Timios National 8-K/A Completion of Acquisition or Disposition of Assets

HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)

The accompanying unaudited pro forma condensed financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the Plan of Merger and Stock Purchase Agreement (the “Agreement”) been consummated as of the dates indicated or the results that may be obtained in the future. Included in the unaudited pro forma condensed financial statements are (i) a pro forma condensed balance sheet reflecting the consolidation of Homeland Security Capital Corporation (“HSCC”) and Safety & Ecology Holdings Corporation (“Safety”) as of March 31, 2008, as if the sale of the Series H Convertible Preferred Stock and the Agreement had occurred on March 31, 2008,and (ii) statements of operations of HSCC for the year ended December 31, 2007, and the three months ended March 31, 2008, giving effect to (a) the Agreement by applying the purchase method of accounting, (b) certain adjustments that are directly attributable to the Agreement, and (c) the sale of the Series H Convertible Preferred Stock as if the transaction was consummated January 1, 2007. These unaudited pro forma condensed financial statements and notes thereto should be read in conjunction with HSCC’s consolidated financial statements and the notes thereto as filed with the Security and Exchange Commission for the period ended March 31, 2008 on Form 10-QSB and the consolidated financial statements and notes thereto as filed with the Security and Exchange Commission for the period ended December 31, 2007 on Form 10-KSB.

HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

MARCH 31, 2008

ASSETS
	HISTORICAL						Pro Forma
	Homeland Security
	Capital Corporation			Safety & Ecology
	and Subsidiaries			Holdings Corporation			Adjustments				Pro Forma
Current Assets
Cash and cash equivalents		126,787			1,851,289			19,596,954		1		3,078,076
								(18,496,954	)	2
Accounts receivable, net		2,501,546			12,310,512			-				14,812,058
Costs in excess of billings on uncompleted contracts		309,717			3,930,641			-				4,240,358
Prepaid expenses and other current assets		92,929			156,674			-				249,603
Total Current Assets		3,030,979			18,249,116			1,100,000				22,380,095
Property and equipment, net		271,360			3,074,023			830,668		3		4,176,051
Deferred financing costs, net		598,782			-			307,282		1		906,064
Notes receivable - related party		479,148			-			-				479,148
Assets held for resale		2,493,572			-			-				2,493,572
Loan receivable - stockholder		-			788,081			(788,081	)	1		-
Other non current assets		150,000			28,670			-				178,670
Goodwill and other intangible assets		-			-			5,951,375		2		5,951,375
Total Assets		7,023,841			22,139,890			7,401,244				36,564,975
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses		1,989,510			4,590,259			(691,186	)	2		5,888,583
Current portion of long term debt		74,447			1,264,180			(621,053	)	2		717,574
Loans payable		-			6,342,730			(6,342,730	)	2		-
Notes payable - bank		-			-			3,159,674		1		3,159,674
Notes payable - related party		-			-			1,500,000		1		1,500,000
Derivative liabilities		7,776,529			-			(7,776,529	)	4		-
Accrued interest and other liabilities		933,826			2,661,829			(242,641	)	2		3,353,014
Billings in excess of costs on uncompleted contracts		11,421			1,052,656			-				1,064,077
Deferred revenue		40,277			-			-				40,277
Total Current Liabilities		10,826,010			15,911,654			(11,014,465	)			15,723,199
Long Term Liabilities
Notes payable - net of $1,718,850 discount		-			-			12,220,073		4		12,220,073
Term notes to bank		-			-			1,649,199		1		1,649,199
Note payable		-			18,000			(18,000	)	2		-
Debentures payable		10,550,000			-			(10,550,000	)	4		-
Debt discount		(4,962,249	)		-			4,962,249		4		-
Capital leases		-			1,738,000			(1,738,000	)	2		-
Other non-current liabilities		133,707			-			(16,132	)	2		117,575
Total Long Term Debt		5,721,458			1,756,000			6,509,389				13,986,847
Total Liabilities		16,547,468			17,667,654			(4,505,076	)			29,710,046
Warrants payable - Sehies H Preferred Stock		-			-			3,099,542		1		3,099,542
Stockholders' Equity (DEFICIT)
Preferred Stock		135,808			20			10,935,860		2		11,071,688
Common Stock		48,846			1,071			(1,071	)	2		48,846
Treasury stock		-			(42,333	)		42,333		2		-
Additional paid-in capital		47,402,553			2,132,681			4,549,540		2		54,084,774
Accumulated Earnings (DEFICIT)		(56,023,358	)		2,769,800			(7,108,887	)	2		(60,362,445	)
Dividends paid		-			(628,736	)		628,736		2		-
Other comprehensive loss		(1,087,476	)		239,733			(239,733	)	2		(1,087,476	)
Total Stockholders' Equity (DEFICIT)		(9,523,627	)		4,472,236			8,806,778				3,755,387
Total Liabilities and Stockholders' Equity (DEFICIT)		7,023,841			22,139,890			7,401,244				36,564,975

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements

HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2008

	HISTORICAL						Pro Forma
	Homeland Security
	Capital Corporation			Safety & Ecology
	and Subsidiaries			Holdings Corporation			Adjustments				Pro Forma
NET SALES	$	1,278,317		$	14,103,451		$	-			$	15,381,768
COST OF GOODS SOLD		1,138,754			10,991,337			-				12,130,091
GROSS PROFIT	$	139,563		$	3,112,114		$	-			$	3,251,677
OPERATING EXPENSES
Selling, general and administrative expenses		1,321,094			2,905,051			40,450		5		4,266,595
Operating loss	$	(1,181,531	)	$	207,063		$	(40,450	)		$	(1,014,918	)
OTHER INCOME (EXPENSE)
Interest expense	$	-		$	(202,246	)	$	(446,500	)	6	$	(648,746	)
Amortization of debt offering costs		(100,000	)		-			-				(100,000	)
Other income		87,249			30,360			-				117,609
Total other expense	$	(12,751	)	$	(171,886	)	$	(446,500	)		$	(631,137	)
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)	$	(1,194,282	)	$	35,177		$	(486,950	)		$	(1,646,055	)
PROVISION (BENEFIT) FOR INCOME TAXES		-			-			-				-
NET INCOME (LOSS)	$	(1,194,282	)	$	35,177		$	(486,950	)		$	(1,646,055	)
Dividends on Preferred Stock		-			-			(300,000	)	8		(300,000	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(1,194,282	)	$	35,177		$	(786,950	)			(1,946,055	)
BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.02	)								$	(0.04	)
BASIC AND DILUTED WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING		48,792,464										48,792,464

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements

HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

YEAR ENDED DECEMBER 31, 2007

	HISTORICAL						Pro Forma
	Homeland Security
	Capital Corporation			Safety & Ecology
	and Subsidiaries			Holdings Corporation			Adjustments				Pro Forma
NET SALES	$	12,628,183		$	50,587,341		$	-			$	63,215,524
COST OF GOODS SOLD		9,592,926			38,611,758			-				48,204,684
GROSS PROFIT	$	3,035,257		$	11,975,583		$	-			$	15,010,840
OPERATING EXPENSES
Selling, general and administrative expenses		4,919,153			11,563,297			271,800		5		16,754,250
Operating loss	$	(1,883,896	)	$	412,286		$	(271,800	)		$	(1,743,410	)
OTHER INCOME (EXPENSE)
Interest expense	$	(954,846	)	$	(1,523,432	)	$	(1,787,800	)	6	$	(4,266,078	)
Amortization of debt discounts, debt offering costs and fair value adjustments		(1,798,930	)					(800,000	)	7		(2,598,930	)
Other income		51,673			99,149			-				150,822
Total other expense	$	(2,702,103	)	$	(1,424,283	)	$	(2,587,800	)		$	(6,714,186	)
LOSS FROM CONTINUING OPERATION	$	(4,585,999	)	$	(1,011,997	)	$	(2,859,600	)		$	(8,457,596	)
GAIN ON SALE DISCONTINUED OPERATIONS		1,634,733			-			-				1,634,733
LOSS BEFORE INCOME TAXES (BENEFIT)	$	(2,951,266	)	$	(1,011,997	)	$	(2,859,600	)		$	(6,822,863	)
PROVISION (BENEFIT) FOR INCOME TAXES		-			-			-				-
NET LOSS	$	(2,951,266	)	$	(1,011,997	)	$	(2,859,600	)		$	(6,822,863	)
Dividends on Preferred Stock		-			-			(1,200,000	)	8		(1,200,000	)
Preferred dividends and other beneficial features associated
with preferred stock issuances		-			-			(7,216,332	)			(7,216,332	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(2,951,266	)	$	(1,011,997	)	$	(11,275,932	)			(15,239,195	)
BASIC AND DILUTED LOSS PER COMMON SHARE
Loss per share from continuing operation	$	(0.11	)								$	(0.36	)
Income per share from discontinued operation		0.04										0.04
NET BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.07	)								$	(0.33	)
BASIC AND DILUTED WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING		43,043,114										43,043,114

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements

HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)

BASIS OF PRESENTATION

The purchase method of accounting has been used in the preparation of the accompanying unaudited pro forma condensed financial statements. Under this method of accounting, the purchase consideration is allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values. For purposes of the unaudited pro forma condensed consolidated financial statements, the preliminary fair values of Safety’s assets were estimated by Safety’s and HSCC’s management. The final allocation of the purchase price will be determined after the completion of a valuation by an independent appraiser and a comprehensive final evaluation of tangible and identifiable intangible assets acquired (including their estimated useful lives).

Prior to the Agreement, Safety maintained a fiscal year ending June 30. The historical statement of operations for Safety for the year ended December 31, 2007, included herein, reflects the addition of total revenues and net losses of $25,093,710 and $248,209 for the six months ended December 31, 2007 and a deduction of total revenue and net income of $24,857,771 and $728,017 for the six months ended December 31, 2006.

CONSIDERATION

The aggregate consideration for the acquisition of Safety was $10,550,000 in cash, $3,300,000 of HSCC’s Series I Convertible Preferred Stock, convertible into common stock at $0.03 per share, warrants to purchase 22,000,000 of HSCC’s common stock, exercisable at $0.03 per share, and an unsecured promissory note in the amount of $2,000,000. $3,900,000 of the cash consideration was paid to the majority stockholder of Safety at closing. The balance of the cash consideration was used to retire debt ($4,650,000) and retire outstanding preferred stock of Safety ($2,000,000). Of the $3,300,000 in HSCC’s Series I Convertible Preferred Stock, $1,500,000 will be held in escrow for twelve months to offset any indemnification claims or purchase price adjustments pursuant to the Agreement. Of the warrants to purchase 22,000,000 common shares, 10,000,000 will be held in escrow for twelve months to offset any indemnification claims or purchase price adjustments pursuant to the Agreement. The Series I Convertible Preferred Stock and the warrants not held in escrow are available to the majority stockholder and various executive managers of Safety.

HSCC financed the acquisition in part with $6,310,000 in sales of senior secured notes and $6,190,000 in sales of its Series H Convertible Preferred Stock. The aggregate proceeds of these sales were reduced by $850,000 in financing and legal costs.

DETAILS OF THE PRO FORMA ADJUSTMENTS RELATING TO THE SALE OF THE SENIOR SECURED NOTES AND THE SERIES H CONVERTIBLE PREFERRED STOCK AND THE ACQUISITION OF SAFETY ARE AS FOLLOWS:

1. Reflects the proceeds from the sale of HSCC’s senior secured notes in the amount of $6,310,000, its Series H Convertible Preferred Stock in the amount of $6,190,000, $778,081 proceeds from the repayment of stockholder notes of Safety, $4,808,873 in proceeds from a bank line of credit and $1,500,000 in a note payable to the previous stockholder of Safety.

2. Reflects the effect of the purchase of Safety on cash balances, deferred financing costs, goodwill, accounts payable, long term debt, loans payable, capital leases, other current and non liabilities, equity accounts and notes payable.

The pro forma financial statements have been prepared on the basis of certain assumptions relating to the allocation of the consideration paid to the acquired assets and liabilities of Safety, based on management’s estimates. The following table is a summary of the preliminary estimate of the total purchase price as of March 31, 2008:

The purchase price consisted of:
Cash paid at closing	$	3,900,000
Series I Preferred Stock		3,300,000
Notes payable		2,000,000
Direct acquisition costs		521,000
Liabilities assumed		3,227,000
Fair value of warrants issued		176,000
Total	$	13,124,000

The purchase price was allocated as follows:
Current assets	$	18,724,000
Property, plant and equipment		4,034,000
Other assets		29,000
Goodwill and other intangible assets		5,951,000
Total assets acquired	$	28,738,000
Current liabilities	$	13,501,000
Long term debt		1,885,000
Other liabilities		228,000
Total liabilities assumed	$	15,614,000
Net assets acquired	$	13,124,000

3. Reflects the adjustment of the carrying value of fixed assets to estimated fair value.

4. Reflects the restructuring of HSCC’s outstanding convertible debentures, deferred financing costs, debt discount and corresponding derivative liabilities associated with previous financing arrangements.

5. Reflects amortization expense of intangibles for $271,800 for the year ended December 31, 2007 and $40,450 for the three months ended March 31, 2008. Pro forma adjustments assume the Agreement was effective January 1, 2007. Included in the Safety statement of operations for the three months ended March 31, 2008 are the months of January, February and March 2008.

6. Reflects interest expense of $90,000 and $1,697,800 respectively, on the $1,500,000, 6% promissory note payable to the selling stockholder and interest expense on the portion of the senior secured notes sold to fund, in part, the acquisition ($6,310,000), for the year ended December 31, 2007. Reflects interest expense of $22,500 and $424,000 respectively, on the $1,500,000, 6% promissory note payable to the selling stockholder and interest expense on the portion of the senior secured notes sold to fund, in part, the acquisition ($6,310,000), for the three months ended March 31, 2008. Pro forma adjustments assume Agreement were effective January 1, 2007. Included in the Safety statement of operations for the three months ended March 31, 2008 are the months of January, February and March 2008.

7. Reflects the amortization of debt offering costs for the year ended December 31, 2007. Pro forma adjustments assume the Agreement were effective January 1, 2007. Included in the Safety statement of operations for the three months ended March 31, 2008 are the months of January, February and March 2008.

8. Reflects dividends on the portion of the Series H Convertible Preferred Stock sold to fund, in part, the acquisition ($6,190,000). Dividends for the year ended December 31, 2007 would have been $1,200,000. Dividends for the three months ended March 31, 2008 would have been $300,000. Pro forma adjustments assume the Agreement were effective January 1, 2007. Included in the Safety statement of operations for the three months ended March 31, 2008 are the months of January, February and March 2008.