Homeland Security Capital Corporation (OTCBB:HOMS), an international provider of specialized technology-based radiological, nuclear, environmental, disaster relief, and security solutions to government and commercial customers, today reported financial results for the second quarter ended December 31, 2009. Revenue for the quarter was $26.6 million compared to $22.2 million for the same period last year. Operating income for the quarter was $1.3 million or $0.02 per share compared to a net loss of $0.4 million or $0.01 per share for the same period last year. Net income attributable to common stockholders, after excluding preferred stock dividends and minority interests, was $0.8 million or $0.02 per share compared to a net loss of $0.7 million or $0.01 per share for the same period last year. EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $2.7 million compared to $0.4 million for the previous year’s quarter. EBITDAS (EBITDA before stock based compensation) for the quarter was $3.0 million compared to $1.3 million in the previous year’s quarter. Revenue for the six months was $47.4 million compared to $39.9 million for the same period last year. Operating income for the six months was $0.5 million or $0.01 per share compared to a net loss of $2.4 million or $0.05 per share for the same period last year. Net loss attributable to common stockholders, after excluding preferred stock dividends and minority interests, for the six months was $0.4 million or $0.01 per share compared to a net loss of $3.0 million or $0.06 per share for the same period last year. EBITDA (earnings before interest, taxes, depreciation and amortization) for the six months was $3.1 million compared to a negative $0.9 million for the previous year’s six months. EBITDAS (EBITDA before stock based compensation) for the six months was $3.7 million compared to $0.3 million in the previous year’s six months.
At December 31, 2009 there were 45,294,009 common shares outstanding.The Company reported funded backlog of $95.7 million at December 31, 2009. Backlog reflects new additions, less revenue earned and any adjustments for contract cancellations. Our funded backlog increased in the quarter by approximately $27.5 million. C. Thomas McMillen, HOMS Chairman and CEO, stated, “The Company has achieved a milestone with record revenue, operating income and EBITDA for the current quarter, a record of which we are proud. We continue to organically grow our revenue and reduce expenses. I am particularly pleased with our increasing gross margins (21.7% in the quarter and 19.7% in the six months) and expense reductions (1.4% in the quarter and 3.4% in the six months, measured year over year), which can be credited to the dedicated oversight by our subsidiary’s senior management”. McMillen continued “At this point we are ahead of our annual plan, but remain vigilant in continuing to press the momentum we have gained thus far this year.” The Company consolidates the results of subsidiaries Safety & Ecology Holdings Corporation, Nexus Technologies Group, Inc., Polimatrix, Inc. and Homeland Security Capital Corporation, the holding company. The Company measures its operating performance against plan taking into consideration EBITDAS adjustments and one time charges. Financial Measures In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, in this press release, the Company presents EBITDA and EBITDAS which are non-GAAP measures. EBITDA is determined by taking the net income before preferred dividends and minority interests and adding back amortization of intangible assets, depreciation and amortization of property and equipment, taxes and interest expense (income), net. EBITDAS is determined by taking EBITDA and then adding back stock based compensation expense. The Company believes that these non-GAAP measurements, viewed in addition to and not in lieu of the Company's reported GAAP results, provides useful information to investors because these metrics provide a more focused measure of operating results. These metrics are an integral part of the Company's internal reporting to measure operations of the company and the performance of senior management.
Additional InformationIn March 2008, the Company entered into a stock purchase agreement with YA Global Investments, L.P. (“YA”) pursuant to which the Company sold to YA 10,000 shares of its Series H Convertible Preferred Stock (“Series H Stock”). The Series H Stock is convertible into shares of Common Stock at an initial ratio of 33,333 shares of Common Stock for each share of Series H Stock, subject to adjustments, including Safety achieving certain earnings milestones, as defined, for the calendar years ending December 31, 2009 and 2008. Safety operates its business on a fiscal year ending June 30. Safety achieved the first milestone for the calendar year ending December 31, 2008. However, based upon information available as of the date of this filing, the second financial milestone for the calendar year ended December 31, 2009, has not been satisfied, resulting in a potential adjustment to the conversion ratio yielding approximately 56,300 shares of Common Stock for each share of Series H Stock, or approximately a potential additional 230,000,000 shares of our Common Stock in the aggregate. Management is currently discussing with YA the possibility of a waiver or amendment of any adjustment to the Series H Stock conversion ratio, however there can be no assurances YA will waive or amend the adjustment, if any, to the Series H Stock conversion ratio. YA has not exercised its conversion rights as of the date of this filing. In June 2009, the Company entered into an amendment to its debt facilities with YA to extend $2,500,000 of its outstanding debt held by YA to October 1, 2010 and to extend $10,560,000 of its outstanding debt to April 1, 2011. In exchange for the extensions, the Company agreed that the effective rate on all its debt with YA would be increased in January 2010 to 15% in the event the Company failed to win a significant procurement. As a result of the Company’s failure to be awarded the procurement, the interest rate on all the Company’s debt has been increased to 15% effective January 1, 2010.
Conference CallThe Company will host an earnings conference call at 4:00 p.m. EST on Tuesday, February 23, 2010. During the call, C. Thomas McMillen, Chairman and Chief Executive Officer, Chris P. Leichtweis, President and Michael T. Brigante, Chief Financial Officer, will discuss the Company's performance and financial results. The telephone number for the conference call is (877) 407-8031 (Toll Free US); and (201) 689-8031 (International). A live webcast of the call will also be available on the Company's website, www.hscapcorp.com. The webcast will be archived on the site, and investors will be able to access an encore recording of the conference call for one week by calling (877) 660-6853 (Replay Toll Free US)- (201) 612-7415 (Replay International), conference ID #344924. The encore recording will be available after the conference call has concluded. About Homeland Security Capital Corporation Homeland Security Capital Corporation is a company engaged in the strategic acquisition, development, and consolidation of homeland security-related businesses, within the fragmented homeland security industry. The company is focused on creating long-term value by taking controlling interest and developing its subsidiary companies through superior operations and management. Former Maryland Congressman C. Thomas McMillen, who served three consecutive terms in the U.S. House of Representatives from the 4th Congressional District of Maryland, heads the company. Homeland Security Capital Corporation operates businesses that provide homeland security products and services solutions, growing organically and by acquisitions. The company is targeting emerging companies that are generating revenues but face challenges in scaling their businesses to capitalize on homeland security opportunities. Homeland Security Capital Corporation’s portfolio of companies include: Safety and Ecology Corporation is a rapidly growing environmental services company in the U.S., providing services nationally, in Europe and the Caribbean. The Company specializes in the removal and remediation of hazardous nuclear materials for the U.S. Department of Energy, U.S. Department of Defense, and other federal agencies. SEC also provides advanced environmental services for private industry across the country and internationally. Since its founding in 1991, SEC has grown approximately 30 percent per year, and has emerged as a technology innovator with more than 450 personnel worldwide and with annual revenues of more than U.S. $70 million. For more information on SEC, visit www.sec-tn.com. Nexus Technologies Group, a mid-Atlantic security integrator for the corporate and governmental security markets that specializes in non-proprietary integrated security solutions including access control, alarm, video, communication, perimeter protection and bomb and metal detection security systems. Utilizing cutting-edge technologies, Nexus provides innovative, engineered and scalable solutions to effectively protect people, property and assets. For more information about Nexus, visit www.nexusna.com. Polimatrix, Inc., a system integrator and total solutions provider delivering advanced radiation and nuclear protection and detection services. The company has been operating since September 2006 as a joint venture between Homeland Security Capital Corporation and Polimaster, Inc. For more information about Polimatrix, visit www.polimatrix.com. For more information about Homeland Security Capital Corporation, visit www.hscapcorp.com. Forward-Looking Statement This release includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address future activities, performance, events or developments, are forward-looking statements. Although HOMS believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and actual results or developments may differ materially from those in the forward-looking statements.