eLEC Revenue Doubles but Company Posts Loss

Although its revenue more than doubled year over year for the first six months of 2005, eLEC Communications Corp., a CLEC offering VoIP services for businesses and consumers, has reported a net loss of $1.7 million, or 10 cents per share, for the first six months of fiscal 2005, ended May 31, 2005.

The results were obtained from the companys quarterly report to the U.S. Securities and Exchange Commission (SEC).

Revenue for the six-month period was $8.7 million compared to $3.8 million for the same period a year ago. The net loss of $1.7 million compares to net income of $864,604, or 5 cents per share, for the same period in 2004.

Revenue for the second quarter, ended May 31, likewise more than doubled, to $4.8 million compared to $1.9 million for the same period a year ago.

On Jan. 18, 2005, eLEC announced the introduction of VoIP services for business and consumers through its VoX Communications subsidiary. Since then, the company has announced several expansions and additions to the new service.

In the first half of 2005, expenses for Selling, general and administration increased significantly, from $1.9 million in the first six months of 2004 to $5.7 million for the same period in 2005, an increase of 195 percent. The company said in its SEC filing that approximately $2 million of that amount was bad debt expense from consumers who did not pay their bills, adding, Although growth tends to be easier in the residential market than in the business market, we are now selling approximately 75% of our new CLEC lines to business customers, who we have found are better at paying their monthly telephone bills.

Furthermore, the filing reads, With our VoIP customers, we anticipate almost no bad debt expense, as we require credit card payment from our residential VoIP users.

The filing notes eLEC will focus on growing its VoIP customer base in the future and we will spend more of our marketing budget to attract VoIP customers than POTS customers, and that the total number of POTS lines in our subscriber base will be decreasing as our VoIP subscriber lines experience growth.

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