UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549







FORM
      10-KSB





x ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
      the
      Fiscal Year Ended December 31, 2007


or


 ̈ TRANSITION
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from ___________ to ___________





Commission
      File Number: 000-2737







**ELCOM
      INTERNATIONAL, INC.**


(Name
      of
      small business issuer in its charter)




DELAWARE
            
            04-3175156(State
                or other jurisdiction of
            
            (I.R.S.
                EmployerIncorporation
                or organization)
            
            Identification
                No.)




10
                OCEANA WAY, NORWOOD, MASSACHUSETTS
            
            02062(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer’s
      telephone number (781) 501-4000





Securities
      registered under Section 12(b) of the Exchange Act:


None


Securities
      registered under Section 12(g) of the Exchange Act:





Common
      Stock, $.01 par value


(Title
      of
      class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act  ̈





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes  ̈ No x





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes  ̈ No x





The
      issuer’s revenues for the year ended December 31, 2007 were
      $5,377,345





The
      aggregate market value of voting and non-voting common equity held by
      non-affiliates of the registrant computed by reference to the closing sale
      price
      of such common equity on the Pink Sheets on September 08, 2008 was $1,656,532.
      For purposes of this disclosure only, the issuer has assumed that its directors,
      executive officers, and beneficial owners of 10% or more of the issuer’s Common
      Stock are affiliates of the issuer.




The
      registrant had 552,177,450  shares
      of
      Common Stock, $.01 par value, outstanding as of September 08, 2008.





Transitional
      Small Business Disclosure Format Yes  ̈ No x





**TABLE
      OF CONTENTS**





PART
                I
            2Item
                1. Description of Business
            2Item
                2. Description of Property
            5Item
                3. Legal Proceedings
            7Item
                4. Submission of Matters to a Vote of Security Holders
            7PART
                II
            8Item
                5. Market for Common Equity and Related Stockholder Matters and Small
                Business Issuer Purchases of Equity Securities
            8Item
                6. Management’s Discussion and Analysis or Plan of
                Operation
            9Item
                7. Financial Statements
            15Item
                8. Changes In and Disagreements With Accountants on Accounting and
                Financial Disclosure
            15Item
                8A. Controls and Procedures
            15Item
                8B. Other Information
            17PART
                III
            18Item
                9. Directors, Executive Officers, Promoters, Control Persons, and
                Corporate Governance; Compliance With Section 16(a) of the Exchange
                Act
            18Item
                10. Executive Compensation
            20Item
                11. Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder Matters
            23Item
                12. Certain Relationships and Related Transactions, and Director
                Independence
            24Item
                13. Exhibits
            25Item
                14. Principal Accountant Fees and Services
            25SIGNATURES
            27REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2ELCOM
                INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
                SHEETS
            F-3ELCOM
                INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
                AND OTHER COMPREHENSIVE INCOME (LOSS)
            F-4ELCOM
                INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
                STOCKHOLDERS’ DEFICIT
            F-5ELCOM
                INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
                FLOWS
            F-6ELCOM
                INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL
                STATEMENTS
            F-7EX-31.1
                Section 302 Certification of Principal Executive OfficerEX-32.2
                Section 302 Certification of Principal Financial and Accounting
                OfficerEX-32.1
                Section 906 Certification of Principal Executive OfficerEX-32.2
                Section 906 Certification of Principal Financial and Accounting
                Officer





**PART
      I**


**Item
      1.** ***Description
      of Business***





**Introduction**





Elcom
      International, Inc. (“Elcom”), a corporation formed in Delaware in December
      1992, is a leading provider of Internet-based remotely hosted, integrated
      eProcurement and eMarketplace solutions and services (“ePurchasing”). Our PECOSTM
(“Professional Electronic Commerce Online System”) ePurchasing solution is
      typically remotely hosted by Elcom, providing rapid deployment and single point
      responsibility for clients. In total, over 100 organizations are currently
      using
      or accessing Elcom’s solution under these arrangements. Since January 16, 2003,
      our Common Stock has been quoted on the Over-the-Counter Bulletin Board (the
      “OTCBB”) under the symbol ELCO. On May 18, 2007, our stock was suspended from
      the OTCBB due to a delay in our filing the annual report for the year ended
      December 31, 2006 with the SEC and since then our stock has been listed in
      the
      Pink Sheets under the symbol ELCO. In addition, since April 16, 2004, our common
      stock was traded on the AIM Exchange (as defined below) under the symbols ELC
      and ELCS (designating the Regulation S Shares); however, the stock was cancelled
      from admission on April 1 st ,
      2008.
      We operate in the U.S. and U.K.





**Overview**





Prior
      to
      the divestiture of its information technology (“IT”) products and services
      business in the U.K. and U.S., we had previously marketed over 130,000 IT
      products to commercial, educational and governmental accounts via several,
      innovative electronic commerce (“eCommerce”) solutions. During 2001, we
      carefully reviewed our business operations, and in order to reduce operational
      and financial risks and properly align our operations with the slowing demand
      for IT products and the overall economic environment, we decided to divest
      our
      IT products and services business to reduce costs and allow us to focus
      exclusively on our core business of providing large scale Commerce Process
      Management solutions. On December 31, 2001, we divested ourselves of our U.K.
      IT
      products business and on March 29, 2002, we divested ourselves of our U.S.
      IT
      products and services business. Commencing during the second quarter of 2002,
      our sole source of revenue has been the implementation of Commerce Process
      Management solutions and associated usage and professional services.





In
      the
      U.K., we have a substantial contract with Capgemini UK Plc (“Capgemini”)
      associated with the Scottish Executive’s eProcurement Scotland Programme, where
      Elcom provides a Commerce Process Management system to agencies, councils,
      and
      National Health Service of Scotland (hospitals) Trusts (“Public Entities”) in
      Scotland. We signed agreements with one Public Entity in 2006 and nine in 2007,
      bringing the total number of Public Entities in the eProcurement Scotland
      Programme to 35. There are approximately 47 Public Entities potentially
      available to join the eProcurement Scotland Programme, and possibly more,
      depending upon the Scottish Executive’s definition of eligibility. We earn
      implementation fees and monthly hosting services fees for each Public Entity
      that joins the eProcurement Scotland Programme. Capgemini is the prime
      contractor in the Scottish Executive Agreement. Elcom subcontracts under this
      agreement as the technology service provider. During 2007 this contract
      accounted for over 75% of our revenues, although this included a one off data
      migration project that slightly distorted the figures, and Elcom continues
      to
      remain dependent on it; however, plans are in place to reduce reliance upon
      this
      contract during 2008 and 2009.





**Common
      Stock Issued under Regulation S in the U.K. - Change in Control of
      Elcom**





On
      December 20, 2005, we agreed to issue an aggregate of 298,582,044 shares of
      our
      common stock (the “2005 Regulation S Shares”) to investors in the U.K., and
      listed the 2005 Regulation S Shares on the Alternative Investment Market of
      the
      London Stock Exchange (“AIM Exchange”). The 2005 Regulation S Shares were issued
      in reliance on the exemption from registration under Regulation S promulgated
      under the Securities Act of 1933, as amended for offshore placements, and
      therefore are subject to restrictions. Under Regulation S, the holders of the
      Regulation S Shares are prohibited from selling their Regulation S Shares in
      the
      United States to a “U.S. person” (as defined in the Securities Act) or for the
      benefit or account of a U.S. person, for a one-year period from the date of
      issuance (which period has expired for the 2005 Regulation S Shares). During
      this one-year period, the holders of the Regulation S Shares may otherwise
      trade
      their Regulation S Shares in the U.K. and outside the U.S., pursuant to
      Regulation S and other securities laws applicable in the jurisdiction in which
      the Regulation S Shares are traded. Upon the expiration of this one-year period,
      the Regulation S Shares will be “restricted securities” as the term is defined
      in Rule 144 under the Securities Act and may be sold in the United States to
      a
      U.S. person or for the benefit or account of a U.S. person in accordance with
      Rule 144. The Regulation S Shares trade on the AIM Exchange and will not
      commingle with the stock quoted on the OTCBB until and unless we register the
      Regulation S Shares with the SEC or an exemption from registration exists with
      respect to the Regulation S Shares. The Regulation S Shares have not been
      registered under the Securities Act and may not be offered or sold in the United
      States (or to a U.S. person) absent registration or an applicable exemption
      from
      the registration requirements. We raised a total of approximately $7.2 million
      in cash, net of issuance costs, and converted $547,000 of non-U.S. Loans and
      related accrued interest (see Note 3 to Consolidated Financial Statements)
      via
      issuance of the 2005 Regulation S Shares in the U.K. The 2005 Regulation S
      Shares were sold at a price of £0.015 (approximately $0.0266) per share. The
      holders of the 2005 Regulation S Shares also have certain registration rights.
      The funds derived from the sale of the 2005 Regulation S Shares were used to
      support our working capital requirements.


2


On
      October 23, 2006, we agreed to issue a total of 76,336,289 shares of our common
      stock (the “2006 Regulation S Shares”) to investors in the U.K. and listed the
      shares on the AIM Exchange. The 2006 Regulation S Shares were issued in reliance
      on the exemption from registration under Regulation S promulgated under the
      (“Securities Act”) for offshore placements, and therefore are subject to the
      same restrictions as the 2005 Regulation S Shares. Elcom raised a total of
      $2.5
      million in cash in connection with the 2006 Regulation S Shares, net of issuance
      costs of $24,000. The funds derived from the 2006 issuance of common stock
      on
      the AIM Exchange are being used to support our working capital requirements.





In
      early
      March 2006, we learned that, as a result of the December 2005 issuance of common
      stock on the AIM Exchange, Smith & Williamson Investment Management Limited
      (“SWIM”) and Smith & Williamson Nominees Limited (“SWIM Nominees,” and
      collectively with SWIM, the “SWIM Entities”) had acquired beneficial ownership
      of more than 50% of our outstanding common stock. Elcom was informed of this
      change in control on March 6, 2006 when the SWIM Entities filed a Schedule
      13D
      with the Securities and Exchange Commission (the “SEC”), reflecting such
      beneficial ownership as of December 20, 2005. Therefore, on December 22, 2005,
      our 10% Senior Convertible Debentures due 2013 (the “Debentures”) which were
      held by SWIM Nominees and all interest accrued thereon, automatically converted
      into Elcom common stock as a result of the acquisition of beneficial ownership
      of a majority interest in Elcom by the SWIM Entities. The bulk of the SWIM
      Entities’ shares were acquired in the issuance of the 2005 Regulation S Shares.
      Based on the SWIM Entities’ Schedule 13D, and our records, including the
      conversion of SWIM Nominees’ Debentures, the SWIM Entities owned approximately
      64.1% of our outstanding common stock as of December 31, 2005. An aggregate
      of
      34,164,959 shares of Elcom common stock (the “Debenture Shares”) were issued
      upon the automatic conversion of Debenture principal of approximately $1,264,000
      and cumulative interest accrued (since issuance) of approximately
      $323,000.





In
      connection with the March 6, 2006 Schedule 13D, the SWIM Entities also informed
      us of their request that the Board of Directors call a special meeting of our
      stockholders for the purposes of amending certain provisions of our by-laws
      and
      replacing three directors with candidates nominated by the SWIM Entities (the
      “SWIM Candidates”). Elcom and its current Board of Directors at that time
      entered into an agreement with the SWIM Entities to effect an orderly transition
      of the Board of Directors to the control of the SWIM Candidates, and avoid
      the
      incremental costs of holding a special meeting of stockholders. Mr. Sean Lewis,
      Former Chairman, and John E. Halnen, Former President and Chief Executive
      Officer, served as Directors until April 21, 2006 when Justin Dignam, Elliott
      Bance and Gregory King were appointed as Directors. On September 7, 2006,
      William Lock was also appointed a Director. As of December 31, 2006 the SWIM
      Entities owned approximately 69% of our outstanding stock.





On
      February 5, 2007, we sold 73,230,009 shares of our common stock (the “2007
      Regulation S Shares”) to investors in the U.K. and listed the shares on the AIM
      Exchange. The 2007 Regulation S Shares were issued in reliance on the exemption
      from registration under Regulation S promulgated under the Securities Act for
      offshore placements, and therefore are subject to the same restrictions as
      the
      2005 Regulation S Shares and the 2006 Regulation S Shares sold previously.
      Elcom
      raised a total of $2.5 million in cash, net of issuance costs of $23,948. The
      funds derived from the 2007 Regulation S Shares are being used to support our
      working capital requirements until we achieve positive cash flow. As a result
      of
      the February 2007 issuance of common stock on the AIM Exchange, the SWIM
      Entities increased their ownership of our outstanding stock to 73%.





**Product
      Overview**





Since
      our
      inception in 1992, we have developed our PECOS system, which automates many
      supply chain and financial settlement functions associated with procurement.
      We
      intend to augment our core Commerce Process Management solutions with other
      supply chain and supplier-oriented systems to enable the conduct of interactive
      procurement, supplier relationship management, and financial settlement. We
      have
      licensed a third-party dynamic trading system platform to provide auction,
      reverse auction, and other electronic negotiation (or eNegotiation) functions,
      which module is offered as optional functionality to clients. Our PECOS solution
      can support large numbers of end-user clients, products, suppliers and
      transactions and its transaction server middleware provides a scalable
      foundation for robust system performance and high transaction
      capacity.


3





Elcom’s
      Commerce Process Management solution combines robust integrated eProcurement
      and
      eMarketplace capabilities and is typically remotely-hosted via our data center.
      Management believes that the combination of eProcurement and eMarketplace
      functionality capabilities in a single code base gives Elcom a strong low-cost
      offering and importantly, can be offered to potential clients from either
      functional viewpoint.





**Procurement
      and Sourcing Overview**





AMR
      Research estimates that the worldwide procurement and sourcing market will
      grow
      from $2.7 billion in 2007 to $3.3 billion in 2010.





**Professional
      Services**





Our
      professional service offerings include ** various
      consulting and supplier services to its clients. These services range from
      implementation of PECOS and initial training and consulting, to interfacing
      data
      from PECOS into back-end computer systems, including Enterprise Resource
      Planning (“ERP”) systems such as Oracle, SAP, Lawson, and others. Suppliers are
      also offered services associated with catalog content and categorization,
      loading procedures and automated data update methodologies.




**Management
      Information Systems**





In
      the
      U.S., we license and utilize software from Oracle Corporation and other software
      firms for our Management Information System (“MIS”). Our MIS incorporates
      modules supporting general ledger, accounts payable and accounts receivable.
      Management receives data from its chartered accountants in the U.K. to manage
      and monitor its U.K. operations.





Our
      operations are dependent in part upon our ability to protect our MIS network
      infrastructure in our Norwood, MA facility against damage from physical/“cyber”
break-ins, natural disasters, operational disruptions and other events. To
      protect our data and provide service to our customers if the data center were
      to
      become inoperative, we have a disaster-recovery system in place.





**Sales
      and Marketing**





As
      of
      December 31, 2007, our sales, marketing and related support personnel in the
      U.S. and U.K. were comprised of four marketing and/or relationship management
      personnel, and nine customer support personnel. We market and sell our Commerce
      Process Management solutions primarily through our channel partners.





**Customer
      Service and Support**





We
      believe that customer satisfaction is essential for our long-term success and
      offer comprehensive customer assistance programs. Our technical support provides
      response to and resolution of customer technical inquiries and is available
      to
      clients by telephone, over the web or by electronic mail. We use a customer
      service automation system to track each customer inquiry until it is
      resolved.





**Competition**





The
      market for Commerce Process Management solutions is competitive and evolving
      rapidly. We expect competition in this market to continue to intensify in the
      future. Among other factors, before investing in an eBusiness system, we believe
      potential clients consider the cost of the system compared to the level of
      features and functions available in eCommerce applications and the cost to
      acquire, implement and maintain the system, as well as the length of time to
      implement a system and, as applicable, integrate it with a company’s existing
      computer system. We compete with vendors of prepackaged eCommerce software,
      vendors of software tools for developing eCommerce applications and systems
      integrators. Our competitors include Ariba, Inc., Perfect Commerce (based on
      the
      Commerce One platform), Ketera (based on Ariba, hosted) and Epsilon (Ariba).
      We
      also see competition from other emerging and established companies, including
      Oracle, SAP, and other ERP systems, many of which have products or alliances
      to
      offer Internet-based eCommerce, including eProcurement modules which function
      as
      part of their ERP system(s). Our potential competitors also include systems
      integrators such as Electronic Data Systems (EDS). Most of our competitors
      are
      much larger than us and have substantially greater resources, both financial
      and
      otherwise.


4


**Intellectual
      Property**





Our
      success and ability to compete are dependent, in part, upon our proprietary
      technology. While we rely to a certain extent on trademark, trade secret, patent
      and copyright law to protect our technology, we believe that factors such as
      the
      technological and creative skills of its personnel, new product developments,
      frequent product enhancements, name recognition and reliable product
      availability and distribution are of equal importance for establishing and
      maintaining a competitive position. Although we have received a patent on
      certain, specific aspects of our PECOS technology, there can be no assurance
      that other entities will not develop, or have not developed, technologies that
      are similar or superior to our technology. The source code for our proprietary
      software is also protected both as a trade secret and as an unregistered
      copyrighted work. Despite these precautions, it may be possible for a third
      party to copy or otherwise obtain and use some portions of our products or
      technology without authorization, or to develop similar technology
      independently.





**Government
      Regulation**





We
      are
      not currently subject to direct regulation by any government agency, other
      than
      regulations generally applicable to businesses, and there are currently few
      laws
      or regulations directly applicable to commerce on the Internet. However, due
      to
      the increasing popularity and use of the Internet, it is possible that
      additional laws and regulations may be adopted with respect thereto, covering
      issues such as greater user privacy, pricing and characteristics, taxation
      of
      Internet sales and quality of products and services. The adoption of any such
      laws or regulations may decrease the growth of eCommerce and/or the Internet,
      which could in turn decrease the demand for our products and increase our cost
      of doing business or otherwise have an adverse effect on our business, operating
      results or financial condition. Moreover, the applicability to the Internet
      of
      existing laws governing issues such as property ownership, libel and personal
      privacy is evolving.





**Environmental
      Matters**





Based
      on
      our experience to date, the cost of compliance with environmental matters has
      been immaterial and we believe that it is in material compliance with applicable
      environmental laws and regulations.





**Personnel**





As
      of
      December 31, 2007, we had a total of 29 full time personnel in the U.S. and
      10
      full time personnel in the U.K. Our personnel are not represented by any labor
      union and we believe that our personnel relations are good. Our future success
      depends, in significant part, upon the continued service of our key technical
      and senior management personnel and our continuing ability to attract and retain
      highly qualified technical and managerial personnel. Competition for highly
      qualified personnel is intense and there can be no assurance that we can retain
      our key managerial and technical personnel or that we will be able to attract
      or
      retain additional highly qualified technical and managerial personnel in the
      future. We relied heavily on stock option grants to motivate and incentivize
      our
      personnel. As of September 08, 2008, we employed 25 full time personnel in
      the
      U.S. and 8 full time and 1 part time personnel in the U.K.





**Company
      Trade Names and Trademarks**





Elcom
      and
      PECOS are trade names and/or trademarks. We have referred to a variety of other
      entities and products in this Form 10-KSB, certain of which are trade names
      or
      trademarks. Such trade names or trademarks are the property of the respective
      companies owning such trade names and trademarks.





**Item
      2.** ***Description
      of Property***





As
      of
      December 31, 2007, we leased the property set forth below. The facility lease
      expires on December 31, 2008. The property is in good condition; however, the
      size exceeds our current requirements and Elcom is in the process of reviewing
      its options regarding relocation. (See Note 7 in the Notes to Consolidated
      Financial Statements, included elsewhere in this Form 10-KSB).




5




**LOCATION**
            
            **APPROXIMATE**
              **SQUARE**
              **FOOTAGE**
            
            **USE**Norwood,
                Massachusetts
            
            
            36,000
            
            
            Corporate
                Headquarters





Our
      U.K.
      personnel work either at customer sites or from home offices which are equipped
      with the necessary office infrastructure to conduct business, including
      high-speed Internet access.


6


**Item
      3.** ***Legal
      Proceedings***





During
      the fourth quarter of 2006, a cash deposit made by Elcom International Inc.
      with
      a sales agent of €1,000,000 (approximately $1,200,000 based on the exchange rate
      at the time) in connection with a potential bid for government contracts outside
      the United States was completed without approval of the Board of Directors.
      The
      funds were due to be returned to Elcom on or before the May 15, 2007. The Board
      of Directors commenced legal proceedings against the sales agent in June 2007,
      however, in March 2008 the Board chose to have the proceedings dismissed due
      to
      a number of concerns, including the collectability of funds even if a positive
      outcome was secured via legal proceedings (for which there could have been
      no
      assurances regarding the outcome), and the ongoing legal fees associated with
      the proceedings.





**Item
      4.** ***Submission
      of Matters to a Vote of Security Holders***





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year covered by this report.


7




**PART
      II**




**Item
      5.** ***Market
      for Common Equity and Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities***





**Price
      Range of Common Stock**





Since
      January 16, 2003, our Common Stock has been quoted on the Over-the-Counter
      Bulletin Board (the “OTCBB”) under the symbol ELCO (ELCOE since April 2007 to
      indicate that the Annual Report on Form 10-KSB for the year ended December
      31,
      2006 had not been filed with the SEC by the appropriate extended deadline).
      In
      addition, since April 16, 2004, our Common Stock has traded on the AIM Exchange
      under the symbols ELC and ELCS (designating the Regulation S Shares). As of
      September 08, 2008, there were approximately 424 stockholders of record. The
      high and low closing sales prices reported by the OTCBB for each of the quarters
      in the two year period ended December 31, 2007 are set forth in the table below.
      For the period from January 1, 2007, to May 17, 2007 to December 31, 2007,
      such
      high and low closing sales prices were $0.069, $0.07 and $0.003, respectively.
      The OTCBB market closing sales prices reflect inter-dealer prices, without
      retail mark-up, mark-downs, or commissions and may not represent actual
      transactions.





**2007**
            
            **2006****Quarter
                Ended**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**March
                31
            
            $
            0.100
            
            $
            0.065
            
            $
            0.170
            
            $
            0.075June
                30
            
            $
            0.080
            
            $
            0.050
            
            $
            0.180
            
            $
            0.100September
                30
            
            $
            0.050
            
            $
            0.015
            
            $
            0.130
            
            $
            0.100December
                31
            
            $
            0.025
            
            $
            0.003
            
            $
            0.140
            
            $
            0.070





We
      have
      never declared or paid cash dividends on our Common Stock. We currently do
      not
      anticipate paying any dividends in the foreseeable future. Any payment of future
      dividends will be at the discretion of the Board of Directors and will depend
      upon, among other things, our earnings, financial condition, capital
      requirements, level of indebtedness, contractual restrictions with respect
      to
      the payment of dividends and other factors that our Board of Directors deems
      relevant.





The
      following table sets forth, for the equity compensation plan categories listed
      below, information as of December 31, 2007:





**Equity
      Compensation Plan Information**





**Plan Category**
            
            **(a)**
              **Number of securities to**
              **be issued upon exercise**
              **of outstanding options,**
              **warrants and rights**
            
            **(b)**
              **Weighted-average**
              **exercise price of**
              **outstanding options,**
              **warrants and rights**
            
            **(c)**
              **Number of securities**
              **remaining available for**
              **future issuance under**
              **equity compensation plans**
              **(excluding securities**
              **reflected in column (a))**Equity compensation
                plans approved by security holders
            
            
            30,934,713
            
            $
            0.34
            
            
            471,845Equity
                compensation plans not approved by security holders
            
            
            N/A
            
            
            N/A
            
            
            N/ATotal
            
            
            30,934,713
            
            $
            0.34
            
            
            471,845





**Recent
      Sales of Unregistered Securities**





During
      October and November 2007, and March, May and June 2008 we received bridge
      loans
      from a non-US investor of £1,250,000 (approximately $2,500,000). The loans are
      repayable upon demand and convertible at the option of the Payee into shares
      of
      common stock, at the price of 3.5p per share, subject to adjustment, downwards
      only, in the event that Common Stock or any equity instruments are issued at
      a
      price lower than 3.5p at any time. The convertible notes that were issued in
      connection with these bridge loans were issued in reliance on the exemption
      from
      registration under Regulation S promulgated under the Securities Act of 1993,
      as
      amended.





**Recent
      Repurchases of Equity Securities**





During
      the fourth quarter of fiscal 2007, we did not repurchase any equity
      securities.


8


**Item
      6.** ***Management’s
      Discussion and Analysis or Plan of Operation***





**Introduction**





This
      introduction is intended to provide context and better understanding of
      Management’s Discussion and Analysis or Plan of Operation (“MD&A”) which
      follows. Under the Interpretive Release promulgated in December 23, 2003 by
      the
      SEC, Elcom intends to endeavor, as much as possible, to explain to its
      stockholders its comparative financial data contained in the MD&A section in
      such a way as to make the information more understandable to the reader. We
      intend to emphasize important historical and current events or other information
      that it believes are appropriate or necessary to an understanding of our
      financial comparisons.





**RESULTS
      OF OPERATIONS**





The
      following table sets forth various items of operating results for each of the
      years in the two-year period ended December 31, 2007 (in thousands):





**2007**
            
            **2006**Net
                revenues
            
            $
            5,377
            
            $
            3,218Gross
                profit
            
            
            4,179
            
            
            2,546Selling,
                general and administrative expenses
            
            
            7,480
            
            
            8,156Research
                and development expenses
            
            
            766
            
            
            1,231Operating
                loss
            
            
            (4,067
            )
            
            (6,841
            )Interest
                expense
            
            
            (50
            )
            
            (69
            )Interest
                and other income, net
            
            
            352
            
            
            78Net
                loss
            
            $
            (3,765
            )
            $
            (6,832
            )





**Year
      ended December 31, 2007 compared to the year ended December 31,
      2006**





*Net
      Revenues.* Net
      revenues for the year ended December 31, 2007 increased to $5,377,000 from
      $3,218,000 in 2006, an increase of $2,159,000, or 67%. License, hosting services
      and other fees for 2007 increased to $3,375,000 from $2,710,000 in 2006, an
      increase of $665,000 or 25%. This increase is primarily due to higher hosting
      services revenue related to the Scottish Executive’s eProcurement Scotland
      Programme related fees. 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 for 2007
      increased to $2,002,000, from $508,000 in 2006. Deferred revenue includes
      $171,222 related to the provision of an eMarketplace to the UK Government under
      a framework agreement with Procserve Shared Services Ltd (see Note 10), the
      bulk
      of which relates to implementation services that were ongoing as of December
      31,
      2007. We began accreting license revenue related to the eMarketplace in June
      2007.





Revenues
      from Capgemini associated with the Scottish Executive Department of the
      Government of Scotland (the “Scottish Executive”), comprised 75% and 61% of net
      revenues for the years ended December 31, 2007 and 2006, respectively, although
      the 2007 figures were distorted by one off income in respect of the number
      of
      client implementations. Management has plans in place to reduce reliance on
      this
      contract during 2008 and 2009.





*Gross
      Profit* .
      Gross
      profit for the year ended December 31, 2007 increased to $4,179,000 from
      $2,546,000 in 2006, an increase of $1,633,000, or 64%. This increase is
      primarily the result of an increase in license, hosting services and other
      fees
      recognized in 2007 over that in 2006. In addition, we recorded a lower level
      of
      cost of revenues in 2007, primarily as a result of decreased personnel time
      required to support the established customer base.





*Selling,
      General and Administrative Expenses* .
      Selling, general and administrative expenses (“SG&A”) for the year ended
      December 31, 2007 were $7,480,000 compared to $8,156,000 in 2006, a decrease
      of
      $676,000, or 8%. The main decrease is a result of the 2006 expenses, which
      included the bad debt write off of the Khan deposit of $1,200,000 - see Item
      3
      Legal Proceedings. However, if the bad debt write off is excluded, expenses
      would have increased by $524,000 or 8%. Personnel expenses remained at a similar
      level to that during 2006. Personnel expenses recorded in 2007 include $591,000
      (2006 - $462,000) of stock option expense related to the adoption of SFAS 123R,
      which requires the expensing of stock-based compensation (stock options) (see
      Note 2 - Critical Accounting Policies - (ii) Stock-Based
      Compensation.


9


*Research
      and Development Expenses.* Research
      and development expenses for the years ended December 31, 2007 and 2006 were
      $766,000 and $1,231,000 respectively, a decrease of $465,000, or 38%, in 2007
      over 2006. The decrease in expense in 2007 primarily relates to ongoing work
      associated with improving the data interchange inbound interface capabilities
      of
      our PECOS technology.





*Operating
      Loss.* We
      reported a loss from operations of $4,067,000 for the year ended December 31,
      2007 compared to a loss of $6,841,000 for the year ended December 31, 2006,
      a
      decrease in the operating loss of $2,774,000 or 41%. This decrease in operating
      loss in 2007 compared to 2006 was primarily due to the increase in top line
      revenue and close control of expenses.





*Interest
      Expense* .
      Interest expense for the year ended December 31, 2007 was $50,000, a decrease
      of
      $19,000 over the $69,000 of interest expense recorded for the year ended
      December 31, 2006. The decrease in interest expense was due primarily to a
      one-off charge of $37,500 recorded in 2006 in relation to the performance bond
      fee.





*Interest
      and Other Income, Net.* Interest
      and other income, net for the year ended December 31, 2007 was $352,000 versus
      $78,000, for the year ended December 31, 2006. The change from 2006 to 2007
      is
      largely due to the release of accrued interest and an accrual for a contingent
      liability that was confirmed during 2007 to be no longer payable.





*Net
      Loss.* We
      generated a net loss for the year ended December 31, 2007 of $3,765,000, versus
      a net loss of $6,832,000 for the year ended December 31, 2006, a decrease in
      the
      loss of $3,067,000 or 45%.





**Liquidity
      and Capital Resources**





Net
      cash
      used in operating activities from continuing operations for the year ended
      December 31, 2007 was $3.7 million, resulting primarily from a net loss from
      continuing operations of $3.8 million.





As
      previously discussed, on February 5, 2007, we agreed to issue 73,230,009 shares
      to investors in the U.K. and listed the shares on the AIM Exchange. As was
      the
      case in 2005 and 2006, the shares were issued in reliance on the exemption
      from
      registration under Regulation S promulgated under the Securities Act of 1933,
      as
      amended for offshore placements, and therefore are subject to the same
      restrictions as the Regulation S Shares sold previously. Elcom raised a total
      of
      $2.5 million in cash, net of issuance costs of $23,948. The funds derived from
      the 2007 issuance of common stock on the AIM Exchange are being used to support
      our working capital requirements.





At
      December 31, 2007, our principal sources of liquidity were cash and cash
      equivalents of $947,000 and net accounts receivable of $1,725,000.





Our
      principal commitment consists of a lease on our headquarter office facility.
      We
      will also require ongoing investments in research and development and property,
      equipment and software in order to further increase operating revenues and
      meet
      the requirements of our customers.




**Risk
      Factors Relating to Liquidity**





Our
      consolidated financial statements as of December 31, 2007 have been prepared
      under the assumption that we will continue as a going concern for 2008. Our
      independent registered public accounting firm, Malone & Bailey, P.C., have
      issued a report dated September 08, 2008 that included an explanatory paragraph
      referring to the significant operating losses and substantial doubt in its
      ability to continue as a going concern without generating incremental operating
      revenues or, if required, additional capital becoming available.





We
      cannot
      assure you that additional financing will not be needed, or if needed be
      available on favorable terms, or at all. If funds are not available when
      required for working capital needs or other transactions, our ability to carry
      out our business plan could be adversely affected, and we may be required to
      scale back our operations to reflect the extent of available funding. If we
      are
      able to arrange for additional credit facilities from lenders, the debt
      instruments are likely to include limitations on our ability to incur other
      indebtedness, to pay dividends, to create liens, to sell our capital stock,
      or
      enter into other transactions. Such restrictions may adversely affect our
      ability to finance our future operations or capital needs or to grow our
      business. If we raise additional funds by issuing equity or convertible debt
      securities, the percentage ownership of our stockholders will be reduced. These
      securities may have rights, preferences or privileges senior to those of the
      common stockholders.


10


If
      we are
      unable to consummate any equity financing or receive additional loaned monies
      to
      provide sufficient working capital, we would likely be forced to curtail
      operations and/or seek protection under bankruptcy laws. The consolidated
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





Our
      lease
      commitment on its headquarters office facility is payable as follows (in
      thousands):





**Payments
                Due by Period**Total
            
            Less than
              1 year
            
            1-3 years
            
            4-5 years
            
            After
              5 yearsOperating
                lease
            
            $
            230
            
            $
            230
            
            $
            
            
            $
            —
            
            $
            —




**Critical
      Accounting Policies and Estimates**





The
      preparation of consolidated financial statements requires us to make estimates
      and judgments that affect the reported amounts of assets, liabilities, revenue
      and expenses, and related disclosure of contingent assets and liabilities.
      On an
      on-going basis, we evaluate our estimates, including those related to income
      taxes, impairment of long-lived assets, and revenue recognition. We base our
      estimates on historical experience and on various other assumptions that are
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions.





In
      August
      2005 we received a comment letter from the SEC concerning our revenue
      recognition and convertible debenture accounting policies. We responded to
      the
      SEC August 2005 comment letter in September 2005, and in January 2006, the
      SEC
      requested clarification of our September response and made further inquiries
      concerning our revenue recognition and convertible debenture accounting
      policies. We responded to the SEC’s January 2006 comment letter in April 2006.
      In June 2006, the SEC sent an additional comment letter requesting further
      clarification of our previous responses, and made further inquiries concerning
      our revenue recognition, convertible debenture, and convertible debt accounting
      policies. We responded to the SEC’s June 2006 comment letter on June 30, 2006
      and as of July 28, 2006, Elcom was informed by the SEC that the SEC had no
      further comments on our accounting policies.





We
      believe that the following critical accounting policies affect our more
      significant judgments and estimates used in the preparation of our consolidated
      financial statements:





*(i)*
            *Revenue
                Recognition*





We
      market
      both an enterprise and non-enterprise (hosted) model of PECOS software. Revenue
      consists principally of fees for licenses, and hosting services, and we also
      earn fees from certain clients by providing a separate, test instance of our
      hosted software system for specified periods of time, for the client’s use in
      evaluating various operational aspects of the system. In addition, we earn
      usage
      and volume related fees derived from “eMarketplace” activities, as well as fees
      from certain suppliers for maintaining their data in the Commerce Process
      Management  system
      for mutual customers. We earn professional services fees for implementation
      and
      related professional services. As part of the revenue recognition process,
      significant management judgments and estimates must be made and used to
      determine the revenue recognized in any accounting period. Material differences
      may result in the amount and timing of our revenue for any period if different
      judgments or estimates were made.





All
      but
      one of Elcom’s hosted services clients do not have an unfettered right to take
      possession of the hosted PECOS software. The hosting services agreements
      typically require Elcom to establish a functional instance of its software
      solution specific to the client before the hosting term begins. Hosting services
      agreements also generally call for us to provide technical support and software
      updates and upgrades to customers during the term of the agreement. We recognize
      these hosting services revenues over the hosting term, which is typically one
      year, in accordance with Emerging Issues Task Force (“EITF”) 00-3, *Application
      of AICPA Statement of Position 97-2, Software Revenue Recognition, Arrangements
      That Include the Right to Use Software Stored on Another Entity’s Hardware
      (“EITF 00-3”),* and ** SEC
      Staff
      Accounting Bulleting Topic 13, *Revenue Recognition (“SAB 13”)* .
      We
      recognize revenue on this basis because our customers do not have (except as
      noted below) the contractual right to take possession of the software at any
      time during the hosting period. Certain of these agreements provide for an
      initial implementation fee for creating and bringing a client’s PECOS system
      live and then provide for time-based hosting services fees thereafter. If a
      hosting services agreement accounted for under EITF 00-3 and SAB 13 provides
      for
      the payment of fees that are required in order for the customer to use the
      software system, beyond those for hosting services, including implementation
      fees, these additional fees are typically recognized ratably over the first
      year
      of the arrangement, if the related hosting services agreement is subject to
      annual renewal by the customer. Otherwise, such fees are typically recognized
      over the term of the related agreement. We entered into a large hosting services
      contract that will be accounted for under EITF 00-3 and SAB 13, as the client(s)
      do not have an unfettered right to take possession of the hosted PECOS software
      system. The initial hosted software system has been accepted by the client,
      and
      the first customer began using the system in late June 2006. In this particular
      contract, Elcom will be paid certain development fees for providing each of
      three phases of the specified software system, implementation fees for each
      customer that contracts to use the software system, and ongoing hosting service
      fees. Because the development and implementation fees are for Elcom professional
      services that are required in order for the customer(s) to use the hosted
      software system, once such professional services are complete, Elcom will
      recognize the associated fee in revenue over the remaining contract life
      (initially five years) as clients in this certain arrangement do not have annual
      opportunities to cancel the arrangement. As of December 31, 2007, due to the
      limited level of use of the software system, only $31,847 had been recognized
      as
      revenue under this contract.


11


One
      of
      our customers, Capgemini, has an unfettered contractual right to take possession
      of the eProcurement software at any time, and we and Capgemini jointly maintain
      a “hot back-up site” to support certain customer requirements. We have concluded
      that, due to Capgemini’s technological expertise, and the jointly maintained
      back-up site, it is feasible for this customer to run the software on its own
      without significant penalty. Accordingly, we account for this contract in
      accordance with Statement of Position (“SOP”) 97-2, *Software
      Revenue Recognition* ,
      as
      amended by SOP 98-9, *Modification
      of SOP 97-2* , *Software
      Revenue Recognition with Respect to Certain Transactions* (“SOP
      97-2, as amended”) using the residual method. In this case the contract calls
      for a license fee, specific fees for initial professional services as locations
      are brought live (implementation fees) and ongoing hosting services for each
      location. Under the residual method, the total contract fee for this contract
      was first allocated to the fair value of the undelivered elements (i.e.,
      implementation services and hosting fees) based on their vendor specific
      objective evidence (“VSOE”) and the remaining portion of the total contract fee
      was allocated to the software license. We determined the VSOE of fair value
      for
      the implementation services based upon its current and historical pricing for
      those services when sold separately and the VSOE of fair value for hosting
      services based upon substantive renewal rates. Per the terms of this contract,
      the timing of the payment of the license fee for this contract was based upon
      the number of Public Entities signing agreements. Accordingly, the license
      fee
      revenue was recognized as the milestones were met and the license payments
      became due. The final milestone was achieved in 2004. Implementation fees for
      this contract are recognized as revenue upon completion of the professional
      services, in accordance with the client specifications and hosting services
      fees
      are recognized over the hosting services term, generally one year.





Deferred
      revenue includes amounts received from customers for which revenue has not
      been
      recognized and generally result from advance customer payments for hosting
      services fees for services not yet rendered and deferred until all requirements
      under EITF 00-3, SAB 13 or SOP 97-2, as applicable, are met. Deferred revenue
      is
      recognized upon delivery of our product, as services are rendered, or as other
      requirements requiring deferral are satisfied.





*(ii)
      Accounting for Convertible Debentures*





During
      2003, Elcom raised funds via private placements to accredited investors of
      10%
      Senior Convertible Debentures due 2013 (the “Debentures”). We accounted for
      these debentures as a conventional convertible debt instrument and have
      accounted for the debentures in accordance with Accounting Principles Board
      Opinion Number 14, *Accounting
      for Convertible Debt and Debt Issued with Stock Purchase
      Warrants* ,
      EITF
      98-5, *Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios* ,
      and
      EITF 00-27, *Application
      of Issue No. 98-5 to Certain Convertible Instruments.* In
      accordance with these pronouncements, over a four year period, through December
      2006, we recorded non-cash interest expense and offsetting credits to equity
      (additional paid-in capital) totaling $1,587,000 over these four years. These
      amounts reflect, as interest expense, the Beneficial Conversion Feature (“BCF”)
      of the difference between the per share conversion price of the Debentures
      and
      the then current trading price of our common stock when the Debentures were
      issued or amended. In accordance with the pronouncements, the BCF recorded
      was
      limited to the face amount of the Debentures and related interest that is
      paid-in-kind. The Debentures also provided for adjustment of the per share
      conversion price in the event that equity was raised after the issuance of
      the
      Debentures, at a price less than the original per share Debenture conversion
      price. Accordingly, an adjustment to the Debenture conversion price (from $0.125
      per share to $0.046 per share) was made in conjunction with common stock
      issuances by Elcom in December 2005. The Debentures provided that adjustments
      to
      the per share conversion price would be made on a weighted average basis. Upon
      the change in control, as defined in the debenture agreements, adjustments
      to
      the per share conversion price would be made on a weighted average basis. Upon
      the change in control of, as defined in the debenture agreements, in December
      2005 the debentures converted to common stock at an adjusted per share price
      of
      $0.04643 when we closed on the sale of our common stock with third parties
      at a
      price of $0.0266 per share.


12


*(iii)
      Shared-Based Payment SFAS No.123R*





As
      of
      January 2006, we adopted SFAS No. 123R, *Share-Based
      Payment* ,
      using
      (1) the modified prospective method, which requires measurement of compensation
      cost for all stock awards at fair value on the date of grant and recognition
      of
      compensation expense over the service periods for awards expected to vest and
      (2) the short-cut method to determine the pool of windfall tax benefits. During
      2007, we recorded $797,000 of compensation expense under SFAS No. 123R
      attributable to stock options. The adoption of SFAS No. 123R had a material
      impact on our consolidated financial statements. The fair value of our stock
      option grants is determined using the Black-Scholes valuation model, which
      is
      consistent with our valuation techniques previously utilized for options in
      footnote disclosures required under SFAS No. 123, *Accounting
      for Stock-Based Compensation.* Such
      value is recognized as expense over the service period, net of estimated
      forfeitures.





**Off-Balance
      Sheet Financings**





We
      do not
      have any off-balance sheet financings. We have no majority-owned subsidiaries
      that are not included in the consolidated financial statements.





**Factors
      Affecting Future Performance**





A
      significant portion of Elcom’s revenues are from license 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 Elcom’s Commerce Process Management solution 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
      Commerce Process Management solution; the procurement of additional services
      from us by Public Entities associated with the Scottish Executive; Capgemini’s
      relationship with the Scottish Executive; and their compliance with the terms
      and conditions of their agreement with the Scottish Executive and our ability
      to
      perform under our agreement with Capgemini.





If
      further business fails to develop under the Capgemini agreement or if the U.S.
      initiatives do not expand as expected, or if we are unable to perform under
      any
      of these agreements, it would have a material adverse effect on our future
      financial results.





**Outlook**





Improvements
      were evident in most areas of the business during 2007 and the directors remain
      optimistic about the future. Further improvements in revenues and operating
      results from operations in future periods will not occur without our being
      able
      to generate incremental operating revenues from existing and new
      clients.


13


**STATEMENT
      UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT**





Except
      for the historical information contained herein, the matters discussed in this
      Annual Report on Form 10-KSB could include forward-looking statements or
      information. All statements, other than statements of historical fact,
      including, without limitation, those with respect to our 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 we believe that such
      forward-looking statements are reasonable, we can give no assurance that our
      expectations are, or will be, correct. These forward-looking statements involve
      a number of risks and uncertainties which could cause our future results to
      differ materially from those anticipated, including: (i) the necessity for
      us to
      generate incremental operating revenues and whether this objective can be met
      given the overall marketplace and client's acceptance and usage of eCommerce
      software systems, eProcurement and eMarketplace solutions including corporate
      demand therefore, 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 and revenue
      growth; (ii) the consequent results of operations given the aforementioned
      factors; (iii) the necessity to achieve profitable operations within the
      constraints of our existing resources and, if it can not, the availability
      of
      incremental capital funding; and (iv) other risks detailed from time to time
      in
      this Annual Report on Form 10-KSB and in our other SEC reports and statements.
      We assume no obligation to update any of the information contained or referenced
      in this Annual Report on Form 10-KSB.


14





**Item
      7.** ***Financial
      Statements***





See
      the
      Consolidated Financial Statements beginning on page F-1. Supplemental earnings
      (loss) per share information is included in Note 2 (m), of the Notes to
      Consolidated Financial Statements.





**Item
      8.** ***Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure***





On
      September 20, 2007, we dismissed Vitale Caturano & Company Ltd (“VCC”) as
      our principal independent accountants. The decision to dismiss VCC was approved
      by our Audit Committee and Board of Directors.




The
      report of VCC for our 2005 financial statements did not contain any adverse
      opinion or disclaimer of opinion and was not qualified or modified as to audit
      scope or accounting principles, except that the report contained an explanatory
      paragraph relating to the Company’s ability to continue as a going
      concern




During
      the fiscal year ended December 31, 2005 , there were no disagreements between
      the Company and VCC on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements, if not resolved to VCC’s satisfaction would have caused VCC to
      make reference to the subject matter of the disagreement in connection with
      its
      report.





In
      preparing the audit for the fiscal year ended December 31, 2006, management
      and
      VCC discovered that, during the fourth quarter of 2006, a cash deposit made
      by
      the Company with a sales agent of €1,000,000 (approximately $1,200,000) in
      connection with a potential bid for government contracts outside the United
      States was completed without approval of our Board. As a result of this
      discovery, we investigated the transaction and further reviewed our internal
      controls. During this review, we and VCC identified certain material weaknesses
      in our internal controls relating to approval of transactions and cash
      management. Since such review, we have strengthened our internal controls by
      adopting additional internal controls policies and procedures relating to cash,
      cash management and corporate governance. VCC performed no work subsequent
      to
      the commencement of the Company’s additional review and
      investigation.





On
      August
      30, 2007, we engaged Malone & Bailey PC (“MB”) as our new principal
      independent accountant to audit our financial statements for 2006 and 2007.
      During the two most recent fiscal years and the interim period preceding the
      engagement of MB, we did not consult with MB regarding either (i) the
      application of accounting principles to a specific transaction, either completed
      or proposed, or the type of audit opinion that might be rendered on our
      financial statements, and MB did not provide a written report or oral advice
      to
      us that was an important factor considered by us in reaching a decision as
      to
      the accounting, auditing or financial reporting issue, or (ii) any matter that
      was either the subject of a disagreement or an event identified in Item
      304(a)(1)(iv) of Regulation S-B.




In
      deciding to select MB, our Audit Committee considered MB's experience and
      expertise related to public companies, as well as reviewed auditor independence
      issues and existing commercial relationships with MB. The Audit Committee
      concluded that MB has no commercial or other relationship that would impair
      its
      independence and has the appropriate expertise that we required regarding our
      current operations.





**Item
      8A.** ***Controls
      and Procedures.***




**Evaluation
      of Disclosure Controls and Procedures**





Disclosure
      controls and procedures include, without limitation, controls and procedures
      designed to ensure that information required to be disclosed by an issuer in
      the
      reports that it files or submits under the Securities Exchange Act of 1934,
      as
      amended (the “Act”) is accumulated and communicated to the issuer’s management,
      including it’s principal executive and principal financial officers, or persons
      performing similar functions, as appropriate to allow timely decisions regarding
      required disclosure. It should be noted that the design of any system of
      controls is based in part upon certain assumptions about the likelihood of
      future events, and there can be no assurance that any design will succeed in
      achieving its stated goals under all potential future conditions regardless
      of
      how remote. As of the end of the period covered by the Annual Report, we carried
      out an evaluation, under the supervision of our Chief Executive Officer and
      Executive Vice President Finance of the effectiveness of the design and
      operation of our disclosure controls and procedures. Based on this evaluation
      our Chief Executive Officer and Executive Vice President Finance, have concluded
      that as of the Evaluation Date, Elcom's disclosure controls and procedures
      were
      not effective in ensuring that information required to be disclosed by Elcom
      in
      the reports it files or submits under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the Commission's
      rules and forms, because of the untimely filing of the interim reports and
      because of the identification of a material weakness in our internal control
      over financial reporting which is identified below, which we view as an integral
      part of our disclosure controls and procedures.


15


**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
      and
      15d-15(f)). Because of its inherent limitations, internal control over financial
      reporting may not prevent or detect misstatements. Also, projections of any
      evaluation of effectiveness to future periods are subject to the risk that
      controls may become inadequate because of changes in conditions, or that the
      degree of compliance with the policies or procedures may
      deteriorate.





Our
      management assessed the effectiveness of our internal control over financial
      reporting as of December 31, 2007. In making this assessment, we used the
      criteria set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission ("COSO") in Internal Control — Integrated Framework. Based on our
      assessment using those criteria, our management concluded that there was a
      material weakness in our internal control over financial reporting.





The
      material weakness was identified as the Company’s limited segregation of duties
      amongst employees with respect to the preparation and review of the financial
      statements. This material weakness is the result of the limited number of
      employees employed within the financial reporting area.





Our
      Executive Vice President Finance evaluated our internal controls and concurred
      that disclosure controls and procedures have not been effective and reported
      within the time periods specified in the SEC rules and forms. However, at this
      time, our resources and size prevent us from being able to employ sufficient
      resources to enable adequate segregation of duties within our internal control
      system. The Company intends to hire additional employees and reallocate duties,
      including responsibilities for financial reporting as soon as the Company has
      the financial resources to do so. Management is required to apply its judgment
      in evaluating the cost-benefit relationship of possible changes in our
      disclosure controls and procedures. However, in the interim period the Company
      has taken corrective action and increased management supervision of the review
      process.





Other
      than the material weakness indicated above, no accounting errors or
      misstatements have been identified by our disclosure controls and procedures
      that would have a material effect on our Financial Statements.




This
      annual report does not include an attestation report of the Company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by the Company's registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management's report
      in this annual report. Accordingly, our management's assessment of the
      effectiveness of our internal control over financial reporting as of December
      31, 2007 has not been audited by our auditors, Malone & Bailey, PC or any
      other independent registered accounting firm.





**Changes
      in Internal Controls over Financial Reporting**




During
      February 2007 our former Executive Vice President Finance, Paul Bogonis,
      resigned and was replaced by David Elliott. Subsequent to this during June
      2007
      our former Chief Executive Officer, John Halnen, was terminated without cause
      and was replaced by Gregory King.




In
      our
      efforts to continuously improve our internal controls, management has taken
      steps to enhance the following controls and procedures this process started
      during 2007 and finished subsequent to the end of fiscal year 2007:




·
            Management
                has documented its accountancy policies and procedures to increase
                consistency among its divisions. This includes the creation of checklists
                which serve to manage the close
                process.




·
            Management
                has increased the review of month-end and the consolidation
                process.




16


**Item
      8B.** ***Other
      Information***




None.


17





**PART
      III**





**Item
      9.** ***Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange Act***





The
      name,
      age and position of Executive Officers and Directors are as
      follows:





**NAME**
            
            **AGE**
            
            **POSITION**David
                Elliott
            
            33
            
            Class
                I Director, Executive Vice President of FinanceGregory
                D. King
            
            55
            
            Class
                III Director, Chief Executive OfficerWilliam
                Lock
            
            50
            
            Class
                III Director, Executive Vice PresidentJustin
                Dignam (1) (2) (3)
            
            46
            
            Class
                I DirectorElliott
                Bance (1) (2) (3)
            
            34
            
            Class
                III Director





(1)  Member
      of
      the Compensation Committee.


(2)  Member
      of
      the Audit Committee.


(3)  Member
      of
      the Nominating Committee.





A
      brief
      biography for each of our Executive Officers and Directors is set forth
      below.





*Gregory
      D. King* was
      appointed as a Class III Director on April 21, 2006. On the same date,
      Mr. King was appointed Executive Vice President of Business Development.
      Mr. King, who is 55, originally joined elcom, inc., Elcom’s technology
      subsidiary in April of 1997 as Vice President of Product Marketing, in
      conjunction with the acquisition of a procurement software application by elcom,
      inc. Mr. King was a part owner of rights to the acquired technology.
      Mr. King was promoted from Vice President of Sales and Marketing to Chief
      Executive Officer on June 20, 2007. Mr. King is a citizen of the United
      States.




*David
      Elliott* was
      appointed as a Class I Director on April 18, 2007. Mr. Elliott was appointed
      Executive Vice President of Finance and Secretary on February 16, 2007 and
      serves as principal financial and accounting officer. Mr. Elliott joined on
      November 14, 2006. Prior to joining Elcom he spent 5 years at Volkswagen Group
      where he was employed in a number of senior financial roles, including
      responsibility for the Volkswagen Development Ventures Fund. Prior to this,
      Mr.
      Elliott was employed as a financial analyst with Daimler Chrysler UK. Mr.
      Elliott is a citizen of the United Kingdom.




*William
      Lock* was
      appointed as a Class III Director on September 7, 2006. Mr. Lock was named
      Chairman of the Board in August 2007. He is a seasoned turnaround specialist
      with considerable experience in mergers, acquisitions, strategic planning and
      advice and corporate finance. Prior to joining the Company, Mr. Lock ran a
      UK-based consultancy practice that specialized in turnaround management. He
      has
      a strong track record of delivering growth, leading to successful shareholder
      exits in a number of sectors, including software, motor and print. Mr. Lock
      started his career working for C.E.S.P., an investment firm based in New York
      that specialized in investment management and turnarounds. Mr. Lock is a citizen
      of the United Kingdom.





*Justin
      Dignam* was
      appointed as a Class I Director on April 21, 2006 at the request of
      the SWIM Entities, as described elsewhere herein. Since October 2003,
      Mr. Dignam has been a Director and the Chief Executive Officer of Big Fish
      Payroll Services LLC, a provider of payroll and tax depositing and filing
      services for small and mid-market employers. Prior thereto, Mr. Dignam was
      a Sales Executive at Kronos Incorporated, leading their Major Markets sales
      organization in Southern California. Beginning in August 1983, he joined
      Automatic Data Processing Inc. (“ADP”). Mr. Dignam held a variety of
      positions, most recently for more than 5 years as a National Accounts Sales
      Executive, leading sales in ADP’s Southern California market area. His last
      position with ADP before his resignation in 2002 was that of Global Sales
      Manager engaging with Fortune 100 multinational companies. Mr. Dignam is a
      citizen of the United States.


18


*Elliott
        Bance* was
        appointed as a Class III Director on April 21, 2006. Mr. Bance
        is, and has been for the last five years, employed in the field of real estate
        sales and development. Since March 2006, Mr. Bance has been employed with
        Asprey Homes Limited, and prior thereto, for at least the last five years,
        with
        Hampton’s Estates Limited. Mr. Bance is a citizen of the United
        Kingdom.
  19
  **Audit
        Committee**
 
 The
        Board
        of Directors has a standing Audit Committee which is directly responsible
        for,
        among other things, the appointment, compensation, retention and oversight
        of
        the independent registered public accounting firm, with whom the Audit Committee
        reviews the scope of audit and non-audit assignments and related fees, the
        accounting principles used by us in financial reporting, internal financial
        control procedures and the adequacy of such internal control procedures.
        The
        Audit Committee is also responsible for pre-approving all audit and non-audit
        services performed by our independent registered public accounting firm.
        Messrs.
        Dignam and Bance serve as the members of the Audit Committee. Each of the
        members of the Audit Committee is an “independent director”, as defined under
        NASDAQ listing standards. The Board of Directors has determined that Mr.
        Dignam
        is an “audit committee financial expert” as defined in Item 407(d) (5)(ii) of
        Regulation S-B.
 
 **Code
        of Ethics**
 
 On
        March
        31, 2004, we adopted a Code of Ethics for Senior Executives and Financial
        Officers (the “Code of Ethics”) which applies to the Chief Executive Officer,
        President, Chief Operating Officer, Chief Financial Officer, controller,
        or
        treasurer or persons performing similar functions. Upon written request to
        our
        headquarters at 10 Oceana Way, Norwood, Massachusetts 02062, Elcom will provide
        to any person, without charge, a copy of the Code of Ethics.
  **Section
        16(a) Beneficial Ownership Reporting Compliance**
  Section
        16(a) of the Securities Exchange Act of 1934 requires Officers and Directors
        and
        certain persons who beneficially own more than ten percent of a registered
        class
        of equity securities (i.e., the Common Stock), to file reports of ownership
        and
        changes in ownership of such securities with the Commission. Officers, Directors
        and greater-than-ten-percent beneficial owners who file these reports are
        required by applicable regulations to furnish us with copies of all Section
        16(a) forms they file.
 
 Based
        solely upon a review of the copies of the forms furnished to us during or
        with
        respect to 2007, and written representations from certain reporting persons,
        we
        believe that no Officer, Director or greater-than-ten-percent beneficial
        owner
        failed to file on a timely basis during the year ended December 31, 2007
        any
        report required by Section 16(a) of the Securities Exchange Act of 1934.
 
 **Item
        10.** ***Executive
        Compensation***
 
 The
        table
        below sets forth information concerning 2007 annual and long-term compensation
        for services in all capacities with respect to those persons (collectively,
        the
        "Named Executive Officers") who were (i) the Chief Executive Officer and
        (ii)
        the other executive officers at the end of the fiscal year, as well as the
        other
        individuals that were executive officers during the year ended December 31,
        2007.
  20
 
 **SUMMARY
        COMPENSATION TABLE**
 
 **Name
                  and**
                **Principal**
                **Position**
              
              **Year**
              
              **Salary**
                **($)**
              
              **Bonus**
                **($)**
              
              **Option**
                **Awards**
                **($)**
              
              **All
                  Other**
                **Compensation**
                **($)**
              
              **Total**
                **($)**Sean
                  P. Lewis (1)
              
              
              2007
              
              
              269,635
              
              
              0
              
              
              0
              
              
              0
              
              
              269,635John
                  E. Halnen – Former President and Chief Executive Officer
                  (2)
              
              
              2007
              
              
              183,449
              
              
              0
              
              
              0
              
              
              162,500
              
              
              345,949William
                  Lock – Chairman of the Board of Directors
              
              
              2007
              
              
              269,635
              
              
              0
              
              
              0
              
              
              0
              
              
              269,635Gregory
                  King - CEO
              
              
              2007
              
              
              161,281
              
              
              0
              
              
              0
              
              
              0
              
              
              161,281David
                  Elliott – Executive Vice President Finance
              
              
              2007
              
              
              139,811
              
              
              0
              
              
              0
              
              
              0
              
              
              139,811
 
 (1)
                  Mr.
                      Lewis served as Chairman of the Board of Directors until August
                      15, 2007,
                      when he resigned his position, however he remained employed
                      in the role of
                      Investment Manager until March 31, 2008 when he resigned his
                      position.
 
 (2)
              Mr.
                  Halnen served as President and Chief Executive Officer until June
                  20,
                  2007, when he resigned his position and received a severance payment
                  of
                  $300,000 which was paid in equal installments over 12 months.
 
 **EXECUTIVE
        COMPENSATION NARRATIVE**
 
 None
        of
        the key executives have employment contracts, which provide for annual salary,
        incentive payments, and severance arrangements. We are currently in the process
        of formulating employment contracts for key executives.
 
 **OUTSTANDING
        EQUITY AWARDS AT FISCAL YEAR-END**
 
 The
        following table sets forth certain information regarding stock options held
        as
        of December 31, 2007 by the executive officers named in the summary compensation
        table:
  21
 
 **OUTSTANDING
        EQUITY AWARDS AT FISCAL YEAR-END**
 
 Option
                  Awards
              
              Stock
                  AwardsName
              
              Number of
                securities
                underlying
                unexercised
                options (#)
                exercisable
              
              Number of
                securities
                underlying
                unexercised
                options
                (#) unexercisable
              
              Equity
                incentive plan
                awards: Number
                of securities
                underlying
                unexercised
                unearned options
                (#)
              
              Option
                Exercise
                price
              
              Option
                expiration
                date
              
              Number
                of shares
                or units
                of stock
                that have
                not
                Vested
                (#)
              
              Market
                value of
                shares or
                units of
                stock
                that have
                not
                vested ($)
              
              Equity
                incentive
                plan
                awards:
                number of
                unearned
                shares,
                units or
                other
                rights that
                have
                not vested
                (#)
              
              Equity
                incentive
                plan
                awards:
                market or
                payout
                value of
                unearned
                shares,
                units or
                other
                rights
                that
                have
                not
                Vested
                ($)Sean P.Lewis
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0John
                  E. Halnen
              
              
              21,250
                22,500
                35,600
                
                
                4,112
                400,000
                
                
                100,000
                150,000
                100,000
                39,500
                12,250
                3,500
                55,400
                110,500
                24,999
                22,750
                75,000
                100,000
                100,000
                150,000
                150,000
                100,000
                105,000
                120,888
              
              
              400,000
                
                
                
                800,000
              
              
              
              
              $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                $
              1.6875
                1.8438
                1.6407
                0.1150
                0.2700
                0.0950
                0.0900
                0.2150
                0.2700
                0.2150
                3.8125
                4.6407
                1.8438
                1.6407
                3.8125
                4.1563
                4.6407
                1.1719
                1.6800
                0.8500
                0.4450
                0.4450
                0.4450
                0.2000
                0.2700
              
              
              10/30/2008
                12/15/2008
                2/16/2009
                8/03/2016
                5/21/2013
                11/7/2014
                1/12/2016
                1/27/2014
                5/21/2013
                1/27/2014
                8/31/2009
                4/17/2010
                12/15/2008
                2/16/2009
                8/31/2009
                11/1/2009
                4/17/2010
                12/21/2010
                6/25/2011
                9/7/2011
                4/12/2012
                4/12/2012
                4/12/2012
                7/26/2012
                5/21/2013
              
              
              0
              
              
              0
              
              
              0
              
              
              0WilliamLock
              
              
              0
              
              
              700,000
              
              
              0
              
              $
              0.1150
              
              
              8/30/2016
              
              
              0
              
              
              0
              
              
              0
              
              
              0Greg
                  King
              
              
              16,250
                40,000
                10,000
                18,750
                700,000
                10,000
                17,731
                100,000
                125,000
                100,000
                700,000
                75,000
                18,750
                8,269
                10,000
                1,000
                72,000
                14,000
                40,000
              
              
              0
                0
                
                
                
                
                350,000
                
                
                
                
                
                
                
                
                
                350,000
              
              
              0
              
              $
                $
                $
                $
                $
                $
                $
                $
                $
                $
                  $
                  $
                  $
                    $
                    $
                      $
                        $
                          $
              1.6407
                3.8125
                4.1563
                4.6407
                0.1150
                1.1719
                5.7500
                0.0800
                0.1400
                0.0950
                0.0900
                0.2000
                1.1719
                5.7500
                1.1719
                0.8500
                0.4450
                0.2000
                3.8200
              
              
              2/16/2009
                08/31/2009
                11/01/2009
                04/17/2010
                08/30/2006
                06/25/2011
                06/28/2010
                03/25/2013
                07/15/2014
                11/15/2014
                01/12/2016
                01/13/2014
                12/21/2010
                06/28/2010
                12/21/2010
                09/07/2011
                04/12/2012
                07/26/2012
                06/28/2009
              
              
              0
              
              
              0
              
              
              0
              
              
              0DavidElliott
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
  22
 
 No
        stock
        options were granted during 2007.
 
 **DIRECTOR
        COMPENSATION**
 
 Directors
        who served during the year ended December 31, received no compensation of
        any
        type in 2007 for their services as Directors.
 
 **Item
        11.** ***Security
        Ownership of Certain Beneficial Owners and Management and Related Stockholder
        Matters***
  **PRINCIPAL
        STOCKHOLDERS AND MANAGEMENT OWNERSHIP**
 
 The
        following table sets forth the beneficial ownership of Common Stock as of
        September 08, 2008 by (i) each Director, (ii) any executive officer who was
        (a)
        the Chief Executive Officer and (b) an executive officer at the end of the
        fiscal year, as well as the individuals that were executive officers during
        the
        year ended December 31, 2007, (iii) all Directors and executive officers
        as a
        group, and (iv) each person or group known to own beneficially more than
        5% of
        its outstanding shares of Common Stock. All information with respect to
        beneficial ownership has been furnished by the respective Director or executive
        officer, or by reference to a public filing, as the case may be. Unless
        otherwise indicated below, each stockholder named below has sole voting and
        investment power with respect to the number of shares set forth opposite
        his or
        its respective name. As of December 31, 2007 and September 08, 2008, there
        were,
        552,177,450 shares of Common Stock outstanding, respectively.
 
 **Number of Shares**
              
              **Percentage****Name and
                  Title of Beneficial Owner (2)**
              
              **Beneficially Owned (1)**
              
              **Common Stock (1)**Gregory
                  D. King (3)
              
              
              876,750
              
              
              *Justin
                  Dignam
              
              
              162,500
              
              
              *Elliott
                  Bance
              
              
              162,500
              
              
              *William
                  Lock
              
              
              350,000
              
              
              *David
                  Elliott
              
              
              0
              
              
              -Sean
                  Lewis (4)
              
              
              26,666,666
              
              
              5
              %**All
                  Directors And Executive Officers as a Group**(5)
              
              
              28,128,416
              
              
              5
              %**Smith
                  & Williamson Investment Management Limited
                  and**
              
              
              403,089,535
              
              
              73
              %**Smith
                  & Williamson Nominees Limited**(6)
  
 *
        Less
        than 1%.
 
 (1)
              In
                  accordance with Securities and Exchange Commission rules, each
                  beneficial
                  owner’s holdings have been calculated assuming full exercise of all
                  outstanding options and warrants to acquire Common Stock, regardless
                  of
                  the option price, which are exercisable by such owner within 60
                  days after
                  September 08, 2008, while assuming no exercise of outstanding options
                  and
                  warrants covering Common Stock held by any other
                  person.
 
 (2)
              For
                  purposes hereof, the address of Directors and Executive Officers
                  is the
                  same as that of our headquarters: 10 Oceana Way, Norwood, Massachusetts
                  02062.
 
 (3)
              Mr.
                  King was appointed as a Director on April 21, 2006. Mr. King’s Common
                  Stock ownership is comprised of 33,750 shares owned following exercising
                  share options under the 1996 and 1997 share option plans and 843,000
                  shares which he has the right to acquire through the exercise of
                  stock
                  options.
 
 (4)
              During
                  2006, Sean Lewis, Chairman until August 15, 2007, acquired common
                  stock
                  ownership of 26,666,666 shares, which is comprised of 13,333,333
                  shares
                  held in the name of Smith & Williamson Nominees Limited for his
                  benefit and 13,333,333 shares held in the name of Smith & Williamson
                  Nominees Limited for the benefit of his wife. In both cases, Smith
&
                  Williamson Nominees Limited has a revocable right to vote and dispose
                  of
                  these shares – See Item 12 Certain Relationships and Related
                  Transactions.
  23
 
 (5)
              Includes
                  1,551,750 shares of Common Stock which the Directors and Executive
                  Officers have the right to acquire within 60 days of September
                  08, 2008,
                  through the exercise of stock
                  options.
 
 (6)
              Smith
                  & Williamson Investment Management Limited and Smith & Williamson
                  Nominees Limited filed a Schedule 13D on March 6, 2006, which was
                  amended
                  on April 5, 2006. The Common Stock ownership presented above is
                  based on
                  such Schedule 13Ds and our records, and includes 7,420,991 shares
                  related
                  to the conversion of Company
                  debentures.
 
 **Item
        12.** ***Certain
        Relationships and Related Transactions and Director
        Independence***
 
 **Related
        Transactions**
  During
        the first and third quarters of 2005, we received bridge loan funds, pursuant
        to
        secured promissory notes, as amended, each in the amount of $120,000 (the
“2005
        Notes”), from each of Robert J. Crowell, Chairman until April 21, 2006, and
        William W. Smith, Vice Chairman and a Director until April 21, 2006 (each
        a
“Holder” and, together, the “Holders”), for a total of $240,000. A total of
        $200,000 ($100,000 from each Holder) was received in the first quarter of
        2005,
        and an additional $40,000 ($20,000 from each Holder) was received in August
        2005. The Holders’ advances provided a portion of the funds required for us to
        continue operating until the December 2005 Regulation S Share issuance (see
        Note
        3). Interest upon the outstanding principal amount of the 2005 Notes accrued
        at
        a rate of 8%. The Crowell and Smith 2005 Notes had different maturity
        provisions. Mr. Crowell’s 2005 Note provided that the principal amount and
        interest accrued thereon was due and payable within five (5) business days
        after
        we notified the payee that we had adequate funds to repay the 2005 Notes,
        while
        Mr. Smith’s 2005 Note provided that his note was payable in full after we
        reported two sequential quarters of positive cash flow from operations. The
        2005
        Notes, at the option of the Holder, were convertible into our common stock,
        issuable in reliance upon an exemption from registration pursuant to Regulation
        D promulgated under the Securities Exchange Act of 1933, as amended (the
        “Restricted Shares”). The 2005 Notes also provided the Holders certain
“piggy-back” registration rights, in the event they elected to convert their
        loan into Restricted Shares.
 
 On
        December 21, 2005, Mr. Smith converted his $120,000 loan, plus approximately
        $7,000 in accrued interest thereon, into 4,593,287 Restricted Shares of our
        common stock in accordance with the 2005 Notes’ conversion terms (see Note
        3).
  Mr.
        Crowell’s $120,000 loan was repaid in cash in January 2006, and a total of
        approximately $7,600 of interest was paid thereon.
 
 The
        2005
        Notes were secured by an Amended and Restated Collateral Agency and Security
        Agreement, William W. Smith, as Collateral Agent, and the Holders, as secured
        parties (the “Security Agreement”). Pursuant to the Security Agreement, we
        granted a first priority senior security interest in all of the personal
        property and intellectual property, wherever located, owned or thereafter
        acquired, to the Collateral Agent, for the benefit of the Holders, to secure
        the
        payment or performance of our obligations under the 2005 Notes. As a result
        of
        financing received from the issuance of the 2005 Regulation S Shares, and
        the
        consequent loan repayments and conversions to common stock, as described
        above,
        the Security Agreement is no longer in effect.
  On
        October 23, 2006, we sold a total of 76,336,289 shares of our common stock
        (the
“2006 Regulation S Shares”) to investors in the U.K. and listed the shares on
        the AIM Exchange. As was the case in 2005 and 2004, the shares were issued
        in
        reliance on the exemption from registration under Regulation S promulgated
        under
        the Securities Act of 1933, as amended for offshore placements, and therefore
        are subject to the same restrictions as the Regulation S Shares that were
        sold
        in 2005 and 2004. Elcom raised a total of $2.5 million in cash in connection
        with the 2006 Regulation S Shares, net of issuance costs of $24,000. The
        funds
        derived from the 2006 issuance of common stock on the AIM Exchange were used
        to
        support our working capital requirements.
 
 On
        February 5, 2007, we sold 73,230,009 shares of our common stock (the “2007
        Regulation S Shares”) to investors in the UK and listed the shares on the AIM
        Exchange. As was the case in 2006, the shares were issued in reliance on
        the
        exemption from registration under Regulation S promulgated under the Securities
        Act of 1993, as amended for offshore placements, and therefore are subject
        to
        the same restrictions as the Regulation S Shares sold previously. Elcom raised
        a
        total of $2.5 million in cash, net of issuance costs of $23,948. The funds
        derived from the 2007 issuance of common stock on the AIM Exchange are being
        used to support our working capital requirements until we achieve positive
        cash
        flow.
  24
 
 During
        2006, Gregory King, Chief Executive Officer, was granted an option to acquire
        700,000 shares at $0.115 per share, of which 350,000 shares become exercisable
        on August 30, 2007 and the remaining 350,000 shares become exercisable on
        August
        30, 2008. In addition, Mr. King has 2,036,750 options outstanding, of which
        526,750 shares are vested with 1,510,000 shares remaining unvested.
 
 During
        2006, Sean Lewis, Chairman until August 15, 2007, acquired common stock
        ownership of 26,666,666 shares, which is comprised of 13,333,333 shares held
        in
        the name of Smith & Williamson Nominees Limited for his benefit and
        13,333,333 shares held in the name of Smith & Williamson Nominees Limited
        for the benefit of his wife. In both cases, Smith & Williamson Nominees
        Limited has a revocable right to vote and dispose of these shares.
 
 Smith
        & Williamson Corporate Finance Limited (“SWCF”) is our nominated adviser
        (“Nomad”) in respect of our AIM Exchange Listing in the U.K. SWCF and the SWIM
        Entities are related parties. During calendar 2007, we ratably accrued fees
        for
        Nomad services rendered by SWCF aggregating £20,000 (approximately $40,000). An
        amount of $33,395 was due to SWCF as of December 31, 2007.
 
 **Director
        Independence**
 
 The
        OTC
        Bulletin Board does not have a requirement that a majority of the Board of
        Directors be independent. However, with respect to the definition of
        independence utilized by NASDAQ, Justin Dignam and Elliott Bance would
        be deemed to be independent while Gregory D. King, William Lock, and David
        Elliott would not. Former directors, John W. Ortiz and Richard J.
        Harries, Jr., who both resigned in 2006, would also have been deemed independent
        under NASDAQ’s definition, while former directors Robert J. Crowell and William
        W. Smith, who both resigned in 2006, as well as John Halnen and Sean P. Lewis,
        who both resigned in June 2007, would not.
 
 **Item
        13** ***.
        Exhibits***
 
 The
        following documents are filed as part of this Annual Report on Form
        10-KSB:
 
 (1)  Consolidated
        Financial Statements:
 
 See
        Index
        to Consolidated Financial Statements on page F-1.
 
 (2)  Index
        to
        Exhibits:
  The
        exhibits filed as part of this Form 10-KSB are listed on the Index to Exhibits,
        which Index to Exhibits is incorporated herein by reference.
 
 **Item
        14** ***.
        Principal Accountant Fees and Services***
 
 Our
        Audit
        Committee oversees our financial reporting process on behalf of the Board
        of
        Directors. The Audit Committee is directly responsible for, among other things,
        the appointment, compensation, retention and oversight of our independent
        registered public accounting firm. In addition, the Audit Committee must
        pre-approve all audit and non-audit services performed by our independent
        registered public accounting firm. The Audit Committee’s activities are governed
        by a written charter adopted by the Board of Directors.
 
 Fees
        for
        services rendered by our previous and current independent registered public
        accounting firms, Vitale, Caturano & Company Ltd. (“VCC”), until September
        2007 and Malone & Bailey PC (“MB”), respectively were:
 
 **2007**
              
              **2006**Audit
                  fees
              
              $
              177,664
              
              $
              166,540Audit
                  related fees
              
              
              14,140
              
              
              11,500Tax
                  services fees
              
              
              0
              
              
              5,500All
                  other Fees
              
              
              2,500
              
              
              900Total
                  fees
              
              $
              194,304
              
              $
              184,440
  25
 
 **Audit
        Fees**
 
 VCC
        billed $82,940 for professional services rendered for the audit of our annual
        financial statements for 2006, and for consultation relating to accounting
        matters.
 
 MB
        has
        billed $83,600 for professional services rendered for the audit of our annual
        financial statements for the year ended December 31, 2006 and $177,664 for
        professional services rendered for the audit of our annual financial statements
        and reviews of interim financial statements that are included in our Forms
        10-QSB filed during the year ended December 31, 2007.
 
 **Audit
        Related Fees**
 
 During
        2007 and 2006, VCC billed $14,140 and $11,500, respectively, in audit related
        fees for the audit of our benefit plan.
 
 **Tax
        Fees**
 
 During
        2006, VCC billed approximately $5,500 in tax services fees for assistance
        with
        various state tax compliance matters.
 
 **All
        Other Fees**
 
 Other
        fees for 2007 and 2006, totaled $2,500 and $900, respectively, were paid
        for
        various matters, including attendance at the annual shareholders’ meeting and
        assistance in drafting responses to the SEC staff comment letters.
 
  26
 
 **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 Elcom
                  International, Inc.(Registrant)Date:
                  September 08, 2008
              By:
              /s/
                David Elliott**David
                  Elliott**Executive
                  Vice President of FinancePrincipal
                  Financial and Accounting Officer
 
 In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 Signatures
              
              Title
              
              Date/s/
                  William Lock
              
              Chairman
                  of the
              
              September
                  08, 2008**William
                  Lock**
              
              Board
                  of Directors/s/
                  Gregory D. King
              
              Chief
                  Executive
              
              September
                  08, 2008**Gregory
                  King**
              
              Officer
                  and Director (PrincipalExecutive
                  Officer)/s/
                  David Elliott
              
              Executive
                  Vice President
              
              September
                08,
                2008**David
                  Elliott**
              
              of
                  Finance (Principal FinancialAnd
                  Accounting Officer) andDirector/s/
                  Elliott Bance
              
              Director
              
              September
                  08, 2008**Elliott
                  Bance**/s/
                  Justin Dignam
              
              Director
              
              September
                  08, 2008**Justin
                  Dignam**
  27
 
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 
 **ELCOM
        INTERNATIONAL, INC.**
 **INDEX
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **DECEMBER
        31, 2007 and 2006**
 
 The
        following consolidated financial statements of Elcom International, Inc.
        are
        included in response to Item 7:
 
 PageReports
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets as of December 31, 2007 and 2006
              F-3Consolidated
                  Statements of Operations and Other Comprehensive Income (Loss)
                  for the
                  years ended December 31, 2007 and 2006
              F-4Consolidated
                  Statements of Stockholders’ Deficit for the years ended December 31, 2007
                  and 2006
              F-5Consolidated
                  Statements of Cash Flows for the years ended December 31, 2007
                  and
                  2006
              F-6Notes
                  to Consolidated Financial Statements
              F-7
                  to F-19
  F-1
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Board of Directors and Stockholders of
 Elcom
        International, Inc.
 Boston,
        Massachusetts
 
 We
        have
        audited the accompanying consolidated balance sheets of Elcom International,
        Inc. and subsidiaries as of December 31, 2007 and 2006, and the related
        consolidated statements of operations and other comprehensive income (loss),
        stockholders’ deficit and cash flows for the years then ended. These
        consolidated financial statements are the responsibility of Elcom’s management.
        Our responsibility is to express an opinion on these consolidated financial
        statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. Elcom is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audits included the consideration of internal control
        over financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of Elcom’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit includes examining,
        on a test basis, evidence supporting the amounts and disclosures in the
        consolidated financial statements. An audit also includes assessing the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Elcom International,
        Inc.
        and subsidiaries as of December 31, 2007 and 2006 and the consolidated results
        of its operations and its cash flows for the years then ended in conformity
        with
        accounting principles generally accepted in the United States of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        Elcom will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, Elcom has suffered recurring losses from
        operations and has an accumulated deficit that raises substantial doubt about
        its ability to continue as a going concern. Management’s plan in regards to
        these matters is also discussed in Note 1. The consolidated financial statements
        do not include any adjustments that might result from the outcome of this
        uncertainty.
 
 MALONE
        BAILEY,PC
 www.malone-bailey.com
 August
        20, 2008, except for Note 10 which is as of September 3, 2008
 Houston,
        Texas
  F-2
  **ELCOM
        INTERNATIONAL, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **(in
        thousands, except share and per share data)**
 
 **December
                  31,****2007**
              
              **2006****ASSETS**CURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              947
              
              $
              1,086Accounts
                  receivable:Trade
              
              
              1,752
              
              
              702Less-allowance
                  for doubtful accounts
              
              
              (27
              )
              
              (10
              )Accounts
                  receivable, net
              
              
              1,725
              
              
              692Prepaids
                  and other current assets
              
              
              494
              
              
              218Total
                  current assets
              
              
              3,166
              
              
              1,996PROPERTY,
                  EQUIPMENT AND SOFTWARE, AT COST:Computer
                  hardware and software
              
              
              21,480
              
              
              21,316Furniture,
                  equipment and leasehold improvements
              
              
              3,088
              
              
              3,08824,568
              
              
              24,404Less
                  accumulated depreciation and amortization
              
              
              (23,897
              )
              
              (23,445
              )671
              
              
              959OTHER
                  ASSETS
              
              
              14
              
              
              14$
              3,851
              
              $
              2,969**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)**CURRENT
                  LIABILITIES:Current
                  portion of capital lease obligation
              
              $
              135
              
              $
              114Related
                  party convertible loan payable
              
              
              —
              
              
              —Convertible
                  loans payable, net of unamortized discount of $637
              
              
              914
              
              
              —Accounts
                  payable
              
              
              864
              
              
              647Deferred
                  revenue
              
              
              1,285
              
              
              942Related
                  party accrued salary, bonuses and interest
              
              
              906
              
              
              1,066Accrued
                  expenses and other current liabilities
              
              
              724
              
              
              1,043Current
                  liabilities of discontinued operations
              
              
              30
              
              
              42Total
                  current liabilities
              
              
              4,858
              
              
              3,854CAPITAL
                  LEASE OBLIGATION, NET OF CURRENT PORTION
              
              
              48
              
              
              164OTHER
                  LONG TERM LIABILITY
              
              
              135
              
              
              288Total
                  liabilities
              
              
              5,041
              
              
              4,306COMMITMENTS
                  AND CONTINGENCIES (Note 7)STOCKHOLDERS'
                  DEFICITPreferred
                  stock, $.01 par value; Authorized — 10,000,000 shares — Issued and
                  outstanding
              
              
              —
              
              
              —Common
                  stock, $.01 par value; Authorized – 700,000,000 shares Issued –552,177,450and
                  478,947,441 shares at December 31, 2007 and 2006,
                  respectively
              
              
              5,522
              
              
              4,789Additional
                  paid-in capital
              
              
              126,957
              
              
              123,743Accumulated
                  deficit
              
              
              (133,080
              )
              
              (129,315
              )Accumulated
                  other comprehensive loss
              
              
              (589
              )
              
              (554
              )Total
                  stockholders' (deficit) equity
              
              
              (1,190
              )
              
              (1,337
              )$
              3,851
              
              $
              2,969
 
 *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  F-3


**ELCOM
      INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**AND
      OTHER COMPREHENSIVE INCOME (LOSS)**


**(in
      thousands, except per share data)**





**For the years ended December 31,****2007**
            
            **2006**Revenues:License,
                hosting services and other fees
            
            $
            3,375
            
            $
            2,710Professional
                services
            
            
            2,002
            
            
            5085,377
            
            
            3,218Cost
                of revenues
            
            
            1,198
            
            
            672Gross
                profit
            
            
            4,179
            
            
            2,546Operating
                Expenses:Selling,
                general and administrative
            
            
            7,480
            
            
            8,156Research
                and development
            
            
            766
            
            
            1,231Total
                operating expenses
            
            
            8,246
            
            
            9,387Operating
                loss
            
            
            (4,067
            )
            
            (6,841
            )Interest
                expense
            
            
            (50
            )
            
            (69
            )Interest
                and other income, net
            
            
            352
            
            
            78Loss
                before income taxes
            
            
            (3,765
            )
            
            (6,832
            )Income
                taxes
            
            
            —
            
            
            —Net
                loss
            
            
            (3,765
            )
            
            (6,832
            )Comprehensive
                income (loss), net of tax
            
            
            (35
            )
            
            281Comprehensive
                loss
            
            $
            (3,800
            )
            $
            (6,551
            )Basic
                and diluted net loss per share
            
            $
            (0.01
            )
            $
            (0.
                01
            )Weighted
                average number of basic and diluted shares outstanding
            
            
            545,557
            
            
            416,209





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*




F-4





**ELCOM
      INTERNATIONAL, INC.**





**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICIT**


**(in
      thousands, except number of shares)**





**Accumulated****Common Stock**
            
            **Additional**
            
            
            
            **Treasury**
            
            **Other**
            
            **Total****Number**
            
            **$.01 Par**
            
            **Paid-in**
            
            **Accumulated**
            
            **Stock,**
            
            **Comprehensive**
            
            **Stockholders’****of Shares**
            
            **Value**
            
            **Capital**
            
            **Deficit**
            
            **At Cost**
            
            **Income (Loss)**
            
            **Equity (Deficit)**BALANCE,
                JANUARY 1, 2006
            
            
            399,152,859
            
            $
            3,992
            
            $
            125,263
            
            $
            (122,483
            )
            $
            (4,712
            )
            $
            (835
            )
            $
            1,225Common
                stock issued for deferred rent
            
            
            3,458,293
            
            
            34
            
            
            216
            
            
            —
            
            
            —
            
            
            —
            
            
            250Stock
                based compensation
            
            
            —
            
            
            —
            
            
            666
            
            
            —
            
            
            —
            
            
            —
            
            
            666Sale
                of common stock
            
            
            76,336,289
            
            
            763
            
            
            1,730
            
            
            —
            
            
            —
            
            
            —
            
            
            2,493Reversal
                of cost of capital (Note 4)
            
            
            —
            
            
            —
            
            
            580
            
            
            —
            
            
            —
            
            
            —
            
            
            580Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (6,832
            )
            
            —
            
            
            —
            
            
            (6,832
            )Cumulative
                translation adjustment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            281
            
            
            281BALANCE,
                DECEMBER 31, 2006
            
            
            478,947,441
            
            $
            4,789
            
            $
            128,455
            
            $
            (129,315
            )
            $
            (4,712
            )
            $
            (554
            )
            $
            (1,337
            )Common
                stock issued for deferred rent
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Stock
                based compensation
            
            
            —
            
            
            —
            
            
            797
            
            
            —
            
            
            —
            
            
            —
            
            
            797Sale
                of common stock
            
            
            73,230,009
            
            
            733
            
            
            1,763
            
            
            —
            
            
            —
            
            
            —
            
            
            2,494Imputed
                interest on convertible loans payable
            
            
            —
            
            
            —
            
            
            654
            
            
            —
            
            
            —
            
            
            —
            
            
            654Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,765
            )
            
            —
            
            
            —
            
            
            (3,765
            )Cumulative
                translation adjustment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (35
            )
            
            (35
            )BALANCE,
                DECEMBER 31, 2007
            
            
            552,177,450
            
            $
            5,522
            
            $
            131,669
            
            $
            (133,080
            )
            $
            (4,712
            )
            $
            (589
            )
            $
            (1,190
            )





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*




F-5





**ELCOM
      INTERNATIONAL, INC.**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(in
      thousands)**





**For the years ended December 31,****2007**
            
            **2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss from continuing operations
            
            $
            (3,765
            )
            $
            (6,832
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization of property, equipment and software
            
            
            452
            
            
            399Non-cash
                interest expense
            
            
            —
            
            
            —Stock-based
                compensation
            
            
            797
            
            
            666Provisions
                for (reversal of) allowance for doubtful accounts
            
            
            17
            
            
            (35
            )Changes
                in current assets and liabilitiesAccounts
                receivable
            
            
            (1,050
            )
            
            (154
            )Prepaids
                and other current assets
            
            
            (276
            )
            
            (103
            )Accounts
                payable
            
            
            217
            
            
            100Deferred
                revenue
            
            
            343
            
            
            398Accrued
                expenses and other current liabilities
            
            
            (479
            )
            
            (706
            )Net
                cash used in continuing operations
            
            
            (3,744
            )
            
            (6,267
            )Net
                cash used in discontinued operations
            
            
            (12
            )
            
            (20
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of property, equipment and software
            
            
            (164
            )
            
            (301
            )Net
                cash used in investing activities
            
            
            (164
            )
            
            (301
            )Net
                cash provided by investing activities of discontinued
                operations
            
            
            —
            
            
            —CASH
                FLOWS FROM FINANCING ACTIVITIES:Repayment
                of capital lease obligations
            
            
            (95
            )
            
            (65
            )Proceeds
                from convertible loans
            
            
            1,568
            
            
            —Repayment
                of related party notes
            
            
            —
            
            
            (120
            )Repayment
                of convertible loans
            
            
            —
            
            
            (1,179
            )Decrease
                in other long term liability
            
            
            (153
            )
            
            (135
            )Proceeds
                from issuance of common stock, net
            
            
            2,496
            
            
            2,493Net
                cash provided by financing activities
            
            
            3,816
            
            
            994FOREIGN
                EXCHANGE EFFECT ON CASH
            
            
            (35
            )
            
            281NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (139
            )
            
            (5,313
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR
            
            
            1,086
            
            
            6,399CASH
                AND CASH EQUIVALENTS, END OF YEAR
            
            $
            947
            
            $
            1,086SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Interest
                paid
            
            $
            50
            
            $
            68Income
                taxes paid
            
            $
            —
            
            $
            —SUPPLEMENTAL
                DISCLOSURE OF NONCASHINVESTING
                AND FINANCING ACTIVITIES:Discount
                on convertible debentures and accrued interest related to reduction
                in per
                share conversion price
            
            $
            17
            
            $
            —Issuance
                of common stock in satisfaction of deferred rent
            
            $
            —
            
            $
            250Cost
                of capital reduction
            
            $
            —
            
            $
            580





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*




F-6





**ELCOM
      INTERNATIONAL, INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**(1)
      NATURE OF OPERATIONS**





Since
      early 2002, Elcom International, Inc. has operated solely as a leading provider
      of remotely-hosted, electronic procurement and electronic marketplace
      Internet-based software solutions.





Since
      its
      inception in 1992, Elcom has developed its PECOSTM (“Professional Electronic
      Commerce Online System”) software, which automates many supply chain and
      financial settlement functions associated with procurement. Elcom has also
      licensed a dynamic trading system platform to provide auction, reverse auction,
      and other electronic negotiation, or eNegotiation, functions from a third party,
      which module is offered as optional functionality to clients.





*Going
      Concern*





As
      of
      December 31, 2007, Elcom had approximately $947,000 of cash and cash equivalents
      and current assets of approximately $3,166,000. Current liabilities amounted
      to
      approximately $4,858,000. Elcom has incurred significant losses and has used
      cash in operating activities in each of the last several years, including
      $3,744,000 in 2007, which raises substantial doubt about Elcom’s ability to
      continue as a going concern. The accompanying consolidated financial statements
      have been prepared on a going concern basis which contemplates the realization
      of assets and the satisfaction of liabilities in the normal course of business.
      The consolidated financial statements do not include any adjustments relating
      to
      the recoverability of assets and satisfaction of liabilities that might be
      necessary should Elcom be unable to continue as a going concern. Elcom’s ability
      to continue as a going concern is primarily dependent upon its ability to grow
      revenue and attain further operating efficiencies and, if necessary, to also
      attract additional capital. Elcom believes that as a result of its recent
      issuances of convertible loan notes (see Notes 3 and 10), that it has the funds
      required to perform under its current contracts. In order to achieve profitable
      operations, Elcom is dependent upon generating new revenues from existing and
      future contracts. There can be no assurance that such incremental revenues
      can
      be realized by Elcom. The consolidated financial statements do not include
      any
      adjustments that might result from the outcome of this uncertainty.





**(2)
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*(a)
      Basis of Consolidation*





The
      accompanying consolidated financial statements include the accounts of Elcom
      and
      its wholly-owned subsidiaries. All material intercompany accounts and
      transactions have been eliminated in consolidation. Elcom has no material
      interests in variable interest entities and therefore, none which require
      consolidation.





*(b)*  *Use
      of Estimates*





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and revenue and expenses during the period reported in the
      consolidated financial statements and accompanying notes. Actual results may
      differ from such estimates.





*(c)
      Cash and Cash Equivalents*





Cash
      and
      cash equivalents at December 31, 2007 and 2006 consisted of $947,000 and
      $1,086,000 respectively, of deposits with banks and financial institutions,
      which were unrestricted as to withdrawal or use and had original maturities
      of
      less than three months. Cash and cash equivalents are stated at cost, which
      approximates market value.




F-7





*(d)
      Accounts Receivable*





Accounts
      receivable are stated at the amount management expects to collect from
      outstanding balances. An allowance for doubtful accounts is provided for those
      accounts receivable considered to be uncollectible based upon historical
      experience and management’s evaluation of outstanding accounts receivable at the
      end of the year. Bad debts are written off against the allowance when
      identified. At December 31, 2007 and 2006, the allowance for doubtful accounts
      was $27,000 and $10,000, respectively.





*(e)
      Property, Equipment and Software*





Property,
      equipment and software are stated at cost. Additions and improvements are
      capitalized and ordinary repairs and maintenance are expensed as incurred.
      Equipment and software are depreciated and amortized on a straight-line basis
      over the estimated useful lives of the assets or lease term, which are three
      to
      five years. The capitalized cost of leased equipment and leasehold improvements
      are amortized over the shorter of the estimated useful life of the related
      assets, or related life of the lease.





During
      2007 and 2006 Elcom did not capitalize any software development costs under
      SOP
      98-1. There were no previously capitalized software development costs written
      off in 2007 or 2006.





*(f)
      Impairment of Long-Lived Assets*





In
      accordance with Statement of Financial Accounting Standards No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets,* Elcom
      evaluates for impairment its long-lived assets to be held and used or to be
      disposed of other than by sale whenever events or changes in circumstances
      indicate that the carrying amount of such assets may not be recoverable.
      Recoverability of assets to be held and used is measured by a comparison of
      the
      carrying amount of any asset to future undiscounted net cash flows expected
      to
      be generated by the asset. Elcom’s cash flow estimates are made for the
      remaining useful life of the assets and are based on historical results adjusted
      to reflect the best estimate of future market and operating conditions. If
      such
      assets are considered to be impaired, the impairment to be recognized is
      measured by the amount by which the carrying amounts of the assets exceed the
      fair value of the assets. Elcom’s estimates of fair value represent the best
      estimate based on industry trends and market rates and transactions. Assets
      to
      be disposed of by sale are reported at the lower of the carrying amount or
      fair
      value, less costs to sell, and depreciation of such assets ceases. As of
      December 31, 2007 and 2006, Elcom believes that no impairment of long-lived
      assets exists.





*(g)
      Revenue Recognition*





Elcom
      markets both an enterprise and non-enterprise (hosted) version of its PECOS
      software system. Revenue consists principally of fees for licenses, and hosting
      services and Elcom also earns fees from certain clients by providing a separate,
      test instance of its hosted software system for specified periods of time,
      for
      the client’s use in evaluating various operational aspects of the system. Test
      system fees are recognized in revenue over the term the test system is
      maintained for a client. In addition, Elcom earns usage and volume related
      fees
      derived from “eMarketplace” activities, which are recognized in revenue when
      earned. Elcom also earns fees from certain suppliers for maintaining their
      data
      in the Commerce Process Management software system for mutual customers, which
      are recognized in revenue over the term that the data is maintained. Elcom
      earns
      professional service fees for implementation and other technical professional
      services. As part of the revenue recognition process, complex accounting
      pronouncements must be interpreted and significant management judgments and
      estimates must be made and applied to determine the revenue recognized in any
      accounting period. Material differences may result in the amount and timing
      of
      revenue recognized for any period if different judgments or estimates were
      made.





All
      but
      one of Elcom’s hosted services clients do not have an unfettered right to take
      possession of the hosted PECOS software. The hosting services agreements
      typically require Elcom to establish a functional instance of its software
      system specific to the client before the hosting term begins. Hosting services
      agreements also generally call for Elcom to provide technical support and
      software updates and upgrades to customers during the term of the agreement.
      Elcom recognizes these hosting services revenues over the hosting term, which
      is
      typically one year, consistent with Emerging Issues Task Force 00-3, *Application
      of AICPA Statement of Position 97-2, Software Revenue Recognition, Arrangements
      That Include the Right to Use Software Stored on Another Entity’s Hardware,* and ** SEC
      Staff
      Accounting Bulleting Topic 13, *Revenue Recognition* .
      Elcom
      recognizes revenue on this basis because its customers do not have (except
      as
      noted below) the contractual right to take possession of the software at any
      time during the hosting period. Certain of these agreements provide for an
      initial implementation fee for creating and bringing a client’s PECOS system
      live and then provided for time-based hosting services fees thereafter. If
      a
      hosting services agreement accounted for under EITF 00-3 and SAB 13 provides
      for
      the payment of fees that are required in order for the customer to use the
      software system, beyond those for hosting services, including implementation
      fees, these additional fees are typically recognized ratably over the first
      year
      of the arrangement, if the related hosting services agreement is subject to
      annual renewal by customer. Otherwise, such fees are typically recognized over
      the term of the related agreement. Elcom entered into a large hosting services
      contract that will be accounted for under EITF 00-3 and SAB 13, as the client(s)
      do not have an unfettered right to take possession of the hosted PECOS software
      system. The initial hosted software system has been accepted by the client,
      and
      the first customer began using the system in late June of 2006. In this
      particular contract, Elcom will be paid certain development fees for providing
      each of three phases of the specified software system, implementation fees
      for
      each customer that contracts to use the software system, and ongoing hosting
      service fees. Because the development and implementation fees are for Elcom
      professional services that are required in order for the customer(s) to use
      the
      hosted software system, once such professional services are complete, Elcom
      will
      recognize the associated fees in revenue over the remaining contract life
      (initially five years) as clients in this certain arrangement do not have annual
      opportunities to cancel the arrangement. As of December 31, 2007, due to the
      limited level of use of the software system, only $31,847 had been recognized
      as
      revenue under this contract.




F-8





One
      of
      Elcom’s customers, Capgemini UK Plc, has an unfettered contractual right to take
      possession of a certain version of the eProcurement software at any time, and
      Elcom and Capgemini jointly maintain a “hot back-up site” to support certain
      customer requirements. Elcom has concluded that, due to Capgemini’s
      technological expertise, and the jointly maintained back-up site, it is feasible
      for this customer to run the software on its own without significant penalty.
      Accordingly, Elcom accounts for this contract in accordance with SOP 97-2, *Software
      Revenue Recognition* ,
      as
      amended by SOP 98-9, *Modification
      of SOP 97-2* , *Software
      Revenue Recognition with Respect to Certain Transactions* using
      the residual method. In this case the contract calls for a license fee, specific
      fees for initial professional services as locations are brought live
      (implementation fees) and ongoing hosting services for each location. Under
      the
      residual method, the total contract fee for this contract was first allocated
      to
      the fair value of the undelivered elements (i.e., implementation services and
      hosting fees) based on their vendor specific objective evidence (“VSOE”) and the
      remaining portion of the total contract fee was allocated to the software
      license. Elcom determined the VSOE of fair value for the implementation services
      based upon its current and historical pricing for those services when sold
      separately and VSOE of fair value for hosting services based upon substantive
      renewals by clients at contractually agreed rates. Per the terms of this
      contract, the timing of the payment of the license fee for this contract was
      based upon the number of public entities signing agreements. Accordingly, the
      license fee revenue was recognized as the milestones were met and the license
      payments became due. The final milestone was achieved in 2004. Implementation
      fees for this contract are recognized as revenue upon completion of the
      professional services, in accordance with the client specifications and hosting
      services fees are recognized over the hosting services term, generally one
      year.





Deferred
      revenue includes amounts received from customers for which revenue has not
      been
      recognized and generally results from advance customer payments for hosting
      services fees not yet rendered and, in 2006 includes amounts related to
      development and implementation services, which are being deferred until all
      requirements under EITF 00-3 and SAB 13 or SOP 97-2, as amended, as applicable,
      are met. Deferred revenue is recognized upon delivery of the product, over
      contract periods as services are rendered, or as other accounting requirements
      underlying deferral are satisfied.





** (h) *Research
      and Development*





Expenditures
      for the research and development of Elcom’s products to be marketed are expensed
      as incurred, except for certain software development costs. There were no
      software development costs capitalized during 2007 and 2006. All software costs
      are amortized as a cost of software distribution either on a straight-line
      basis, or on the basis of each product’s projected revenues, whichever results
      in greater amortization, over the remaining estimated economic life of the
      product, which is generally estimated to be eighteen months. Elcom assesses
      the
      recoverability of capitalized software costs by comparing the cost capitalized
      for each product, to the net of estimated future gross revenues less the
      estimated future cost of completing, maintaining, supporting and disposing
      of
      the product.





*(i)
      Foreign Currency Translation*





The
      accounts of Elcom’s foreign subsidiary are translated in accordance with SFAS
      No. 52, *Foreign
      Currency Translation* .
      Accordingly, assets and liabilities of these foreign subsidiaries are translated
      into U.S. dollars using the exchange rate at each balance sheet date. Income
      and
      expense accounts are translated using an average rate of exchange during the
      period. Foreign currency translation adjustments are accumulated as a separate
      component of stockholders' equity and reported as part of other comprehensive
      income (loss) in the statement of operations and other comprehensive income
      (loss).




F-9





*(j)
      Income Taxes*





Elcom
      provides for income taxes in accordance with SFAS No. 109, *Accounting
      for Income Taxes* .
      Under
      the asset and liability method specified by SFAS No. 109, a deferred tax asset
      or liability is determined, net of valuation allowances, based on the difference
      between the financial statement carrying amounts of existing assets and
      liabilities and their respective tax bases. Deferred tax assets and liabilities
      are measured using the enacted tax rates in effect when these differences are
      expected to be secured or settled. The effect on the deferred tax assets and
      liabilities of a change in tax rates is recognized in income in the period
      that
      includes the enactment date of the applicable tax rate.





*(k)
      Stock-Based Compensation*





Elcom
      has
      adopted nine stock option plans. As of December 31, 2007, these plans provided
      that up to an aggregate of 31,406,558 incentive stock options (ISOs) and
      nonqualified options may be granted to key personnel, directors and consultants
      of Elcom, as determined by the compensation committee of the Board of Directors.
      ISOs are granted at not less than the estimated fair market value of Elcom's
      common stock on the date of grant and at 110% for shareholders who own more
      than
      10% of the outstanding shares. The option plans also provide that the options
      are exercisable on varying dates and have terms not to exceed 10 years. In
      addition, three of Elcom’s Option Plans allow for the exercise of vested options
      for a 180-day period commencing on the date of employee termination, provided
      that such termination is without “cause”. Under all other stock option plans,
      upon an optionee’s termination without cause, unless an option agreement
      contains differing terms with respect to vesting and exercisability which
      supersedes the provisions of the applicable plan, all unexercisable portions
      of
      the optionee’s options lapse and the optionee may exercise his or her vested
      options for up to 90 days following the date of termination.





One
      of
      the option plans, the 1995 Non-employee Director Stock Option Plan provided
      for
      up to 250,000 nonqualified stock options to acquire Elcom’s common stock to be
      reserved for grants to outside directors of Elcom. In April 2006, all of Elcom’s
      then Non-Employee Directors resigned and all outstanding options under the
      1995
      Non-employee Director Plan have lapsed. No further options may be granted under
      this plan, which expired in 2005. The 1995 Non-employee Director Plan provided
      that upon joining the Board of Directors, any new non-employee director was
      automatically granted 5,000 nonqualified stock options, and also provided that
      non-employee directors be granted up to an additional 15,000 nonqualified stock
      options annually thereafter, while remaining on the Board of Directors. The
      1995
      Non-employee Director Plan provided that options be granted at fair market
      value
      on the date of grant, vest ratably over three years, and have terms not to
      exceed 10 years.




Elcom
      issues stock options to its employees and outside directors pursuant to
      stockholder approved stock option plans. Effective January 1, 2006, Elcom
      adopted the provisions of SFAS No. 123 (Revised 2004), *Share-Based
      Payments* using
      the statement’s modified prospective transition method, in accordance with SAB
      Topic 14: *Share-Based Payments* .
      Prior
      to January 1, 2006, Elcom followed SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      as
      amended by SFAS No. 148, *Accounting
      for Stock-Based Compensation Transition and Disclosure, an amendment to FASB
      Statement No. 123,* which
      required entities to recognize as expense over the vesting period the fair
      value
      of stock-based awards on the date of grant or measurement date. For employee
      stock-based awards, however, SFAS Nos. 123 and 148 allowed entities to continue
      to apply the intrinsic value method under the provisions of Accounting
      Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      provide pro forma net earnings disclosures as if the fair-value-based method
      defined in SFAS No. 123 had been applied. Elcom elected to apply the provisions
      of APB Opinion No. 25 and provide the pro forma disclosures in accordance with
      SFAS Nos. 123 and 148 for periods prior to January 1, 2006.





The
      adoption of SFAS 123R on January 1, 2006 had the following impact on fiscal
      2006 results: net loss was higher by $666,000, with no change to diluted net
      loss per share, than if Elcom had continued to account for stock-based
      compensation under APB 25.





Under
      the
      provisions of SFAS 123R, Elcom recognizes the estimated fair value of
      stock-based compensation in the consolidated statement of operations over the
      requisite service period of each option granted, which service period is
      represented by each option’s vesting provisions, all of which are time-based.
      All of Elcom’s stock-based compensation is accounted for as equity instruments
      and there have been no liability awards granted. Under the modified prospective
      transition method of SFAS 123R, Elcom applies the provisions of SFAS 123R to
      all
      awards granted or modified after January 1, 2006. The unrecognized expense
      of
      awards not yet vested as of January 1, 2006 is being recognized in the
      consolidated statement of operations using the same valuation method
      (Black-Scholes option pricing model) and assumptions determined under the
      original provisions of SFAS 123, as disclosed in Elcom’s previous consolidated
      financial statements. For the years ended December 31, 2007 and 2006, Elcom
      recorded stock-based compensation expense in the consolidated statement of
      operations as follows:




F-10




**Year ended December 31,****2007**
            
            **2006**Cost
                of revenues
            
            $
            84,000
            
            $
            65,000Selling,
                general and administrative
            
            
            632,000
            
            
            462,000Research
                and development
            
            
            81,000
            
            
            139,000$
            797,000
            
            $
            666,000




The
      adoption of SFAS 123R had no impact on Elcom’s cash flows for 2006. Elcom used
      the Black-Scholes valuation model to estimate the fair value of stock-based
      compensation awarded after January 1, 2006. The weighted-average grant date
      fair
      value of awards under Elcom’s stock option plans in 2006 was $0.09 per share.





There
      were no option grants during 2007. The following table summarizes assumptions
      used for options granted to employees and directors during 2006:




**2006**Volatility
                range
            
            
            154.35%Risk-free
                interest rate range
            
            
            4.39
                to 4.82%Expected
                life of options
            
            
            5.75
                to 6 yearsExpected
                dividend yield
            
            
            0%





Elcom
      has
      generally relied upon its historical information as the most reasonable basis to
      determine its valuation assumptions with respect to share-based payments,
      because it has no reason to believe that its future experience will differ
      from
      its historical experience. The volatility figure is based on the daily actual
      historical volatility of Elcom’s common stock over the five-year period
      (consistent with the expected life of the options) to the end of the applicable
      quarter. The volatility calculation is based on the reported trading of Elcom’s
      common stock on the Over-the-Counter Bulletin Board and NASDAQ Capital Market,
      as applicable. The risk-free interest rate is based on the U.S. Government
      five-year Treasury Constant Maturity rate, with a five-year term, as of the
      end
      of the applicable quarter. The expected life of options is generally the
      simplified method allowed under Staff Accounting Bulletin 107. The expected
      dividend yield is zero based on the fact that Elcom has never paid a dividend
      and does not presently have an intention to pay cash dividends.





Based
      on
      Elcom’s historical turnover rates, an overall annualized estimated forfeiture
      factor of 16% has been utilized. Under the provisions of SFAS 123R, additional
      expense will be recorded in future periods if the actual forfeiture rate is
      lower than estimated, and a recovery of prior expense will be recorded if the
      actual forfeiture rate is higher than estimated.





As
      of
      December 31, 2007, Elcom had unamortized stock-based compensation, net of
      expected forfeitures, aggregating $870,297, which will be amortized to expense
      over the requisite service periods, currently through January of 2009. The
      unamortized stock-based compensation will be recognized over a weighted-average
      period of approximately 12 months.





Information
      relating to Elcom’s option plans (including convertible shares from the Elcom,
      Inc. option plans) is as follows:




F-11




**Number Of**
              **Shares**
            
            **Option Price**
              **Per Share**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Outstanding,
                December 31, 2005
            
            $
            15,503,337
            
            $
            0.08
                - 22.50
            
            $
            1.14Granted
            
            
            23,055,000
            
            
            0.09
                - 0.12
            
            
            0.10Terminated
            
            
            (7,623,624
            )
            
            0.08
                - 8.00
            
            
            1.25Exercised
            
            
            -
            
            
            -
            
            
            -Outstanding,
                December 31, 2006
            
            
            30,934,713
            
            
            0.08
                - 22.50
            
            
            0.34Granted
            
            
            -
            
            
            -
            
            
            -Terminated
            
            
            (8,291,849
            )
            
            0.08
                - 12.63
            
            
            0.55Exercised
            
            
            -
            
            
            -
            
            
            -Outstanding,
                December 31, 2007
            
            
            22,642,864
            
            $
            0.08
                - 22.50
            
            $
            0.25Exercisable,
                December 31, 2006
            
            
            8,188,464
            
            
            0.08
                - 22.50
            
            $
            0.99Exercisable,
                December 31, 2007
            
            
            11,552,864
            
            
            0.08
                - 22.50
            
            $
            0.39





The
      following table summarizes information about stock options (including
      convertible options) outstanding as of December 31, 2007:





**Options Outstanding**
            
            **Options Exercisable****Range of**
              **Exercise**
              **Prices**
            
            **Number**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$0.08
                - 0.10
            
            
            11,415,000
            
            
            7.75
            
            $
            0.09
            
            
            3,335,000
            
            $
            0.090.12 - 0.14
            
            
            7,622,500
            
            
            8.21
            
            
            0.12
            
            
            4,630,000
            
            
            0.120.16 - 0.20
            
            
            1,638,000
            
            
            5.83
            
            
            0.2
            
            
            1,638,000
            
            
            0.20.22 - 0.45
            
            
            856,000
            
            
            4.71
            
            
            0.38
            
            
            838,500
            
            
            0.390.60 - 0.85
            
            
            132,000
            
            
            3.86
            
            
            0.78
            
            
            132,000
            
            
            0.781.17 - 1.69
            
            
            443,063
            
            
            2.82
            
            
            1.44
            
            
            443,063
            
            
            1.441.77 - 3.81
            
            
            164,313
            
            
            1.87
            
            
            3.63
            
            
            164,313
            
            
            3.634.06 - 4.64
            
            
            227,350
            
            
            2.1
            
            
            4.43
            
            
            227,350
            
            
            4.435.56 - 5.75
            
            
            129,638
            
            
            2.49
            
            
            5.74
            
            
            129,638
            
            
            5.7412.63 - 22.50
            
            
            15,000
            
            
            2.03
            
            
            15.92
            
            
            15,000
            
            
            15.9222,642,864
            
            
            
            
            
            
            
            
            11,552,864




F-12




As
      of
      December 31, 2007, the weighted-average remaining contractual term for options
      outstanding was 7.40 years and for options exercisable was 6.63 years. As of
      December 31, 2007, based on the closing price of Elcom’s common stock on the
      OTCBB of $0.003 per share on the last day of trading in December 2007, the
      aggregate estimated intrinsic value for options outstanding and exercisable
      was
      nil.





In
      accordance with SFAS No 123R, Elcom utilized the shortcut method to determine
      the tax windfall pool associated with stock options at December 31,
      2007.





*(m)
      Net Loss Per Share*





Net
      loss
      per share is based on the weighted average number of common and common
      equivalent shares outstanding during each period presented, calculated in
      accordance with SFAS No. 128, *Earnings
      Per Share.* Basic
      earnings per share (EPS) is computed by dividing income (loss) available to
      common stockholders by the weighted average number of common shares outstanding
      during the periods. Diluted EPS gives effect to all potential common shares
      outstanding during the period. As Elcom was in a net loss position for all
      periods presented, diluted EPS is the same as basic EPS because the effect
      of
      any potential common stock equivalents would be anti-dilutive.





The
      following potentially dilutive securities have been excluded from the
      computation of diluted net loss per share since their inclusion would be
      antidilutive:




**Year Ended**
              **December 31,****2007**
            
            **2006**Stock
                options
            
            
            22,642,864,
            
            
            30,934,713Warrants
            
            
            300,000
            
            
            300,000





*(n)
      Fair Value of Financial Instruments*





Elcom’s
      financial instruments consist mainly of cash and cash equivalents, accounts
      receivable and accounts payable. The carrying amounts of Elcom’s cash and cash
      equivalents, accounts receivable and accounts payable approximate fair value
      due
      to the short-term nature of these instruments.





*(o)
      Comprehensive Income (Loss)*





Elcom
      follows SFAS No. 130, *Reporting
      Comprehensive Income* ,
      which
      requires presentation of the components of comprehensive earnings. The
      difference between the reported comprehensive loss and the reported net loss
      represents the foreign currency translation adjustment for the
      period.





*(p)
      Segment Reporting*





Elcom
      applies SFAS No. 131 *,
      Disclosures about Segments of an Enterprise and Related
      Information* ,
      which
      establishes standards for the reporting of information about operating segments
      in annual and interim financial statements. Operating segments are defined
      as
      components of an enterprise for which separate financial information is
      available that is evaluated regularly by the chief operating decision maker(s)
      in deciding how to allocate resources and in assessing performance. SFAS No.
      131
      also requires disclosures about products and services, geographic areas and
      major clients. Elcom has determined that for all periods presented, there is
      one
      operating segment (software products) and there are two geographical areas
      (the
      U.S. and U.K.).





*(q)
      Concentration of Credit Risk and Significant Customers*





SFAS
      No.
      105, *Disclosure
      of Information about Financial Instruments with Off-Balance-Sheet Risk and
      Financial Instruments with Concentrations of Credit Risk* ,
      requires disclosure of any significant off-balance-sheet and credit risk
      concentrations. Elcom has no significant off-balance-sheet concentrations such
      as foreign exchange contracts, option contracts or other foreign hedging
      arrangements. Elcom maintains the majority of its cash and cash equivalent
      balances, which may exceed federally insured limits, with one financial
      institution in the U.S and one financial institution in the U.K., both of which
      Elcom believes are stable and well-capitalized financial institutions. Elcom’s
      excess cash is invested on an overnight or short-term basis in interest-bearing
      accounts with these financial institutions.




F-13




The
      principal financial instrument that potentially subjects Elcom to concentrations
      of credit risk is accounts receivable. The majority of Elcom’s revenues are from
      municipalities or relatively large companies who are not required to provide
      collateral for amounts owed to Elcom. Elcom’s customers are dispersed over a
      wide geographic area and are subject to periodic review under Elcom’s credit
      policies. Elcom does not believe that it is subject to any unusual credit risks,
      other than the normal level of risk attendant to operating its
      business.





Concentration
      of credit risk with respect to accounts receivable is limited to certain
      customers to whom Elcom makes substantial sales. To reduce its credit risk,
      Elcom routinely assesses the financial strength of its customers. Elcom
      maintains an allowance for potential credit losses, but historically has not
      experienced any losses in excess of the loss allowance related to individual
      customers or groups of customers in any particular industry or geographic
      area.




One
      customer represented 75% of net revenues in 2007, and 61% in 2006, respectively.
      As of December 31, 2007 and 2006, one customer individually accounted for 69%
      and 56% of trade accounts receivable, respectively.





*(r)
      Recent Pronouncements*





We
      do not
      expect the adoption of recently issued accounting pronouncements to have a
      significant impact on our results of operations, financial position or cash
      flow.





*(s)
      Reclassifications*





Certain
      amounts have been reclassified to be consistent with the presentation for all
      periods, with no effect on net loss or stockholders’ deficit.





**(3)
      NOTES PAYABLE**




During
      the first and third quarters of 2005, Elcom borrowed bridge loan funds, pursuant
      to secured promissory notes, as amended, each in the amount of $120,000 (the
      “2005 Notes”), from each of Robert J. Crowell, former Chairman and CEO of Elcom
      and William W. Smith, former Vice Chairman of Elcom (each a “Holder” and,
      together, the “Holders”), for a total of $240,000. The Holders’ advances
      provided a portion of the funds required for Elcom to continue operating until
      Elcom’s 2005 AIM Exchange common stock issuance (see Note 6). Interest upon the
      outstanding principal amount of the 2005 Notes accrued at a rate of 8%. The
      Crowell and Smith 2005 Notes had different maturity provisions. Mr. Crowell’s
      2005 Note provided that the principal amount and interest accrued thereon was
      due and payable within five (5) business days after Elcom notified the payee
      that it has adequate funds to repay the 2005 Notes, while Mr. Smith’s 2005 Note
      provided that his note is payable in full after Elcom reports two sequential
      quarters of positive cash flow from operations. The 2005 Notes, at the option
      of
      the Holder, were convertible into Elcom’s common stock, issuable in reliance
      upon an exemption from registration pursuant to Regulation D promulgated under
      the Securities Exchange Act of 1933, as amended (the “Restricted Shares”). The
      2005 Notes also provided the Holders certain “piggy-back” registration rights,
      in the event they opted to convert their loan into Restricted Shares.




On
      December 21, 2005, Mr. Smith converted his $120,000 loan, plus approximately
      $7,000 in accrued interest thereon, into 4,593,287 Restricted Shares of Elcom’s
      common stock; in accordance with the 2005 Notes’ conversion terms (see Note
      6).




Mr.
      Crowell’s $120,000 loan was repaid in cash in January 2006, and a total of
      approximately $7,600 of interest was paid thereon.




F-14




Beginning
      in early July, 2005 and through December, 2005, Elcom borrowed £1,165,000
      (approximately $2,029,000) (the “Non-U.S. Loans”). The loan advances provided a
      portion of the funds required for Elcom to continue operating until Elcom’s 2005
      AIM Exchange common stock issuance. The Non-U.S. Loans bore interest at a rate
      of 8% per annum and matured upon the closing of Elcom’s 2005 AIM Exchange common
      stock issuance. The Non-U.S. Loans also provided that the amounts advanced
      and
      related accrued interest were convertible into common stock in the 2005 AIM
      Exchange common stock issuance, at the issuance price. In conjunction with
      the
      2005 AIM Exchange common stock issuance, Non-U.S. Loans aggregating £300,000,
      plus accrued interest thereon of approximately £9,000 (totaling approximately
      $547,000), were converted into 20,563,711 shares of common stock issued in
      the
      2005 AIM Exchange common stock issuance (see Note 6). In addition, Non-U.S.
      Loans totaling £180,000 (approximately $318,000) plus interest were paid off in
      2005, and the remaining £685,000 (approximately $1,179,000) balance of the
      Non-U.S. Loans and related accrued interest were paid off in early January
      2006.





During
      October and November 2007, Elcom received bridge loans from a non-US investor
      of
£750,000 (approximately $1,551,000). The loans are repayable upon demand and
      convertible at the option of the Payee into shares of common stock, at the
      price
      of 3.5p per share, subject to adjustment, downwards only, in the event that
      Common Stock or any equity instruments are issued at a price lower than 3.5p
      at
      anytime. The loans are expected to be converted into shares at some stage in
      the
      future. The convertible notes that were issued in connection with these bridge
      loans were issued in reliance on the exemption from registration under
      Regulation S promulgated under the Securities Act of 1993, as
      amended.





A
      discount of $653,969 was recorded for the imputed interest rate upon issuance
      of
      the convertible notes. The discount is amortized utilizing the effective
      interest method over the period commencing on the issuance date to the stated
      maturity date.





The
      following table summarizes the issuance of Convertible Loans payable (in
      thousands):





ImputedDescription
            
            Rate
            
            Date of Maturity
            
            **2008***Principal
                issuances*£750,000
                Convertible loans
            
            
            11
            %
            
            12/19/12
            
            
            1,551*Total
                issuances during the year ended*
            
            
            
            
            
            
            
            
            1,551*Principal
                balance, end of year*
            
            
            
            
            
            
            
            
            1,551*Unamortized
                discount, end of year*
            
            
            
            
            
            
            
            
            (637
            )Total
                debt, net of discount
            
            
            
            
            
            
            
            $
            914





Elcom
      evaluated its convertible notes for derivative treatment according to SFAS
      133
      and EITF 00-19 and determined that the conversion feature did not meet the
      definition of liability and therefore did not need to be bifurcated and recorded
      at fair market value.




**(4)
      ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**





Accrued
      expenses and other current liabilities consist of the following (in
      thousands):




**December
                31,****2007**
            
            **2006**Salary,
                wages and benefits
            
            $
            354
            
            $
            448Taxes,
                including U.K. Value Added Tax
            
            
            207
            
            
            113Legal
                and audit fees
            
            
            -
            
            
            137Interest
            
            
            -
            
            
            53Other
                accruals
            
            
            163
            
            
            292$
            724
            
            $
            1,043





During
      2006, Elcom determined that a portion of the cost of capital recorded during
      December 2002 for Cripple Creek Securities, LLC was not payable. Therefore,
      $580,000 previously accrued as financial consulting was restored to paid in
      capital, and the related accrual account was reduced.





The
      other
      long term liability recorded on the consolidated balance sheet relates to a
      portion of a long term software license payable over five years, beginning
      in
      the fourth quarter of 2004. This long term software license requires payments
      of
      $177,000 and $135,000 in 2008 and 2009, respectively.




F-15




**(5)
      EMPLOYEE BENEFITS**





Elcom
      maintains two defined contribution benefit plans, one for eligible employees
      in
      the U.S. and one for eligible employees in the U.K. The plans contain provisions
      allowing for discretionary Company contributions to the U.K. defined
      contribution plan, in which participating employees are 100% vested for 2007
      and
      2006 were $116,000 and $93,000, respectively. No discretionary Company
      contributions were made to the U.S. defined contribution plan for any of the
      periods presented. Elcom has no material obligations for post retirement
      benefits.




**(6)
      STOCKHOLDERS' EQUITY**





*(a)
      Common Stock*





On
      July
      31, 2006, Elcom increased the number of authorized shares of its common stock,
      par value $0.01 per share, from 500,000,000 to 700,000,000.





*(b)
      Preferred Stock*





Elcom
      has
      authorized 10,000,000 shares of $.01 par value preferred stock, with the Board
      of Directors authorized to fix the rights, privileges, preferences and
      restrictions of any series thereof as it may designate. As of December 31,
      2007
      and 2006, no shares were outstanding.





*(c)
      Issuances of Common Stock Under Regulation S*





On
      October 23, 2006, Elcom sold a total of 76,336,289 common shares to investors
      in
      the UK and listed the shares on the AIM Exchange. The shares were issued in
      reliance on the exemption from registration under Regulation S promulgated
      under
      the Securities Act of 1933, as amended for offshore placements, and therefore
      are subject to the same restrictions as the Regulation S Shares that were sold
      in 2005. Elcom raised a total of $2.5 million in cash, net of issuance costs
      of
      $24,000.





*(d)* *Issuances
          of Common Stock Under Regulation D*





On
      February 24, 2006, Elcom issued 3,458,293 shares of common stock to its landlord
      in satisfaction of deferred rent totaling $250,000. The stock was issued at
      a
      per share price of $0.0723, which represents the mean of the average closing
      bid
      and ask prices of Elcom’s common stock on the AIM Exchange on June 20, 2005 and
      January 31, 2006, as agreed between the landlord and Elcom.





*(e)
      Warrants*





**Twelve Months Ended**
              **December 31,****2007**
            
            **2006**Warrants
            
            
            300,000
            
            
            300,000





On
      March
      29, 2002, Elcom issued warrants to purchase 300,000 common shares to the company
      that acquired Elcom’s U.S. IT products business. The warrants have an exercise
      price of $1.03 per share and expire on March 29, 2009. The fair market value
      of
      the warrants at the date of the grant was $0.91 per share, based on the
      Black-Scholes option pricing model, using a volatility factor of 119%, a risk
      free interest rate of 3%, an expected dividend yield of 0%, and a contractual
      life of seven years. At December 31, 2007 and 2006, all of these warrants were
      outstanding and exercisable.




**(7)
      COMMITMENTS AND CONTINGENCIES**





*(a)
      Leases*





Elcom
      has
      entered into capital leases for various software, furniture, computer, telephone
      and other equipment. The lease terms range from two to four years and, upon
      expiration, all leases provide purchase options at a nominal price. Property,
      equipment and software include assets acquired under capital leases totaling
      $1,968,000 and $1,938,000 at December 31, 2007 and 2006, respectively. Related
      accumulated amortization was $1,811,000 and $1,686,000 as of December 31,
      2007and 2006, respectively. Amortization of leased assets is included in
      depreciation and amortization expense.




F-16




Elcom
      entered into a non-cancelable operating lease for its headquarters office space
      in 1993. In October 2007, the lease period was extended to December 31, 2008.
      During 2004 and 2005 the lease was amended to allow Elcom to defer a portion
      of
      the lease payments to future periods. Such deferrals amounted to $603,000 as
      of
      December 31, 2005. In early 2006, Elcom paid $353,000 of the deferred amount
      in
      cash and issued 3,458,293 common shares in satisfaction of the $250,000 balance.





Future
      minimum rental payments under non-cancelable leases as of December 31, 2007
      are
      as follows:





**Capital**
            
            **Operating****Year
                Ending December 31 (in thousands)**
            
            **Lease**
            
            **Lease**2007
            
            $
            148
            
            $
            2512008
            
            
            48
            
            
            —2009
            
            
            2
            
            
            —Total
                minimum lease payments
            
            
            198
            
            $
            251Less
                amounts representing interest
            
            
            (15
            )Present
                value of minimum lease payments
            
            
            183Current
                portion
            
            
            135Long
                term portion
            
            $
            48





Rent
      expense for operating leases amounted to approximately $272,000 and $284,000
      for
      2007 and 2006, respectively.





*(b)
      Employment Contracts and Personnel Expenses*





None
      of
      the key executives have employment contracts, which provide for annual salary,
      incentive payments, and severance arrangements. We are currently in the process
      of formulating employment contracts for key executives.





During
      prior periods, certain employees elected to receive lower salaries while Elcom
      implemented its cost containment programs. The amounts due to executive officers
      under these arrangements are included in related party accrued salary, bonuses
      and interest, and the balance due other employees is included in accrued
      expenses and other current liabilities. Upon the achievement of positive
      operating cash flow for two sequential quarterly periods, Elcom will begin
      to
      repay the amounts owed to these employees. As of December 31, 2007, the
      total deferred salary amount was $998,000, with approximately $714,000 of such
      balance due to Robert J. Crowell, Chairman of Elcom until April 21, 2006;
      approximately $42,000 of such amount is due to Gregory King, Elcom’s Executive
      Vice President of Business Development, who was appointed a Director of Elcom
      on
      August 20, 2006. Elcom and Mr. Crowell entered into an Accrued Salary
      Payment Agreement, pursuant to which Elcom shall pay the accrued salary amount
      in installments less applicable withholdings. Elcom shall only begin to pay
      the
      accrued salary amount upon Elcom achieving 2 sequential quarterly periods of
      positive operating cash flow (excluding cash-inflows from financing) and the
      Board in its sole discretion, shall determine the specific amount of any such
      payment.





*(c)
      Litigation and Contingencies*





During
      the fourth quarter of 2006, a cash deposit made by Elcom International Inc.
      with
      a sales agent of €1,000,000 (approximately $1,200,000) in connection with a
      potential bid for government contracts outside the United States was completed
      without approval of the Board of Directors. The funds were due to be returned
      to
      Elcom on or before the May 15, 2007. The Board of Directors commenced legal
      proceedings against the sales agent in July 2007, however these proceedings
      were
      stopped in March 2008 due to a number of concerns, including concerns regarding
      the collectability of any funds, even if a positive outcome was secured via
      legal proceedings, for which there could have been no assurances regarding
      the
      outcome of and the ongoing costs of any legal case.





**(8)
      BUSINESS SEGMENT INFORMATION**





Elcom’s
      continuing operations are classified as a single business segment, specifically
      the development and hosting of purchasing Internet-based software solutions
      which automate many supply chain and financial settlement functions associated
      with procurement. The basic approach used in respect of corporate allocations
      recognizes that in almost all respects the U.K. operates as a sales and limited
      service branch of the US parent. Elcom operates both in the U.S. and U.K. and
      geographic financial information for the years ended December 31, 2007 and
      2006,
      were as follows (in thousands):





F-17




**For Years ended December 31,****2007**
            
            **2006**Net
                revenuesU.S.
            
            $
            800
            
            $
            824U.K.
            
            
            4,577
            
            
            2,394Net
                revenues
            
            $
            5,377
            
            $
            3,218Gross
                profitU.S.
            
            $
            126
            
            $
            459U.K.
            
            
            4,053
            
            
            2,087Gross
                profit
            
            $
            4,179
            
            $
            2,546





Identifiable
      assets as of December 31, 2007 and 2006 are as follows:





**2007**
            
            **2006**Identifiable
                assets from continuing operationsU.S.
            
            $
            2,379
            
            $
            1,352U.K
            
            
            1,472
            
            
            1,617$
            3,851
            
            $
            2,969




**(9)
      INCOME TAXES**





Elcom
      uses the liability method, where deferred tax assets and liabilities are
      determined based on the expected future tax consequences of temporary
      differences between the carrying amounts of assets and liabilities for financial
      and income tax reporting purposes. During fiscal years ended December 31, 2007
      and 2006, Elcom incurred losses before income taxes comprised of:





**2007**
            
            **2006**U.S.
            
            $
            (3,490
            )
            $
            (3,235
            )Foreign
            
            
            (275
            )
            
            (3,597
            )$
            (3,765
            )
            $
            (6,832
            )





Therefore,
      no tax liability has been recorded. The net deferred tax assets generated mostly
      by the loss carryforward has been fully reserved. The U.S cumulative net
      operating loss carry forward is approximately $126.8 million at December 31,
      2007 and will expire in the years 2013 through 2024.





Deferred
      tax assets (liabilities) consisted of the following as of December 31 (in
      thousands):





**2007**
            
            **2006**Deferred
                tax assets:Nondeductible
                reserves
            
            $
            11
            
            $
            29Accrued
                expenses
            
            
            439
            
            
            539Depreciation
            
            
            3,011
            
            
            2,643Foreign
                net operating losscarryforwards
            
            
            3,319
            
            
            3,369FAS
                123 R
            
            
            589
            
            
            268Net
                federal and state operatingloss
                carryforwards
            
            
            43,995
            
            
            43,40751,364
            
            
            50,255Valuation
                allowance
            
            
            (51,364
            )
            
            (50,255
            )Net
                deferred tax assets
            
            
            —
            
            
            —Deferred
                tax liabilities:Other
                intangible assets
            
            
            —
            
            
            ——
            
            
            —Net
                deferred taxes
            
            $
            —
            
            $
            —




F-18




Internal
      Revenue Section 382 restricts the ability to use these carryforwards whenever
      an
      ownership change as defined occurs.





At
      December 31, 2007, Elcom had state net operating loss carry forwards of
      approximately $14.1 million, which are available to offset future state taxable
      income. These losses expire during the years 2008 through 2027.





At
      December 31, 2007, Elcom had foreign net operating loss carryforwards of
      approximately $9.5 million, which are available to offset future foreign taxable
      income. Generally, these losses may be carried forward
      indefinitely.





**(10)
      SUBSEQUENT EVENTS**





During
      March, May and June 2008, Elcom received bridge loans from a non-US investor
      of
£500,000 (approximately $1,000,000). The loans are repayable upon demand and
      convertible at the option of the Payee into shares of common stock, at the
      price
      of 3.5p per share, subject to adjustment, downwards only, in the event that
      Common Stock or any equity instruments are issued at a price lower than 3.5p
      at
      anytime. The convertible notes that were issued in connection with these bridge
      loans were issued in reliance on the exemption from registration under
      Regulation S promulgated under the Securities Act of 1993, as amended.





In
      April
      2008, the listing of the Company’s common stock on the AIM Exchange in the U.K.
      was cancelled.





In
      May
      2008, the Company entered into a compromise agreement with its former chairman
      whereby the Company paid £30,000 plus cost contribution to its former chairman
      in full and final settlement of the latter’s claim against the Company.





Elcom
      was
      a member of a consortium led by PA Consulting Group UK Plc (“PA) which had been
      awarded a contract, including a Framework Agreement between Procserve Shared
      Services Ltd. (“PASSL”), a wholly-owned subsidiary of PA, and a U.K. government
      agency, for the creation and deployment of an eMarketplace for U.K. Public
      Entities.  The agreements were signed on August 12, 2005 for a primary term
      of five years. On September 3, 2008, Elcom and Procserve entered into a
      contract, which governs the termination of the Sub Framework Agreement by mutual
      consent.





F-19


**EXHIBIT
      INDEX**





ExhibitNo.
            
            Description
                of Document2.1
            
            Agreement
                for the sale and purchase of shares in the capital of Prophet Group
                Limited dated December 6, 1996, by and among Lantec (Management)
                Limited
                (a subsidiary of the Registrant) and the Vendors (as defined
                therein).
            
            (2)2.2
            
            Agreement
                for the sale and purchase of shares in the capital of Data Supplies
                Limited dated February 21, 1997, by and among Elcom Group Limited
                (a
                subsidiary of the Registrant), the Vendor (as defined therein) and
                Mr.
                Savage.
            
            (3)2.3
            
            Offer
                for the Sale of Business and Certain Assets of Elcom Holdings Limited
                and
                Elcom Information Technology Limited.
            
            (21)2.4.1
            
            Domain
                Name Transfer Documents.
            
            (21)2.4.2
            
            Lloyds
                TSB Novation Agreement.
            
            (21)2.4.3
            
            Property
                Document.
            
            (21)2.4.4
            
            Elcom
                Logo License.
            
            (21)2.4.5
            
            Starbuyer
                Trademark License.
            
            (21)2.5
            
            Asset
                Purchase and Sale Agreement dated March 25, 2002 by and among Elcom
                Services Group, Inc., elcom, inc. and Elcom International, Inc. and
                ePlus
                Technology, Inc.
            
            (25)2.6.1
            
            Amendment
                to Asset Purchase Agreement.
            
            (25)2.6.2
            
            Managed
                Services Agreement, dated March 29, 2002 by and among Elcom Services
                Group, Inc., elcom, inc. and Elcom International, Inc. and ePlus
                Technology, Inc.
            
            (25)2.6.3
            
            Registration
                Rights Agreement dated March 29, 2002 by and between Registrant and
                Elcom
                International, Inc. and ePlus Technology, Inc.
            
            (25)3.3
            
            Second
                Restated Certificate of Incorporation of the Registrant, as
                amended.
            
            (4)(29)
                (30)3.4
            
            By-Laws
                of the Registrant, amended as of November 6, 1995, and December 21,
                2005.
            
            (1)(31)4.1
            
            Form
                of 8% Convertible Promissory Note.
            
            (28)4.2
            
            Form
                of 8% Replacement Convertible Promissory Note.
            
            (31)4.3
            
            Form
                of 8% Convertible Promissory Note.
            
            (31)4.4
            
            Specimen
                certificate of the Registrant’s Common Stock.
            
            (1)4.5
            
            Form
                of 8% Series A Cumulative Convertible Preferred (“Series A”) Stock
                Purchase Agreement, with attached list of purchasers and number of
                shares
                purchased, as of December 10, 1993.
            
            (1)4.6
            
            Form
                of Series B Preferred Stock Purchase Agreement for Closings held
                on April
                15, June 21 and August 11, 1994, with attached list of purchasers
                and
                number of shares purchased.
            
            (1)4.7
            
            Form
                of Series B Preferred Stock Purchase Agreement for Closings held
                on
                December 30, 1994 and February 6, 1995, with attached list of purchasers
                and number of shares purchased.
            
            (1)











Exhibit No.
            
            Description
                of Document4.8
            
            Form
                of Series C Preferred Stock Purchase Agreement for Closings held
                on June
                22 and June 30, 1995, with attached list of purchasers and number
                of
                shares purchased.
            
            (1)4.9
            
            Securities
                Agreement, dated September 1, 1993, as amended February 1, 1994,
                by and
                among the Registrant, Robert J. Crowell, and 19 other listed purchasers,
                as of June 2, 1995, and list of other assignees of certain registration
                rights thereunder.
            
            (1)(11)4.10
            
            Securities
                Agreement, dated October 28, 1994, by and among the former stockholders
                of
                CSI and the Registrant.
            
            (1)4.11
            
            Computerware
                Stockholders’ Agreement, dated February 6, 1995, by and among the
                Registrant, Robert J. Crowell and the former shareholders of
                Computerware.
            
            (1)4.12
            
            Amended
                and Restated Lantec Stockholders’ Agreement, dated April 6, 1996, by and
                among the Registrant, Robert J. Crowell and the former shareholders
                of
                Lantec and Renouncement of related Board Observer Right effective
                December
                16, 1999.
            
            (5)(16)4.13
            
            Form
                of Lantec Warrant Agreement, dated January 7, 2000, with attached
                Second
                Amended List of Holders of Warrants to Purchase Common Shares of
                the
                Registrant.
            
            (16)4.14
            
            AMA
                Securities Agreement, dated February 29, 1996, by and among the Registrant
                and the former stockholders of AMA (UK) Limited.
            
            (7)4.15
            
            Final
                Agreement of Settlement and Mutual Release of All Claims and Demands,
                dated March 26, 1997, by and among the Registrant and certain of
                its
                subsidiaries, and the Former Shareholders of Computerware Business
                Trust.
            
            (10)4.16
            
            Warrant
                by and between Registrant and ePlus Technology, Inc., dated March
                29,
                2002.
            
            (25)4.17
            
            Form
                of Amended 10% Convertible Senior Debenture due April 23,
                2013.
            
            (34)4.18
            
            Warrant
                Agreement, dated December 3, 2001, by and between Elcom and Cripple
                Creek
                Securities, LLC.
            
            (24)10.1
            
            Form
                of Indemnity Agreement for Executive Officers and/or Directors of
                the
                Registrant, with attached list of Director and/or Executive Officer
                Indemnitees.
            
            (1)(13)
                (*)10.2
            
            Stock
                Option Plan of the Registrant dated February 23, 1993, as amended
                June 3,
                1994 and November 6, 1995.
            
            (1)(*)10.3
            
            1995
                (Computerware) Stock Option Plan of the Registrant, dated February
                6,
                1995, as amended by Amendment No. 1 dated August 19, 1996.
            
            (1)(7)
                (*)10.4
            
            Lease
                Agreement for the Registrant’s Headquarters, dated July 5, 1993, by and
                between Oceana Way Associates and the Registrant, and Agreement of
                Amendment thereto, dated October 20, 1997, December 31, 2000 and
                February
                24, 2006.
            
            (1)(11)
                (19)(33)10.5
            
            Lease
                Agreements for Lantec Headquarters, among Allied Dunbar Assurance
                PLC to
                Businessland (UK) Limited and Businessland Inc., dated November 23,
                1988,
                with Licenses to Assign to Lantec Information Services Ltd., and
                Supplemental Deed dated November 4, 1993.
            
            (1)











Exhibit No.
            
            Description
                of Document10.6
            
            Structured
                Equity Line Flexible Financing Agreement, dated December 30, 1999,
                between
                the Registrant and Cripple Creek Securities, LLC, Amended and Restated
                Structured Equity Line Flexible Financing Agreement, dated April
                7, 2000,
                Amendment No. 1, and Amendment No. 2.
            
            (15)(17)10.7
            
            Registration
                Rights Agreement, dated December 30, 1999, between the Registrant
                and
                Cripple Creek Securities, LLC., and Amended and Restated Registration
                Rights Agreement, dated April 7, 2000.
            
            (16)(15)10.8
            
            Form
                of Warrant and Minimum Commitment Warrant of the Registrant issuable
                to
                Cripple Creek Securities, LLC.
            
            (15)10.9
            
            1995
                Non-Employee Director Stock Option Plan of the Registrant, dated
                October
                9, 1995, and Amendment No. 1 thereto.
            
            (1)(8)
                (*)10.10
            
            The
                1996 Stock Option Plan of Elcom International, Inc.
            
            (6)(*)10.11
            
            The
                1997 Stock Option Plan of Elcom International, Inc., and Amendments
                One
                and Two thereto.
            
            (11)(12)
                (*)10.12
            
            The
                2000 Stock Option Plan of the Registrant.
            
            (18)
                (*)10.13
            
            The
                2001 Stock Option Plan of the Registrant, as amended and
                restated.
            
            (20)
                (*)10.14
            
            The
                2002 Stock Option Plan of the Registrant.
            
            (22)
                (*)10.15
            
            The
                2004 Stock Option Plan of the Registrant.
            
            (29)
                (*)10.16
            
            The
                2005 Stock Option Plan of the Registrant.
            
            (30)
                (*)10.17
            
            Elcom
                International, Inc. Executive Profit Performance Bonus Plan for Executive
                Officers dated September 4, 1997.
            
            (9)(*)10.18
            
            Elcom
                International, Inc. Key Personnel Profit Performance Bonus Plan dated,
                September 4, 1997.
            
            (9)(*)10.19
            
            Employment
                Agreement dated December 21, 2005, between Elcom International, Inc.
                and
                Robert J. Crowell.
            
            (31)(*)10.20
            
            Employment
                Agreement dated December 21, 2005, between Elcom International, Inc.
                and
                John E. Halnen.
            
            (31)(*)10.21
            
            Form
                of Registration Agreement, dated April 23, 2003, among Elcom
                International, Inc. and the Investors party thereto.
            
            (26)10.22
            
            Form
                of Collateral Agency and Security Agreement, dated April 23, 2003,
                among
                Elcom International, Inc. and the Investors party thereto.
            
            (26)10.23
            
            Form
                of Investment Agreement between Elcom, Smith & Williamson Corporate
                Finance Limited, several investors and the Directors of Elcom named
                therein.
            
            (27)10.24
            
            Accrued
                Salary Payment Agreement dated December 21, 2005 by and between Elcom
                International, Inc. and Robert J. Crowell.
            
            (31)(*)10.25
            
            Amended
                and restated Collateral Agency and Security Agreement, dated as of
                August
                9, 2005, among Elcom, William W. Smith, as Collateral Agent and the
                secured parties.
            
            (28)10.26
            
            Form
                of Subscription Agreement, dated November 30, 2005, as amended, and
                accepted by the Registrant on December 20, 2005, by and between the
                Registrant and members of the Investor Group.
            
            (31)











Exhibit No.
            
            Description
                of Document10.27
            
            Sub-Framework
                Agreement, dated August 12, 2005, between PA Shared Services Limited
                and
                Elcom Systems Limited.
            
            (32)10.28
            
            Revenue
                Share Agreement, dated August 12, 2005, between Elcom Systems Limited,
                IMPAQ Business Solutions Limited, PA Consulting Services Limited,
                @UK plc
                and PA Shared Services Limited.
            
            (32)10.29
            
            Parent
                Company Guarantee, dated August 12, 2005, by Elcom International,
                Inc. and
                elcom, inc., in favor of PA Shares Services Limited.
            
            (32)10.30
            
            Agreement,
                dated as of March 23, 2006, by and among Elcom International, Inc.,
                Smith
                & Williamson Investment Management Limited and Smith & Williamson
                Nominees Limited, and the directors named therein.
            
            (35)10.31
            
            Form
                of Indemnity Agreement for Executive Officers and/or Directors of
                the
                Registrant executed by and between Elcom International, Inc. and
                Sean
                Lewis, dated March 30, 2006.
            
            (36)10.32
            
            Release
                Agreement, dated April 21, 2006, by and between Elcom International,
                Inc. and Robert J. Crowell.
            
            (37)10.33
            
            Form
                of Indemnification Agreement for Internal Revenue Code Section 409A,
                one executed by and between Elcom International, Inc. and John E.
                Halnen
                and one executed by and between Elcom International, Inc. and Robert
                J.
                Crowell.
            
            (37)10.34
            
            Consulting
                Agreement, dated as of July 21, 2006, by and between Elcom International,
                Inc. and Laurence F. Mulhern.
            
            (38)10.35
            
            First
                Amendment to Employment Agreement, dated as of August 1, 2006, by and
                between Elcom International, Inc. and John E. Halnen.
            
            (39)10.36
            
            Form
                of Subscription Agreement dated October 18, 2006 by and among the
                Registrant and members of the Investor Group.
            
            (40)10.37
            
            Agreement,
                dated as of February 2, 2007, by and among Elcom International, Inc.,
                Smith & Williamson Investment Management Limited and Smith &
                Williamson Nominees Limited, and the directors named therein.
            
            (41)21.1
            
            List
                of the Registrant’s Subsidiaries.
            
            (16)23.1
            
            Consent
                of Vitale, Caturano & Company, Ltd.
            
            (x)31.1
            
            Rule
                13a-15(e) Certification of Principal Executive Officer.
            
            (x)31.2
            
            Rule
                13a-15(e) Certification of Principal Financial and Accounting
                Officer.
            
            (x)32.1
            
            Section
                1350 Certification of Principal Executive Officer.
            
            (x)32.2
            
            Section
                1350 Certification of Principal Financial and Accounting
                Officer.
            
            (x)








(x)
            Filed
                herewith.





(*)
            Management
                contract or compensatory plan or
                arrangement.





(1)
            Previously
                filed as an exhibit to Registration Statement No. 33-98866 on Form
                S-1 and
                incorporated herein by reference.





(2)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed December
                19, 1996,
                and incorporated herein by
                reference.









(3)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed March 6,
                1997, and
                incorporated herein by reference.





(4)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 2002 and incorporated herein by
                reference.





(5)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended March 31, 1996 and incorporated herein by
                reference.





(6)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended September 30, 1996 and incorporated herein by
                reference.





(7)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 1996 and incorporated herein by
                reference.





(8)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended June 30, 1997 and incorporated herein by
                reference.





(9)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended September 30, 1997 and incorporated herein by
                reference.





(10)
            Previously
                filed as an exhibit to Registrant’s Current Report on Form 8-K dated March
                26, 1997 filed April 8, 1997, and incorporated herein by
                reference.





(11)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 1997, and incorporated herein by
                reference.





(12)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 1998 and incorporated herein by
                reference.





(13)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended June 30, 1999 and incorporated herein by
                reference.





(14)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended September 30, 1999 and incorporated herein by
                reference.





(15)
            Previously
                filed as an exhibit to Registration Statement No. 333-94743 on Form
                S-3
                and incorporated herein by
                reference.





(16)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 1999 and incorporated herein by
                reference.





(17)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended June 30, 2000 and incorporated herein by
                reference.





(18)
            Previously
                filed as an exhibit to Registration Statement No. 333-54852 on Form
                S-8
                and incorporated herein by
                reference.





(19)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 2000 and incorporated herein by
                reference.





(20)
            Previously
                filed as an exhibit to Registration Statement No. 333-61316 on Form
                S-8
                and incorporated herein by
                reference.





(21)
            Previously
                filed as an exhibit to Registrant’s Current Report on Form 8-K, filed on
                January 11, 2002, and incorporated herein by
                reference.









(22)
            Previously
                filed as an exhibit to Registration Statement No. 333-91488 on Form
                S-8
                and incorporated herein by
                reference.





(23)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the
                quarter ended June 30, 2002 and incorporated herein by
                reference.





(24)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K for the
                year ended December 31, 2001 and incorporated herein by
                reference.





(25)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed April 10,
                2002 and
                incorporated herein by reference.





(26)
            Previously
                filed as an exhibit to Registrant’s Annual Report on Form 10-K, as
                amended, for the year ended December 31, 2003 and incorporated herein
                by reference.





(27)
            Previously
                filed as an exhibit to Registrant’s Quarterly Report on Form 10-QSB for
                the quarter ended June 30, 2004 and incorporated herein by
                reference.





(28)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed August 10,
                2005,
                and incorporated herein by
                reference.





(29)
            Previously
                filed as an Appendix to Registrant’s Definitive Proxy Statement filed May
                21, 2004, and incorporated herein by
                reference.





(30)
            Previously
                filed as an Appendix to Registrant’s Definitive Proxy Statement filed May
                23, 2005, and incorporated herein by
                reference.





(31)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed December
                23, 2005,
                and incorporated herein by
                reference.





(32)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed August 18,
                2005,
                and incorporated herein by
                reference.





(33)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed March 2,
                2006, and
                incorporated herein by reference.





(34)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed March 10,
                2006,
                and incorporated herein by
                reference.





(35)
            Previously
                filed as an exhibit to Current Report on Form 8-K dated March 23,
                2006
                filed March 24, 2006), and incorporated herein by
                reference.





(36)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed April 10,
                2006 and
                incorporated herein by reference.





(37)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed April 27,
                2006 and
                incorporated herein by reference.





(38)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed July 27,
                2006 and
                incorporated herein by reference.





(39)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed August 3,
                2006 and
                incorporated herein by reference.









(40)
            Previously
                filed as an exhibit to Current Report on Form 8-K filed October 24,
                2006
                and incorporated herein by
                reference





(41)
            Previously
                filed as an exhibit to Current Report on Form 8-K dated February
                2, 2007
                (filed February 7, 2007), and incorporated herein by
                reference.