Elcom International, Inc. Reports First Quarter 2005 Operating
Results NORWOOD, Mass., May 10 /PRNewswire-FirstCall/ -- Elcom
International, Inc. (OTC:ELCOOTC:andOTC:AIM:OTC:ELCOTC:andOTC:ELCS)
(BULLETIN BOARD: ELCO and AIM: ELC and ELCS) , today announced
operating results for its first quarter ended March 31, 2005.
Financial Summary Table (Unaudited) (in thousands, except per share
amounts) Quarter Ended March 31 2005 2004 Net revenues $613 $1,709
Gross profit 497 1,603 Operating expenses 1,572 1,673 Operating
loss (1,075) (70) Net loss (1,136) (173) Basic and diluted net loss
per share $(0.02) $(0.01) Basic and diluted weighted average common
shares outstanding 61,282 30,909 Please note that the first quarter
of 2004 includes a non-recurring license fee of $1.1 million as
further discussed herein. The above table, the following
description and the condensed consolidated financial statements
should be read in conjunction with the information contained in the
Company's March 31, 2005 Quarterly Report on Form 10-QSB, filed on
May 9, 2005, and Annual Report on Form 10-KSB, as amended, for
fiscal year 2004. Net revenues for the quarter ended March 31, 2005
decreased to $613,000, from $1,709,000 in the same period of 2004,
a decrease of $1,096,000. Net revenues decreased primarily due to
recording the fourth and final lump sum license payment from
Capgemini UK Plc ("Capgemini", formerly Cap Gemini Ernst and Young
UK Plc), of $1,142,000 in the first quarter of 2004, which was
earned upon signing the thirteenth customer of the eProcurement
Scotland program (this license fee is non-recurring). License and
associated fees include license fees, hosting fees, supplier fees,
usage fees and maintenance fees. Gross profit for the quarter ended
March 31, 2005 decreased to $497,000 from $1,603,000 in the
comparable 2004 quarterly period, a decrease of $1,106,000. This
decrease is a result of the much higher level of one-time license
and associated fees revenue recorded in the first quarter of 2004
as described above, versus revenues recorded in the first quarter
of 2005. Operating expenses for the quarter ended March 31, 2005
were $1,572,000 compared to $1,673,000 in the 2004 quarter, a
decrease of $101,000 or 6%. Throughout the first three quarters of
2003, the Company implemented cost containment measures designed to
better align its SG&A expenses with lower than anticipated
revenues. Those measures included personnel reductions throughout
most functional and corporate areas. In general, these reductions
have remained in place throughout 2004 and into 2005. In March
2004, the Company began hiring several staff in the U.K. and U.S.
(support services) in order to service the expanding demand in the
municipal market in the U.K., although the Company's headcount
(full and part-time) has only increased by two, from 36 at March
31, 2004 to 38 at March 31, 2005. Nonetheless, due to a change in
the mix of employees, personnel expenses decreased approximately
$120,000 from the March 2004 quarter to the March 2005 quarter.
Travel expenses increased from the 2004 quarter to the 2005
quarter, reflecting the increased level of travel required in
connection with ongoing negotiations associated with the Zanzibar
contract in the U.K., as well as discussions associated with
raising capital. The first quarter of 2005 also reflects an
increase in certain facility-related and other administrative
expenses, reflecting the impact of inflation, however these
increases were mostly offset by a reduction in depreciation and
amortization expense, as various Company assets have been fully
depreciated/amortized. The Company reported an operating loss of
$1,075,000 for the quarter ended March 31, 2005 compared to a loss
of $70,000 reported in the comparable quarter of 2004, an increase
of $1,005,000 in the loss reported. This increased operating loss
in the first quarter of 2005 compared to the 2004 quarter was
primarily due to the 2004 one-time increase in license and
associated fees revenue as discussed above. The Company's net loss
for the quarter ended March 31, 2005 was $1,136,000, an increase in
the loss of $963,000 from the comparable quarterly loss in 2004 of
$173,000, as a result of the factors discussed above. Factors
Affecting Future Performance The Company's consolidated financial
statements as of December 31, 2004 and March 31, 2005 have been
prepared under the assumption that the Company will continue as a
going concern for the year ending December 31, 2005. In the
Company's Annual Report on Form 10-KSB, the Company's independent
public accountants, Vitale, Caturano & Company, LTD., have
issued their report dated February 9, 2005 that included an
explanatory paragraph referring to the Company's significant
operating losses and substantial doubt in its ability to continue
as a going concern without additional capital becoming available.
The Company has incurred net losses every year since 1998, has an
accumulated deficit of $117,779,000 as of March 31, 2005, and
expects to incur a loss in fiscal year 2005. As of March 31, 2005,
the Company had $67,000 of cash, which, along with anticipated
operating receipts (including advance payments by certain clients),
the Company expects will allow it to operate into June of 2005. The
Company required additional financing in the first quarter of 2005
in order to continue to operate. Beginning in the second half of
February 2005, the Company received bridge loans from the Chairman
and CEO and Vice Chairman and Director. The bridge loans are
intended, now in conjunction with the advance payments by certain
clients, to provide the Company with funds necessary to operate
during the period leading up to the Zanzibar contract being awarded
and the proposed offering of Common Stock in the U.K. Through May
2, 2005, the Company has received a total of $200,000 from such
bridge loans, however the Company expects it will require
additional funds in June of 2005 to operate until the proposed
offering of Common Stock in the U.K. may be consummated. The
Company intends to seek additional capital via the issuance and
sale of common shares to investors on the Alternative Investment
Market of the London Stock Exchange ("AIM Exchange") in July of
2005, which, if consummated, is expected to result in substantial
dilution to its stockholders. Failure to consummate such financing
or other near-term financing or additional customer advances would
likely force the Company to curtail operations and/or seek
protection under bankruptcy laws. The Company is currently in
discussions with multiple parties regarding the raising of
additional capital, including the possible AIM Exchange offering,
however, there can be no assurance that any such financing can be
realized by the Company or, if realized, what the terms thereof may
be, or that any amount the Company is able to raise will be
adequate to support the Company's working capital requirements
until it achieves profitable operations. However, the accompanying
consolidated financial statements have been prepared assuming that
the Company will continue as a going concern and, as such, do not
include any adjustments that may result from the outcome of these
uncertainties. About Elcom International, Inc. Elcom International,
Inc. (OTC:ELCOOTC:andOTC:AIM:OTC:ELCOTC:and ELCS) (BULLETIN BOARD:
ELCO and AIM: ELC and ELCS) , operates elcom, inc ("Elcom"), an
international B2B Commerce Service Provider offering affordable
solutions for buyers, sellers and commerce communities to automate
many or all of their purchasing processes and conduct business
online. PECOS, Elcom's remotely-hosted flagship solution, enables
enterprises of all sizes to achieve the many benefits of B2B
eCommerce without the burden of infrastructure investment and
ongoing content and system management.
http://www.elcominternational.com/ STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT Except for the historical
information contained herein, the matters discussed in this press
release could include forward-looking statements or information.
All statements, other than statements of historical fact,
including, without limitation, those with respect to the Company's
objectives, plans and strategies set forth herein and those
preceded by or that include the words "believes," "expects,"
"targets," "intends," "anticipates," "plans," or similar
expressions, are forward-looking statements. Although the Company
believes that such forward-looking statements are reasonable, it
can give no assurance that the Company's expectations are, or will
be, correct. These forward-looking statements involve a number of
risks and uncertainties which could cause the Company's future
results to differ materially from those anticipated, including: (i)
availability and terms of appropriate working capital and/or other
financing to keep the Company operating, particularly in light of
the audit opinion from the Company's independent accountants in the
Company's Annual Report on Form 10-KSB, as amended; (ii) the
Company's necessity to obtain additional financing or customer
advance payments and raise additional capital to continue as a
going concern past June 2005, particularly in light of the
Company's $67,000 balance of cash and cash equivalents at March 31,
2005 and its history of ongoing operating losses; (iii) the overall
marketplace and client's acceptance and usage of eCommerce software
systems, eProcurement and eMarketplace solutions including
corporate demand therefor, the impact of competitive technologies,
products and pricing, particularly given the substantially larger
size and scale of certain competitors and potential competitors,
and control of expenses, revenue growth; (iv) the consequent
results of operations given the aforementioned factors; (v) the
awarding of the Zanzibar contract and/or the timing thereof; and
(vi) the necessity of the Company to raise additional working
capital or obtain additional customer advance payments to fund
operations during June 2005 and the availability of any such
funding to the Company and other risks detailed from time to time
in the Company's Annual Reports on Form 10-KSB, Quarterly Reports
on Form 10-QSB and in its other SEC reports and statements. In the
event the Company is unable to raise additional working capital
from investors, additional software implementations, professional
services fees, and monthly license and other fees, or by the sale
of assets or by other means, including the possible sale of Common
Stock, the Company would be forced to curtail or cease operations
and/or seek protection under U.S. bankruptcy laws. The Company
assumes no obligation to update any of the information contained or
referenced in this press release. The financial data set forth
below should be read in conjunction with the consolidated financial
statements and other disclosures contained in the Company's 2004
Annual Report on Form 10-K, as amended. The Company filed its Form
10-QSB for the first quarter of 2005 on May 9, 2005. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE
INCOME (LOSS) (in thousands, except per share data) (unaudited)
Three Months Ended March 31, 2005 2004 Net Revenues: License and
associated fees $495 $1,558 Professional services 118 151 Total Net
Revenues 613 1,709 Cost of sales 116 106 Gross profit 497 1,603
Operating Expenses: Selling, general and administrative 1,452 1,632
Research and development 120 41 Total operating expenses 1,572
1,673 Operating loss (1,075) (70) Interest and other income
(expense), net (1) (34) Interest expense (60) (69) Net loss before
tax (1,136) (173) Income tax benefit -- -- Net loss (1,136) (173)
Foreign currency translation adjustment, net of tax 8 --
Comprehensive loss $(1,128) $(173) Basic and diluted net loss per
share $(0.02) $(0.01) Weighted average number of basic and diluted
shares outstanding 61,282 30,909 CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands, except share data) March 31, December 31,
2005 2004 (unaudited) ASSETS CURRENT ASSETS: Cash and cash
equivalents $67 $390 Accounts receivable: Trade 473 354 Other 6 --
479 354 Less-Allowance for doubtful accounts 44 47 Accounts
receivable, net 435 307 Prepaid expenses and other current assets
135 53 Total current assets 637 750 PROPERTY, EQUIPMENT AND
SOFTWARE, AT COST: Computer hardware and software 20,639 20,639
Furniture, equipment and leasehold improvements 3,088 3,088 23,727
23,727 Less -- Accumulated depreciation and amortization 22,816
22,708 911 1,019 OTHER ASSETS 10 10 NON-CURRENT ASSETS OF
DISCONTINUED OPERATIONS 48 48 $1,606 $1,827 LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of
capital lease obligations $31 $30 Loans payable 200 -- Accounts
payable 628 468 Deferred revenue 527 510 Accrued expenses and other
current liabilities 2,950 2,421 Current liabilities of discontinued
operations 313 303 Total current liabilities 4,649 3,732 CAPITAL
LEASE OBLIGATIONS, NET OF CURRENT PORTION 19 27 OTHER LONG TERM
LIABILITY 516 546 Convertible Debentures, NET OF DISCOUNT 390 362
Total liabilities 5,574 4,667 COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY DEFICIT: Preferred stock, $.01 par value;
Authorized -- 10,000,000 shares -- Issued and outstanding - none --
-- Common stock, $.01 par value; Authorized -- 200,000,000 shares
-- Issued - 61,812,569 shares 618 618 Additional paid-in capital
118,703 118,703 Accumulated deficit (117,779) (116,643) Treasury
stock, at cost -- 530,709 shares (4,712) (4,712) Accumulated other
comprehensive loss (798) (806) Total stockholders' deficit (3,968)
(2,840) $1,606 $1,827 DATASOURCE: Elcom International, Inc.
CONTACT: Investor Relations of Elcom International, Web site:
http://www.elcom.com/
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