Electronic Clearing House Inc. Provides an Update on Legal and Sarbanes-Oxley 404 Compliance Expense

The Company estimates it will incur a cost to comply with Section 404 of the Sarbanes-Oxley Act of approximately $1,000,000 in FY 2005, comprised almost equally among added auditor expenses, accounting consultants and internal staff additions that will be required. Regarding the dispute with the Company’s former independent sales organization, the arbitration panel decided in January 2005 that the independent sales organization should receive an award of $501,000 which exceeded the Company’s good faith estimate of $300,000, an amount that was accrued in FY 2004. In addition to this added $201,000 award amount, it is anticipated that legal fees the Company may have to pay on behalf of this independent sales organization could be as high as $185,000. While the final amount could be less once the panel provides a determination with respect to legal fees, the Company intends to accrue a total of $400,000 in its first fiscal quarter of 2005 toward this dispute. The Company continues to invest in building its business, with over $300,000 being invested in a sales and marketing campaign in the San Diego area in the second quarter 2005 and over $1,500,000 in fiscal year 2005 is projected for R & D expenses and various technical initiatives that it believes will result in more efficient and robust operations.