**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-QSB**




(MARK
      ONE)




x Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act
      of
      1934




For
      the
      quarterly period ended June 30, 2007




o Transition report under Section 13 or 15(d) of the Securities Exchange Act
      of
      1934




For
      the
      transition period from _______ to _______.




*Commission
      file number*


814-00631





**HOMELAND
      SECURITY CAPITAL CORPORATION**


(Name
      of
      small business issuer in its charter)





Delaware
            
            59-2050585(State
                or Other Jurisdiction of Incorporation
            
            (I.R.S.
                Employer Identification No.)or
                Organization)1005
                Glebe Road, Suite 550Arlington,
                VA
            
            22201(Address
                of principal executive offices)
            
            (Zip
                code)





(703)
      528-7073


(Issuer's
      Telephone Number, Including Area Code)




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes o No x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o No x




**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**




Check
      whether the registrant filed all documents and reports required to be filed
      by
      Sections 12, 13 or 15(d) of the Exchange Act subsequent to the distribution
      of
      securities under a plan confirmed by a court. o Yes o No




**APPLICABLE
      ONLY TO C**  **ORPORATE
      ISSUERS:**




Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date:




There
      were 41,755,250 par value $.001 per share, shares of common stock outstanding
      as
      of August 15, 2007.




Transitional
      Small Business Disclosure Format: Yes o No x
















**PART
      I**




**FINANCIAL
      INFORMATION**




**ITEM
      1. FINANCIAL STATEMENTS**




The
      accompanying interim condensed consolidated financial statements and notes
      to
      the consolidated financial statements for the interim periods as of June 30,
      2007 and for the three and six month periods ended June 30, 2007 and 2006,
      are
      unaudited. The accompanying interim unaudited financial statements have been
      prepared by the Company in accordance with accounting principles generally
      accepted in the United States for interim financial statements and pursuant
      to
      the requirements for reporting on Form 10-QSB and Article 10 of Regulation
      S-B.
      Accordingly, these interim unaudited financial statements do not include all
      the
      information and footnotes required by generally accepted accounting principles
      for complete financial statements. In the opinion of management, all adjustments
      (consisting of normal recurring adjustments) considered necessary for a fair
      presentation have been included. Operating results for the three and six month
      periods ended June 30, 2007, are not necessarily indicative of the results
      that
      may be expected for the year ending December 31, 2007. The condensed
      consolidated financial statements should be read in conjunction with the
      financial statements and notes thereto included in the Form 10-KSB/A of the
      Company as of and for the year ended December 31, 2006. In 2007, the Company
      has
      separately disclosed the operating, investing and financing portions of the
      cash
      flows attributable to its discontinued operations, which in prior periods were
      reported on a combined basis. Additionally, certain June 30, 2006 balances
      have
      been reclassified to conform to the June 30, 2007 financial statement
      presentation.









HOMELAND
                  SECURITY CAPITAL CORPORATION AND SUBSIDIARIESConsolidated
                  Balance Sheet (Unaudited)
  Assets
              
              
              June
                  30, 2007Cash
              
              $
              701,417Accounts
                  receivable - net
              
              
              5,287,186Inventories
              
              
              -Cost
                  in excess of billings on uncompleted contracts
              
              
              353,213Product
                  sales component assets held for sale
              
              
              1,602,530Other
                  current assets
              
              
              127,067Total
                  current assets
              
              
              8,071,413Fixed
                  assets, net
              
              
              289,448Deferred
                  financing costs - net
              
              
              960,658Notes
                  receivable - related party
              
              
              500,000-Total
                  assets
              
              $
              9,821,519Liabilities
                  and Stockholders' Equity (Deficit)Current
                  liabilitiesAccounts
                  payable
              
              $
              2,709,131Billings
                  in excess of costs on uncompleted contracts
              
              
              406,556Current
                  portion of long term debt
              
              
              46,337Notes
                  payable
              
              
              419,200Derivative
                  liability
              
              
              8,768,369Accrued
                  interest and other liabilities
              
              
              238,558Liabilities
                  of product sales component held for resale
              
              
              1,496,312Total
                  current liabilities
              
              
              14,084,463Long
                  term debtConvertible
                  debentures - related party, net of $5,689,624 discount
              
              
              5,060,376Long
                  term debt
              
              
              181,723Total
                  long term debt
              
              
              5,242,099Total
                  liabilities
              
              
              19,326,562Stockholders'
                  Equity (Deficit)Preferred
                  stock, $0.01 par value, 3,000,000 shares authorized,2,000,000
                  shares issued and outstandingPreferred
                  stock Series F
              
              
              100,000Preferred
                  stock Series G
              
              
              100,000Common
                  stock, $0.001 par value, 200,000,000 shares authorized,41,755,250
                  issued and outstanding
              
              
              41,755Additional
                  paid-in capital
              
              
              47,035,627Accumulated
                  deficit
              
              
              (56,782,425
              )Total
                  stockholders' equity (deficit)
              
              
              (9,505,043
              )Total
                  liabilities and stockholders' equity (deficit)
              
              $
              9,821,519
  The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.







F-3


HOMELAND
                  SECURITY CAPITAL CORPORATION AND SUBSIDIARIESConsolidated
                  Statements of Operations (Unaudited)
  Three
                  Months Ended June 30, 2007
              
              
              Three
                  Months Ended June 30, 2006
              
              
              Six
                  Months Ended June 30, 2007
              
              
              Six
                  Months Ended June 30, 2006Sales
              
              $
              3,899,699
              
              $
              2,053,707
              
              $
              6,285,087
              
              $
              2,741,737Cost
                  of salesMaterials
              
              
              2,714,379
              
              
              888,314
              
              
              4,091,868
              
              
              1,392,287Labor
              
              
              504,306
              
              
              278,001
              
              
              764,344
              
              
              539,099Other
              
              
              -
              
              
              -
              
              
              -
              
              
              -Total
                  cost of sales
              
              
              3,218,685
              
              
              1,166,315
              
              
              4,856,212
              
              
              1,931,386Gross
                  profit (deficit) on sales
              
              
              681,014
              
              
              887,392
              
              
              1,428,875
              
              
              810,351Operating
                  expensesMarketing
              
              
              8,246
              
              
              6,684
              
              
              16,648
              
              
              11,271Personnel
              
              
              745,748
              
              
              775,713
              
              
              1,430,164
              
              
              1,406,437Insurance
                  and facility costs
              
              
              115,325
              
              
              191,930
              
              
              215,099
              
              
              204,011Travel
                  and transportation
              
              
              76,488
              
              
              72,030
              
              
              136,574
              
              
              106,935Other
                  operating costs
              
              
              35,520
              
              
              -
              
              
              70,040
              
              
              -Depreciation
                  and amortization
              
              
              19,188
              
              
              18,765
              
              
              36,699
              
              
              21,065Professional
                  services
              
              
              200,940
              
              
              123,480
              
              
              419,788
              
              
              422,747Administrative
                  costs
              
              
              4,576
              
              
              85,033
              
              
              45,835
              
              
              157,500Total
                  operating expenses
              
              
              1,206,031
              
              
              1,273,635
              
              
              2,370,847
              
              
              2,329,966Operating
                  loss
              
              
              (525,017
              )
              
              (386,243
              )
              
              (941,972
              )
              
              (1,519,615
              )Other
                  income (expense)Interest
                  expense
              
              
              (218,425
              )
              
              (51,934
              )
              
              (323,611
              )
              
              (90,535
              )Amortization
                  of debt discounts
              
              
              (534,083
              )
              
              (290,000
              )
              
              (1,003,276
              )
              
              (483,333
              )Amortization
                  of debt offering costs
              
              
              (98,669
              )
              
              (43,332
              )
              
              (189,490
              )
              
              (72,220
              )Adjustment
                  of fair value of derivative liability
              
              
              552,365
              
              
              1,234,899
              
              
              (155,710
              )
              
              805,077Settlement
                  of debt
              
              
              25,000
              
              
              13,276
              
              
              51,261
              
              
              13,276Other
                  income (expense)
              
              
              2,495
              
              
              5,761
              
              
              7,407
              
              
              15,554Total
                  other income (expense)
              
              
              (271,317
              )
              
              868,670
              
              
              (1,613,419
              )
              
              187,819Income
                  (loss) from continuing operations
              
              
              (796,334
              )
              
              482,427
              
              
              (2,555,391
              )
              
              (1,331,796
              )Loss
                  from discontinued operations
              
              
              (1,397,052
              )
              
              -
              
              
              (1,959,218
              )
              
              -Net
                  loss attributable to common stockholders
              
              $
              (2,193,386
              )
              $
              482,427
              
              $
              (4,514,609
              )
              $
              (1,331,796
              )Loss
                  per common share, basic and dilutedIncome/(loss)
                  per share from continuing operations
              
              $
              (0.02
              )
              $
              0.01
              
              $
              (0.06
              )
              $
              (0.03
              )Loss
                  per share from discontinued operations
              
              
              (0.03
              )
              
              -
              
              
              (0.05
              )
              
              -Net
                  loss per common share attributableto
                  common stockholders
              
              $
              (0.05
              )
              $
              0.01
              
              $
              (0.11
              )
              $
              (0.03
              )Weighted
                  average shares outstanding -basic
                  and diluted
              
              
              41,755,250
              
              
              41,441,791
              
              
              41,755,250
              
              
              41,678,589
  The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.




F-4


HOMELAND
                  SECURITY CAPITAL CORPORATION AND SUBSIDIARIESConsolidated
                  Statements of Cash Flows (Unaudited)
  Six
                  Months Ended June 30, 2007
              
              
              Six
                  Months Ended June 30, 2006Cash
                  flows from operating activities:Net
                  loss
              
              $
              (4,514,609
              )
              $
              (1,331,796
              )Adjustments
                  to reconcile net loss to netcash
                  used in operating activities:Settlement
                  of debt
              
              
              (51,261
              )
              
              (11,514
              )Stock
                  issued for payment of expenses
              
              
              181,151
              
              
              271,216Depreciation
                  and amortization
              
              
              36,699
              
              
              21,065Write
                  off goodwill
              
              
              582,470
              
              
              -Amortization
                  of debt discount
              
              
              1,003,277
              
              
              (321,744
              )Amortization
                  of debt offering costs
              
              
              189,490
              
              
              72,220Valuation
                  losses for changes in derivative liability
              
              
              155,710
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  Receivable
              
              
              (1,379,273
              )
              
              (3,277,316
              )Inventories
              
              
              -
              
              
              (52,776
              )Costs
                  in excess of billings on uncompleted contracts
              
              
              (87,241
              )
              
              -Other
                  assets
              
              
              (12,885
              )
              
              (670,373
              )Accounts
                  payable
              
              
              589,244
              
              
              723,050Accrued
                  liabilities
              
              
              98,284
              
              
              76,413Billings
                  in excess of costs on uncompleted contracts
              
              
              (94,525
              )
              
              653,312Net
                  assets of discontinued operations
              
              
              745,271
              
              
              -Net
                  cash used in operating activities
              
              
              (2,558,198
              )
              
              (3,848,243
              )Cash
                  flows from investing activities:Purchase
                  of fixed assets
              
              
              (82,574
              )
              
              (202,991
              )Increase
                  in other assets
              
              
              -
              
              
              25,724Increase
                  in notes receivable - related party
              
              
              (500,000
              )
              
              -Investing
                  activity from discontinued operations
              
              
              55,434
              
              
              -Net
                  cash used in investing activities
              
              
              (527,140
              )
              
              (177,267
              )Cash
                  flows from financing activities:Proceeds
                  from convertible debentures - related party
              
              
              2,750,000
              
              
              4,000,000Cost
                  of convertible debentures - related party
              
              
              (282,486
              )
              
              (430,000
              )Conversion
                  of convertible debentures
              
              
              -
              
              
              (222,500
              )Common
                  stock issued for convertible debentures
              
              
              -
              
              
              230,229Proceeds
                  from term debt
              
              
              480,128
              
              
              -Financing
                  activity from discontinued operations
              
              
              62,974
              
              
              -Net
                  cash provided by financing activities
              
              
              3,010,616
              
              
              3,577,729Net
                  increase (decrease) in cash
              
              
              (74,722
              )
              
              (447,781
              )Cash,
                  beginning of period
              
              
              776,139
              
              
              1,094,061Cash,
                  end of period
              
              $
              701,417
              
              $
              646,280Cash
                  paid for:Interest
              
              $
              351,388
              
              $
              17,410Taxes
              
              $
              -
              
              $
              -
  The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.




F-5


HOMELAND
                  SECURITY CAPITAL CORPORATION AND SUBSIDIARIESConsolidated
                  Statements of Changes in Stockholders' Equity (Deficit)For
                  the six months ended June 30, 2007
  Additional
              
              
              
              
              
              TotalPreferred
              
              
              Common
                  Stock
              
              
              Paid-In
              
              
              Accumulated
              
              
              Stockholders'Stock
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              (Deficit)Balance,
                  December 31, 2006
              
              
              200,000
              
              
              41,755,250
              
              
              41,755
              
              
              46,854,476
              
              
              (52,267,816
              )
              
              (5,171,585
              )Value
                  of vested stock options (Unaudited)
              
              
              
              
              
              
              
              
              
              
              
              181,151
              
              
              
              
              
              181,151Net
                  loss (Unaudited)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,514,609
              )
              
              (4,514,609
              )Balance,
                  June 30, 2007 (Unaudited)
              
              $
              200,000
              
              
              41,755,250
              
              $
              41,755
              
              $
              47,035,627
              
              $
              (56,782,425
              )
              $
              (9,505,043
              )
     Note:
                  The above amounts for shares of common stock, amount of common
                  stock and
                  additional paid in capital have been restated from previousreports
                  due to the retroactive application of the stockholder approved
                  1 for 100
                  reverse stock split as further described in Note 6 of the notes
                  tothe
                  condensed consolidated financial statements.
    The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.




F-6




**HOMELAND
      SECURITY CAPITAL CORPORATION**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


(UNAUDITED)




JUNE
      30,
      2007




**Overview**




Homeland
      Security Capital Corporation (the "Company" or "HSCC"), a Delaware corporation,
      is a consolidator in the fragmented homeland security industry. The Company
      is
      focused on long-term value by taking controlling interests in and developing
      its
      subsidiary companies through superior operations and management. The Company
      is
      involved in the acquisition and management of businesses that provide homeland
      security product and service solutions and will grow organically and through
      acquisitions. The targets are emerging companies that are generating revenues
      from promising security products and services but face challenges in scaling
      their businesses to capitalize on the opportunities in the homeland security
      industry. Prior to changing its focus, the Company was a closed-end management
      investment company. However, at its stockholders' meeting on December 30, 2005,
      the Company approved the withdrawal of the Company's election as a business
      development company and the Company changed its focus to the homeland security
      industry.





**1.
      Presentation of Unaudited Interim Financial Statements**





The
      accompanying interim condensed financial statements are unaudited, but in the
      opinion of management of the Company, contain all adjustments, which include
      normal recurring adjustments, necessary to present fairly the financial position
      at June 30, 2007, the results of operations for the three and six months ended
      June 30, 2007 and 2006, and cash flows for the six months ended June 30, 2007
      and 2006.





The
      Company was incorporated in 1997. From its inception until June 2003, the
      Company was engaged the manufacture of set top boxes and digital video servers
      for interactive television and high speed internet networks. In June 2003 the
      Company elected to become a business development company (“BDC”), to be
      regulated pursuant to Section 54 of the Investment Company Act of 1940, as
      amended. On December 30, 2005 the stockholders of the Company voted to amend
      the
      Certificate of Incorporation of the Company to change the name to Homeland
      Security Capital Corporation and to withdraw the Company’s election as a BDC.
      Accordingly, the Company changed its business plan to primarily seek acquisition
      of and joint ventures with companies that provide homeland security products
      and
      services.




On
      February 7, 2006, the Company organized Nexus Technologies Group, Inc. (“Nexus”)
      and purchased $3,400,000 of Nexus’ convertible preferred stock. Simultaneously
      Nexus acquired 100% of the common stock of Corporate Security Solutions, a
      security integration firm, with a strong presence in the Mid-Atlantic region
      with a focus on the New York City market. At June 30, 2007, the Company owned
      approximately 93% of the outstanding capital stock of Nexus.




On
      August
      21, 2006, the Company organized Security Holding Corp. (“SHC”) and purchased
      $3,000,000 of SHC’s convertible preferred stock. Simultaneously SHC acquired
      100% of the outstanding stock of Security Holdings Enterprises, Inc. (“SHEI”).
      SHEI owned 100% of the outstanding equity of three subsidiaries. SHEI merged
      with SHC, with SHC remaining as the surviving corporate entity. SHC, through
      its
      subsidiaries has been involved in RFID technology, enterprise security software
      systems, access control devices and secure internet portals. At June 30, 2007,
      the Company owned approximately 69% of the outstanding capital stock of SHC.
      In
      August 2006, SHC acquired the assets of Compass Technologies, Inc for $500,000
      in cash. As further described in Note 7, the Company has agreed to sell its
      ownership interest in SHC and discontinue operations in the RFID, access control
      and security software components of the business.





On
      September 15, 2006, the Company formed Polimatrix (“PMX”) and on September 18,
      2006 entered into a U.S.-based joint venture with Polimaster, Inc., a company
      involved in the field of radiological detection and isotope identification.
      At
      June 30, 2007, the Company owned 51% of PMX.




The
      Company, in each case, owns a majority of the outstanding capital stock of
      its
      subsidiaries, controls each of the subsidiary boards of directors and provides
      an extensive advisory services to the subsidiaries. Accordingly, the Company
      believes it exercises sufficient control over the operations and financial
      results of each company and consolidates the results of operations, eliminating
      minority interests when such minority interests have a basis in the consolidated
      entity.





7




**2.
      Minority Interest in Secure America Acquisition Corporation**





The
      Company has indirectly acquired a minority equity interest in Secure America
      Acquisition Corporation (“SAAC”). SAAC is a blank check company formed for the
      purpose of acquiring one or more operating businesses in the homeland security
      industry. On June 1, 2007, the Company loaned $500,000 to Secure America
      Acquisition Holdings, LLC, the principal initial stockholder of SAAC, pursuant
      to an unsecured promissory note (the “SAAH Note”). The SAAH Note has a maturity
      date of May 31, 2011 and bears interest at a rate of 5% per annum. All principle
      and accrued interest on the SAAH note is due upon maturity. The obligations
      of
      SAAH under the SAAH Note have been guaranteed by C. Thomas McMillen, our
      President, Chief Executive Officer and Chairman. As consideration for the
      issuance of the SAAH Note, the Company received 250,000 membership interests
      in
      SAAH (the “SAAH Interests”) which equals approximately 10.59% of SAAH. Through
      its membership interests in SAAH, the Company is deemed to currently
      beneficially own approximately 10.0% of the outstanding capital stock of SAAC
      and is entitled to receive 250,000 shares of common stock in SAAC. Investment
      and voting rights of SAAH are controlled by C. Thomas McMillen (the Company’s
      President, Chief Executive Officer and Chairman) and Harvey Weiss.





In
      addition to the Company’s ownership in SAAH, Mr. McMillen, our President, Chief
      Executive Officer and Chairman, owns approximately 1,322,000 membership
      interests in SAAH, or approximately 56.01%, Mr. Brigante, our Chief Financial
      Officer, owns approximately 70,000 membership interests in SAAH, or
      approximately 2.98%, Mr. McNeill, our Director, owns approximately 50,000
      membership interests in SAAH, or approximately 2.12% and Mr. Griffin, our
      Director, owns approximately 25,000 membership interests in SAAH, or
      approximately 1.06%.





On
      June
      25, 2007, SAAC filed a registration statement (the “Registration Statement”)
      with the Securities Exchange Commission relating to an initial public offering
      (the “Offering”) of 10,000,000 units, each unit comprised of one common share
      and one warrant to purchase a common share, priced at $8.00/unit. SAAH, has
      agreed to purchase, in a private placement that will occur immediately prior
      to
      SAAC’s Offering, 1,525,000 warrants, or founder warrants, at a purchase price of
      $1.00 per warrant. Each founder warrant purchased in the private placement
      entitles the holder to purchase one share of SAAC common stock at a purchase
      price of $6.00 per share.





The
      Company has also entered into an agreement (the “SAAC Agreement”) with SAAC to
      receive a monthly fee of up to $7,500 for providing SAAC with office space
      and
      certain office and administrative services. The SAAC Agreement will become
      effective upon the effectiveness of the Registration Statement with the
      Securities and Exchange Commission. Certain employees of the Company will
      perform required services pursuant to the SAAC Agreement.





Pursuant
      to a promissory note, SAAH has advanced SAAC $150,000 to date to cover expenses
      related to the Offering. Such loan will be payable without interest on the
      earlier of (1) June 4, 2008 or (2) the date of the Offering of SAAC. SAAC
      intends to repay this loan from the available proceeds of its initial public
      offering.




**3.
      Share-Based Compensation**





In
      2005,
      the Company issued to directors and an officer of the Company options to
      purchase 7,960,000 shares of common stock par value $0.001 per share (the
      "Common Stock") in the future. In February 2006, the Company issued 600,000
      options to a contractor and 100,000 options to an employee of the Company to
      purchase shares of Common Stock of the Company in the future. In July 2006,
      the
      Company issued 850,000 options to two employees to purchase shares of Common
      Stock of the Company in the future. Of these options, 100,000 were forfeited.
      In
      December 2006, the Company issued 250,000 options to an employee to purchase
      shares in future years. On May 10, 2007, the Company modified the terms of
      519,210 of the options for an employee attaining the position of Chief Financial
      Officer. Also, on May 10, 2007 a director resigned forfeiting 240,000 options
      and on May 16, 2007 a new director was approved and granted 720,000 options,
      vesting at 90,000 per quarter for eight quarters.




8




Of
      the
      options granted in 2005, 2006 and 2007, options to purchase 763,713 shares
      of
      Common Stock vested during the six month period ended June 30, 2007 and the
      Company recorded $110,568 as compensation expense related to the vesting of
      these options. During the six month period ended June 30, 2006, options to
      purchase 2,908,333 shares of Common Stock vested and the Company recorded
      $271,217 as compensation expense related to the vesting of these
      options.





The
      following table reflects options outstanding at the beginning of 2005, 2006
      and
      2007; options granted during 2005, 2006 and January 1, 2007 through June 30,
      2007; options exercised during 2005, 2006 and January 1, 2007 through June
      30,
      2007; options forfeited during 2005, 2006 and January 1, 2007 through June
      30,
      2007; options outstanding at December 31, 2005, December 31, 2006 and June
      30,
      2007; and options exercisable at December 31, 2005, December 31, 2006 and June
      30, 2007, along with their weighted average exercise price:


June
                  2007
              
              December
                  2006
              
              December
                  2005Options
              
              Weighted
                Average
                Exercise
                Price
              
              Options
              
              Weighted
                Average
                Exercise
                Price
              
              Options
              
              Weighted
                Average
                Exercise
                PriceOutstanding
                  at beginning of Period
              
              
              9,660,000
              
              $
              0.098
              
              
              7,960,000
              
              $
              0.096
              
              
              -
              
              $
              -Granted
              
              
              720,000
              
              
              0.12
              
              
              1,800,000
              
              
              0.161
              
              
              7,960,000
              
              
              0.096Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Forfeited
              
              
              (240,000
              )
              
              0.17
              
              
              (100,000
              )
              
              0.170
              
              
              -
              
              
              -Outstanding
                  at end of Period
              
              
              10,140,000
              
              
              0.098
              
              
              9,660,000
              
              
              0.098
              
              
              7,960,000
              
              
              0.096Options
                  exercisable at end of Period
              
              
              8,551,170
              
              
              0.103
              
              
              7,410,000
              
              
              0.095
              
              
              2,560,000
              
              
              0.096


All
      of the options reflected in the table above have been restated to reflect a
      1
      for 100 reverse split of the Company’s common stock - See Note 9.





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions used for
      grants in 2005, 2006 and 2007; risk-free interest rate of between 4.4% and
      4.95%
      and volatility between 178% and 456% and expected lives of ten
      years.





Not
      included in the table above, but included in compensation expense are options
      issued by our subsidiaries to purchase 685,000 shares of the subsidiaries’
common stock in the future. Compensation expense for these options is calculated
      by comparing our subsidiaries to comparable publicly traded companies in their
      industry for stock volatility purposes and using the Black-Scholes
      option-pricing model.




**4.
      Debentures**





On
      June
      1, 2007, the Company entered into a Securities Purchase Agreement with Cornell
      Capital Partners, LP (“Cornell”), which provides for the purchase by Cornell of
      a secured convertible debenture (the “Debenture”) in the amount of $2,750,000.
      The Debenture is convertible into the Company’s common stock, par value $0.001
      per share (the “Common Stock”), based on a conversion price which shall be equal
      to the lesser of (1) $0.40 or (2) a ten percent discount to the lowest daily
      volume weighted average price of the Common Stock for the thirty days preceding
      conversion. The Debenture bears interest at 12% per annum and the principal
      amount will be payable on the third anniversary of the effective date of the
      Debenture. If the closing bid price of the Common Stock is trading below the
      conversion price at the time of the redemption notice, the Company shall pay
      an
      amount equal to the principal amount being redeemed plus a redemption premium
      equal to ten percent (10%) of the principal amount being redeemed, and accrued
      interest. Pursuant to a Security Agreement between the Company and Cornell
      and a
      Pledge and Escrow Agreement between the Company, Cornell and the escrow
      agent, issued in connection with the Debenture, the Company's obligations under
      the Debenture are secured by a pledge of all of its assets. In connection with
      the sale of the Debenture, the Company also entered into an Agreement with
      Cornell (the “Agreement”) increasing the interest rate payable under certain
      existing convertible debentures issued by the Company to Cornell in an aggregate
      amount of $8,000,000 from 5% to 10% per annum, modifying the registration rights
      associated with such existing debentures to require the Company to file a
      registration statement covering the resale of shares of Common Stock issuable
      upon conversion of the existing debentures only upon demand by Cornell of such
      filing and waiving any penalty due for the failure to register the shares
      through the date of the Agreement.




9




In
      connection with the Securities Purchase Agreement, the Company issued a warrant
      to Cornell for 800,000 shares of the Common Stock (the “Warrant”). The Warrant
      has an exercise price equal to $0.15, which may be adjusted under the terms
      of
      the Warrant, and has a term of five years from the date of issuance on June
      1,
      2007. The Company also entered into a Registration Rights Agreement with the
      Cornell pursuant to which the Company is obligated to file a registration
      statement covering the resale of shares of Common Stock issuable upon the
      conversion of the Debenture.





The
      table
      below reflects all the Company’s debentures currently outstanding:


**February
                  2006**
                **Debenture**
                **2006
                  A**
              
              **August
                  2006**
                **Debenture**
                **2006
                  B**
              
              **June
                  2007**
                **Debenture**
                **2007
                  A**
              
              **August
                  2006**
                **Warrant**
              
              **June
                  2007**
                **Warrant**
              
              **Total**Face
                  amount
              
              $
              4,000,000
              
              $
              4,000,000
              
              $
              2,750,000
              
              
              
              
              
              
              
              $
              10,750,000Less:
                  Cost of issuance
              
              
              (520,000
              )
              
              (569,863
              )
              
              (282,491
              )
              
              
              
              
              
              
              
              (1,372,354
              )Net
                  proceeds
              
              $
              3,480,000
              
              $
              3,430,137
              
              $
              2,467,509
              
              
              
              
              
              
              
              $
              9,377,646Value
                  of derivativeliability
                  at issue date
              
              $
              3,331,544
              
              $
              2,298,787
              
              $
              2,335,962
              
              $
              154,863
              
              $
              92,486
              
              $
              8,213,642Gain
                  (Loss) of valueof
                  derivative liability
              
              
              (460,634
              )
              
              942,671
              
              
              178,179
              
              
              (79,450
              )
              
              (20,325
              )
              
              560,441Value
                  at June 30, 2007
              
              $
              2,870,910
              
              $
              3,241,458
              
              $
              2,514,141
              
              $
              75,413
              
              $
              72,161
              
              $
              8,774,083Face
                  amount
              
              $
              4,000,000
              
              $
              4,000,000
              
              $
              2,750,000
              
              
              
              
              
              
              
              $
              10,750,000Debt
                  discount
              
              
              3,331,544
              
              
              2,298,787
              
              
              2,335,962
              
              
              
              
              
              
              
              
              7,966,293Less
                  amortizationof
                  discount
              
              
              (1,573,229
              )
              
              (638,552
              )
              
              (64,888
              )
              
              
              
              
              
              
              
              (2,276,669
              )Net
                  debt discount
              
              
              1,758,315
              
              
              1,660,235
              
              
              2,271,074
              
              
              
              
              
              
              
              
              5,689,624Net
                  ConvertibleDebentures
              
              $
              2,241,685
              
              $
              2,339,765
              
              $
              478,926
              
              
              
              
              
              
              
              $
              5,060,376




**5.
      Business Segments**





The
      Company analyzes its assets, liabilities, cash flows and results of operations
      by operating unit or subsidiary. In the case of our platform companies, which
      are our first level subsidiaries, the Company relies on local management to
      analyze each of its subsidiaries and report to us based on a consolidated
      entity. As a result, the Company, in its application of SFAS 131, will make
      its
      financial decisions based on the overall performance of a first level
      subsidiary. In the past, our subsidiaries derived their revenues and cash flow
      from different activities, services in the case of Nexus and products in the
      case of SHC and starting in this quarter PMX. However, on July 3, 2007, the
      Company entered into an agreement to sell its SHC subsidiary. Accordingly,
      the
      SHC product sales segment activity is no longer included in results from
      continuing operations and is no longer included as segment information.





The
      following table reflects the Company’s segments at June 30, 2007, excluding the
      discontinued operations of SHC:




Homeland
                Security Capital Corporation Consolidated
            
            
            Holding
                Company(Homeland
                Security Capital Corporation)
            
            
            Services
                Company(Nexus
                Technology Group)
            
            
            Products
                Company(Polimatrix,
                Inc.)
            
            
            ConsolidatedRevenues
            
            
            -
            
            
            6,092,652
            
            
            192,435
            
            
            6,285,087Gross
                margin
            
            
            -
            
            
            1,422,631
            
            
            6,244
            
            
            1,428,875Operating
                expenses
            
            
            1,030,223
            
            
            1,220,071
            
            
            83,854
            
            
            2,334,148Depreciation
                expense
            
            
            4,600
            
            
            32,099
            
            
            -
            
            
            36,699Other
                expenses - net
            
            
            1,547,931
            
            
            65,488
            
            
            -
            
            
            1,613,419Net
                income (loss) from continuing
              operations
            
            
            (2,582,754
            )
            
            104,973
            
            
            (77,610
            )
            
            (2,555,391
            )Current
                assets
            
            
            583,068
            
            
            5,851,136
            
            
            34,679
            
            
            6,468,883Total
                assets
            
            
            2,060,208
            
            
            6,124,102
            
            
            34,679
            
            
            8,218,989




10




**6.
      Reverse Stock Split**





At
      the
      Company’s stockholders meeting held on July 10, 2007, the common stockholders
      approved a resolution to amend the Certificate of Incorporation to effect a
      combination, or reverse split, of the Company’s Common Stock at a ratio of
      1-for-100 and accordingly the Company filed an amendment to the Certificate
      of
      Incorporation, with the Secretary of State of Delaware which provides that
      the
      shares of Common Stock then issued and outstanding will be combined at a ratio
      of 1-for-100. The reverse split will reduce the number of authorized shares
      of Common Stock from 20,000,000,000 to 200,000,000 but will not change the
      par
      value of our Common Stock. Except for any changes resulting from the treatment
      of fractional shares, each stockholder will hold the same percentage of Common
      Stock outstanding immediately after the reverse stock split as such stockholder
      did immediately prior to the reverse stock split. Stockholders holding
      fractional shares will be entitled to receive cash in the amount of $0.001/share
      in lieu of their fractional shares. As of June 30, 2007, and 2006, the accounts
      of the Company and results of operations and cash flows have been computed
      giving effect to the reverse stock split.





**7.
      Discontinued operations**





The
      Company will discontinue its RDIF, access control and security software
      businesses upon the closing of the sale, expected to occur in late-August,
      of
      its SHC subsidiary. O n
      April
      2, 2007, the Company’s and SHC’s boards of directors approved the sale of
      Cyberlynk, Inc. (a subsidiary of SHC) to Bridgestone Capital, LLC, a company
      owned by Joel Konicek, the Chief Executive Officer of SHC, and Jim Peroutka,
      the
      Chief Technology Officer of SHC.





On
      July
      3, 2007, the Company entered into an agreement to sell the remaining SHC
      business to Vuance Ltd. (“Vuance”). Pursuant to the terms of the Purchase
      Agreement, dated July 3, 2007, by and among the Company, as majority shareholder
      of SHC, the other shareholders of SHC (the “Minority Shareholders”) and
      SuperCom, Inc., a Delaware corporation and wholly owned subsidiary of Vuance
      (“SuperCom”), SuperCom will acquire all of the issued and outstanding capital
      stock of SHC for a purchase price of $5.1 million, payable in Vuance ordinary
      (common) shares. The closing of the sale is scheduled to take place in
      lateAugust 2007 and is subject to certain conditions, including the approval
      of
      the purchase agreement by the shareholders of Vuance.




On
      the
      closing of the transaction, the number of Vuance shares issued will be
      calculated based on the volume-weighted average closing price of Vuance’s
      ordinary shares for the 15 trading days prior to the closing date; however,
      the
      Purchase Agreement provides that the shares cannot be priced lower than $5.170
      or higher than $5.714. At the closing, Vuance will also assume all obligations
      of SHC under a certain note currently in the amount of $467,582. Alternatively,
      Vuance, at its discretion, may issue Vuance ordinary shares in exchange for
      the
      note, in which event all of SHC's obligations under the note shall terminate.
      The Company and the other shareholders of SHC have agreed to certain lock-up
      periods during which they will not sell or otherwise dispose of the Vuance
      shares.





Management
      expects that the transaction will be consummated and has recognized the SHC
      activity as discontinued operations for the three and six months ended June
      30,
      2007.




The
      following table reflects selected elements of SHC’s three and six month’s
      results for 2007 and 2006:


Selected
                  information for the Three and Six Months Ended March 31 and June
                  30,
                  2007and 2006:
              
              
              March
                  31,
                2007
              
              
              March
                  31,
                2006
              
              
              June
                  30,
                2007
              
              
              June
                  30,
                2006Revenue
              
              
              1,447,300
              
              
              -
              
              
              2,163,570
              
              
              -Gross
                  Margin
              
              
              643,989
              
              
              -
              
              
              874,119
              
              
              -Operating
                  expenses
                (includes
                  $0 and $483,942 of goodwill impairment write-down at March 31,
                  2007 and
                  June 30, 2007, respectively and $0 at March 31, 2006 and June 30,
                  2006,
                  respectively)
              
              
              1,261,897
              
              
              -
              
              
              2,833,337
              
              
              -Net
                  Loss
              
              
              599,379
              
              
              -
              
              
              1,959,218
              
              
              -Net
                  Assets
              
              
              2,301,845
              
              
              -
              
              
              1,613,408
              
              
              -Net
                  Liabilities
              
              
              1,602,596
              
              
              -
              
              
              1,596,312
              
              
              -


11


**8.
      Going concern**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business. As reflected in the
      accompanying financial statements, the company has a net loss of $4,514,609,
      a
      working capital deficiency of $6,013,050 and a stockholders' deficiency of
      $9,505,043. These factors raise substantial doubt about our ability to continue
      as a going concern. The ability of the Company to continue as a going concern
      is
      dependent on the Company's ability to raise additional funds and implement
      its
      business plan. There can be no assurance that we will be able to raise
      additional funds on terms acceptable to the Company or at all. The financial
      statements do not include any adjustments that might be necessary if the Company
      is unable to continue as a going concern.





**9.
      Subsequent Events**




On
      July
      3, 2007, the Company entered into a Sales and Purchase agreement with Vuance
      for
      the sale of the Company’s 69% owned subsidiary SHC (See Note 7). The sale is
      expected to close in lateAugust.





On
      July
      10, 2007, at the Company’s annual meeting, the shareholders of the Company
      approved a reverse split of the Company’s Common Stock in the ratio of 1 for 100
      (See Note 6). On July 30, 2007 the split became effective and the Company
      started trading, split effected, under the symbol HOMS.OB.





On
      August
      7, 2007, Secure America Acquisition Corporation (“SAAC”) filed the first
      amendment to its registration statement filed with the Securities Exchange
      Commission on June 25, 2007 (See Note 2). The Company continues to hold a 10.59%
      member interest in Secure America Acquisition Holdings LLC, SAAC’s major
      investor.




12


**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**Introductory
      Statements**




*Forward-Looking
      Statements and Associated Risks. This Report contains forward-looking
      statements. Such forward-looking statements include statements regarding, among
      other things, (a) our projected sales and profitability, (b) our growth
      strategies, (c) anticipated trends in our industry, (d) our future financing
      plans, (e) our anticipated needs for working capital, (f) our lack of
      operational experience, and (g) the benefits related to ownership of our common
      stock. 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. These forward-looking
      statements are based largely on our company's expectations and are subject
      to a
      number of risks and uncertainties, including those described in "Business Risk
      Factors" of our Form 10-KSB/A for the year ended December 31, 2006. Actual
      results could differ materially from these forward-looking statements as a
      result of changes in trends in the economy and our company's industry, demand
      for our products, competition, reductions in the availability of financing
      and
      availability of raw materials, and other factors. In light of these risks and
      uncertainties, there can be no assurance that the forward-looking statements
      contained in this Report will in fact occur as projected.*




**Overview**




Homeland
      Security Capital Corporation (together with any subsidiaries shall be referred
      to as the “Company”, “we”, “us” and “our”) was incorporated in Delaware on
      August 12, 1997, and is located in Arlington, Virginia. The Company focuses
      on
      the acquisition and development of homeland security businesses.




The
      Company’s original business was to develop and manufacture, at third party
      plants, digital set top boxes and digital video servers for the interactive
      television and high speed Internet markets.




On
      September 3, 2003, the Company elected to become a business development company
      ("BDC"), to be regulated pursuant to Section 54 of the Investment Company Act
      of
      1940, as amended (the "Investment Company Act"). A business development company
      is an investment company designed to assist eligible portfolio companies with
      capital formation and management advice. The Company then changed its business
      plan to primarily seek investments in developing companies.




On
      December 30, 2005, at a special stockholders meeting (the "Special Meeting"),
      the stockholders of the Company voted to amend the Certificate of Incorporation
      of the Company to change the name to “Homeland Security Capital Corporation” and
      voted to withdraw the Company's election as a BDC. Accordingly, the Company
      has
      changed its business plan to primarily seek acquisition of companies that
      provide homeland security products and services.




The
      Company is seeking to build consolidated enterprises through the acquisition
      and
      integration of multiple businesses in the homeland security industry. We will
      seek to create long-term shareholder value by taking controlling interests
      in
      companies that provide homeland security products and services and helping
      them
      develop through superior operations, management and acquisitions. Our value
      creation strategy is designed to foster significant growth at our platform
      companies by providing leadership and counsel, capital support and financial
      expertise, strategic guidance and operating discipline, access to best practices
      and industry knowledge. We are targeting emerging companies in fragmented
      sectors of the homeland security industry. These target companies are generating
      revenues from promising security products and services but face challenges
      in
      scaling their businesses to capitalize on opportunities in the homeland security
      industry.




As
      part
      of the Company's new business strategy, the Company acquired a majority interest
      in Nexus Technologies Group, Inc. ("Nexus") on February 8, 2006 through the
      purchase of $3.4 million in preferred stock of Nexus. Nexus is a mid-Atlantic
      security integrator for the corporate and governmental security markets. Based
      in Hawthorne, N.Y., Nexus' subsidiaries began operations in 2001. Nexus
      specializes in non-proprietary integrated security solutions, including access
      control, alarm, video, communication, perimeter protection and bomb and metal
      detection security systems.




The
      Company acquired a majority interest in Security Holding Corp. (“SHC”) on August
      22, 2006 through the purchase of $3 million of preferred stock in SHC. SHC
      manufactures, designs and supports radio frequency identification (“RFID”)
      security and access control devices for the commercial and governmental security
      markets. Based in Milwaukee, WI, SHC and its subsidiaries specialize in
      proprietary and non-proprietary RFID products, including access control, asset
      tracking and the integration of multiple disciplines of electronic security
      and
      environmental and operational systems. In
      August 2006, SHC acquired the assets of Compass Technologies, Inc. for $500,000
      in cash. At June 30, 2007 the Company owned approximately 69% of the outstanding
      capital stock of SHC. On July 3, 2007, the Company entered into an agreement
      to
      sell its ownership interest in SHC and discontinue operations in the RFID,
      access control and security software components of the
      business.




13




On
      September 18, 2006, the Company entered into a joint venture with Polimaster,
      Inc., a leader in the development and manufacturing of equipment for
      monitoring, detecting, locating and identifying nuclear and radioactive
      materials. The joint venture will operate as Polimatrix, Inc., (“PMX”) which
      will be owned 51% by the Company. The PMX products and systems offer technology
      that provides a networked approach to hardware and software solutions for
      detection, identification, communication and mapping of nuclear and radioactive
      materials.




Where
      applicable in this quarterly report, references to the ‘Company’, ‘we’, ‘us’ and
‘our’ shall include Nexus and PMX while references to discontinued operations
      will include SHC.




**Critical
      Accounting Policies**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires our management to make
      assumptions, estimates and judgments that affect the amounts reported in the
      financial statements, including the notes thereto, and related disclosures
      of
      commitments and contingencies, if any. We consider our critical accounting
      policies to be those that are complex and those that require significant
      judgments and estimates in the preparation of our financial statements,
      including valuation of our investments. Management relies on historical
      experience and on other assumptions believed to be reasonable under the
      circumstances in making its judgment and estimates. Actual results could differ
      materially from those estimates.





Revenue
      Recognition - Nexus recognizes revenue on their security system installation
      and
      integration contracts using the percentage of completion method.  PMX
      recognizes revenue based on sale of their products and services.




Estimates
      - The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from those
      estimates.




Fair
      Value of Financial Instruments - The carrying amount of items included in
      working capital approximates fair value because of the short maturity of those
      instruments. The carrying value of the Company's debt approximates fair value
      because it bears interest at rates that are similar to current borrowing rates
      for loans of comparable terms, maturity and credit risk that are available
      to
      the Company.




Debt
      Offering Costs - Debt offering costs are related to private placements and
      are
      being amortized on a straight line basis over the term of the related debt,
      most
      of which is in the form of convertible debentures. Should conversion occur
      prior
      to the stated maturity date the remaining unamortized cost is
      expensed.




Investment
      Valuation - Investments in equity securities are recorded at fair value,
      represented as cost, plus or minus unrealized appreciation or depreciation,
      respectively. The fair value of investments that have no ready market, are
      determined in good faith by management, and approved by the Board of Directors,
      based upon assets and revenues of the underlying investee companies as well
      as
      general market trends for businesses in the same industry. Because of the
      inherent uncertainty of valuations, management's estimates of the values of
      the
      investments may differ significantly from the values that would have been used
      had a ready market for the investments existed and the differences could be
      material.




Income
      Taxes - The Company accounts for income taxes using the asset and liability
      method, whereby deferred tax assets and liabilities are determined based upon
      the differences between financial reporting and tax bases of assets and
      liabilities and are measured using the enacted tax rates and laws that will
      be
      in effect when the differences are expected to reverse. A valuation allowance
      related to the deferred tax assets is also recorded when it is more likely
      than
      not that some or all of the deferred tax asset will not be
      realized.




14




Segment
      Reporting - ****** Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure
      About Segments of an Enterprise and Related Information" requires use of the
      "management approach" model for segment reporting. The management approach
      model
      is based on the way a company's management organizes segments within the company
      for making operating decisions and assessing performance. Reportable segments
      are based on products and services, geography, legal structure, management
      structure, or any other manner in which management disaggregates a company.
      The
      Company's operations are classified into two principal reporting segments that
      provide different products or services. The
      discontinued operations represent a component of one of these
      segments.




**Results
      of Operations**




***Three
      Months Ended June 30, 2007 Compared With the Three Months Ended June 30,
      2006***




**Revenues**




For
      the
      three months ended June 30, 2007, the Company had sales of $3,899,699 compared
      to sales of $2,053,707 for the three months ended June 30, 2006 resulting in
      an
      increase of $1,845,992 or 90%. Sales consisted of fees earned on security
      systems installation, integration contracts and product sales and the increase
      in sales is due to the implementation of the Company's new business strategy
      of
      acquiring and integrating businesses that provide homeland security products
      and
      services.




**Cost
      of goods sold**




For
      the
      three months ended June 30, 2007, cost of sales was $3,218,685 compared to
      $1,166,315 for the three months ended June 30, 2006. Cost of sales consists
      of
      materials, labor and other costs incurred by the Company and associated with
      security systems installation, integration contracts and product sales. The
      increase in cost of sales of $2,052,370 or 176% is due to the implementation
      of
      the Company's new business strategy of acquiring and integrating businesses
      that
      provide homeland security products and services.




**Operating
      expenses**




Operating
      expenses for the three months ended June 30, 2007 were $1,206,031 compared
      to
      $1,273,635 for the three months ended June 30, 2006. The decrease of $67,604
      or
      5% in operating expenses is primarily due to general and administrative expenses
      that were incurred in the acquisitions and operations of Nexus and SHC. The
      decrease consisted of reductions of personnel costs of $29,965, insurance and
      facility costs of $76,605 and administrative costs of $80,457. These cost
      reductions were offset by increases in additional marketing costs of $1,562,
      other operating costs of $40,401 and professional costs of $77,460. These costs
      and other expenses were incurred in connection with the Company's change in
      business strategy for the three month period.




**Other
      income and expense**




The
      Company had net other expense of $271,317 for the three months ended June 30,
      2007 compared to net other income of $868,670 for the three months ended June
      30, 2006 for an increase in other expenses of $1,139,987 or 131%. Income was
      increased by a gain on the settlement of certain trade payables of $11,724,
      offset by a decrease in interest income of $3,266. Other expense was increased
      by increases in interest expense of $166,491, amortization of debt discounts
      of
      $244,083, amortization of debt offering costs of $55,337 and by a change in
      the
      derivative liability valuation of $682,534.




**Net
      income (loss)**




As
      a
      result of the foregoing, the Company recorded a net loss from continuing
      operations of $796,334 and an overall net loss of $2,193,386 including
      discontinued operations for the three months ended June 30, 2007 compared to
      a
      net income of $482,427 for the three months ended June 30, 2006. The overall
      net
      loss represents an increase of $2,675,813 or 555% when compared to the three
      months ended June 30, 2006.




15




***Six
      Months Ended June 30, 2007 Compared With the Six Months Ended June 30,
      2006***




**Revenues**




For
      the
      six months ended June 30, 2007, the Company had sales of $6,285,087 compared
      to
      sales of $2,741,737 for the six months ended June 30, 2006 resulting in an
      increase of $3,543,350 or 129%. Sales consisted of fees earned on security
      systems installation, integration contracts and product sales and the increase
      in sales is due to the implementation of the Company's new business strategy
      of
      acquiring and integrating businesses that provide homeland security products
      and
      services.




**Cost
      of goods sold**




For
      the
      six months ended June 30, 2007, cost of sales was $4,856,212 compared to
      $1,931,386 for the six months ended June 30, 2006. Cost of sales consists of
      materials, labor and other costs incurred by the Company and associated with
      security systems installation, integration contracts and product sales. The
      increase in cost of sales of $2,924,826 or 151% is due to the implementation
      of
      the Company's new business strategy of acquiring and integrating businesses
      that
      provide homeland security products and services.




**Operating
      expenses**




Operating
      expenses for the six months ended June 30, 2007 were $2,370,847 compared to
      $2,329,966 for the six months ended June 30, 2006. The increase of $40,881
      or 2%
      in operating expenses is primarily due to general and administrative expenses
      that were incurred in the acquisitions and operations of Nexus and SHC. The
      increase consisted of additional marketing costs of $5,377, personnel costs
      of
      $23,727, insurance, facility and depreciation costs of $26,722 and travel costs
      of $29,639. These cost increases were offset by decreases in other operating
      costs and administrative costs of $41,625 and professional costs of $2,959.
      These costs and other expenses were incurred in connection with the Company's
      change in business strategy for the six month period.




**Other
      Income and expense**




The
      Company had net other expense of $1,613,419 for the six months ended June 30,
      2007 compared to net other income of $187,819 for the six months ended June
      30,
      2006 for an increase in other expenses of $1,801,238 or 959%. Income was
      increased by a gain on the settlement of certain trade payables of $37,985,
      offset by a decrease in interest income of $8,147. Other expense was increased
      by increases in interest expense of $233,076, amortization of debt discounts
      of
      $519,943, amortization of debt offering costs of $117,270 and by a change in
      the
      derivative liability valuation of $960,787.







**Net
      income (loss)**




As
      a
      result of the foregoing, the Company recorded a net loss from continuing
      operations of $2,555,391 and an overall net loss of $4,514,609 including
      discontinued operations for the six months ended June 30, 2007 compared to
      a net
      loss of $1,331,796 for the six months ended June 30, 2006. The overall net
      loss
      represents an increase in the net loss of $3,182,813 or 239%.





**Liquidity
      and Capital Resources**




The
      primary source of financing for the Company since its inception has been through
      the issuance of common and preferred stock and debt. The Company had cash on
      hand of $701,417 at June 30, 2007 and $776,139 at December 31, 2006. Our primary
      needs for cash are to fund our ongoing operations until such time as they begin
      to generate sufficient cash to fund operations and to have cash available to
      make additional acquisitions of businesses that provide homeland security
      products and services. While we believe that we have sufficient cash on hand
      to
      satisfy our current operating commitments, we will require significant
      additional funding in order to make additional acquisitions.






The
      Company entered into a Securities Purchase Agreement with Cornell, dated as
      of
      February 6, 2006, which provided for the purchase by Cornell of a Convertible
      Debenture (the "2006 A Debenture") in the amount of $4,000,000, which debenture
      is convertible into Common Stock. The conversion price of the 2006 A Debenture
      shall be equal to the lesser of (1) $1.00 or (2) a ten percent discount to
      the
      lowest daily volume weighted average price of the Common Stock for the thirty
      days preceding conversion. Cornell will be entitled to convert the 2006 A
      Debenture at a conversion price into Common Stock, provided that Cornell cannot
      convert into shares of Common Stock that would cause Cornell to own more than
      4.9% of the issued and outstanding Common Stock. The 2006 A Debenture will
      bear
      interest at 5% per annum and the principal amount will be payable on the third
      anniversary of the effective date of the 2006 A Debenture. If the Common Stock
      is trading below the conversion price, the Company may redeem the 2006 A
      Debenture at any time upon the payment of a redemption premium equal to twenty
      percent of the amounts redeemed.




16




On
      February 6, 2006, the Company entered into an Investment Agreement with Cornell,
      pursuant to which the Company exchanged with Cornell 1,000,000 shares of Series
      G Convertible Preferred Stock (the "Series G Preferred Shares") for 4,500,000
      shares of the Company's Common Stock owned by Cornell. Each share of Series
      G
      Preferred Shares may be converted, at Cornell’s discretion, into 4.5 shares of
      the Common Stock. The Series G Preferred Shares are senior to all Common Stock
      and all series of preferred stock of the Company. Each share of Series G
      Preferred Shares has a liquidation preference of $10.00 plus any accrued and
      unpaid dividends. The holders of Series G Preferred Shares are not entitled
      to
      receive any dividends. The Company paid a $10,000 structuring fee to Yorkville
      Advisors Management, LLC in connection with the transaction.




On
      August
      21, 2006, the Company entered into a Securities Purchase Agreement with Cornell,
      which provided for the purchase by Cornell of a secured Convertible Debenture
      (the "2006 B Debenture") in the amount of $4,000,000, which debenture is
      convertible into Common Stock. The conversion price of the 2006 B Debenture
      shall be equal to the lesser of (1) $1.00 or (2) a ten percent discount to
      the
      lowest daily volume weighted average price of the Common Stock for the thirty
      days preceding conversion. The 2006 B Debenture has an interest at rate of
      5%
      per annum and the principal amount will be payable on the third anniversary
      of
      the effective date of the 2006 B Debenture. If the Common Stock is trading
      below
      the conversion price at the date of redemption notice, the Company shall pay
      an
      amount equal to the principal amount being redeemed plus a redemption premium
      equal to twenty percent of the amounts redeemed and accrued interest Pursuant
      to
      a Security Agreement between the Company and Cornell, the Company's obligations
      under the 2006 B Debenture are secured by a pledge of all of its
      assets.





In
      connection with the August 21, 2006 Securities Purchase Agreement, the Company
      issued a warrant to Cornell for 1,000,000 shares of the Company’s Common Stock
      (the “2006 B Warrant”). The 2006 B Warrant has an exercise price equal to $1.00,
      which may be adjusted under the terms of the 2006 B Warrant, and has a term
      of
      five years from the date of issuance on August 21, 2006. The Company also
      entered into a Registration Rights Agreement with Cornell pursuant to which
      the
      Company agreed to file a registration statement covering the resale of shares
      of
      Common Stock issuable upon conversion of the Debenture.




On
      June
      1, 2007, the Company entered into a Securities Purchase Agreement with Cornell,
      which provides for the purchase by Cornell of a secured convertible debenture
      (the “Debenture”) in the amount of $2,750,000. The Debenture is convertible into
      the Company’s common stock, par value $0.001 per share (the “Common Stock”),
      based on a conversion price which shall be equal to the lesser of (1) $0.40
      or
      (2) a ten percent discount to the lowest daily volume weighted average price
      of
      the Common Stock for the thirty days preceding conversion. The Debenture bears
      interest at 12% per annum and the principal amount will be payable on the third
      anniversary of the effective date of the Debenture. If the closing bid price
      of
      the Common Stock is trading below the conversion price at the time of the
      redemption notice, the Company shall pay an amount equal to the principal amount
      being redeemed plus a redemption premium equal to ten percent (10%) of the
      principal amount being redeemed, and accrued interest. Pursuant to a Security
      Agreement between the Company and Cornell and a Pledge and Escrow Agreement
      between the Company, Cornell and the escrow agent, issued in connection
      with the Debenture, the Company's obligations under the Debenture are secured
      by
      a pledge of all of its assets. In connection with the sale of the Debenture,
      the
      Company also entered into an Agreement with Cornell (the “Agreement”) increasing
      the interest rate payable under certain existing convertible debentures issued
      by the Company to Cornell in an aggregate amount of $8,000,000 from 5% to 10%
      per annum, modifying the registration rights associated with such existing
      debentures to require the Company to file a registration statement covering
      the
      resale of shares of Common Stock issuable upon conversion of the existing
      debentures only upon demand by Cornell of such filing and waiving any penalty
      due for the failure to register the shares through the date of the
      Agreement.




In
      connection with the June 1, 2007 Securities Purchase Agreement, the Company
      issued a warrant to Cornell for 800,000 shares of the Company’s Common Stock
      (the “2007 A Warrant”). The 2007 A Warrant has an exercise price equal to $0.15,
      which may be adjusted under the terms of the 2007 A Warrant, and has a term
      of
      five years from the date of issuance on June 1, 2007. The Company also entered
      into a Registration Rights Agreement with the Cornell pursuant to which the
      Company is obligated to file a registration statement covering the resale of
      shares of Common Stock issuable upon the conversion of the
      Debenture.





During
      the three months ended June 30, 2007, we had a net decrease in cash of $74,722.
      Our sources and uses of funds were as follows:




17




**Cash
      Flows from Operating Activities**




We
      used
      net cash of $2,558,198 in our operating activities during the six month period
      ended June 30, 2007. Our net cash used in operating activities resulted
      primarily from the Company's net loss of $4,514,609 for the six month period,
      the non cash settlement of debt instruments of $51,261 and the change in
      operating assets and liabilities of $886,396. These uses have been offset by
      $181,151 from the use of stock issued as compensation and for payment of
      expenses, $36,699 in depreciation and amortization, $582,470 in write down
      of
      subsidiaries’ assets, $1,192,767 in amortization of debt discount and debt
      offering costs, and the valuation loss on the derivative liabilities of
      $155,710. Cash was generated from the changes in the non cash items of
      assets of discontinued operations and assets held for sale in the amount of
      $745,271.




**Cash
      Flows from Investing Activities**




We
      used
      net cash of $527,140 in our investing activities during the six month period
      ended June 30, 2007 through the purchases of fixed assets of $82,574 and
      advancing $500,000 to an unconsolidated affiliated company. These
      uses were offset by investing activities of $55,434 from discontinued
      operations.




**Cash
      Flows from Financing Activities**




We
      were
      provided cash of $3,010,616 from financing activities during the six month
      period ended June 30, 2007, consisting of issuance of $2,750,000 of convertible
      debentures (net of $282,486 in issuance costs), increases of term debt for
      the
      acquisition of operating assets of $480,128 and financing activities of
      discontinued operations of $62,974.




As
      of
      June 30, 2007, we had a deficit in net working capital of
      $6,013,050.




**ITEM
      3. CONTROLS AND PROCEDURES**





***Evaluation
      of Disclosure Controls and Procedures***





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed by our company is recorded,
      processed, summarized and reported, within the time periods specified in the
      rules and forms of the SEC. C. Thomas McMillen, our Chief Executive Officer,
      and
      Michael Brigante, our Chief Financial Officer, are responsible for establishing
      and maintaining disclosure controls and procedures for our company.




Our
      management has evaluated the effectiveness of our disclosure controls and
      procedures as of June 30, 2007 (under the supervision and with the
      participation of the Chief Executive Officer and the Chief Financial Officer),
      pursuant to Rule 13a-15(b) promulgated under the Exchange Act. As part of
      such evaluation, management considered the matters discussed below relating
      to
      internal control over financial reporting. Based on this evaluation, our
      Company’s Chief Executive Officer and Chief Financial Officer have concluded
      that our Company’s disclosure controls and procedures were effective as of June
      30, 2007.




The
      term
“internal control over financial reporting” is defined as a process designed by,
      or under the supervision of, the registrant’s principal executive and principal
      financial officers, or persons performing similar functions, and effected by
      the
      registrant’s board of directors, management and other personnel, to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles and includes those policies and
      procedures that:




·
            pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect the transactions and dispositions of the assets of
                the
                registrant;




·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that receipts and expenditures of the
                registrant are being made only in accordance with authorizations
                of
                management and directors of the registrant;
                and




·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of the registrant’s assets
                that could have a material effect on the financial
                statements.




18







***Changes
      In Internal Controls Over Financial Reporting***





In
      connection with the evaluation of the Company’s internal controls during the
      Company’s last fiscal quarter, the Company’s Chief Executive Officer and the
      Chief Financial Officer have determined that there are no changes to the
      Company’s internal controls over financial reporting that have materially
      affected, or are reasonably likely to materially effect, the Company’s internal
      controls over financial reporting.





***Inherent
      Limitations on Effectiveness of Controls***




The
      Company’s management does not expect that its disclosure controls or its
      internal control over financial reporting will prevent or detect all error
      and
      all fraud. A control system, no matter how well designed and operated, can
      provide only reasonable, not absolute, assurance that the control system’s
      objectives will be met. The design of a control system must reflect the fact
      that there are resource constraints, and the benefits of controls must be
      considered relative to their costs. Further, because of the inherent limitations
      in all control systems, no evaluation of controls can provide absolute assurance
      that misstatements due to error or fraud will not occur or that all control
      issues and instances of fraud, if any, within the Company have been detected.
      These inherent limitations include the realities that judgments in decision
      making can be faulty and that breakdowns can occur because of simple error
      or
      mistake. Controls can also be circumvented by the individual acts of some
      persons, by collusion of two or more people, or management override of the
      controls. The design of any system of controls is based in part on certain
      assumptions about the likelihood of future events, and there can be no assurance
      that any design will succeed in achieving its stated goals under all potential
      future conditions. Projections of any evaluation of controls effectiveness
      to
      future periods are subject to risks. Over time, controls may become inadequate
      because of changes in conditions or deterioration in the degree of compliance
      with policies or procedures.


19




**PART
      II**





**ITEM
      1. LEGAL PROCEEDINGS**




None.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**




None.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**




None.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None.





**ITEM
      5. OTHER INFORMATION**




None.





**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**


(a)
      Exhibits





31.1
            
            Certification
                by Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith31.2
            
            Certification
                by Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith32.1
            
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith32.2
            
            Certification
                by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith




(b)
      Reports on Form 8-K





On
      May
      15, 2007, the Company filed a Current Report on Form 8-K reporting the amendment
      to the Company’s Form 10-KSB for the period ended December 31,
      2006.





On
      May
      15, 2007, the Company filed a Current Report on Form 8-K to disclose the (i)
      resignation of Carl J. Rickersten as a director of the Company, (ii) the
      appointment of the Honorable Brian C. Griffin as a director of the Company
      and
      (iii) the appointment of Michael Brigante as chief financial officer of the
      Company.





On
      June
      6, 2007, the Company filed a Current Report on Form 8-K to disclose the entry
      into a Securities Agreement, dated June 1, 2007, with Cornell Capital
      Partners, whereby Cornell Capital Partners purchased a Debenture in the amount
      of $2,750,000.





On
      Jun
      26, 2007, the Company filed a Current Report on Form 8-K to disclose the
      Company’s acquisition of a minority interest in Secure America Acquisition
      Holdings, LLC.





20


**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, the
      Registrant has duly caused this Report to be signed in its behalf by the
      undersigned, thereunto duly authorized.


**HOMELAND
                SECURITY CAPITAL CORPORATION**By:
            /s/ Michael
              T. BriganteMichael
                T. BriganteChief
                Financial Officer
              
              August
                  14, 2007




21