Elcom International, Inc. Reports Third Quarter 2004 Operating
Results NORWOOD, Mass., Nov. 15 /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 third quarter ended September 30, 2004.
Financial Summary Table (Unaudited) (in thousands, except per share
amounts) Quarter Ended Nine Months Ended September 30, September
30, 2004 2003 2004 2003 Net sales $667 $367 $2,974 $1,567 Gross
profit 607 331 2,777 1,202 Operating loss from continuing
operations (1,053) (1,346) (2,143) (5,409) Net loss from continuing
operations (1,106) (1,278) (2,351) (4,910) Net income (loss) from
discontinued operations -- (197) -- 110 Net loss $(1,106) $(1,475)
$(2,351) $(4,800) Basic and diluted net loss per share data:
Continuing operations $(0.02) $(0.04) $(0.05) $(0.16) Discontinued
operations -- (0.01) -- -- Basic and diluted net loss per share
$(0.02) $(0.05) $(0.05) $(0.16) Basic and diluted weighted average
common shares outstanding 61,282 30,902 49,557 30,902 The above
table, the following description and the condensed consolidated
financial statements should be read in conjunction with the Risk
Factors and other information contained in the Company's Forms
10-QSB for the periods ended March 31, June 30 and September 30,
2004 and 2003 Annual Report on Form 10-K, as amended. Net sales for
the quarter ended September 30, 2004 increased to $667,000 from
$367,000 in the same period of 2003, an increase of $300,000, or
82%. Professional services revenue increased due primarily to an
increase in implementation activities in the U.K. related to the
Scottish Executive's eProcurement Scotl@nd program. Professional
services revenue includes implementation fees, integration fees and
other professional services income. Licenses and associated fees
increased slightly, primarily reflecting a higher level of ongoing
hosting activity in both the U.S. and U.K. in 2004 versus 2003.
License and associated fees include license fees, hosting fees,
supplier fees, usage fees, and maintenance fees. Selling, general
and administrative expenses ("SG&A") for the quarter ended
September 30, 2004 were $1,564,000 compared to $1,610,000 in the
2003 quarter, a decrease of $46,000. During the third quarter of
2003 the Company's SG&A expenses were reduced by approximately
$284,000 related to receipt of a franchise tax refund. 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 and has maintained this
decreased level of expenses throughout the first three quarters of
2004. The measures taken in 2003 included personnel reductions
throughout most functional and corporate areas. 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 public
sector market in the U.K. However, overall headcount has only
increased by one, from 38 employees at the end of the 2003 quarter
to 39 employees (four (4) of whom are part-time), at the end of the
2004 quarter. The decrease in SG&A from the 2003 quarter to the
2004 quarter is due largely to a reduction in depreciation and
amortization expense (various Company assets have been fully
depreciated/amortized), a small decrease in personnel related
expenses, and are net of an increase in administrative expenses,
reflecting the increased cost of the Company's shares being listed
on the London Stock Exchange's AIM. The Company reported an
operating loss from continuing operations of $1,346,000 for the
quarter ended September 30, 2003 compared to a loss of $1,053,000
reported in the comparable quarter of 2004, a decrease
(improvement) of $293,000, or 22% in the reported loss. This
smaller operating loss from continuing operations in the third
quarter of 2004 compared to the 2003 quarter was due to both the
reduction in SG&A and the increase in net sales. Net sales for
the nine months ended September 30, 2004 increased to $2,974,000
from $1,567,000 in the same period of 2003, an increase of
$1,407,000. Licenses and associated fees increased 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 which was earned upon signing the thirteenth
customer of the eProcurement Scotland program in the first quarter
of 2004 (this license fee is non-recurring). Professional services
fees increased by $106,000, from $425,000 in 2003 to $531,000 in
2004, reflecting more implementation work and other professional
services activities than were recorded in the first nine months of
2003. During the first three quarters of 2004 six eProcurement
Scotland customers were brought live, and five additional customers
are currently in various stages of implementation, with two or
three of those customers anticipated to go live in the fourth
quarter of 2004. In the first three quarters of 2003 one
eProcurement Scotland customer was brought live. SG&A for the
nine months ended September 30, 2004 was $4,702,000 compared to
$6,417,000 in the first three quarters of 2003, a decrease of
$1,715,000 or 27%. 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. Reductions in personnel resulted in
a decrease in personnel expense in the first nine months of 2004 of
approximately $838,000 when compared to the first nine months of
2003. In March 2004, as described above, 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 overall headcount has only increased by one, from 38
employees at the end of the 2003 quarter to 39 employees at the end
of the 2004 quarter, four (4) of whom were part-time. The remaining
decrease in SG&A from the first three quarters of 2003 to the
first three quarters of 2004 is due largely to a reduction in
depreciation and amortization expense, as various Company assets
have been fully depreciated/amortized as well as credits negotiated
with two service providers which resulted in one-time credits of
$192,000 in the first nine months of 2004. In the first three
quarters of 2003 the Company's SG&A expenses were reduced by
approximately $800,000 related to reversal of a franchise tax
accrual (as payment was no longer deemed probable), and receipt of
a franchise tax refund. The Company reported an operating loss from
continuing operations of $5,409,000 for the nine months ended
September 30, 2003 compared to a loss of $2,143,000 reported in the
comparable nine months of 2004, a decrease (improvement) of 60%, or
$3,266,000 in the reported loss. This smaller operating loss from
continuing operations in the first nine months of 2004 compared to
the first three quarters of 2003 was due to both the reduction in
SG&A and the one-time increase in license and associated fees
revenue in the first quarter of 2004, as described above. The
Company's net loss from continuing operations for the nine months
ended September 30, 2004 was $2,351,000, a decrease of $2,559,000
from the $4,910,000 loss reported in the first three quarters of
2003, as a result of the factors discussed above. Robert J.
Crowell, the Company's Chairman and CEO, stated, "Our third quarter
2004 earnings do not yet reflect the full anticipated increase in
activity under our agreement with Capgemini associated with the
Scottish Executive, which began to accelerate late last year. Our
2004 nine-month results included the recognition of our final lump
sum payment from Capgemini associated with the Scottish Executive
of approximately $1 million. Elcom's sales pipeline slowed a bit
during the summer months; however the Company has experienced a
strong increase in activity and is in the process of responding to
several bid requests in both the U.K. and U.S., one of which is
associated with a government agency in the U.K. and is quite large.
Overall, the shortfall in revenues year to date has resulted in a
requirement that the Company raise additional funds, and we are
currently in discussions with several parties regarding funding of
the Company within the next few months." As of September 30, 2004,
the Company had $857,000 of cash, which the Company anticipates
will allow it to operate into the first quarter of 2005. Prior to
that time, the Company intends to raise additional funding
sufficient to support its operations. The Company is currently in
discussions with several parties regarding the raising of
additional capital, however there can be no assurance that the
Company will receive any such funding or, if raised, on what terms
or what the timing thereof may be. Without such funding the Company
would likely be forced to curtail operations and/or take other
measures during the first quarter of 2005. STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT Except for the historical
information contained herein, the matters discussed in this press
release may 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," "given," "targets,"
"intends," "anticipates," "plans," "projects", "forecasts" 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) the Company's history of ongoing
operating losses; (ii) the overall marketplace and clients'
acceptance and usage of eCommerce software systems, 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,
control of expenses, revenue generation by the acquisition of new
customers, the acceptance of the eProcurement Scotland program by
public entities, and corporate demand for eProcurement and
eMarketplace solutions; (iii) the consequent results of operations
given the aforementioned factors; and (iv) the requirement for the
Company to raise additional working capital to fund operations
during the next few months but by no later than early in the first
quarter of 2005 and the availability and terms of any such funding
to the Company. Without any such funding, the Company believes it
may be forced to curtail operations, and if no alternative to
financing, such as a merger or acquisition is consummated, the
Company may have no option but to seek protection under bankruptcy
laws. Other risks are detailed from time to time in the Company's
2003 Annual Report on Form 10-K, as amended, its Quarterly Reports
on Form 10-QSB for the quarterly periods ended March 31, June 30,
and September 30, 2004, and in its other SEC reports and
statements. 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 2003 Annual Report on Form 10-K, as
amended and Forms 10-QSB for the periods ended March 31, June 30,
and September 30, 2004 (which the Company plans to file on November
15, 2004). CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data) Three Months Ended
Nine Months Ended September 30, September 30, 2004 2003 2004 2003
Net sales $667 $367 $2,974 $1,567 Cost of sales 60 36 197 365 Gross
profit 607 331 2,777 1,202 Operating Expenses: Selling, general and
administrative 1,564 1,610 4,702 6,417 Research and development 96
67 218 194 Total operating expenses 1,660 1,677 4,920 6,611
Operating loss from continuing operations (1,053) (1,346) (2,143)
(5,409) Interest and other income (expense), net 7 99 (18) 79
Interest expense (60) (31) (190) (72) Net loss from continuing
operations before tax (1,106) (1,278) (2,351) (5,402) Income tax
benefit -- -- -- 492 Net loss from continuing operations (1,106)
(1,278) (2,351) (4,910) Discontinued operations: Net income from
discontinued operations, net of tax -- (197) -- 110 Net income
(loss) $(1,106) $(1,475) $(2,351) $(4,800) Basic and diluted net
income (loss) per share data: Continuing operations $(0.02) $(0.04)
$(0.05) $(0.16) Discontinued operations -- ( 0.01) -- -- Basic and
diluted net loss per share $(0.02) $(0.05) $(0.05) $(0.16) Weighted
average number of basic and diluted shares outstanding 61,282
30,902 49,557 30,902 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) September 30, December 31, 2004 2003
ASSETS CURRENT ASSETS: Cash and cash equivalents $857 $515 Accounts
receivable, net 286 1,027 Prepaids and other current assets 82 43
Total current assets 1,225 1,585 PROPERTY, EQUIPMENT AND SOFTWARE,
NET 299 783 OTHER ASSETS 10 15 NON-CURRENT ASSETS OF DISCONTINUED
OPERATIONS 48 80 $1,582 $2,463 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: Loans payable $-- $1,113 Other current
liabilities 2,913 3,374 Current liabilities of discontinued
operations 261 444 Total current liabilities $3,174 $4,931
Convertible debentures, net of discount 335 254 Total liabilities
3,509 5,185 TOTAL STOCKHOLDERS' DEFICIT (1,927) (2,722) $1,582
$2,463 AT THE COMPANY: Investor Relations E-mail: DATASOURCE: Elcom
International, Inc. CONTACT: Investor Relations of Elcom
International, Web site: http://www.elcom.com/
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