##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-KSB
  þ

ANNUAL REPORT UNDER SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2005oro

TRANSITION REPORT UNDER SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934   Commission File Number:
    000-27376
      ELCOM INTERNATIONAL,
    INC.
 (Name of small business issuer
    in its charter)
  Delaware

04-3175156(State or other jurisdiction
    of
    Incorporation or organization)

(I.R.S. Employer
    Identification No.)10 Oceana Way, Norwood,
    Massachusetts(Address of principal
    executive offices)

02062(Zip Code)   Issuers telephone number
 (781) 440-3333
  Securities Registered pursuant to Section 12(b) of the
    Exchange Act:
 None
  Securities Registered pursuant to Section 12(g) of the
    Exchange Act:
  Common Stock, $.01 par value
 (Title of class)
  o
  þ o
  Regulation S-B Form 10-KSB Form 10-KSB. o
        DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-KSB.
  o þ




---



TABLE OF CONTENTS  PART IItem 1.   Description of BusinessItem 3.   Legal ProceedingsItem 4.   Submission of Matters to a Vote of Security HoldersPART IIItem 5.   Market for Common Equity and Related Stockholder MattersItem 6.   Managements Discussion and Analysis or Plan of OperationItem 7.   Financial StatementsItem 8.   Changes In and Disagreements With Accountants on Accounting and Financial DisclosureItem 8A.   Controls and Procedures.Item 8B.   Other InformationPART IIIItem 9.   Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange ActItem 10.   Executive CompensationItem 11.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 12.   Certain Relationships and Related TransactionsItem 13.   ExhibitsItem 14.   Principal Accountant Fees and ServicesSIGNATURESREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMELCOM INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETSELCOM INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)ELCOM INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)ELCOM INTERNATIONAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWSELCOM INTERNATIONAL, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTSEX-23.1 Consent of Vitale, Caturano & Company, PCEX-31.1 Section 302 Certification of CEOEX-32.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO    Table of Contents  
  PART I
 
  Item 1.
    Description
    of Business  Introduction
  tm
  Overview
       2




---



##### Table of Contents



Common
    Stock Issued under Regulation S in the
    U.K.  Change in Control of Elcom
  non-U.S. investor
   3




---



##### Table of Contents



Product
    Overview
  tm tm
    Procurement
    and Sourcing Overview
  and/or
  Products
    and Pricing
  Products. tm
 4




---



##### Table of Contents



Pricing. TM
  Professional
    Services
    Management
    Information Systems
      Sales and
    Marketing
  and/or
  Customer
    Service and Support
    Competition
     5




---



##### Table of Contents



and/or
  Intellectual
    Property
  tm
  Government
    Regulation
  and/or
  Environmental
    Matters
    Personnel
   6




---



##### Table of Contents



Company
    Trade Names and Trademarks
  and/or Form 10-KSB,
  Item 2.
    Description
    of Property  Form 10-KSB.
  ApproximateSquareLocation

Footage


UseNorwood, Massachusetts


36,000


Corporate Headquarters    
  Item 3.
    Legal
    Proceedings   
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   
  PART II
 
  Item 5.
    Market
    for Common Equity and Related Stockholder Matters  Price
    Range of Common Stock
    7




---



##### Table of Contents



2005


2004Quarter Ended

High


Low


High


LowMarch 31,

$
0.280


$
0.075


$
0.280


$
0.175June 30,

$
0.150


$
0.060


$
0.240


$
0.140September 30,

$
0.150


$
0.070


$
0.250


$
0.130December 31,

$
0.120


$
0.066


$
0.165


$
0.060     Equity
    Compensation Plan Information
    Sales of
    Unregistered Securities  Common Stock Issued
    Under Regulation S
       8




---



##### Table of Contents



Sales of
    Unregistered Securities  Common Stock Issued
    Under Regulation D
         
  Item 6.
    Managements
    Discussion and Analysis or Plan of Operation  Introduction
   9




---



##### Table of Contents



Historical
    Overview
    tm
  and/or U.S.-based
   10




---



##### Table of Contents



non-U.S. investors
 11




---



##### Table of Contents



RESULTS
    OF OPERATIONS
    2005


2004Net revenues

$
2,714


$
3,807Gross profit


1,996



3,347Selling, general and
    administrative expenses


5,413



6,032Research and development expenses


825



320Operating loss from continuing
    operations


(4,242
)


(3,005
)Interest expense


1,605



251Interest and other income
    (expense), net


7



(16
)Net loss


(5,840
)


(3,272
)   Year
    ended December 31, 2005 compared to the year ended
    December 31, 2004
  Net Revenues.
    Gross Profit.
  Selling, General and Administrative
    Expenses.
 12




---



##### Table of Contents



Research and Development Expenses.
  Operating Loss.
  Interest Expense. paid-in-capital.
  Interest and Other Income (Expense),
    Net. non-U.S. investors
  Net Loss From Discontinued Operations.
 13




---



##### Table of Contents



Net Loss.
  Liquidity
    and Capital Resources
    non-U.S. investor
         14




---



##### Table of Contents



Risk
    Factors Relating to Liquidity
        Payments Due by PeriodLess than








AfterTotal


1 year(a)


1-3 years


4-5 years


5 yearsOperating lease

$
1,158


$
887


$
271


$



$
     (a)
    
    Of the $887,000 due in 2006, $250,000 was satisfied in early
    2006 by issuing Company common stock to its landlord.  Critical
    Accounting Policies and Estimates
     15




---



##### Table of Contents



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), SEC Staff Accounting Bulleting Topic 13, Revenue
    Recognition (SAB 13).
  back-up back-up Software Revenue
    Recognition SOP 98-9, Modification of
    SOP 97-2 Software Revenue Recognition with Respect to Certain
    Transactions (SOP 97-2,
 16




---



##### Table of Contents



EITF 00-3, SOP 97-2,
    Accounting for the Costs of
    Computer Software to Be Sold, Leased, or Otherwise Marketed.
    Accounting for
    Convertible Debt and Debt Issued with Stock Purchase
    Warrants Accounting for Convertible
    Securities with Beneficial Conversion Features or Contingently
    Adjustable Conversion Ratios EITF 00-27, Application of Issue
    No. 98-5
    to Certain Convertible Instruments. (paid-in-capital) paid-in-kind. (paid-in-capital).
 17




---



##### Table of Contents



(paid-in-capital)
  Off-Balance
    Sheet Financings
    Factors
    Affecting Future Performance
  back-to-back
      Outlook
    STATEMENT
    UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
  Form 10-KSB
 18




---



##### Table of Contents



Form 10-KSB Form S-3 Form 10-KSB.
 
  Item 7.
    Financial
    Statements  page F-1.
 
  Item 8.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure  Regulation S-K
 
  Item 8A.
    Controls
    and Procedures.  Rules 13a-15(e) 15d-15(e) Form 10-KSB. Form 10-KSB.
   
  Item 8B.
    Other
    Information   
  PART III
 
  Item 9.
    Directors,
    Executive Officers, Promoters and Control Persons; Compliance
    With Section 16(a) of the Exchange Act   19




---



##### Table of Contents



Item 10.
    Executive
    Compensation   
  Item 11.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   
  Item 12.
    Certain
    Relationships and Related Transactions  Crowell
    and Smith Secured Promissory Notes
    50-day
 20




---



##### Table of Contents



U.K.
    Secured Promissory Notes
  non-U.S. investors
    Collateral
    Agency and Security Agreement
  non-U.S. investors Non-U.S. Lenders), Non-U.S. Lenders Non-U.S. Lenders Non-U.S. Lender
 21




---



##### Table of Contents



Convertible
    Debentures
             22




---



##### Table of Contents



Other
    Transactions
     
  Item 13.
    Exhibits  Form 10-KSB:
    page F-1.
    Form 10-KSB page E-1,
 
  Item 14.
    Principal
    Accountant Fees and Services   23




---



##### Table of Contents



SIGNATURES
         By:
    /s/  John E. Halnen   John E. Halnen
        Signatures

Title

Date/s/  Robert J.
    CrowellRobert
    J. Crowell

Chairman of the Board of Directors

March 23, 2006/s/  John E. HalnenJohn
    E. Halnen

President, Chief Executive Officer
    and Director (Principal Executive Officer)

March 23, 2006/s/  Laurence F.
    MulhernLaurence
    F. Mulhern

Chief Financial Officer
    (Principal Financial Officer)

March 23, 2006/s/  William W. SmithWilliam
    W. Smith

Vice Chairman and Director

March 23, 2006/s/  Richard J.
    HarriesRichard
    J. Harries, Jr.

Director

March 23, 2006/s/  John W. OrtizJohn
    W. Ortiz

Director

March 23, 2006Sean
    P. Lewis

Director

March 23, 2006  24




---



##### Table of Contents



CONSOLIDATED
    FINANCIAL STATEMENTS
  ELCOM
    INTERNATIONAL, INC. AND SUBSIDIARIES
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  December 31,
    2005
    PageReport of Independent Registered
    Public Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2005 and 2004


F-3Consolidated Statements of
    Operations and Other Comprehensive Income (Loss) for the years
    ended December 31, 2005 and 2004


F-4Consolidated Statements of
    Stockholders Equity (Deficit) for the years ended
    December 31, 2005 and 2004


F-5Consolidated Statements of Cash
    Flows for the years ended December 31, 2005 and 2004


F-6Notes to Consolidated Financial
    Statements


F-7 to F-26  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Vitale,
    Caturano & Company, Ltd.
      F-2




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
  December 31,2005


2004(In thousands, except share and
    per share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
6,399


$
390Accounts receivable:Trade


548



354Less  Allowance for
    doubtful accounts


45



47Accounts receivable, net


503



307Prepaids and other current assets


119



53Total current assets


7,021



750PROPERTY, EQUIPMENT AND SOFTWARE,
    AT COST:Computer hardware and software


20,675



20,639Furniture, equipment and leasehold
    improvements


3,088



3,08823,763



23,727Less  Accumulated
    depreciation and amortization


23,020



22,708743



1,019OTHER ASSETS


10



10NON-CURRENT ASSETS OF DISCONTINUED
    OPERATIONS






48$
7,774


$
1,827LIABILITIES AND
    STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Current portion of capital lease
    obligation

$
27


$
30Related party convertible loan
    payable


120



Convertible loans payable


1,179



Accounts payable


547



468Deferred revenue


545



510Related party accrued salary,
    bonuses and interest


1,121



709Accrued expenses and other current
    liabilities


2,525



1,712Current liabilities of discontinued
    operations


62



303Total current liabilities


6,126



3,732CAPITAL LEASE OBLIGATION, NET OF
    CURRENT PORTION






27OTHER LONG TERM LIABILITY


423



546RELATED PARTY CONVERTIBLE
    DEBENTURES, net of discount






261CONVERTIBLE DEBENTURES, net of
    discount






101Total liabilities


6,549



4,667COMMITMENTS AND CONTINGENCIES
    (Note 7)STOCKHOLDERS EQUITY (DEFICIT):Preferred stock, $.01 par
    value;
    Authorized  10,000,000 shares  Issued
    and outstanding  none






Common stock, $.01 par value;
    Authorized  500,000,000 and
    200,000,000 shares   issued  399,152,859
    and 61,812,569 shares


3,992



618Additional paid-in capital


125,263



118,703Accumulated deficit


(122,483
)


(116,643
)Treasury stock, at
    cost  530,709 shares


(4,712
)


(4,712
)Accumulated other comprehensive loss


(835
)


(806
)Total stockholders equity
    (deficit)


1,225



(2,840
)$
7,774


$
1,827    F-3




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    AND OTHER COMPREHENSIVE INCOME (LOSS)
  For the Years Ended
    December 31,2005


2004(In thousands, except per share
    data)Net revenues:License, hosting services and
    other fees

$
2,081


$
2,997Professional services


633



8102,714



3,807Cost of revenues


718



460Gross profit


1,996



3,347Operating Expenses:Selling, general and administrative


5,413



6,032Research and development


825



320Total operating expenses


6,238



6,352Operating loss


(4,242
)


(3,005
)Interest expense


(1,605
)


(251
)Interest and other income
    (expense), net


7



(16
)Loss before income taxes


(5,840
)


(3,272
)Income taxes






Net loss


(5,840
)


(3,272
)Other comprehensive income (loss),
    net of tax


(29
)


33Comprehensive loss

$
(5,869
)

$
(3,239
)Basic and diluted net loss per
    share

$
(0.08
)

$
(0.06
)Weighted average number of basic
    and diluted shares outstanding


72,173



52,504    F-4




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    (DEFICIT)
  AccumulatedCommon Stock


Additional





Treasury


Other


TotalNumber


$.01 Par


Paid-in


Accumulated


Stock,


Comprehensive


Stockholdersof Shares


Value


Capital


Deficit


At Cost


Income (Loss)


Equity (Deficit)(In thousands, except number of
    shares)BALANCE, JANUARY 1, 2004


31,432,546


$
314


$
115,886


$
(113,371
)

$
(4,712
)

$
(839
)

$
(2,722
)Exercise of common stock options


52,450



1



4















5Common stock issued as compensation


550,000



5



110















115Sale of common stock, net of
    offering costs of approximately $709


29,777,573



298



2,703















3,001Net loss














(3,272
)










(3,272
)Cumulative translation adjustment






















33



33BALANCE, DECEMBER 31, 2004


61,812,569


$
618


$
118,703


$
(116,643
)

$
(4,712
)

$
(806
)

$
(2,840
)Sale of common stock, net of
    offering costs of approximately $240


278,018,333



2,780



4,375















7,155Common stock issued upon conversion
    of loans payable and related accrued interest


25,156,998



252



422















674Stock option granted to non-employee










1















1Additional beneficial conversion
    feature of convertible debentures due to reduction in per share
    conversion price










517















517Common stock issued upon conversion
    of convertible debentures and related accrued interest


34,164,959



342



1,245















1,587Net loss














(5,840
)










(5,840
)Cumulative translation adjustment






















(29
)


(29
)BALANCE, DECEMBER 31, 2005


399,152,859


$
3,992


$
125,263


$
(122,483
)

$
(4,712
)

$
(835
)

$
1,225    F-5




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Years EndedDecember 31,2005


2004(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net loss from continuing operations

$
(5,840
)

$
(3,272
)Adjustments to reconcile net loss
    to net cash used in operating activities Depreciation and amortization of
    property, equipment and software


333



598Amortization of convertible
    debenture beneficial conversion feature


1,419



108Non-cash interest expense


145



127Stock based compensation


1



115Deferred rent expense


312



103Provisions for doubtful accounts
    receivable


2



8Changes in current assets and
    liabilities:Accounts receivable


(198
)


712Prepaids and other current assets


(66
)


(10
)Accounts payable


79



(213
)Deferred revenue


35



(223
)Accrued expenses and other current
    liabilities


1,113



231Net cash used in continuing
    operations


(2,665
)


(1,716
)Net cash used in discontinued
    operations


(241
)


(141
)CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchase of property, equipment
    and software


(57
)


(772
)Decrease in other assets and
    deferred costs






5Net cash used in investing
    activities


(57
)


(767
)Net cash provided by investing
    activities of discontinued operations


48



32CASH FLOWS FROM FINANCING
    ACTIVITIES:Repayment of capital lease
    obligations


(30
)


(5
)Proceeds from loans payable


2,269



290Repayment of loans payable


(318
)


(1,403
)Increase (decrease) in other long
    term liability


(123
)


546Proceeds from issuance of common
    stock, net


7,155



3,006Net cash provided by financing
    activities


8,953



2,434FOREIGN EXCHANGE EFFECT ON CASH


(29
)


33NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS


6,009



(125
)CASH AND CASH EQUIVALENTS,
    BEGINNING OF PERIOD


390



515CASH AND CASH EQUIVALENTS, END OF
    PERIOD

$
6,399


$
390SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:Interest paid

$
26


$
6Income taxes paid

$



$
SUPPLEMENTAL DISCLOSURE OF NONCASH
    INVESTING AND 
    FINANCING ACTIVITIES:Discount on convertible debentures
    and accrued interest related to reduction in per share
    conversion price

$
517


$
Conversion of convertible
    debentures and accrued interest to equity

$
1,587


$
Conversion of loans payable and
    accrued interest to equity

$
674


$
Acquisition of equipment under
    capital lease

$



$
62Stock based compensation

$
1


$
115    F-6




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    Nature of
    Operations    tm tm
      (2)
    Summary
    of Significant Accounting Policies  (a) Basis
    of Consolidation
   F-7




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (b) Reclassification
    (c) Use
    of Estimates
    (d) Cash
    and Cash Equivalents
    (e) Accounts
    Receivable
    (f) Property,
    Equipment and Software
    98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use, SOP 98-1 SOP 98-1 SOP 98-1,
  SOP 98-1.
  (g) Impairment
    of Long Lived Assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets,
 F-8




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (h) Revenue
    Recognition
      License and Hosting Services Revenue.
  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, SEC Staff Accounting
    Bulleting Topic 13, Revenue
    Recognition.
  back-up back-up 97-2, Software Revenue Recognition SOP 98-9, Modification of
    SOP 97-2 Software Revenue Recognition with Respect to Certain
    Transactions ( SOP 97-2,
 F-9




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other Fees Revenue.
  Professional Services Revenue.
  Deferred Revenue.
  (i) Advertising
    and Marketing
    (j) Research
    and Development
  Accounting
    for the Costs of Computer Software to Be Sold, Leased or
    Otherwise Marketed
  (k) Foreign
    Currency Translation
  Foreign
    Currency Translation
 F-10




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (l) Income
    Taxes
  Accounting for Income Taxes
  (m) Stock-Based
    Compensation
  180-day
   F-11




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   elcom,
    inc.
  Option


WeightedNumber of


Exercise Price


AverageShares


Per Share


Exercise PriceOutstanding, January 1, 2004


11,297,827


$
0.08  22.50


$
1.89Granted


6,549,999



0.10      .24



0.16Terminated


(700,874
)


0.08  12.63



1.70Exercised


(52,450
)


0.08    0.20



0.09Outstanding, December 31, 2004


17,094,502


$
0.08  22.50


$
1.24Granted


100,000



0.08



0.08Terminated


(1,691,165
)


0.08  22.50



2.05Exercised










Outstanding, December 31, 2005


15,503,337


$
0.08  22.50


$
1.14Exercisable, December 31, 2004


9,251,303


$
0.08  22.50


$
2.16Exercisable, December 31, 2005


11,739,586


$
0.08  22.50


$
1.46   elcom,
    inc.
  Options Outstanding


Options ExercisableWeighted


Weighted





WeightedAverage


Average





AverageRange of

Number


Remaining


Exercise


Number


ExerciseExercise Prices

Outstanding


Contractual Life


Price


Exercisable


Price$  0.08    0.105


2,869,999



7.20


$
0.09



2,298,999


$
0.090.14    0.20


4,767,000



8.09



0.17



1,787,501



0.180.22    0.30


1,675,000



5.28



0.26



1,461,748



0.260.45    0.49


1,793,250



5.67



0.45



1,793,250



0.450.60    0.94


429,000



4.22



0.85



429,000



0.851.00    1.69


1,358,464



4.53



1.47



1,358,464



1.471.77    3.81


600,313



3.69



3.40



600,313



3.404.06    4.81


992,630



3.82



4.43



992,630



4.435.03    5.88


565,363



2.27



5.38



565,363



5.386.00    8.00


410,318



1.08



7.31



410,318



7.3112.63  22.50


42,000



4.01



13.80



42,000



13.8015,503,337











11,739,586      F-12




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounting for
    Stock-Based Compensation Accounting for Stock Based
    Compensation Transition and Disclosure, an Amendment to FASB
    Statement No. 123
      2005


2004(In thousands, except per share
    data)Net loss:As reported

$
(5,840
)

$
(3,272
)Plus  stock based
    compensation under APB Opinion No. 25


1



Less  stock based
    compensation under SFAS No. 123


(317
)


(809
)Pro forma

$
(6,156
)

$
(4,081
)Net loss per share:As reported  basic
    and diluted

$
(0.08
)

$
(0.06
)Pro forma  basic
    and diluted

$
(0.09
)

$
(0.08
)     2005


2004Volatility


163.1
%


117.9
%Risk-free interest rate


4.33
%


3.61
%Expected life of options


5 years



5 yearsExpected dividend yield


0
%


0
%  F-13




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     (n) Net
    Loss Per Share
  Earnings Per
    Share.
  (o) Fair
    Value of Financial Instruments
    (p) Comprehensive
    Income (Loss)
  Reporting
    Comprehensive Income
  (q) Segment
    Reporting
  Disclosures about
    Segments of an Enterprise and Related Information
  (r) Concentration
    of Credit Risk and Significant Customers
  Disclosure of Information about
    Financial Instruments with Off-Balance-Sheet Risk and Financial
    Instruments with Concentrations of Credit Risk
     F-14




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (s) Recent
    Pronouncements
  Exchanges
    of Nonmonetary Assets  An Amendment of APB
    Opinion No. 29 Accounting
    for Nonmonetary Transactions
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock Issued to Employees fair-value-based fair-value-based
    
    All new awards issued after the effective date;
    All modifications, repurchased or cancellations of existing
    awards after the effective date; and
    Unvested awards at the effective date.    Accounting for Certain Financial Instruments with
    Characteristics of Both Liabilities and Equity
 F-15




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (3)
    Loans
    Payable        non-U.S. investors Non-U.S. Loans). Non-U.S. Loans Non-U.S. Loans Non-U.S. Loans Non-U.S. Loans Non-U.S. Loans
  Non-U.S. Loans non-U.S. investors,
 F-16




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       (4)
    Accrued
    Expenses and Other Current Liabilities    December 31,2005


2004Salary, wages and benefits

$
864


$
418Taxes, including U.K. Value Added
    Tax


123



116Financial consulting


580



580Legal and audit fees


216



124Deferred rent


603



291Interest


60



104Other accruals


79



79$
2,525


$
1,712     (5)
    Employee
    Benefits   F-17




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (6)
    Stockholders
    Equity  (a) Common
    Stock
    (b) Preferred
    Stock
    (c) Issuances
    of Common Stock Under Regulation S
  Non-U.S. Loans
     F-18




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (d) Issuances
    of Common Stock Under Regulation D
          (e) Warrants
     F-19




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (f) Convertible
    Debentures
           F-20




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounting for Convertible
    Securities with Beneficial Conversion Features or Contingently
    Adjustable Conversion Ratios EITF 00-27, Application of Issue
    No. 98-5
    to Certain Convertible Instruments,
    (7)
    Commitments
    and Contingencies  (a) Leases
       F-21




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Capital


OperatingYear Ending December 31,
    (in thousands)

Lease


Lease2006

$
29


$
2842007






271Total minimum lease payments

$
29


$
555Less amounts representing interest


(2
)Present value of minimum lease
    payments

$
27Current portion


27Long term portion

$
     (b) Employment
    Contracts and Personnel Expenses
    and/or
  (c) Contingencies
     F-22




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (8)
    Discontinued
    Operations        Year Ended
    December 31,2005


2004Revenue

$



$
Net income (loss) from
    discontinued operations

$



$
Gain on disposal of discontinued
    operations, net of tax

$



$
       December 31,


December 31,2005


2004Other non-current assets

$



$
48Accrued expenses and other current
    liabilities

$
62


$
303  F-23




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (9)
    Business
    Segment Information    For Years Ended
    December 31,2005


2004Net revenuesU.S.

$
727


$
836U.K.


1,987



2,971Net revenues

$
2,714


$
3,807Gross profitU.S.

$
505


$
804U.K.


1,491



2,543Gross profit

$
1,996


$
3,347     2005


2004Identifiable assets from
    continuing operationsU.S.

$
4,522


$
1,517U.K., including cash of $2,686 and
    $91


3,252



2627,774



1,779Identifiable assets from
    discontinued operations






48$
7,774


$
1,827   (10)
    Income
    Taxes    2005


2004U.S.

$
(3,348
)

$
(2,010
)Foreign


(2,492
)


(1,262
)$
(5,840
)

$
(6,309
)    F-24




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2005


2004Statutory tax rate


34.0
%


34.0
%Reversal of reserves no longer
    required






Non deductible debenture costs and
    other


8.3



1.3Valuation reserve provided against
    utilization of net operating loss carryforwards


(42.3
)


(35.3
)



     2005


2004Deferred tax assets:Nondeductible reserves

$
294


$
314Accrued expenses


865



623Other temporary differences






70Depreciation


6,414



6,220Foreign net operating loss
    carryforwards


6,946



5,350Net federal and state operating
    loss carryforwards


52,206



51,30866,725



63,885Valuation allowance


(64,194
)


(61,353
)Net deferred tax assets


2,532



2,532Deferred tax liabilities:Other intangible assets


(2,532
)


(2,532
)(2,532
)


(2,532
)Net deferred taxes

$



$
          F-25




---



##### Table of Contents



ELCOM
    INTERNATIONAL, INC.
    AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         F-26




---



##### Table of Contents



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
    by and among Elcom Services Group, Inc., elcom, inc. and Elcom
    International, Inc. and ePlus Technology, Inc. dated
    March 25, 2002.

(25)2
.6.1

Amendment to Asset Purchase
    Agreement.

(25)2
.6.2

Managed Services Agreement by and
    among Elcom Services Group, Inc., elcom, inc. and Elcom
    International, Inc. and ePlus Technology, Inc. dated
    March 29, 2002.

(25)2
.6.3

Registration Rights Agreement by
    and between Registrant and Elcom International, Inc. and ePlus
    Technology, Inc. dated March 29, 2002.

(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 issued in December 2005.

(31)4
.3

Form of 8% Convertible
    Promissory Note issued in December 2005 to Mr. Crowell and
    Mr. Smith.

(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)4
.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) E-1




---



##### Table of Contents



ExhibitNo.

Description of
    Document4
.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, between the Company 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
    among 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)10
.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(1),
    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. (8), 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)(*) E-2




---



##### Table of Contents



ExhibitNo.

Description of
    Document10
.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 by and between Elcom International, Inc.
    and Robert J. Crowell.

(31)(*)10
.20

Employment Agreement dated
    December 21, 2005 by and between Elcom International, Inc.
    and John E. Halnen.

(31)(*)10
.21

Form of Registration Agreement,
    dated April 23, 2003, between Elcom International, Inc. and
    the Investors party thereto.

(26)10
.22

Form of Collateral Agency and
    Security Agreement, dated April 23, 2003, between Elcom
    International, Inc. and the Investors party thereto.

(26)10
.23

Form of Investment Agreement by
    and among the Company, Smith & Williamson Corporate
    Finance Limited, several investors and the Directors of the
    Company 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 the Company, 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)10
.27

Sub-Framework
    Agreement, dated August 12, 2005, by and between PA Shared
    Services Limited and Elcom Systems Limited.

(32)10
.28

Revenue Share Agreement, dated
    August 12, 2005, by and among 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)21
.1

List of the Registrants
    Subsidiaries.

(16)23
.1

Consent of Vitale,
    Caturano & Company PC.

(x)31
.1

Rule 13a-15(e)
    Certification of Chief Executive Officer.

(x)31
.2

Rule 13a-15(e)
    Certification of Chief Financial Officer.

(x)32
.1

Section 1350 Certification of
    Chief Executive Officer.

(x)32
.2

Section 1350 Certification of
    Chief Financial 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
    dated December 6, 1996 (filed December 19, 1996), and
    incorporated herein by reference. E-3




---



##### Table of Contents



(3)
    
    Previously filed as an exhibit to Current Report on
    Form 8-K
    dated February 21, 1997 (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
    dated December 31, 2001, (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
    dated March 29, 2002 (filed April 10, 2002) and
    incorporated herein by reference. E-4




---



##### Table of Contents



(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
    dated September 30, 2005 (filed October 6, 2005), and
    incorporated herein by reference.(29)
    
    Previously filed as an Appendix to Registrants Definitive
    Proxy Statement dated May 26, 2004 (filed May 21,
    2004), and incorporated herein by reference.(30)
    
    Previously filed as an Appendix to Registrants Definitive
    Proxy Statement dated May 27, 2005 (filed May 23,
    2005), and incorporated herein by reference.(31)
    
    Previously filed as an exhibit to Current Report on
    Form 8-K
    dated December 20, 2005 (filed December 23, 2005), and
    incorporated herein by reference.(32)
    
    Previously filed as an exhibit to Current Report on
    Form 8-K
    dated August 12, 2005 (filed August 18, 2005), and
    incorporated herein by reference.(33)
    
    Previously filed as an exhibit to Current Report on
    Form 8-K
    dated February 24, 2006 (filed March 2, 2006), and
    incorporated herein by reference.(34)
    
    Previously filed as an exhibit to Current Report on
    Form 8-K
    dated March 6, 2006 (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. E-5