Elcom International, Inc. Reports First Quarter 2004 Operating
Results NORWOOD, Mass., May 13 /PRNewswire-FirstCall/ -- Elcom
International, Inc. (BULLETIN BOARD: ELCO and AIM: ELC and ELCS) ,
today announced operating results for its first quarter ended March
31, 2004. Financial Summary Table (Unaudited) (in thousands, except
per share amounts) Quarter Ended March 31 2004 2003 Net sales
$1,709 $669 Gross profit 1,603 475 Operating expenses 1,673 2,409
Operating loss from continuing operations (70) (1,934) Net loss
from continuing operations (173) (1,445) Net loss from discontinued
operations -- (116) Basic net loss per share from continuing
operations $(0.01) $(0.05) Basic weighted average common shares
outstanding 30,909 30,902 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, 2004 Quarterly Report on Form 10-QSB and Annual
Report on Form 10-K, as amended, for fiscal year 2003. Net sales
for the quarter ended March 31, 2004 increased to $1,709,000
compared to $669,000 from the same period of 2003, an increase of
$1,040,000 or 155%. License and associated fees increased due
primarily to recording the final lump sum 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 fee is non-recurring). License and associated fees include
license fees, hosting fees, annual fees, joining fees and
maintenance fees. Professional services fees decreased by $112,000
from $259,000 in 2003 to $147,000 in 2004, reflecting less actual
implementations and other professional services activities than
were recorded in the first quarter of 2003. Operating expenses for
the quarter ended March 31, 2004 were $1,673,000 compared to
$2,409,000 in the 2003 quarter, a decrease of $736,000 or 30.6%.
Throughout 2003, the Company implemented cost containment measures
designed to align its operating expenses with lower than
anticipated revenues. Those measures included personnel reductions
throughout most functional and corporate areas. These personnel
reductions resulted in a decrease in personnel expense in the first
quarter of 2004 of approximately $529,000 when compared to the
first quarter of 2003. 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.
and in anticipation of the funding of the Company via the sale of
Regulation S Shares in the U.K. (discussed below). The remaining
decrease in operating expenses from the 2003 quarter to the 2004
quarter is largely due to a reduction in depreciation and
amortization expense, as various Company assets have been fully
depreciated/amortized. The Company's first quarter operating
expenses in 2003 were reduced by the reversal of a franchise tax
accrual of $506,000, as payment was no longer deemed probable. The
Company reported an operating loss from continuing operations of
$70,000 for the quarter ended March 31, 2004 compared to a loss of
$1,934,000 reported in the comparable quarter of 2003, a decrease
of $1,864,000 in the loss reported. This smaller operating loss
from continuing operations in the first quarter of 2004 compared to
the 2003 quarter was due primarily to the recognition of revenue
from the final lump sum payment from Capgemini, recorded as license
and associated fees revenue and the reduction in operating
expenses. The Company's net loss from continuing operations for the
quarter ended March 31, 2004 was $173,000, a decrease of $1,272,000
from the comparable quarterly loss in 2003 of $1,445,000, as a
result of the factors discussed above. At March 31, 2004, and prior
to the sale of the Regulation S Shares, the Company's principal
sources of liquidity were cash and cash equivalents of $143,000 and
accounts receivable, net of $145,000. Subsequent Event Affecting
Liquidity On April 16, 2004, the Company closed on the sale of
29,777,573 shares of its Common Stock (the "Regulation S Shares")
to investors in the U.K., and listed the Regulation S Shares and
its existing common shares on the AIM market of the London Stock
Exchange. The Company raised a total of approximately $3.6 million
via this issuance and sale of Regulation S Shares in the U.K, with
net proceeds to the Company of approximately $3.2 million. The
Regulation S Shares were sold at a price equal to the conversion
rate of the Company's recent placements of Debentures in 2003 of
$0.1246 per share. The funds derived from the sale of the
Regulation S Shares will be used to support the Company's working
capital requirements. Factors Affecting Future Performance A
significant portion of the Company's revenues from continuing
operations in the first quarter of 2004 (approximately $1,142,000
after currency conversions) are from recognition of the final lump
sum license fee from Capgemini related to the eProcurement Scotland
program. The eProcurement Scotland program is expected to be an
ongoing source of revenues for the Company; however, because this
was the final lump sum payment, which is a non-recurring fee, it is
anticipated the Company's revenues from this source will be lower
in the remaining quarters of 2004. If the Company, in conjunction
with Capgemini, the primary contractor for the eProcurement
Scotland program, is unable to perform under this license, it would
have a significant effect on the Company's financial results.
Robert J. Crowell, the Company's Chairman and CEO, stated, "Our
first quarter 2004 earnings do not yet reflect the increase in
activity under our agreement with Capgemini associated with the
Scottish Executive, which began late last year. Our first quarter
results were substantially enhanced by the recognition to earnings
of our final lump sum payment from Capgemini associated with the
Scottish Executive. Our underlying recurring revenues remain
generally consistent with Professional Services slightly less when
compared to last year. With our sales pipeline expanding, I expect
to see continued increases in activity under the Capgemini
agreement, and with other channel partners and opportunities." Mr.
Crowell continued, "We are extremely pleased at our successful
placement of shares in the U.K. and subsequent listing on the
Alternative Investment Market ("AIM"), which was effective April
16, 2004. With this financing in place, the Company filed its
Amendment Number 2 to its Form 10-K on May 10, 2004. This amended
filing contains an unqualified audit opinion as the Company is now
regarded as a 'going concern'. The Company now stands to benefit
from having a more secure financial foundation and believes 2004
will represent a new beginning for the Company as we begin to
expand, especially through our channel partners." About Elcom
International, Inc. Elcom International, Inc.
(OTC:ELCOOTC:andOTC:AIM:OTC:ELCOTC:andOTC:ELCS) (BULLETIN BOARD:
ELCO and AIM: ELC and ELCS) is a leading international provider of
remotely-hosted eProcurement and private eMarketplace solutions.
Elcom's innovative remotely-hosted technology establishes the next
standard of value and enables enterprises of all sizes to realize
the many benefits of eProcurement without the burden of significant
infrastructure investment and ongoing content and system
management. PECOS Internet Procurement Manager, Elcom's
remotely-hosted eProcurement and eMarketplace enabling platform was
the first "live" remotely-hosted eProcurement system in the world.
Additional information, including access to all of Elcom's filings
with the SEC, can be found at 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)
the Company's history of ongoing operating losses; (ii) the overall
marketplace and client's acceptance and usage of eCommerce software
systems, specifically the Company's PECOS eProcurement and
eMarketplace systems and demand thereof by public sector
organizations in the U.K., 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, corporate demand for
eProcurement and eMarketplace solutions; (iii) the consequent
results of operations given the aforementioned factors; and (iv)
the possibility that the Company's revenues may not reach the level
necessary to support positive cash flow and if so, the Company
might need to raise additional working capital to fund operations
in the future; and (v) the availability and terms of any such
funding to the Company, if available, and other risks detailed from
time to time in the Company's Annual Report on Form 10-K, as
amended, filed on May 10, 2004, in its Form 10-QSB for the first
quarter of 2004, and its other SEC reports and statements. The
Company assumes no obligation to update any of the information
contained or referenced in this press release. AT THE COMPANY:
Investor Relations E-mail: The financial data set forth below
should be read in conjunction with the consolidated financial
statements and other disclosures contained in both the Company's
2003 Annual Report on Form 10-K, as amended and Form 10-QSB for the
first quarter of 2004. The Company intends to file its Form 10-QSB
for the first quarter of 2004 by May 17, 2004. CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (in
thousands, except per share data) (unaudited) Three Months Ended
March 31, 2004 2003 Net Sales: License and associated fees $1,562
$410 Professional services 147 259 Total Net Sales 1,709 669 Cost
of sales 106 194 Gross profit 1,603 475 Operating Expenses:
Selling, general and administrative 1,632 2,350 Research and
development 41 59 Total operating expenses 1,673 2,409 Operating
loss from continuing operations (70) (1,934) Interest and other
income (expense), net (34) 4 Interest expense (69) (7) Net loss
from continuing operations before tax (173) (1,937) Income tax
benefit -- 492 Net loss from continuing operations (173) (1,445)
Discontinued operations: Net loss from discontinued operations, net
of tax -- (116) Net loss (173) (1,561) Foreign currency translation
adjustment, net of tax -- (18) Comprehensive loss $(173) $(1,579)
Basic and diluted net loss per share data: Continuing operations
$(0.01) $(0.05) Discontinued operations -- -- Basic and diluted net
loss per share $(0.01) $(0.05) Weighted average number of basic and
diluted shares outstanding 30,909 30,902 CONSOLIDATED BALANCE
SHEETS (in thousands, except share data) March 31, December 31,
2004 2003 (unaudited) ASSETS CURRENT ASSETS: Cash and cash
equivalents $143 $515 Accounts receivable: Trade 201 938 Other 1
140 202 1,078 Less-Allowance for doubtful accounts 57 51 Accounts
receivable, net 145 1,027 Prepaid expenses and other current assets
146 43 Current assets of discontinued operations 24 -- Total
current assets 458 1,585 PROPERTY, EQUIPMENT AND SOFTWARE, AT COST:
Computer hardware and software 18,034 18,016 Land, buildings and
leasehold improvements 1,333 1,333 Furniture, fixtures and
equipment 3,544 3,544 22,911 22,893 Less -- Accumulated
depreciation and amortization 22,305 22,110 606 783 OTHER ASSETS 10
15 NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS 80 80 $1,154
$2,463 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Loans payable $200 $1,113 Accounts payable 883 681 Deferred revenue
467 733 Accrued expenses and other current liabilities 1,700 1,960
Current liabilities of discontinued operations 401 444 Total
current liabilities 3,651 4,931 CONVERTIBLE DEBENTURES, NET OF
DISCOUNT 281 254 Total liabilities 3,932 5,185 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
-- 100,000,000 shares -- Issued -- 31,994,996 and 31,432,546 shares
320 314 Additional paid-in capital 115,997 115,886 Accumulated
deficit (113,544) (113,371) Treasury stock, at cost -- 530,709
shares (4,712) (4,712) Accumulated other comprehensive loss (839)
(839) Total stockholders' deficit (2,778) (2,722) $1,154 $2,463
DATASOURCE: Elcom International, Inc. CONTACT: Investor Relations
of Elcom International, Inc., Web site: http://www.elcom.com/
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