope of SFAS 133,
 Accounting for Derivative Instruments and Hedging Activities as well as
 related hedging items, bifurcated derivatives, and non derivative instruments
 that are designated and qualify as hedging instruments. Entities with
 instruments subject to SFAS 161 must provide more robust qualitative
 disclosures and expanded quantitative disclosures. SFAS 161 is effective
 prospectively for financial statements issued for fiscal years and interim
 periods beginning after November 15, 2008, with early application permitted.
 The Company is currently evaluating the effects, if any, that SFAS 161 will
 have on its financial statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Stock based
 compensation consists of stock options and issuance of common stock for
 services. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Effective
 August 1, 2005, the Company adopted Statement of Financial Accounting
 Standards No. 123R, Share Based Payment (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, is
 recognized in net earnings in the periods after the date of adoption. The
 compensation cost charged to operations pursuant to SFAS No. 123R for
 employee stock options was $26,909 and $18,762 for the years ended July 31,
 2008 and 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The fair value for options
 was estimated at the date of grant using a Black-Scholes option-pricing model
 with the following assumptions for the years ended July 31, 2008 and 2007.
 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 2.25% and 4.55% for the
 years ended July 31, 2008 and 2007, respectively. The volatility factor was
 determined based on an independent study and the assumed market volatility
 was 45% for both periods presented. The assumed dividend yield was 0% and an
 expected option life was assumed to be four years for both periods presented.
 The assumption for the expected life is based on evaluations of historical
 and expected future exercise behavior.                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-12

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Table of Contents

eAUTOCLAIMS, INC.

NOTES
TO FINANCIAL STATEMENTS

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | In accordance with
 Emerging Issues Task Force Issue 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 issued to non-employees 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.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3. | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company currently
 operates only within the United States. Substantially, all of the
 Companys revenue generating
 operations have similar economic characteristics, including the nature of the products and services sold;
 the type and class of clients for products and services; the methods
 used to deliver products and services
 and regulatory environments.                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4. | 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. For
 the years ended July 31, 2008 and 2007, during which the Company reported a
 net loss, 21,905,886 and 16,723,961 shares issuable for 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, 2008 there
 were no convertible securities outstanding.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|5. | PROPERTY AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | At July 31,
 2008 property and equipment, at cost, consists of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                               |  |   |           |  |                       |              
|------------------------------ |  | - | --------- |  | --------------------- | -------------
|                               |  |   |           |  | Estimated
Useful Life
|                               |  |   |           |  |                      
|                               |  |   |           |  |                       |              
|Computer
 Equipment            |  | $ | 814,547   |  |                       | 3 years      
|Software                       |  |   | 1,832,998 |  |                       | 3 years      
|Office
 equipment              |  |   | 111,725   |  |                       | 3 to 10 years
|Leasehold
 improvements        |  |   | 253,554   |  |                       | Term of Lease
|Furniture
 and fixtures        |  |   | 64,020    |  |                       | 7 to 10 years
|                               |  |   |           |  |                       |              
|                               |  |   |           |  |                       |              
|                               |  |   | 3,076,844 |  |                       |              
|Less
 accumulated depreciation |  |   | 2,403,921 |  |                       |              
|                               |  |   |           |  |                       |              
|                               |  |   |           |  |                       |              
|                               |  | $ | 672,923   |  |                       |              
|                               |  |   |           |  |                       |              

| |                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At July 31,
 2008 office equipment and software include amounts acquired under capital
 leases of approximately $432,000 with related accumulated depreciation of
 approximately $187,000.

F-13

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

|   |                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------
|6. | ACCOUNTS
 PAYABLE, ADVANCED PAYMENTS AND ACCRUED EXPENSES                                            
|   |                                                                                                      
|   | At July 31,
 2008 accounts payable,
 advanced payments and accrued expenses consist of the following:

|                                                                         |  |   |           | 
|------------------------------------------------------------------------ |  | - | --------- | 
|Advanced payments from
 customers                                        |  | $ | 1,079,577 | 
|Accounts payable to repair
 facilities and other vendors                 |  |   | 549,177   | 
|Accrued payroll and
 vacation wages                                      |  |   | 124,372   | 
|Other accrued liabilities
 (none in excess of 5% of current liabilities) |  |   | 414,347   | 
|                                                                         |  |   |           | 
|                                                                         |  | $ | 2,167,473 | 
|                                                                         |  |   |           | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. | PURCHASE
 AND SALE OF BUILDING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the year ended July
 31, 2006, 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, which will be recognized over the term of the new seven
 year lease. Accordingly, in the years ended July 31, 2008 and 2007, the
 Company recognized gains of $108,132 each year from this transaction. The new
 lease, which runs through December, 2012, was signed with the new owner as
 part of the agreement to sell the facility.                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|8. | RESTRICTED
 CASH                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the year ended July
 31, 2007, the Company had placed $730,000 in a certificate of deposit as
 collateral for a Letter of Credit issued to satisfy a contractual requirement
 with a client. According to the terms of the agreement, the client has the
 right to draw on the Letter of Credit if the client elects to terminate the
 contract, which has a three- year term, in the event the Company fails to
 meet certain service level and financial covenants. Failure to meet these
 covenants does not automatically invoke the contract termination. The Company
 also has the ability to terminate the Letter of Credit when certain financial
 benchmarks are attained.                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | At July 31, 2008, the
 Company had a $420,000 balance in this certificate of deposit. In January
 2008 the Company reached an agreement with the beneficiary of this Letter of
 Credit to reduce the required amount from $730,000 to $420,000. Accordingly,
 the Company reduced the certificate of deposit being held as collateral for
 the Letter of Credit from $730,000 to $420,000 and returned $310,000 to
 working capital. According to the terms of the agreement, the client has the
 right to draw on the Letter of Credit if the client elects to terminate the
 contract, which has approximately two years remaining on the original
 three-year term, in the event the Company fails to meet certain service level
 and financial covenants. Failure to meet these covenants does not
 automatically invoke the contract termination.
 The Company also has the ability to reduce further or terminate the Letter of
 Credit when certain financial benchmarks are attained.

F-14

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9.  | LINE OF
 CREDIT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company has a $75,000
 line of credit established with its bank. Under the terms of the agreement,
 the Company may borrow any amount up to the maximum value of the line and
 will pay monthly interest at a rate of prime plus 7% on the unpaid balance.
 As of July 31, 2008, the Company had no outstanding borrowings against this
 credit line.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10. | NOTES
 PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company received a
 total of $550,000 from the issuance of notes in February and March 2007 to multiple
 investors. The proceeds were used to help fund the certificate of deposit
 used as collateral for a Letter of Credit. The one-year notes, which required
 repayment in full of the principal on various dates between February 8, 2008
 and March 30, 2008, paid monthly interest at an annual rate of 12%. In
 addition to the interest earned, each investor received three-year, $0.16
 warrants to purchase shares of the Companys common stock equal to 93,750
 warrants for each $50,000 invested. A total of 1,031,250 warrants were issued
 to these investors. The Company also agreed that, in the event of default of
 the principal repayment, each investor would be issued shares of the
 Companys common stock in an amount equal to 450,000 shares for each $50,000
 invested and additional warrants equal to 30% of the amount invested. Under
 these terms, if a default occurred, the Company would be required to issue a
 total of 4,950,000 shares and 165,000 additional new three-year warrants with
 an exercise price equal to eighty percent (80%) of the average closing price
 per share of the Companys common stock for a period of ten (10) consecutive
 business days ending immediately prior to the date which causes a default.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | During the year ended July
 31, 2008 the Company repaid holders of notes a total of $100,000 and reached
 agreement with the holders of the remaining notes to extend the maturity
 dates under the same terms and conditions as under the original agreement.
 Under the extended agreements, $200,000 of the notes now mature in September
 2008 and $250,000 of the notes now mature in February and March 2009. The
 Company will continue to pay monthly interest at an annual rate of 12% to the
 note holders until the new maturity dates. The number of shares and warrants
 that would be required to be issued to current note holders in the event of a
 default has therefore been reduced to 4,050,000 shares and 135,000 warrants
 to reflect the effect of the repayment of $100,000 of the original notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In accordance with
 Accounting Principles Board Opinion No. 14, Accounting for Convertible Debt
 and Debt Issued with Stock Purchase Warrants (APB 14), proceeds received
 from the sale of debt with detachable stock purchase warrants should be
 allocated to both debt and warrants based on their relative fair value, with
 the portion allocable to the warrants to be accounted for as Additional Paid
 in Capital and reduce the carrying value of debt. In order to determine the
 fair value of the warrants, the Company employed several valuation models to
 arrive at a value of $5,156 for the warrants. This amount was amortized to
 interest expense over the initial twelve-month term of the notes. At July 31,
 2008, the discount on the notes had been amortized in full.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-15

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11. | RELATED
 PARTY TRANSACTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company received
 $100,000 for working capital in January 2008 and $100,000 in February 2008
 from the Chairman of the Board for the issuance of notes. The notes, which
 are non-interest bearing, require repayment in full eighteen months from the
 dates of issuance. In May 2008, the Chairman of the Board agreed to convert
 his $200,000 in outstanding notes payable into shares of the Companys common
 stock at the fair market value of $.035 per share. A total of 5,714,285
 shares were issued as a result of this conversion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|12. | LITIGATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In April 2008, the Company
 reached a settlement with its former Chief Executive Officer regarding a
 lawsuit filed against the Company by him in December 2007. Under terms of the
 agreement, the Company paid the former CEO a total of $10,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|13. | COMMITMENTS
 AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In April 2007 the Company
 entered into a new eighteen month employment agreement with its President and
 Chief Executive Officer. The agreement specifies an annual base salary of
 $150,000, and, 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 quarterly bonus
 compensation in an amount approved by the Companys Board of Directors based
 upon the performance criteria as may be established by the Compensation
 Committee from time to time. Such bonuses, which at no time may be less than
 3% of the Companys EBITDA as computed under GAAP, may be paid in cash or
 issued in shares of the Companys common stock as elected by the CEO. 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 of a minimum of $10,000 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. If the CEOs employment is terminated for
 any reason other than cause, the CEO will receive a lump sum payment equal
 to one (1) times the current base salary. If the CEOs employment is
 terminated by the Company after a Change of Control, the CEO will receive a
 lump-sum payment equal to 2.99 times the current base salary.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In addition, in January
 and March 2007 the Company entered into employment agreements ranging in
 length from twenty-four to twenty-seven months with both of the Companys
 current officers that range from $125,000 to $132,000 annually. These
 executives also receive automobile allowances of $400 per month. If their
 contracts are not renewed they receive severance packages of between six and nine
 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 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 its assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-16

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company leases
 equipment and facilities under non-cancelable capital and operating leases
 expiring on various dates through December 2012. The main operating lease
 consists of a seven-year lease for 30,000 square feet of a 62,000 square foot
 facility. Rent, including applicable taxes, at the period ended
 July 31, 2008 was $23,005 per month and increases 3% at the beginning of each
 calendar year through the remaining life of the lease. Total rent expense
 under the operating leases for the years ended July 31, 2008 and 2007 totaled
 approximately $273,000 and $265,000 respectively. During the fourth quarter
 of fiscal 2008, the Company concluded an agreement with its landlord whereby
 payment of $11,500 per month of the monthly rent would be deferred until
 November, 2008 at which time the regular monthly rent payment would be
 resumed plus an additional $6,500 per month of the arrearage until the
 balance is brought current. The Company agreed to pay interest at the rate of
 8% on the deferred balance, which will be paid when the arrearage is
 eliminated.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The approximate minimum
 future payments under this operating lease are payable as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                     |  |   |           | 
|-------------------- |  | - | --------- | 
|Year ending July 31, |  |   |           | 
|                     |  |   |           | 
|2009                 |  |   | 316,000   | 
|2010                 |  |   | 290,000   | 
|2011                 |  |   | 299,000   | 
|2012                 |  |   | 308,000   | 
|2013                 |  |   | 103,000   | 
|                     |  |   |           | 
|                     |  | $ | 1,316,000 | 
|                     |  |   |           | 

| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company leases
 equipment under non-cancelable capital leases expiring on various dates
 through fiscal 2011. The approximate minimum future payments under these
 capital leases are payable as follows:

|                                                          |   |        |         | 
|--------------------------------------------------------- | - | ------ | ------- | 
|Year
ending July 31,                                      |   |        |         | 
|                                                          |   |        |         | 
|2009                                                      |   | $      | 118,000 | 
|2010                                                      |   |        | 96,000  | 
|2011                                                      |   |        | 6,000   | 
|                                                          |   |        |         | 
|                                                          |   | $      | 220,000 | 
|                                                          |   |        |         | 
|Less amount representing
 interest                        |   | 22,000 |        
|                                                          |   |        |         | 
|                                                          |   |        |         | 
|                                                          |   |        | 198,000 | 
|Less current maturities                                   |   |        | 101,000 | 
|                                                          |   |        |         | 
|                                                          |   |        |         | 
|Long-term capital lease obligationless current maturities | $ | 97,000 |        
|                                                          |   |        |         | 

| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Interest expense on
 capital leases for the years ended July 31, 2008 and 2007 amounted to
 approximately $25,000 and $17,000, respectively.

F-17

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|14. | STOCKHOLDERS
 EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | During the year end July
 31, 2008 the Company issued 3,183,333 shares of common stock to three
 Directors for services rendered in accordance with the approved Board
 compensation plan. A total of $136,000 was charged to expense during this
 period, which was approximately equal to the fair market value of the shares
 at the time of issuance. In addition, 50,000 shares of common stock were
 issued to a member of management in accordance with the terms of his
 employment agreement. A total of $3,500 was charged to expense, which was
 approximately equal to the fair market value of the shares at the time of
 issuance.                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | During the year ended July
 31, 2008 a total of 367,074 shares of common stock were issued as a result of
 the exercise of outstanding options, all with a strike price of $0.01. Of
 this total, 200,000 options were exercised by the President and CEO. The
 Company received proceeds of $3,671.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In May 2008, the Chairman
 of the Board agreed to convert his $200,000 in outstanding notes payable into
 shares of the Companys common stock at the fair market value of $.035 per
 share. A total of 5,714,285 shares were issued as a result of this
 conversion. Also in May, 2008, the Company raised an additional $400,000 for
 working capital purposes from the Chairman through the issuance of shares and
 warrants of the Companys common stock. As a result of this transaction, the
 Company issued a total of 11,428,571 shares to the Chairman at the
 approximate fair value of $.035 per share. The Company also issued a three
 year warrant to the Chairman of the Board to purchase 8,571,428 shares of the
 Companys common stock at an exercise price of $.035 per share. A total of
 $25,714 was charged to expense, which represented the fair value of the
 warrants. The Company also paid $1,650 for legal fees and $24,000 to an agent
 for helping to facilitate this transaction.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | At July 31, 2008 the
 Company had a total of 20,606,112 outstanding warrants to purchase common
 stock with exercise prices ranging from $0.035 to $0.63 and which expire at
 various dates through June 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | During the fiscal year
 ended July 31, 2007 the Company issued a total of 2,746,108 shares of common
 stock in exchange for services. Of this total, 121,858 shares were issued to
 members of management in accordance with the terms of their employment
 contracts and $17,623 was charged to expense during this period, which was
 approximately equal to the fair market value of the shares at the time of
 issuance. The Company issued a total of 650,000 shares to a sales consultant,
 worth $91,000 at fair market value which was charged to expense during the
 period in which they were earned. The Company also issued a total of
 1,974,250 shares of common stock to four outside directors and the Chairman
 of the Board in exchange for their services.                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Of the 1,974,250 shares
 issued 1,252,330 shares were issued for services that were rendered for
 fiscal year 2007 and were expensed over the year as they were earned. During
 the year ended July 31, 2007 the Company expensed $196,250 for these shares,
 which was approximately equal to the fair market value of the shares when
 issued. Also included in the above total are 721,920 shares, worth
 approximately $115,000 at fair market value, which were issued to the new
 Chairman of the Board for consulting services. These shares were charged to
 expense during the period in which they were earned.                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-18

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | During the year ended July
 31, 2007 a total of 344,370 net shares of common stock were issued to
 employees and a consultant as a result of the exercise of outstanding
 options, all with a strike price of $0.01. This
 reflected a total of 101,036 options that were exercised and subsequently
 sold back by four senior managers who delivered these shares to satisfy tax
 withholding requirements. These shares were valued at $15,557 which
 represents the fair value of the shares at the time of surrender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | During the year ended July
 31, 2007 the Company issued a total of 9,895,488 shares of common stock to
 investors who exercised outstanding warrants. Of this total, 9,177,859
 warrants were exercised by investors in the month of June 2007 when the
 Company offered all holders of outstanding common stock purchase warrants the
 opportunity to exercise their warrants at $0.16 per share for a thirty day
 time period. For each warrant exercised during the window period, the holder
 was entitled to receive one half (1/2) of a new common stock purchase warrant
 exercisable at $0.16 for a two-year period expiring on June 30, 2009. As a
 result, the Company received $1,468,457 from investors who exercised these
 warrants. In addition, the Company issued 4,588,930 new $0.16 two-year
 warrants to these investors. Issuing these units resulted in the Company recording
 a non-cash compensation expense of $45,889. The remaining 717,629 cashless
 warrants were exercised by an investor according to the terms of the warrant
 agreement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company is authorized
 to issue 5,000,000 shares of $.001 par value, series A, convertible preferred
 stock. As of July 31, 2008 there were no shares of preferred stock
 outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|15. | 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. As of July 31, 2008, 16,755,400
 shares are authorized for award under the plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | A summary of the status of
 the Companys options as of July 31, 2008 and 2007 and changes during the
 years then ended is presented below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 
|----------------------------------------------------------------- |  | ---------------- | --------- | ------------------------------- | - | ---------------- |  | ------------------------------- | --------- | - | - | ---- | 
|                                                                  |  | July 31, 2008    |           | July 31, 2007                   |  
|                                                                  |  |                  |           |                                 |  
|                                                                  |  | Number of
Shares |           | Weighted-Average
Exercise Price |   | Number of
Shares |  | Weighted-Average
Exercise Price |          
|Balance at beginning of
 year                                     |  |                  | 2,030,348 |                                 | $ | 0.28             |  |                                 | 3,274,254 |   | $ | 0.32 | 
|Granted                                                           |  |                  | 150,000   |                                 |   | 0.06             |  |                                 | 200,000   |   |   | 0.15 | 
|Cancelled or Expired                                              |  |                  | (513,500  | )                               |   | 0.20             |  |                                 | (998,500  | ) |   | 0.51 | 
|Exercised                                                         |  |                  | (367,074  | )                               |   | 0.01             |  |                                 | (445,406  | ) |   | 0.01 | 
|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 
|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 
|Outstanding
 at end of year                                       |  |                  | 1,299,774 |                                 | $ | 0.36             |  |                                 | 2,030,348 |   | $ | 0.28 | 
|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 
|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 
|Options exercisable at end
 of year                               |  |                  | 1,149,774 |                                 | $ | 0.40             |  |                                 | 1,830,348 |   | $ | 0.29 | 
|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 
|Weighted Average fair
 value of options granted during the period |  |                  |           |                                 | $ | 0.02             |  |                                 |           |   | $ | 0.06 | 
|                                                                  |  |                  |           |                                 |   |                  |  |                                 |           |   |   |      | 

|  |                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------
| | The value of options
 exercised in the fiscal years ended 2008 and 2007 was $3,671 and $4,454, respectively.
| | The fair value of vested
 options in fiscal 2008 was $26,909.                                               
| | As of July 31, 2008, all
 compensation costs relating to option awards have been recognized.                

F-19

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | The following table
 summarizes information about stock options outstanding at July 31, 2008:

|                        |  |                     |           |                                             |  |                                 |  |                    |      |                                 |  |           |  |   |      | 
|----------------------- |  | ------------------- | --------- | ------------------------------------------- |  | ------------------------------- |  | ------------------ | ---- | ------------------------------- |  | --------- |  | - | ---- | 
|                        |  | Options Outstanding |           | Options Exercisable                         | 
|                        |  |                     |           |                                             | 
|Range of Exercise Price |  | Number
Outstanding  |           | Weighted
average
Remaining
Contractual
Life |  | Weighted
average
Exercise
Price |  | Number
Exercisable |      | Weighted
average
Exercise
Price | 
|                        |  |                     |           |                                             |  |                                 |  |                    |      |                                
|$0.01                   |  |                     | 203,274   |                                             |  | 4.62                            |  | $                  | 0.01 |                                 |  | 203,274   |  | $ | 0.01 | 
|$0.10 -$.47             |  |                     | 966,500   |                                             |  | 2.36                            |  |                    | 0.21 |                                 |  | 816,500   |  |   | 0.24 | 
|$.51 -$2.00             |  |                     | 130,000   |                                             |  | 1.96                            |  |                    | 2.00 |                                 |  | 130,000   |  |   | 2.00 | 
|                        |  |                     |           |                                             |  |                                 |  |                    |      |                                 |  |           |  |   |      | 
|                       
|$0.01 - $2.00           |  |                     | 1,299,774 |                                             |  |                                 |  | $                  | .36  |                                 |  | 1,149,774 |  | $ | 0.40 | 
|                        |  |                     |           |                                             |  |                                 |  |                    |      |                                 |  |           |  |   |      | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | The intrinsic value of
 shares outstanding and exercisable at July 31, 2008 and 2007 was
 approximately $4,000 and $95,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | During the year ended July
 31, 2008 the Company granted 150,000 options to its Board members according
 to the approved Board Compensation plan. The weighted average fair value of
 these options using a Black-Scholes valuation model was $.02.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|16. | INCOME
 TAXES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | As of July 31, 2008 the
 Company had deferred tax assets of approximately $11,582,000 resulting from
 temporary differences and net operating loss carry-forwards of approximately
 $27,000,000 which are available to offset future taxable income, if any,
 through 2028. 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. The utilization of the net operating loss carry
 forwards may also be limited as a result of change of ownership provision
 under section 382 of the Internal Revenue Services Code. . 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.

F-20

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Table of Contents

eAUTOCLAIMS, INC.

NOTES TO FINANCIAL STATEMENTS

| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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,
2008 |            
|                                      |  |               |            
|Temporary differences:                |  |               |             |  
|Allowance for doubtful accounts       |  |               | 19,000      |  
|Accrued vacation                      |  |               | 22,000      |  
|Compensation not currently deductible |  |               | 857,000     |  
|Deferred gain on building             |  |               | 148,000     |  
|Property and equipment                |  |               | 6,000       |  
|Net operating losses                  |  |               | 10,709,000  |  
|Less valuation allowance              |  |               | <11,761,000 | >
|                                      |  |               |             |  
|                                      |  |               |             |  
|Deferred tax assets                   |  | $             | -
 0 -      |  
|                                      |  |               |             |  

| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | The reconciliation of the
 effective income tax rate to the federal statutory rate for each of the years
 ended July 31, 2008 and 2007 is as follows:

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

|    |                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|17. | EMPLOYEE BENEFIT PLAN                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company has a
 noncontributory defined contribution plan under Section 401 (k) of the
 Internal Revenue 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, 2008 or 2007.                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                        
|18. | MAJOR CUSTOMERS                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended
 July 31, 2008 and 2007, one customer accounted for 18% and 38% of total
 revenue respectively. During the years ended July 31, 2008 and 2007 a second
 customer accounted for approximately 14% and 18% of total revenue,
 respectively. At July 31, 2008, our two largest customers accounted for 27%
 of the outstanding accounts receivable.
|    |                                                                                                                                                                                                                                                                                                                                                                        
|19. | SUBSEQUENT EVENT                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                        
|    | On September
 25, 2008 the Company borrowed $50,000 against its $75,000 bank line of
 credit. On October 1, 2008, the Company drew down the remaining $25,000 of
 the line of credit.                                                                                                                                                                                  

F-21

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