UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
| ¨ | Preliminary Information Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)) |
| x | Definitive Information Statement (Supplement to Definitive Information Statement) |
HOMELAND SECURITY CAPITAL CORPORATION
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
| ¨ | No fee required |
| ¨ | Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11 |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| x | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
Homeland Security Capital Corporation
4601 Fairfax Drive, Suite 1200
Arlington, VA 22203
SUPPLEMENT TO
DEFINITIVE INFORMATION STATEMENT
PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
REGULATION 14C PROMULGATED THEREUNDER
EXPLANATORY NOTE
On August 8, 2011, Homeland Security Capital Corporation, a Delaware corporation (the “Company”), filed with the Securities and Exchange Commission (the “Commission”) a Definitive Information Statement (the “Information Statement”) informing its stockholders of the approval by the Company and the Stockholders (as defined below) of the sale of all of the issued and outstanding capital stock (the “Sale”) of Safety & Ecology Holdings Corporation, a Nevada corporation (“SEHC”), a wholly-owned subsidiary of the Company, to Perma-Fix Environmental Services, Inc. (“PESI”), a Delaware corporation, pursuant to that certain Stock Purchase Agreement, dated as of July 15, 2011, by and among PESI, the Company and SEHC (the “Purchase Agreement”), and the transactions contemplated thereby. The Sale, the Purchase Agreement and all related transactions were unanimously approved by (a) the disinterested members of the Company’s Board of Directors and (b) the holders of (i) a majority in voting power of the outstanding capital stock of the Company entitled to vote on the Sale, which is comprised of the common stock, par value $0.001 per share (the “Common Stock”), the Series H Convertible Preferred Stock, $0.01 par value per share (“Series H Preferred”), and Series I Convertible Preferred Stock, $0.01 par value per share (“Series I Preferred”) (all of the holders of the voting capital stock of the Company, collectively, the “Stockholders”), voting as a single class with the Common Stock on an as-converted basis, and (ii) more than 66% of Series H Preferred, voting as a separate class (the “Required Vote”), by written consent, in lieu of a special meeting of the Stockholders.
This Supplement to the Information Statement (the “Supplement”) is being sent to the Company’s Stockholders of record as of July 25, 2011 (the “Record Date”) by the Board of Directors only to provide updated information regarding the status of the Sale, the Purchase Agreement and all related transactions, which are expected to be consummated in the near future. Copies of the Information Statement were first mailed to our Stockholders on August 8, 2011, and more than 20 days have passed since the initial mailing of the Information Statement. As a result, the corporate actions described therein may take effect in accordance with Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
We Are Not Asking You for a Proxy and You are Requested Not To Send Us a Proxy.
Copies of this Supplement are expected to first be mailed on or about October 19, 2011, to our Stockholders of record on the Record Date. We have asked brokers and other custodians, nominees and fiduciaries to forward this Supplement to the beneficial owners of our capital stock held of record as of the Record Date and we will reimburse such persons for out-of-pocket expenses incurred in forwarding such material.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDERS’ MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
THIS SUPPLEMENT IS BEING PROVIDED ONLY TO INFORM YOU OF THE STATUS OF THE PURCHASE AGREEMENT, THE SALE AND ALL RELATED TRANSACTIONS. NO FURTHER ACTION IS REQUIRED BY ANY OF THE COMPANY’S STOCKHOLDERS.
PLEASE NOTE THAT THE COMPANY’S CONTROLLING STOCKHOLDERS HAVE ALREADY VOTED TO APPROVE THE PURCHASE AGREEMENT, THE SALE AND ALL RELATED TRANSACTIONS AND THE NUMBER OF VOTES HELD BY THE STOCKHOLDERS EXECUTING THE CONSENT WAS SUFFICIENT TO SATISFY THE STOCKHOLDER VOTE REQUIREMENT FOR THE TRANSACTION UNDER APPLICABLE LAW AND THE COMPANY’S CHARTER, SO NO ADDITIONAL VOTES WILL BE NEEDED TO APPROVE THESE ACTIONS.
FORWARD-LOOKING STATEMENTS
Certain statements included in this Supplement regarding the Company and SEHC are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Supplement will in fact occur. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. The reader is directed to the Company’s filings with the Commission, including current reports on Form 8-K, quarterly reports on Form 10-Q, and annual reports on Form 10-K, for a discussion of such risks and uncertainties.
2
SUPPLEMENTAL INFORMATION
Pursuant to the terms of the Purchase Agreement, and in preparation for the anticipated closing of the transactions contemplated thereby, the parties have agreed to the following matters, which are expected to result in an adjustment to the Purchase Price. Capitalized terms that are otherwise not defined herein shall have the meanings ascribed to them in the Information Statement.
In accordance with Section 1.4 of the Purchase Agreement, the Company must deliver to PESI at least five business days prior to Closing the Estimated Closing Balance Sheet, which the Company currently estimates will reflect an Estimated Net Working Capital Amount of approximately $4,961,977 which would result in an Estimated Net Working Capital Deficiency of approximately $5,038,023 to be deducted from the Cash Consideration and the Purchase Price. The Estimated Net Working Capital Deficiency could change from the Company’s current estimate, which would result in a larger or lesser amount to be deducted from the Cash Consideration payable to the Company at the Closing and a commensurate change in the Purchase Price. The calculation of the Estimated Net Working Capital Deficiency includes deductions of receivables outstanding longer than 120 days, PESI’s review and identification of receivables it considers to be at risk and the parties’ mutual agreement as to which receivables of SEHC and its subsidiaries are at risk of collection when calculating SEHC’s Current Assets for such purposes in accordance with Section 1.4(b) of the Purchase Agreement. Section 1.5(a) provides that PESI shall prepare and deliver to the Company a Closing Statement reflecting the Net Working Capital Amount of SEHC as of the Closing, or the Closing Net Working Capital Amount, within 75 days after the Closing. Section 1.5(b) provides that the Company may dispute the Closing Net Working Capital Amount and the Closing Statement within 45 days after the Company’s receipt of the Closing Statement. The parties have agreed that the Closing Statement will be prepared and delivered at the Closing and the parties have therefore agreed to review and finalize the Closing Net Working Capital Amount, as reflected on the Closing Statement, contemporaneously with the Closing. If the Final Net Working Capital Deficiency is the same as the Estimated Net Working Capital Deficiency, and the Estimated Net Working Capital Deficiency has not changed from the Company’s estimate set forth above, an aggregate of $5,038,023 will be deducted at Closing from the Cash Consideration payable to the Company and the Purchase Price. As described above, however, the deficiency could increase or decrease pursuant to the terms of the Purchase Agreement, which would result in a larger or lesser amount being deducted from the Cash Consideration payable to the Company at Closing and a commensurate change in the Purchase Price.
In addition, the parties have agreed, pursuant to Section 3 of the Note, that PESI will prepay $500,000 of the principal amount payable under the Note to the Company within ten days after the Closing.
Finally, PESI has agreed to a conditional waiver of a potential breach of the representations and warranties made by the Company and SEHC in the Purchase Agreement arising out of certain issues regarding the performance of one of SEHC’s subsidiaries under a Material Contract with a Material Customer (as each such term is defined in the Purchase Agreement) that the parties believe may cause such Material Customer to modify its relationship with SEHC and/or such subsidiary or its usage of the services of SEHC or such subsidiary, such that the Material Contract at issue may not be renewed at the time of its potential renewal, or that if it is renewed, it will not be renewed on substantially the same terms (the “Contingent Claim”). The parties have therefore agreed that if such Material Contract has not been renewed at the time of its potential renewal on terms substantially similar to the current terms, this Contingent Claim would result in Losses (as defined in the Purchase Agreement) incurred by PESI in the sum of $1,500,000 for which PESI would be entitled to indemnification pursuant to Section 8.1 of the Purchase Agreement and distribution from the Escrow Account. Such distribution would be made automatically and without any further action on the part of the Company.
Effective October 14, 2011, Christopher P. Leichtweis resigned as President and a director of the Company. Mr. Leichtweis is the controlling Stockholder of the Company, with approximately 68.7% of the voting capital stock of the Company. Mr. Leichtweis remains in his positions with SEHC.
As disclosed in the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2011, the Company is currently in default under the terms of the Forbearance Agreement, dated July 29, 2011
3
and as amended on September 7, 2011 (as amended, the “Forbearance Agreement”), entered into by and among the Company, YA, as lender, Homeland Security Advisory Services, Inc., Celerity Systems, Inc. and Nexus Technologies Group, Inc. (now known as NTG Management Corp.). As of September 15, 2011, the Company became subject to foreclosure by YA without notice. YA may immediately commence enforcing its rights and remedies pursuant to the Forbearance Agreement, the agreements relating to the Debt and under applicable law. However, YA has not yet notified the Company of its intention to foreclose on the assets of the Company, all of which are pledged as collateral for the Debt.
If the Company does not consummate the Sale, we expect that YA would foreclose on the Company’s assets. However, if the Sale is consummated as described in this Supplement and the net proceeds of such Sale are used to pay down the Debt, as required by the Forbearance Agreement, YA has informed us that it will not foreclose on the Company’s assets and will agree to new repayment terms with respect to the remaining portion of the Debt. The decrease in the Purchase Price, as described in this Supplement, will result in a lesser amount of the Debt being paid off by the Company.
Set forth on pages 5-9 of this Supplement is estimated unaudited pro forma consolidated financial data giving effect to the Sale but updated to reflect the adjustment in the Purchase Price described herein.
As of the date of this Supplement, no further adjustments to the Purchase Price are contemplated, except as otherwise provided herein. None of the supplemental information provided hereby alters or modifies in any way the information disclosed in the Information Statement; the information provided in this Supplement is intended only to inform Stockholders of the status of the Sale, the Purchase Agreement and all transactions contemplated thereby since the date of the Information Statement.
The parties otherwise expect to consummate the Sale, the Purchase Agreement and all transactions contemplated thereby as soon as practicable in the near future.
4
ESTIMATED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following estimated unaudited pro forma consolidated financial data gives effect to the Sale on the basis of the adjustment in the Purchase Price pursuant to the terms of the Purchase Agreement as described in this Supplement. The estimated unaudited pro forma consolidated balance sheets as of June 30, 2010 and 2011 have been prepared assuming the Sale occurred as of the beginning of each respective period. The estimated unaudited pro forma consolidated statements of operations for the years ended June 30, 2010 and 2011 have been prepared assuming that the Sale occurred as of the beginning of each respective period. The estimated unaudited pro forma consolidated financial data is presented for informational purposes only and is not necessarily indicative of the results of future operations of the Company or the actual results of operations that would have occurred had the Sale been consummated as of the dates indicated above.
The estimated unaudited pro forma consolidated financial data should be read in conjunction with the related notes in this Supplement, our audited financial statements as of and for the periods ended June 30, 2010 and 2011 contained in our Annual Report on Form 10-K for the year ended June 30, 2011.
THE PRO FORMA INFORMATION PRESENTED IS NOT NECESSARILY INDICATIVE OF THAT WHICH WOULD HAVE BEEN ATTAINED HAD THE SALE OCCURRED AT AN EARLIER DATE.
5
HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Balance Sheet
As of June 30, 2011
| Audited | Pro Forma | Pro Forma | Pro Forma | |||||||||||||||||||||||||
| June 30, 2011 | Adjustments (1) | June 30, 2011 | Adjustments (2) | June 30, 2011 | Adjustments (3) | June 30, 2011 | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Cash | $ | 2,113,324 | $ | — | $ | 2,113,324 | $ | 2,549,960 | $ | 4,663,284 | $ | — | $ | 2,113,324 | ||||||||||||||
Other current assets | 38,072 | — | 38,072 | — | 38,072 | — | 38,072 | |||||||||||||||||||||
Current assets of discontinued operations | 23,552,012 | (21,460,785 | ) | 2,091,227 | — | 2,091,227 | — | 2,091,227 | ||||||||||||||||||||
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Total current assets | 25,703,408 | (21,460,785 | ) | 4,242,623 | 2,549,960 | 6,792,583 | — | 4,242,623 | ||||||||||||||||||||
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Fixed assets of discontinued operations | 853,050 | (587,420 | ) | 265,630 | — | 265,630 | — | 265,630 | ||||||||||||||||||||
Notes receivable - related party | 449,127 | — | 449,127 | — | 449,127 | — | 449,127 | |||||||||||||||||||||
Non-current assets of discontinued operations | 6,728,807 | (7,602,729 | ) | (873,922 | ) | — | (873,922 | ) | — | (873,922 | ) | |||||||||||||||||
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Total assets | $ | 33,734,392 | $ | (29,650,934 | ) | $ | 4,083,458 | $ | 2,549,960 | $ | 6,633,418 | $ | — | $ | 4,083,458 | |||||||||||||
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Liabilities and Stockholders’ Deficit | ||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | 952,804 | $ | — | $ | 952,804 | $ | — | $ | 952,804 | $ | — | $ | 952,804 | ||||||||||||||
Current portion of long term debt - related party | 19,725,040 | — | 19,725,040 | (19,725,040 | ) | — | (17,375,000 | ) | 2,350,040 | |||||||||||||||||||
Accrued other liabilities | 166,894 | — | 166,894 | — | 166,894 | — | 166,894 | |||||||||||||||||||||
Current liabilities of discontinued operations | 14,390,292 | (10,248,728 | ) | 4,141,564 | — | 4,141,564 | — | 4,141,564 | ||||||||||||||||||||
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Total current liabilities | 35,235,030 | (10,248,728 | ) | 24,986,302 | (19,725,040 | ) | 5,261,262 | (17,375,000 | ) | 7,611,302 | ||||||||||||||||||
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Long term debt - related party, less current maturities | — | — | — | — | — | — | — | |||||||||||||||||||||
Dividends payable | 5,051,048 | — | 5,051,048 | — | 5,051,048 | — | 5,051,048 | |||||||||||||||||||||
Non-current liabilities of discontinued operations | 69,843 | — | 69,843 | — | 69,843 | — | 69,843 | |||||||||||||||||||||
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Total liabilities | 40,355,921 | (10,248,728 | ) | 30,107,193 | (19,725,040 | ) | 10,382,153 | (17,375,000 | ) | 12,732,193 | ||||||||||||||||||
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Warrants Payable - Series H Preferred Stock | 169,768 | — | 169,768 | — | 169,768 | — | 169,768 | |||||||||||||||||||||
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Stockholders’ Deficit | ||||||||||||||||||||||||||||
Homeland Security Capital Corporation stockholders’ deficit: | ||||||||||||||||||||||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 1,559,899 and 1,559,985 shares issued and outstanding, respectively | 14,153,834 | — | 14,153,834 | — | 14,153,834 | — | 14,153,834 | |||||||||||||||||||||
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 54,491,449 and 51,624,725 shares issued and 50,921,018 and 48,054,294 shares outstanding, respectively | 54,492 | — | 54,492 | — | 54,492 | — | 54,492 | |||||||||||||||||||||
Additional paid-in capital | 55,189,354 | (19,184,183 | ) | 36,005,171 | 19,184,183 | 55,189,354 | 19,184,183 | 55,189,354 | ||||||||||||||||||||
Additional paid-in capital - warrants | 272,529 | — | 272,529 | — | 272,529 | — | 272,529 | |||||||||||||||||||||
Treasury stock - 3,570,431 shares at cost | (250,000 | ) | — | (250,000 | ) | — | (250,000 | ) | — | (250,000 | ) | |||||||||||||||||
Accumulated deficit | (76,495,077 | ) | — | (76,495,077 | ) | 3,090,817 | (73,404,260 | ) | (1,809,183 | ) | (78,304,260 | ) | ||||||||||||||||
Accumulated comprehensive loss of discontinued operations | (118,215 | ) | 118,215 | — | — | — | — | — | ||||||||||||||||||||
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Total Homeland Security Capital Corporation stockholders’ deficit | (7,193,083 | ) | (19,065,968 | ) | (26,259,051 | ) | 22,275,000 | (3,984,051 | ) | 17,375,000 | (8,884,051 | ) | ||||||||||||||||
Noncontrolling interest of discontinued operations | 401,786 | (336,238 | ) | 65,548 | — | 65,548 | — | 65,548 | ||||||||||||||||||||
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Total stockholders’ deficit | (6,791,297 | ) | (19,402,206 | ) | (26,193,503 | ) | 22,275,000 | (3,918,503 | ) | 17,375,000 | (8,818,503 | ) | ||||||||||||||||
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Total liabilities and stockholders’ deficit | $ | 33,734,392 | $ | (29,650,934 | ) | $ | 4,083,458 | $ | 2,549,960 | $ | 6,633,418 | $ | — | $ | 4,083,458 | |||||||||||||
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Notes to the Pro Forma Statements:
| (1) | Assumes the sale of SEHC and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
| (2) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement and reflects the effect on the Company’s assets, liabilities and shareholders’ equity, as presented in the Information Statement filed with the Commission on, and first mailed to Stockholders as of, August 8, 2011. |
| (3) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement if the Final Net Working Capital Deficiency is the same as the Estimated Net Working Capital Deficiency, and such amount would be deducted at Closing from the Cash Consideration payable to the Company, as described in this Supplement, and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
6
HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Statements of Operations
| Audit | Pro Forma | Pro Forma | ||||||||||||||||||
| Year Ended 2011 | Adjustments (1) | June 30, 2011 | Adjustments (2) | June 30, 2011 | ||||||||||||||||
Net revenue | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
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Costs of revenue | — | — | — | — | — | |||||||||||||||
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Gross profit on revenue | — | — | — | — | — | |||||||||||||||
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Operating expenses: | ||||||||||||||||||||
Personnel | 1,270,411 | — | 1,270,411 | — | 1,270,411 | |||||||||||||||
Insurance and facility costs | 186,747 | — | 186,747 | — | 186,747 | |||||||||||||||
Travel and transportation | 34,727 | — | 34,727 | — | 34,727 | |||||||||||||||
Professional services | 1,387,237 | — | 1,387,237 | — | 1,387,237 | |||||||||||||||
Administrative costs | 68,273 | — | 68,273 | — | 68,273 | |||||||||||||||
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Total operating expenses | 2,947,395 | — | 2,947,395 | — | 2,947,395 | |||||||||||||||
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Operating loss | (2,947,395 | ) | — | (2,947,395 | ) | — | (2,947,395 | ) | ||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest expense to related party | (2,003,558 | ) | — | (2,003,558 | ) | — | (2,003,558 | ) | ||||||||||||
Impairment losses | (308,213 | ) | — | (308,213 | ) | — | (308,213 | ) | ||||||||||||
Other income | 61,774 | — | 61,774 | — | 61,774 | |||||||||||||||
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Total other expense | (2,249,997 | ) | — | (2,249,997 | ) | — | (2,249,997 | ) | ||||||||||||
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Loss from continuing operations before income taxes | (5,197,392 | ) | — | (5,197,392 | ) | — | (5,197,392 | ) | ||||||||||||
Income tax | — | — | — | — | — | |||||||||||||||
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Loss from continuing operations | (5,197,392 | ) | — | (5,197,392 | ) | — | (5,197,392 | ) | ||||||||||||
Income from discontinued operations, net of tax | 1,208,009 | 2,772,079 | 3,980,088 | (2,127,921 | ) | (919,912 | ) | |||||||||||||
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Net (loss) income | (3,989,383 | ) | 2,772,079 | (1,217,304 | ) | (2,127,921 | ) | (6,117,304 | ) | |||||||||||
Less: Net loss attributable to noncontrolling interests | (395,732 | ) | 318,738 | (76,994 | ) | 318,738 | (76,994 | ) | ||||||||||||
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Net (loss) income attributable to Homeland | ||||||||||||||||||||
Security Capital Corporation stockholders | (4,385,115 | ) | 3,090,817 | (1,294,298 | ) | (1,809,183 | ) | (6,194,298 | ) | |||||||||||
Less preferred dividends and other beneficial conversion features associated with preferred stock issuance | (1,600,733 | ) | — | (1,600,733 | ) | — | (1,600,733 | ) | ||||||||||||
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Net (loss) income attributable to common stockholders of Homeland Security Capital Corporation | $ | (5,985,848 | ) | $ | 3,090,817 | $ | (2,895,031 | ) | $ | (1,809,183 | ) | $ | (7,795,031 | ) | ||||||
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(Loss) income per common share attributable to Homeland | ||||||||||||||||||||
Security Capital Corporation stockholders - basic and diluted | ||||||||||||||||||||
Basic - continuing operations | $ | (0.10 | ) | $ | (0.10 | ) | $ | (0.10 | ) | |||||||||||
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Diluted - continuing operations | $ | (0.10 | ) | $ | (0.10 | ) | $ | (0.10 | ) | |||||||||||
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Basic - discontinued operations | $ | 0.02 | $ | 0.07 | $ | (0.02 | ) | |||||||||||||
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Diluted - discontinued operations | $ | 0.02 | $ | 0.07 | $ | (0.02 | ) | |||||||||||||
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Weighted average shares outstanding - | 53,870,980 | 53,870,980 | 53,870,980 | |||||||||||||||||
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Diluted | 53,870,980 | 53,870,980 | 53,870,980 | |||||||||||||||||
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|
|
|
|
| |||||||||||||||
Notes to the Pro Forma Statements:
| (1) | Assumes the sale of SEHC and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
| (2) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement and reflects the effect on the Company’s assets, liabilities and shareholders’ equity, as presented in the Information Statement filed with the Commission on, and first mailed to Stockholders as of, August 8, 2011. |
| (3) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement if the Final Net Working Capital Deficiency is the same as the Estimated Net Working Capital Deficiency, and such amount would be deducted at Closing from the Cash Consideration payable to the Company, as described in this Supplement, and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
7
HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Balance Sheet
As of June 30, 2010
| Audited | Pro Forma | Pro Forma | Pro Forma | |||||||||||||||||||||||||
| June 30 2010 | Adjustments (1) | June 30, 2010 | Adjustments (2) | June 30, 2010 | Adjustments (3) | June 30, 2010 | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Cash | $ | 220,944 | $ | — | $ | 220,944 | $ | 4,019,110 | $ | 4,240,054 | $ | — | $ | 220,944 | ||||||||||||||
Other current assets | 22,332 | — | 22,332 | — | 22,332 | — | 22,332 | |||||||||||||||||||||
Current assets of discontinued operations | 28,460,475 | (24,591,619 | ) | 3,868,856 | — | 3,868,856 | — | 3,868,856 | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total current assets | 28,703,751 | (24,591,619 | ) | 4,112,132 | 4,019,110 | 8,131,242 | — | 4,112,132 | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Fixed assets of discontinued operations | 1,129,885 | (851,932 | ) | 277,953 | — | 277,953 | — | 277,953 | ||||||||||||||||||||
Notes receivable - related party | 430,627 | — | 430,627 | — | 430,627 | — | 430,627 | |||||||||||||||||||||
Securities available for sale | 110,826 | — | 110,826 | — | 110,826 | — | 110,826 | |||||||||||||||||||||
Other non-current assets | 45,003 | — | 45,003 | — | 45,003 | — | 45,003 | |||||||||||||||||||||
Non-current assets of discontinued operations | 7,050,292 | (7,924,214 | ) | (873,922 | ) | — | (873,922 | ) | — | (873,922 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total assets | $ | 37,470,384 | $ | (33,367,765 | ) | $ | 4,102,619 | $ | 4,019,110 | $ | 8,121,729 | $ | — | $ | 4,102,619 | |||||||||||||
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|
|
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| |||||||||||||||
Liabilities and Stockholders’ Deficit | ||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | 289,000 | $ | — | $ | 289,000 | $ | — | $ | 289,000 | $ | — | $ | 289,000 | ||||||||||||||
Current portion of long term debt - related party | 500,000 | — | 500,000 | (500,000 | ) | — | (500,000 | ) | — | |||||||||||||||||||
Accrued other liabilities | 167,273 | — | 167,273 | — | 167,273 | — | 167,273 | |||||||||||||||||||||
Current liabilities of discontinued operations | 14,810,313 | (13,665,135 | ) | 1,145,178 | — | 1,145,178 | — | 1,145,178 | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total current liabilities | 15,766,586 | (13,665,135 | ) | 2,101,451 | (500,000 | ) | 1,601,451 | (500,000 | ) | 1,601,451 | ||||||||||||||||||
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|
|
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|
|
|
|
|
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| |||||||||||||||
Long term debt - related party, less current maturities | 17,755,890 | — | 17,755,890 | (17,755,890 | ) | — | (16,875,000 | ) | 880,890 | |||||||||||||||||||
Dividends payable | 3,464,934 | — | 3,464,934 | — | 3,464,934 | — | 3,464,934 | |||||||||||||||||||||
Non-current liabilities of discontinued operations | 1,372,416 | — | 1,372,416 | — | 1,372,416 | — | 1,372,416 | |||||||||||||||||||||
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|
|
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|
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|
|
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|
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| |||||||||||||||
Total liabilities | 38,359,826 | (13,665,135 | ) | 24,694,691 | (18,255,890 | ) | 6,438,801 | (17,375,000 | ) | 7,319,691 | ||||||||||||||||||
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|
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| |||||||||||||||
Warrants Payable - Series H Preferred Stock | 169,768 | — | 169,768 | — | 169,768 | — | 169,768 | |||||||||||||||||||||
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| |||||||||||||||
Stockholders’ Deficit Homeland Security Capital Corporation stockholders’ deficit: | ||||||||||||||||||||||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, | ||||||||||||||||||||||||||||
1,559,899 and 1,559,985 shares issued and outstanding, respectively | 14,225,110 | — | 14,225,110 | — | 14,225,110 | — | 14,225,110 | |||||||||||||||||||||
Common stock, $0.001 par value, 2,000,000,000 shares authorized, | ||||||||||||||||||||||||||||
54,491,449 and 51,624,725 shares issued and | ||||||||||||||||||||||||||||
50,921,018 and 48,054,294 shares outstanding, respectively | 51,625 | — | 51,625 | — | 51,625 | — | 51,625 | |||||||||||||||||||||
Additional paid-in capital | 55,297,972 | (19,515,160 | ) | 35,782,812 | 19,515,160 | 55,297,972 | 19,515,160 | 55,297,972 | ||||||||||||||||||||
Additional paid-in capital - warrants | 272,529 | — | 272,529 | — | 272,529 | — | 272,529 | |||||||||||||||||||||
Treasury stock - 3,570,431 shares at cost | (250,000 | ) | — | (250,000 | ) | — | (250,000 | ) | — | (250,000 | ) | |||||||||||||||||
Accumulated deficit | (70,509,228 | ) | — | (70,509,228 | ) | 2,759,840 | (67,749,388 | ) | (2,140,160 | ) | (72,649,388 | ) | ||||||||||||||||
Accumulated comprehensive loss | (152,385 | ) | — | (152,385 | ) | — | (152,385 | ) | — | (152,385 | ) | |||||||||||||||||
Accumulated comprehensive loss of discontinued operations | (148,768 | ) | 148,768 | — | — | — | — | — | ||||||||||||||||||||
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|
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|
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|
|
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|
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| |||||||||||||||
Total Homeland Security Capital Corporation stockholders’ deficit | (1,213,145 | ) | (19,366,392 | ) | (20,579,537 | ) | 22,275,000 | 1,695,463 | 17,375,000 | (3,204,537 | ) | |||||||||||||||||
Noncontrolling interest of discontinued operations | 153,935 | (336,238 | ) | (182,303 | ) | — | (182,303 | ) | — | (182,303 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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| |||||||||||||||
Total stockholders’ deficit | (1,059,210 | ) | (19,702,630 | ) | (20,761,840 | ) | 22,275,000 | 1,513,160 | 17,375,000 | (3,386,840 | ) | |||||||||||||||||
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|
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total liabilities and stockholders’ deficit | $ | 37,470,384 | $ | (33,367,765 | ) | $ | 4,102,619 | $ | 4,019,110 | $ | 8,121,729 | $ | — | $ | 4,102,619 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Notes to the Pro Forma Statements:
| (1) | Assumes the sale of SEHC and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
| (2) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement and reflects the effect on the Company’s assets, liabilities and shareholders’ equity, as presented in the Information Statement filed with the Commission on, and first mailed to Stockholders as of, August 8, 2011. |
| (3) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement if the Final Net Working Capital Deficiency is the same as the Estimated Net Working Capital Deficiency, and such amount would be deducted at Closing from the Cash Consideration payable to the Company, as described in this Supplement, and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
8
HOMELAND SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Statements of Operations
| Audit | Pro Forma | Pro Forma | ||||||||||||||||||
| Year Ended 2010 | Adjustments (1) | June 30, 2010 | Adjustments (2) | June 30, 2010 | ||||||||||||||||
Net revenue | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
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| |||||||||||
Costs of revenue | — | — | — | — | — | |||||||||||||||
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| |||||||||||
Gross profit on revenue | — | — | — | — | — | |||||||||||||||
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|
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| |||||||||||
Operating expenses: | ||||||||||||||||||||
Personnel | 1,774,622 | — | 1,774,622 | — | 1,774,622 | |||||||||||||||
Insurance and facility costs | 102,731 | — | 102,731 | — | 102,731 | |||||||||||||||
Travel and transportation | 34,122 | — | 34,122 | — | 34,122 | |||||||||||||||
Professional services | 568,628 | — | 568,628 | — | 568,628 | |||||||||||||||
Administrative costs | — | — | — | — | — | |||||||||||||||
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|
|
|
|
|
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|
|
| |||||||||||
Total operating expenses | 2,480,103 | — | 2,480,103 | — | 2,480,103 | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Operating loss | (2,480,103 | ) | — | (2,480,103 | ) | — | (2,480,103 | ) | ||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest expense to related party | (1,877,204 | ) | — | (1,877,204 | ) | — | (1,877,204 | ) | ||||||||||||
Amortization of debt discounts and offering costs | (369,736 | ) | — | (369,736 | ) | — | (369,736 | ) | ||||||||||||
Impairment losses | (104,997 | ) | — | (104,997 | ) | — | (104,997 | ) | ||||||||||||
Other income | 60,933 | — | 60,933 | — | 60,933 | |||||||||||||||
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|
|
|
|
|
|
|
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| |||||||||||
Total other expense | (2,291,004 | ) | — | (2,291,004 | ) | — | (2,291,004 | ) | ||||||||||||
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|
|
|
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| |||||||||||
Loss from continuing operations before income taxes | (4,771,107 | ) | — | (4,771,107 | ) | — | (4,771,107 | ) | ||||||||||||
Income tax | — | — | — | — | — | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Loss from continuing operations | (4,771,107 | ) | — | (4,771,107 | ) | — | (4,771,107 | ) | ||||||||||||
Income from discontinued operations, net of tax | 6,814,464 | 2,622,460 | 9,436,924 | (2,277,540 | ) | 4,536,924 | ||||||||||||||
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|
|
|
|
|
|
|
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| |||||||||||
Net (loss) income | 2,043,357 | 2,622,460 | 4,665,817 | (2,277,540 | ) | (234,183 | ) | |||||||||||||
Less: Net loss attributable to noncontrolling interests | (124,484 | ) | 137,380 | 12,896 | 137,380 | 12,896 | ||||||||||||||
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| |||||||||||
Net (loss) income attributable to Homeland | ||||||||||||||||||||
Security Capital Corporation stockholders | 1,918,873 | 2,759,840 | 4,678,713 | (2,140,160 | ) | (221,287 | ) | |||||||||||||
Less preferred dividends and other beneficial conversion features associated with preferred stock issuance | (1,610,551 | ) | — | (1,610,551 | ) | — | (1,610,551 | ) | ||||||||||||
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|
|
|
|
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|
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| |||||||||||
Net (loss) income attributable to common stockholders of Homeland Security Capital Corporation | $ | 308,322 | $ | 2,759,840 | $ | 3,068,162 | $ | (2,140,160 | ) | $ | (1,831,838 | ) | ||||||||
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| |||||||||||
(Loss) income per common share attributable to Homeland Security Capital Corporation stockholders - basic and diluted | ||||||||||||||||||||
Basic - continuing operations | $ | 0.01 | $ | 0.06 | $ | (0.04 | ) | |||||||||||||
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| |||||||||||||||
Diluted - continuing operations | $ | 0.00 | $ | 0.00 | $ | (0.04 | ) | |||||||||||||
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|
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| |||||||||||||||
Basic - discontinued operations | $ | 0.13 | $ | 0.18 | $ | 0.09 | ||||||||||||||
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|
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| |||||||||||||||
Diluted - discontinued operations | $ | 0.01 | $ | 0.01 | $ | 0.09 | ||||||||||||||
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| |||||||||||||||
Weighted average shares outstanding - | 51,291,270 | 51,291,270 | 51,291,270 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Diluted | 699,666,666 | 699,666,666 | 51,291,270 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Notes to the Pro Forma Statements:
| (1) | Assumes the sale of SEHC and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
| (2) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement and reflects the effect on the Company’s assets, liabilities and shareholders’ equity, as presented in the Information Statement filed with the Commission on, and first mailed to Stockholders as of, August 8, 2011. |
| (3) | Assumes the sale of SEHC under the terms of the Stock Purchase Agreement if the Final Net Working Capital Deficiency is the same as the Estimated Net Working Capital Deficiency, and such amount would be deducted at Closing from the Cash Consideration payable to the Company, as described in this Supplement, and reflects the effect on the Company’s assets, liabilities and shareholders’ equity. |
9
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the SEC. Accordingly, we are required to file reports with the SEC including annual reports, quarterly reports, current reports and other reports as required by SEC rules. All reports that we file electronically with the SEC are available for viewing free of charge over the Internet via the SEC’s EDGAR system at http://www.sec.gov. We will provide without charge to each person who received a copy of the Information Statement and this Supplement, upon written or oral request, a copy of any information that is incorporated by reference in this Information Statement. Requests should be directed to Homeland Security Capital Corporation, Attention: Secretary at 4601 Fairfax Road, Suite 1200, Arlington, VA 22203, telephone number (703) 528-7073. For further information about us, you may read and copy any reports, statements and other information filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0102. You may obtain further information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
* * *
10
