NORWOOD, Mass., Aug. 4 /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 second quarter ended June 30, 2006.
Financial Summary Table (Unaudited) (in thousands, except per share
amounts) Quarter Ended Six Months Ended June 30, June 30, 2006 2005
2006 2005 Net revenues $881 $764 $1,774 $1,377 Gross profit 695 652
1,451 1,149 Operating loss (1,166) (885) (2,279) (1,960) Net loss
$(1,167) $(958) $(2,246) $(2,094) Basic and diluted net loss per
share $(--) $(0.01) $(0.01) $(0.03) Basic and diluted weighted
average common shares outstanding 402,080 61,282 401,049 61,282 The
above table, the following description and the appended condensed
consolidated financial information 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, and June 30,
2006 and 2005 Annual Report on Form 10-KSB, as amended. Quarter
ended June 30, 2006 compared to the quarter ended June 30, 2005.
Net Revenues. Net revenues for the quarter ended June 30, 2006
increased to $881,000, from $764,000 in the same period of 2005, an
increase of $117,000, or 15%. License, hosting services and other
fees increased from $484,000 in the 2005 quarter to $877,000 in the
2006 quarter, an increase of $393,000, or 81%. This increase is
primarily due to $245,000 in non-recurring eMarketplace agent fees
related to a terminated agreement, as well as an increase in the
level of customers in the eProcurement Scotland Program. License,
hosting services and other fees include license fees, hosting
services fees, test system fees, supplier fees, usage fees, and
eMarketplace agent and affiliate fees. Professional services fees
decreased by $276,000, to $4,000 in the 2006 quarter, from $280,000
in the 2005 quarter, reflecting a decrease in eProcurement Scotland
client implementations, from two in the second quarter of 2005 to
none in the second quarter of 2006. In addition, revenues recorded
in the second quarter of 2005 include certain non-recurring
professional services revenues for projects completed in 2005.
During the second quarter of 2006, much of the Company's technical
staff was focused on research and development activities, including
completing a new version of the Company's PECOS software system
(which was released on June 30, 2006), and therefore the time
available for other professional services projects was limited.
While the Company anticipates that professional services revenues
will increase in future quarters, the accounting for professional
implementation and development services revenues related to the
Zanzibar eMarketplace will be accreted to revenue over the
remaining term of the contract (which expires in July of 2010,
subject to client renewal) which will minimize the impact of these
revenues on reported earnings. Deferred revenue includes $65,000
related to the Zanzibar eMarketplace, the bulk of which relates to
implementation services that are ongoing as of June 30, 2006. The
Company anticipates that it will begin accreting professional
services revenues related to the Zanzibar eMarketplace
implementation services in the third quarter of 2006. Gross Profit.
Gross profit for the quarter ended June 30, 2006 increased to
$695,000 from $652,000 in the comparable 2005 quarterly period, an
increase of $43,000, or 7%. This increase is primarily a result of
the higher level of non-recurring eMarketplace agent fees related
to a terminated agreement recorded in the second quarter of 2006 as
described above, versus revenues recorded in the second quarter of
2005. The level of gross profit recorded in the second quarter of
2006 is reduced by the costs of professional services incurred in
support of the Zanzibar eMarketplace as well as the costs
associated with certain other client technical software system
modification projects. The Company currently expenses these costs
because it can not be assured its efforts will meet the specific
client requirements, and only records the professional services
revenues when the client requirements and all revenue recognition
requirements are met. Selling, General and Administrative Expenses.
Selling, general and administrative ("SG&A") expenses for the
quarter ended June 30, 2006 were $1,595,000 compared to $1,316,000
in the second quarter of 2005, an increase of $279,000, or 21%.
Because of the cash constraints experienced by the Company over the
last several years, Elcom has operated with as few personnel as
possible, and certain of its personnel have been compensated at
below market rates. In order to address staffing requirements
related to its increasing level of business activity, the Company
engaged third party contractors during late 2005 and through the
beginning of the second quarter of 2006, and began to hire
additional personnel in April 2006. The Company's headcount (full
and part-time) has increased by eight, from 36 at June 30, 2005 to
44 at June 30, 2006, and the Company expects headcount to increase
in the next several quarters. In addition, the Company also has
provided and plans to provide raises to certain personnel whose
compensation has been or is below the market rate. Therefore, Elcom
anticipates that its SG&A expenses will also increase in future
quarters. Accordingly, in addition to the increases in cost of
revenues and research and development expense (which are generally
comprised of personnel and third party contractor costs), the
Company's personnel costs increased $155,000 in the second quarter
of 2006 as compared to the second quarter of 2005, and increased
$76,000 over the amounts recorded in the first quarter of 2006.
Personnel expenses recorded in the second quarter of 2006 include
$62,000 of stock option expense related to the initial
implementation of Statement of Financial Accounting Standards No.
123 (Revised 2004), Share-Based Payments ("SFAS 123R"), which
requires the expensing of stock based compensation (stock options),
which was not required in the second quarter of 2005. In addition
to the increase in personnel expenses, the primary reasons for the
increase in SG&A expenses in the second quarter of 2006 as
compared to the second quarter of 2005 relate to additional
software licensing, computer supplies and other computer
infrastructure expenses related to the Company's growing business,
as well as increases in insurance and legal expenses related to the
change in control of the Company. Increases in travel and marketing
expenses in the second quarter of 2006 as compared to the second
quarter of 2005, were generally offset by a reduction in facilities
expenses in the second quarter of 2006 as compared to the second
quarter of 2005, as the Company renegotiated its headquarters lease
in the first quarter of 2006. Research and Development Expense.
Research and development expense for the quarters ended June 30,
2006 and 2005 were $266,000 and $221,000, respectively, reflecting
an increase in the 2006 quarter of $45,000 over the expense
recorded in the second quarter of 2005. The expense in the 2006
quarter primarily relates to ongoing work associated with improving
the data interchange and inbound interface capabilities of the
Company's PECOS technology, as well as an increased level of work
in the second quarter of 2006 as compared to the second quarter of
2005, on a variety of other internal enhancements incorporated in a
new version of the Company's software system released on June 30,
2006. The increase in research and development expense in the
second quarter of 2006, as compared to the second quarter of 2005,
is due to the increased level of development activity as noted
above, as well as approximately $14,000 of third party consulting
expense and $18,000 of stock-based compensation expense reflected
in the second quarter of 2006, while in the second quarter of 2005
all expenses were internal and stock-based compensation expense was
not recorded. Research and development expense for the quarter
ended March 31, 2006 was $330,000, which declined to $266,000 in
the second quarter of 2006, reflecting accomplishment of various
development activities related to the Zanzibar eMarketplace in the
first quarter of 2006. Accordingly, the Company anticipates that
research and development expense will moderate further in 2006.
Operating Loss. The Company reported an operating loss of
$1,166,000 for the quarter ended June 30, 2006 compared to a loss
of $885,000 reported in the comparable quarter of 2005, an increase
of $281,000 in the loss reported. This increased operating loss in
the second quarter of 2006 compared to the same quarter in 2005 was
primarily due to the increase in SG&A expenses and research and
development expenses in 2006, net of the increase in recorded gross
profit. Interest and Other Income (Expense), Net. Interest income
and other income (expense), net for the quarter ended June 30, 2006
was income of $5,000 versus income of $1,000 in the second quarter
of 2005. The increase in income, net in 2006 is primarily related
to interest income earned on the funds raised in December of 2005.
Interest Expense. Interest expense for the quarter ended June 30,
2006 was $6,000, compared to $74,000 in the same period of 2005.
The second quarter 2006 interest expense reflects interest
primarily related to capitalized leases, while the second quarter
2005 second quarter expense primarily reflects interest on the
Company's Convertible Debentures, and amortization of the related
conversion discount. The Debentures converted into Company common
stock in December of 2005. Net Loss. The Company's net loss for the
quarter ended June 30, 2006 was $1,167,000, an increase in the loss
of $209,000 from the loss recorded in the second quarter 2005 of
$958,000, as a result of the factors discussed above. Six months
ended June 30, 2006 compared to the six months ended June 30, 2005.
Net Revenues. Net revenues for the six months ended June 30, 2006
increased to $1,774,000, from $1,377,000 in the same period of
2005, an increase of $397,000, or 29%. License, hosting services
and other fees increased from $979,000 in the first half of 2005,
to $1,436,000 in the first half of 2006, an increase of $457,000,
or 47%. This increase is primarily due to $245,000 in non-recurring
eMarketplace agent fees related to a terminated agreement, as well
as an increase in the level of customers using the eProcurement
Scotland software system. License, hosting services and other fees
include license fees, hosting services fees, test system fees,
supplier fees, usage fees, and eMarketplace agent and affiliate
fees. Professional services fees decreased by $60,000, to $338,000
in the first half of 2006, from $398,000 in the first half of 2005,
reflecting a decrease in professional services revenues related to
projects completed in 2005. During the second quarter of 2006, much
of the Company's technical staff was focused on completing a new
version of the Company's PECOS software system (which was released
on June 30, 2006), and therefore the time available for other
professional services projects was limited. Professional services
revenues reflect implementation fees for six eProcurement Scotland
clients that went live in the first half of 2005, and professional
services revenues in the first six months of 2006 reflect
implementation fees for six additional eProcurement Scotland
clients that went live in the first half of 2006. Gross Profit.
Gross profit for the six months ended June 30, 2006 increased to
$1,451,000 from $1,149,000 in the comparable 2005 six month period,
an increase of $302,000, or 26%. This increase is primarily a
result of the higher level of non-recurring eMarketplace agent fees
related to a terminated agreement recorded in the second quarter of
2006 as described above, versus revenues recorded in the first half
of 2005. The level of gross profit recorded in the first half of
2006 is reduced by the costs of professional services incurred in
support of the Zanzibar eMarketplace as well as the costs
associated with certain client technical software system
modification projects. The Company currently expenses these costs
because it can not be assured its efforts will meet the specific
client requirements, and only records the professional services
revenues when the client requirements and all revenue recognition
requirements are met. Selling, General and Administrative Expenses.
SG&A expenses for the six months ended June 30, 2006 were
$3,134,000 compared to $2,768,000 in the first six months of 2005,
an increase of $366,000, or 13%. Because of the cash constraints
experienced by the Company over the last several years, Elcom has
operated with as few personnel as possible, and certain of its
personnel have been compensated at below market rates. In order to
address staffing requirements related to its increasing level of
business activity, the Company engaged third party contractors
during late 2005 and through the beginning of the second quarter of
2006, and began to hire additional personnel in April 2006. The
Company's headcount (full and part-time) has increased by eight,
from 36 at June 30, 2005 to 44 at June 30, 2006, and the Company
expects headcount to increase in the next several quarters. In
addition, the Company also has provided and plans to provide raises
to certain personnel whose compensation has been or is below the
market rate. Therefore, Elcom anticipates that its SG&A
expenses will also increase in future quarters. Accordingly, in
addition to the increases in cost of revenues and research and
development expense (which are generally comprised of personnel and
third party contractor costs), the Company's personnel costs
increased $125,000 in the first six months of 2006 as compared to
the first half of 2005, primarily due to $114,000 of stock option
expense recorded in the first half of 2006, related to the initial
implementation of SFAS 123R which requires the expensing of stock
based compensation (stock options), which was not required in the
first half of 2005. In addition to the increase in personnel
expenses, the primary reasons for the increase in SG&A expenses
in the first six months of 2006, as compared to the first half of
2005, relate to additional software licensing, computer supplies
and other computer infrastructure expenses related to the Company's
growing business, as well as increases in insurance and legal
expenses related to the change in control of the Company. Increases
in travel and marketing expenses in the first half of 2006 as
compared to the first six months of 2005, were generally offset by
both a reduction in facilities expense the first half of 2006 as
compared to the first six months of 2005, as the Company
renegotiated its headquarters lease in the first quarter of 2006,
as well as a reduction in depreciation and amortization expense the
first half of 2006 as compared to the first six months of 2005, as
many Company assets are fully depreciated. Due to the acquisition
of various equipment and software in the first half of 2006, the
Company anticipates that depreciation and amortization expense will
increase in future periods. Research and Development Expense.
Research and development expense for the six months ended June 30,
2006 and 2005 were $596,000 and $341,000, respectively, reflecting
an increase in the first half of 2006 of $255,000 over the expense
recorded in the first half of 2005. The increase in expense in the
first half of 2006, compared to the same six month period in 2005,
was due primarily to an increased level of work commenced in late
2005, related to new software for supplier directories, marketplace
portals, client sign on, request for quotation module, interfaces
to other software, as well as enhancements to improve the data
interchange, and inbound interface capabilities, and a variety of
other internal enhancements incorporated in a new version of the
Company's PECOS software system released on June 30, 2006. Certain
of these items were completed in the first quarter of 2006, and are
primarily related to the Zanzibar eMarketplace, but will also be
included in Elcom's offerings to other customers and potential
customers. In the first half of 2006, research and development
expense included approximately $114,000 of third party consulting
expense and $35,000 of stock-based compensation expense, while in
the first six months of 2005 all expenses were internal and
stock-based compensation expense was not recorded. Operating Loss.
The Company reported an operating loss of $2,279,000 for the six
months ended June 30, 2006, compared to a loss of $1,960,000
reported in the first half of 2005, an increase of $319,000 in the
loss reported. This increased operating loss in the first half of
2006 compared to the same period of 2005 was primarily due to the
increase in SG&A expenses and research and development expenses
in 2006, net of the increase in recorded gross profit. Interest and
Other Income (Expense), Net. Interest income and other income
(expense), net for the first six months of 2006 was income, net of
$46,000 versus a net nil balance in the first half of 2005. The
increase in income, net in 2006 is primarily related to interest
income earned on the funds raised in December of 2005. Interest
Expense. Interest expense for the six months ended June 30, 2006
was $13,000, compared to $134,000 in the same period of 2005. The
expense for the first half of 2006 reflects interest primarily
related to capitalized leases, while the expense for the first half
2005 primarily reflects interest on the Company's Convertible
Debentures, and amortization of the related conversion discount.
The Debentures converted into Company common stock in December of
2005. Net Loss. The Company's net loss for the six months ended
June 30, 2006 was $2,246,000, an increase in the loss of $152,000
from the loss recorded in the six months of 2005 of $2,094,000, as
a result of the factors discussed above. Liquidity and Capital
Resources Net cash used in operating activities for the six months
ended June 30, 2006 was $2,313,000, which is attributable primarily
to the Company's net loss of $2,246,000, together with an increase
of $105,000 in prepaid expenses and decreases in accounts payable
and accrued expenses totaling $832,000, which uses were partly
offset by a decrease in accounts receivable and an increase in
deferred revenues totaling $535,000 and non-cash depreciation,
amortization and stock based compensation expenses aggregating
$352,000. Net cash used in operating activities for the six months
ended June 30, 2005 was $264,000, which is attributable primarily
to the Company's net loss of $2,094,000, together with an increase
in prepaid expenses of $106,000, which uses were largely offset by
a reduction in accounts receivable and an increase in accounts
payable, deferred revenue and accrued liabilities totaling
$1,477,000 and depreciation, amortization and non-cash rent
expenses of $450,000. In general, the increase in accounts payable
and accrued liabilities in the first half of 2005 is a reflection
of the Company's weak balance sheet and liquidity as of June 30,
2005, while the increase in deferred revenue at June 30, 2005
resulted primarily from certain customer advance payments made to
augment the Company's liquidity. In the U.K., the Company has a
small overdraft facility with its bank, which allows for short-term
overdrafts. The largest overdraft in the first half of 2005 was
approximately $18,000. The facility is an informal arrangement,
secured by a pledge of U.K. assets. There was no overdraft position
during the first half of 2006. The Company's principal commitments
consist of a lease on its headquarters office facility, capital
lease obligations and a long-term software license payable. The
Company will also require ongoing investments in research and
development, and equipment and software in order to further
increase operating revenues and meet the requirements of its
customers. On December 20, 2005 the Company agreed to issue a total
of 298,582,044 shares of common stock to investors in the U.K. and
listed the shares on the AIM Exchange. Elcom raised a total of $7.9
million, with net proceeds to the Company of $7.7 million. Of the
total raised, approximately $547,000 represented the conversion of
non-U.S. investor loans and related accrued interest. The funds
derived from the 2005 issuance of common stock on the AIM Exchange
are being used to support the Company's working capital
requirements until the Company achieves positive cash flow, which
management anticipates achieving in 2007. Risk Factors Relating to
Liquidity The Company's consolidated financial statements as of
June 30, 2006 have been prepared under the assumption that the
Company will continue as a going concern for the year ending
December 31, 2006. The Company's independent registered public
accounting firm, Vitale, Caturano & Company, Ltd., has issued a
report dated March 6, 2006 that included an explanatory paragraph
referring to the Company's significant operating losses and
expressing substantial doubt in Elcom's ability to continue as a
going concern, without generating incremental, ongoing operating
revenues or, if required, additional capital becoming available.
The Company's ability to continue as a going concern is currently
primarily dependent upon its ability to grow revenue, and attain
further operating efficiencies. If the Company is unable to
generate incremental, ongoing operating revenues before the end of
2006, it will require additional capital investment or debt
financing in order to continue operations. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. As of June 30, 2006,
the Company had approximately $2.6 million of cash and cash
equivalents, and has used $2.3 million of cash in operating
activities in the first six months of 2006. The Company has
incurred $8.1 million of cumulative net losses for the
eighteen-month period ended June 30, 2006. As a result of funds
raised via common stock issuances at the end of fiscal 2005, the
Company has substantially improved its financial position from June
30, 2005. The Company believes it has sufficient liquidity to fund
operations through the end of 2006, however, it anticipates that it
will incur a loss in fiscal 2006, and will require additional
operating revenues in order to achieve profitable operations. The
Company is currently seeking to arrange a credit facility to enable
the Company to borrow additional working capital, if required.
There can be no assurance the Company will be successful in
arranging such a facility, or if successful, what the terms of such
a facility might be. Factors Affecting Future Performance A
significant portion of the Company's revenues are from hosting
services and associated fees received from Capgemini under a
back-to-back contract between Elcom and Capgemini which essentially
mirrors the primary agreement between Capgemini and the Scottish
Executive, executed in November 2001. Future revenue under this
arrangement is contingent on the following significant factors: the
rate of adoption of the Company's ePurchasing software system by
Public Entities associated with the Scottish Executive; renewal by
existing Public Entity clients associated with the Scottish
Executive of their rights to use the ePurchasing software system;
the procurement of additional services from the Company by Public
Entities associated with the Scottish Executive; Capgemini's
relationship with the Scottish Executive; their compliance with the
terms and conditions of their agreement with the Scottish
Executive; and the ability of the Company to perform under its
agreement with Capgemini. In addition, the Company intends to
continue to commit resources to provide the eProcurement and
eMarketplace components of the Zanzibar eMarketplace for public
sector organizations in the U.K. under its agreements with PASSL
and PA. Future revenue under this arrangement is contingent
primarily on the timing and rate of adoption by U.K. Public
Entities of the Zanzibar eMarketplace, as well as the timing and
level of costs incurred to develop the required infrastructure to
support the architecture of the Zanzibar eMarketplace, stage one
(of three stages) of which was accepted in February 2006, and the
ability of the consortium, as a whole, to operate on a profitable
basis. If further business fails to develop under the Capgemini
agreement or if the Zanzibar eMarketplace does not attract a
profitable level of clients, or if the U.S. eMarketplaces do not
expand as expected, or if the Company is unable to perform under
any of these agreements, it would have a material adverse affect on
the Company's future financial results. Outlook As evidenced by the
level of SG&A expenses, research and development expenses, and
cost of revenues, the Company's expenditures in 2006 have begun to
increase as compared to 2005 in order to more properly staff the
Company to address the increased level of its business. The
Company's expects that its expenses will continue to increase,
although at a moderating rate, as described above. Accordingly, the
Company expects that its operating loss will continue through 2006.
Improvements in revenues and operating results from operations in
future periods will not occur without the Company being able to
generate incremental, ongoing operating revenues from existing and
new clients. The Company believes it has sufficient liquidity to
fund operations through the end of 2006; however, it anticipates
that it will incur a loss in fiscal 2006, and will require
additional, ongoing operating revenues in order to achieve
profitable operations. If the Company is unable to generate
incremental, ongoing operating revenues before the end of 2006, it
will require additional capital investment or debt financing in
order to continue operations. The Company can make no assurance
that it will be able to raise additional capital or arrange a
credit facility in the event its capital resources are exhausted.
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT Except
for the historical information contained herein, the matters
discussed in 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 necessity for the Company to control its expenses as well as to
generate incremental, ongoing operating revenues and whether this
objective can be met given the overall marketplace and clients'
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;; (ii) the consequent
results of operations given the aforementioned factors; and (iii)
the necessity of the Company to achieve profitable operations
within the constraints of its existing resources, and if it can
not, the availability of incremental capital funding to the
Company, particularly in light of the audit opinion from the
Company's independent registered public accounting firm in the
Company's 2005 Annual Report on Form 10-KSB, as amended, and other
risks detailed from time to time in its March 31 and June 30, 2006
Quarterly Reports on Form 10-QSB and in its other SEC reports and
statements, including particularly the Company's "Risk Factors"
contained in the prospectus included as part of the Company's
Registration Statement on Form S-3 filed on June 21, 2002. 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 2005 Annual Report on Form 10-K, as amended and Forms
10-QSB for the periods ended March 31, and June 30, 2006. ELCOM
INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) June 30, December 31, 2006 2005
(unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $2,607
$6,399 Accounts receivable: Trade 428 548 Less-Allowance for
doubtful accounts 47 45 Accounts receivable, net 381 503 Prepaid
expenses and other current assets 224 119 Total current assets
3,212 7,021 PROPERTY, EQUIPMENT AND SOFTWARE, AT COST: Computer
hardware and software 21,177 20,675 Furniture, equipment and
leasehold improvements 3,088 3,088 24,265 23,763 Less --
Accumulated depreciation and amortization 23,215 23,020 1,050 743
OTHER ASSETS 14 10 Total assets $4,276 $7,774 LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of
capital lease obligations $94 $27 Related party convertible loan
payable -- 120 Convertible loans payable -- 1,179 Accounts payable
450 547 Deferred revenue 958 545 Related party accrued salary,
bonuses and interest 1,031 1,121 Accrued expenses and other current
liabilities 1,629 2,525 Current liabilities of discontinued
operations 45 62 Total current liabilities 4,207 6,126 CAPITAL
LEASE OBLIGATIONS, NET OF CURRENT PORTION 162 -- OTHER LONG TERM
LIABILITY 357 423 Total liabilities 4,726 6,549 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 -
500,000,000 shares - Issued - 402,611,152 and 399,152,859 shares
4,026 3,992 Additional paid-in capital 125,647 125,263 Accumulated
deficit (124,729) (122,483) Treasury stock, at cost -- 530,709
shares (4,712) (4,712) Accumulated other comprehensive loss (682)
(835) Total stockholders' equity (deficit) (450) 1,225 $4,276
$7,774 ELCOM INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (in
thousands, except per share data) (unaudited) Three Months Ended
Six Months Ended June 30, June 30, 2006 2005 2006 2005 Net
Revenues: License, hosting services and other fees $877 $484 $1,436
$979 Professional services 4 280 338 398 Total net revenues 881 764
1,774 1,377 Cost of revenues 186 112 323 228 Gross profit 695 652
1,451 1,149 Operating Expenses: Selling, general and administrative
1,595 1,316 3,134 2,768 Research and development 266 221 596 341
Total operating expenses 1,861 1,537 3,730 3,109 Operating loss
(1,166) (885) (2,279) (1,960) Interest and other income (expense),
net 5 1 46 -- Interest expense (6) (74) (13) (134) Net loss before
income taxes (1,167) (958) (2,246) (2,094) Income taxes -- -- -- --
Net loss (1,167) (958) (2,246) (2,094) Other comprehensive income,
net of tax 129 17 153 25 Comprehensive loss $(1,038) $(941)
$(2,093) $(2,069) Basic and diluted net loss per share $(--)
$(0.01) $(0.01) $(0.03) Weighted average number of basic and
diluted shares outstanding 402,080 61,282 401,049 61,282 ELCOM
INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30,
2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,246)
$(2,094) Adjustments to reconcile net loss to net cash used in
operating activities: Depreciation and amortization 184 253 Stock
based compensation 168 -- Deferred rent expense -- 197 Provisions
for doubtful accounts receivable 1 Changes in current assets and
liabilities: Accounts receivable, net 122 182 Prepaid expenses and
other current assets (105) (106) Accounts payable (97) 151 Deferred
revenue 413 193 Accrued expenses and other current liabilities
(735) 951 Net cash used in continuing operating activities (2,296)
(272) Net cash (used in) provided by discontinued operations (17) 8
Net cash used in operating activities (2,313) (264) CASH FLOWS FROM
INVESTING ACTIVITIES: Additions to property, equipment and software
(225) -- Change in other assets (4) (21) Net cash used in investing
activities (229) (21) CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable -- 200 Repayments of loans payable
(1,299) -- Repayments of capital lease obligations (38) (15)
Decrease in other long term liability (66) (60) Net cash provided
by (used in) financing activities (1,403) 125 FOREIGN EXCHANGE
EFFECT ON CASH 153 25 NET DECREASE IN CASH AND CASH EQUIVALENTS
(3,792) (135) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,399
390 CASH AND CASH EQUIVALENTS, END OF PERIOD $2,607 $255
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $28
$3 Income taxes paid $-- $-- Issuance of common stock in
satisfaction of deferred rent $250 $-- Acquisition of equipment
under capital leases $267 $-- AT THE COMPANY: Investor Relations
E-mail: DATASOURCE: Elcom International, Inc. CONTACT: Investor
Relations of Elcom International, Inc., Web site:
http://www.elcom.com/
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