UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2009
 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
  Delaware
(State or Other Jurisdiction of Incorporation 
or Organization)
    
    52-2050585
(I.R.S. Employer Identification No.)1005 North Glebe Road, Suite 550
Arlington, VA
(Address of principal executive offices)
    
    22201
(Zip code)
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
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APPLICABLE ONLY TO CORPORATE ISSUERS:
    - 2 -




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PART I. FINANCIAL INFORMATION.
 Item 1.
    
    Financial Statements.
   - 3 -




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September 30
    
    
    June 302009
    
    
    2009(unaudited)AssetsCash
    
    $
    1,578,706
    
    
    $
    2,356,534Accounts receivable  net
    
    
    16,253,680
    
    
    
    13,425,804Cost in excess of billings on uncompleted contracts
    
    
    3,419,282
    
    
    
    3,937,086Other current assets
    
    
    409,168
    
    
    
    613,348Total current assets
    
    
    21,660,836
    
    
    
    20,332,772Fixed assets  net
    
    
    3,933,634
    
    
    
    4,398,833Deferred financing costs  net
    
    
    250,618
    
    
    
    386,210Notes receivable  related party
    
    
    416,790
    
    
    
    412,127Securities available for sale
    
    
    270,137
    
    
    
    193,945Other non-current assets
    
    
    329,621
    
    
    
    319,516Intangible assets  net
    
    
    380,232
    
    
    
    391,372Goodwill
    
    
    6,403,982
    
    
    
    6,403,982Total assets
    
    $
    33,645,850
    
    
    $
    32,838,757Liabilities and Stockholders DeficitCurrent liabilitiesAccounts payable
    
    $
    7,674,271
    
    
    $
    10,003,336Current portion of long term debt
    
    
    696,157
    
    
    
    1,247,016Notes payable  related party
    
    
    50,740
    
    
    
    50,110Accrued interest and other liabilities
    
    
    3,222,152
    
    
    
    3,257,903Billings in excess of costs on uncompleted contracts
    
    
    1,126,588
    
    
    
    1,022,125Deferred revenue
    
    
    53,934
    
    
    
    59,636Total current liabilities
    
    
    12,823,842
    
    
    
    15,640,126Senior notes payable  related party
    
    
    13,916,889
    
    
    
    13,904,870Interest payable  related party
    
    
    2,646,261
    
    
    
    2,210,131Secured notes payable  related party
    
    
    250,000
    
    
    
    250,000Long term debt, less current maturities
    
    
    5,009,262
    
    
    
    1,421,272Dividends payable
    
    
    2,271,386
    
    
    
    1,869,107Total liabilities
    
    
    36,917,640
    
    
    
    35,295,506Warrants Payable  Series H
    
    
    169,768
    
    
    
    169,768Stockholders DeficitPreferred stock, $0.01 par value, 10,000,000 shares authorized,
1,918,080 shares issued and outstanding
    
    
    14,264,888
    
    
    
    14,261,207Common stock, $0.001 par value, 2,000,000,000 shares authorized,
53,270,160 shares issued and 49,699,729 shares outstanding
    
    
    53,270
    
    
    
    53,270Additional paid-in capital
    
    
    54,404,902
    
    
    
    54,131,548Additional paid-in capital  warrants
    
    
    272,529
    
    
    
    272,529Treasury stock  3,570,431 shares at cost
    
    
    (250,000
    )
    
    
    (250,000
    )Accumulated deficit
    
    
    (72,105,289
    )
    
    
    (70,953,480
    )Accumulated comprehensive loss
    
    
    (81,858
    )
    
    
    (141,591
    )Total stockholders deficit
    
    
    (3,441,558
    )
    
    
    (2,626,517
    )Total liabilities and stockholders deficit
    
    $
    33,645,850
    
    
    $
    32,838,757
   - 4 -




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Three Months Ended September 30,2009
    
    
    2008Net contract revenue
    
    $
    20,849,442
    
    
    $
    17,667,231Contract costs
    
    
    17,303,240
    
    
    
    14,832,940Gross profit on contract revenue
    
    
    3,546,202
    
    
    
    2,834,291Operating expensesMarketing
    
    
    67,440
    
    
    
    69,757Personnel
    
    
    2,188,309
    
    
    
    2,609,757Insurance and facility costs
    
    
    260,123
    
    
    
    295,615Travel and transportation
    
    
    97,919
    
    
    
    163,448Other operating costs
    
    
    216,945
    
    
    
    232,623Depreciation and amortization
    
    
    346,694
    
    
    
    147,530Amortization of intangible assets
    
    
    11,139
    
    
    
    34,274Professional services
    
    
    196,188
    
    
    
    315,183Administrative costs
    
    
    271,926
    
    
    
    301,292Total operating expenses
    
    
    3,656,683
    
    
    
    4,169,479Operating loss
    
    
    (110,481
    )
    
    
    (1,335,188
    )Other expenseInterest expense
    
    
    (489,792
    )
    
    
    (501,652
    )Amortization of debt discounts and offering costs
    
    
    (147,611
    )
    
    
    (135,111
    )Other income
    
    
    32,190
    
    
    
    30,861Total other expense
    
    
    (605,213
    )
    
    
    (605,902
    )Net loss before income tax expense
    
    
    (715,694
    )
    
    
    (1,941,090
    )Income tax expense
    
    
    30,155
    
    
    
    Net loss
    
    
    (745,849
    )
    
    
    (1,941,090
    )Preferred dividends and other beneficial conversion
features associated with preferred stock issuance
    
    
    (405,960
    )
    
    
    (356,910
    )Net loss attributable to common stockholders
    
    $
    (1,151,809
    )
    
    $
    (2,298,000
    )Loss per common share  basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.05
    )Weighted average shares outstanding  basic and diluted
    
    
    53,270,160
    
    
    
    48,846,244
   - 5 -




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Three Months Ended September 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (745,849
    )
    
    $
    (1,941,090
    )Adjustments to reconcile net loss to net
cash used in operating activities:Share-based compensation expense
    
    
    273,354
    
    
    
    982,095Depreciation
    
    
    496,572
    
    
    
    438,044Amortization of intangibles
    
    
    11,139
    
    
    
    34,274Loss on disposal of fixed assets
    
    
    2,111
    
    
    
    Amortization of debt discount
    
    
    12,019
    
    
    
    12,018Amortization of debt offering costs
    
    
    135,592
    
    
    
    123,093Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,827,876
    )
    
    
    (410,138
    )Costs in excess of billings on uncompleted contracts
    
    
    517,804
    
    
    
    (364,353
    )Other assets
    
    
    189,413
    
    
    
    (130,831
    )Accounts payable
    
    
    (2,329,065
    )
    
    
    (1,007,027
    )Billings in excess of costs on uncompleted contracts
    
    
    104,463
    
    
    
    866,885Accrued interest and other liabilities
    
    
    401,009
    
    
    
    781,176Deferred revenue
    
    
    (5,702
    )
    
    
    3,159Net cash used in operating activities
    
    
    (3,765,016
    )
    
    
    (612,695
    )Cash flows from investing activities:Purchase of fixed assets
    
    
    (38,683
    )
    
    
    (179,032
    )Proceeds from sale of fixed assets
    
    
    5,199
    
    
    
    Net cash used in investing activities
    
    
    (33,484
    )
    
    
    (179,032
    )Cash flows from financing activities:Proceeds from notes payable
    
    
    15,280
    
    
    
    21,094Net borrowings (payments) on line of credit
    
    
    3,245,000
    
    
    
    (1,153,935
    )Repayments of term debt
    
    
    (223,149
    )
    
    
    (159,752
    )Net cash provided by (used in) financing
activities
    
    
    3,037,131
    
    
    
    (1,292,593
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (16,459
    )
    
    
    (79,547
    )Net decrease in cash
    
    
    (777,828
    )
    
    
    (2,163,867
    )Cash, beginning of period
    
    
    2,356,534
    
    
    
    3,182,357Cash, end of period
    
    $
    1,578,706
    
    
    $
    1,018,490
   - 6 -




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AdditionalAdditional
    
    
    Paid-In
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    TotalPreferred
    
    
    Common Stock
    
    
    Paid-In
    
    
    Capital -
    
    
    Treasury
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Shares Issued
    
    
    Amount
    
    
    Capital
    
    
    Warrants
    
    
    Stock
    
    
    Deficit
    
    
    Loss
    
    
    (Deficit)Balance, June 30, 2009
    
    $
    14,261,207
    
    
    
    53,270,160
    
    
    $
    53,270
    
    
    $
    54,131,548
    
    
    $
    272,529
    
    
    $
    (250,000
    )
    
    $
    (70,953,480
    )
    
    $
    (141,591
    )
    
    $
    (2,626,517
    )Amortization of Series H
warrants
    
    
    3,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,681
    )
    
    
    
    
    
    
    Dividends on Series H and
Series I
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,279
    )
    
    
    
    
    
    
    (402,279
    )Value of vested stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273,354
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273,354Increase in value of securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,192
    
    
    
    76,192Currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,459
    )
    
    
    (16,459
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (745,849
    )
    
    
    
    
    
    
    (745,849
    )Balance, September 30, 2009
    
    $
    14,264,888
    
    
    
    53,270,160
    
    
    $
    53,270
    
    
    $
    54,404,902
    
    
    $
    272,529
    
    
    $
    (250,000
    )
    
    $
    (72,105,289
    )
    
    $
    (81,858
    )
    
    $
    (3,441,558
    )
   - 7 -




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HOMELAND SECURITY CAPITAL CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1. Organization and Basis of Presentation of Unaudited Interim Financial Statements.
 Organization
  Basis of Presentation
    Form 10-Q.
  - 8 -




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2. Fair Value Measurements
 Fair Value Measurements and Disclosures
     3. Minority Interest in Secure America Acquisition Corporation
      4. Income Taxes
   - 9 -




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5. Stock Options
 Stock Options Awarded Under the 2005 Plan
  Stock Options Awarded Under the 2008 Plan
  Stock Options Awarded Outside of Approved Plans
    September 2009
    
    
    June 2009Weighted Average
    
    
    
    
    
    
    Weighted AverageExercise
    
    
    Grant Date
    
    
    
    
    
    
    Exercise
    
    
    Grant DateOptions
    
    
    Price
    
    
    Fair Value
    
    
    Options
    
    
    Price
    
    
    Fair ValueOutstanding at
beginning of period
    
    
    75,669,374
    
    
    $
    0.057
    
    
    $
    0.049
    
    
    
    9,560,000
    
    
    $
    0.103
    
    
    $
    0.107Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,850,000
    
    
    
    0.050
    
    
    
    0.036Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,673,986
    )
    
    
    0.050
    
    
    
    0.036Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,640
    )
    
    
    0.050
    
    
    
    0.036Outstanding at
end of period
    
    
    75,669,374
    
    
    $
    0.057
    
    
    $
    0.049
    
    
    
    75,669,374
    
    
    $
    0.057
    
    
    $
    0.049Options exercisable
at end of period
    
    
    54,927,189
    
    
    $
    0.059
    
    
    $
    0.048
    
    
    
    47,992,293
    
    
    $
    0.060
    
    
    $
    0.050
  - 10 -




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6. Business Segments
   Homeland Security
    
    Holding
    
    
    Services
    
    
    Services
    
    
    ProductsCapital Corporation -
    
    Company
    
    
    Company
    
    
    Company
    
    
    CompanyConsolidated
    
    (HSCC)
    
    
    (Safety)
    
    
    (Nexus)
    
    
    (PMX)
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    18,087,585
    
    
    $
    2,082,857
    
    
    $
    679,000
    
    
    $
    20,849,442Gross margin
    
    
    
    
    
    
    2,940,858
    
    
    
    578,184
    
    
    
    27,160
    
    
    
    3,546,202Operating expenses
    
    
    777,906
    
    
    
    2,310,232
    
    
    
    210,712
    
    
    
    
    
    
    
    3,298,850Depreciation expense
    
    
    
    
    
    
    349,612
    
    
    
    8,221
    
    
    
    
    
    
    
    357,833Other income
(expense)  net
    
    
    (547,172
    )
    
    
    (60,266
    )
    
    
    2,225
    
    
    
    
    
    
    
    (605,213
    )Net income (loss)
    
    
    (1,226,600
    )
    
    
    92,115
    
    
    
    361,476
    
    
    
    27,160
    
    
    
    (745,849
    )Current assets
    
    
    137,871
    
    
    
    18,099,581
    
    
    
    2,713,509
    
    
    
    709,875
    
    
    
    21,660,836Total assets
    
    
    317,810
    
    
    
    29,681,414
    
    
    
    2,936,751
    
    
    
    709,875
    
    
    
    33,645,850Interest expense
    
    
    443,566
    
    
    
    43,273
    
    
    
    2,953
    
    
    
    
    
    
    
    489,792Capital expenditures
    
    
    
    
    
    
    15,074
    
    
    
    23,609
    
    
    
    
    
    
    
    38,683
  Homeland Security
    
    Holding
    
    
    Services
    
    
    Services
    
    
    ProductsCapital Corporation -
    
    Company
    
    
    Company
    
    
    Company
    
    
    CompanyConsolidated
    
    (HSCC)
    
    
    (Safety)
    
    
    (Nexus)
    
    
    (PMX)
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    16,585,876
    
    
    $
    1,070,193
    
    
    $
    11,162
    
    
    $
    17,667,231Gross margin
    
    
    
    
    
    
    2,341,174
    
    
    
    492,334
    
    
    
    783
    
    
    
    2,834,291Operating expenses
    
    
    1,560,858
    
    
    
    1,907,682
    
    
    
    423,127
    
    
    
    96,008
    
    
    
    3,987,675Depreciation expense
    
    
    2,400
    
    
    
    175,667
    
    
    
    3,737
    
    
    
    
    
    
    
    181,804Other income
(expense)  net
    
    
    (515,790
    )
    
    
    (83,945
    )
    
    
    (6,167
    )
    
    
    
    
    
    
    (605,902
    )Net income (loss)
    
    
    (2,079,048
    )
    
    
    173,880
    
    
    
    59,303
    
    
    
    (95,225
    )
    
    
    (1,941,090
    )Current assets
    
    
    447,560
    
    
    
    17,613,658
    
    
    
    1,747,143
    
    
    
    756
    
    
    
    19,809,117Total assets
    
    
    2,108,681
    
    
    
    28,328,313
    
    
    
    2,001,317
    
    
    
    756
    
    
    
    32,439,067Interest expense
    
    
    427,939
    
    
    
    67,103
    
    
    
    6,610
    
    
    
    
    
    
    
    501,652Capital expenditures
    
    
    
    
    
    
    173,207
    
    
    
    5,825
    
    
    
    
    
    
    
    179,032
  - 11 -




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##### 



7. Loss Per Share
    September 30,
    
    
    September 30,2009
    
    
    2008Basic and Diluted Loss Per Share:Loss (Numerator)
    
    $
    (745,849
    )
    
    $
    (1,941,090
    )Less: Series H Preferred Stock beneficial
conversion feature
    
    
    (3,681
    )
    
    
    Less: Preferred stock dividends
    
    
    (402,279
    )
    
    
    (356,910
    )Loss attributable to common stockholders
    
    $
    (1,151,809
    )
    
    $
    (2,298,000
    )Shares (Denominator)Weighted-average number of common
shares:Basic and diluted
    
    
    53,270,160
    
    
    
    48,846,244Basic and diluted loss per share
    
    $
    (0.02
    )
    
    $
    (0.05
    )
 8. Cash Flows
  September 30,
    
    
    September 30,2009
    
    
    2008Cash paid during the year for:Interest
    
    $
    46,226
    
    
    $
    165,711Taxes
    
    
    6,947
    
    
    
    Supplemental disclosure for noncash investing
and financing activity:Temporary recovery (impairment) of value of
securities available for sale
    
    
    76,192
    
    
    
    (782,705
    )Dividends accrued on Preferred Stock
    
    
    (402,279
    )
    
    
    (356,910
    )
  - 12 -




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##### 



9. Related Party Transactions
     10. Continuing Operations
   - 13 -




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##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 This Quarterly Report on Form 10-Q , including, without limitation, Managements Discussion and
Analysis of Financial Condition and Results of Operations, contains forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act). We intend that the forward-looking statements be
covered by the safe harbor for forward-looking statements in the Exchange Act. The forward-looking
information is based on various factors and was derived using numerous assumptions. All statements,
other than statements of historical fact, that address activities, events or developments that we
intend, expect, project, believe or anticipate will or may occur in the future are forward-looking
statements. Such statements are based upon certain assumptions and assessments made by our
management in light of their experience and their perception of historical trends, current
conditions, expected future developments and other factors they believe to be appropriate. These
forward-looking statements are usually accompanied by words such as believe, anticipate,
plan, seek, expect, intend and similar expressions.
 Forward-looking statements necessarily involve risks and uncertainties, and our actual results
could differ materially from those anticipated in the forward looking statements due to a number of
factors, including those set forth in Part I, Item 1A, entitled Risk Factors, of our Annual
Report on Form 10-K for the year ended June 30, 2009, as may be updated and supplemented by
Part II, Item 1A, entitled Risk Factors, of this Quarterly Report on Form 10-Q , and elsewhere in
this report. These factors as well as other cautionary statements made in this Quarterly Report on
Form 10-Q, should be read and understood as being applicable to all related forward-looking
statements wherever they appear herein. The forward-looking statements contained in this Quarterly
Report on Form 10-Q represent our judgment as of the date hereof. We encourage you to read those
descriptions carefully. We caution you not to place undue reliance on the forward-looking
statements contained in this report. These statements, like all statements in this report, speak
only as of the date of this report (unless an earlier date is indicated) and we undertake no
obligation to update or revise the statements except as required by law. Such forward-looking
statements are not guarantees of future performance and actual results will likely differ, perhaps
materially, from those suggested by such forward-looking statements. In this report, the
Company, the Holding Company, we, us, and our refer to Homeland Security Capital
Corporation.
 Overview
    - 14 -




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##### 



Results of Operations
 Three Month Period Ended September 30, 2009 as Compared to the Three Month Period Ended September
30, 2008
 Contract revenue
  Three Months Ended
    
    
    Three Months Ended
    
    
    IncreaseSeptember 30, 2009
    
    
    September 30, 2008
    
    
    (Decrease)Safety
    
    $
    18,087,585
    
    
    $
    16,585,876
    
    
    $
    1,501,709
    
    
    
    9.0
    %Nexus
    
    
    2,082,857
    
    
    
    1,070,193
    
    
    
    1,012,664
    
    
    
    94.6
    %PMX
    
    
    679,000
    
    
    
    11,162
    
    
    
    667,838
    
    
    
    5,983.1
    %$
    20,849,442
    
    
    $
    17,667,231
    
    
    $
    3,182,211
    
    
    
    18.0
    %
  Contract cost
  Three Months Ended
    
    
    Three Months Ended
    
    
    IncreaseSeptember 30, 2009
    
    
    September 30, 2008
    
    
    (Decrease)Safety
    
    $
    15,146,727
    
    
    $
    14,244,702
    
    
    $
    902,025
    
    
    
    6.3
    %Nexus
    
    
    1,504,673
    
    
    
    577,859
    
    
    
    926,814
    
    
    
    160.4
    %PMX
    
    
    651,840
    
    
    
    10,379
    
    
    
    641,461
    
    
    
    6,180.4
    %$
    17,303,240
    
    
    $
    14,832,940
    
    
    $
    2,470,300
    
    
    
    16.7
    %
   - 15 -




---



##### 



Operating expenses
  Three Months Ended
    
    
    Three Months Ended
    
    
    IncreaseSeptember 30, 2009
    
    
    September 30, 2008
    
    
    (Decrease)Holding Company
    
    $
    777,906
    
    
    $
    1,563,258
    
    
    $
    (785,352
    )
    
    
    (50.2
    %)Safety
    
    
    2,659,844
    
    
    
    2,083,349
    
    
    
    576,495
    
    
    
    27.7
    %Nexus
    
    
    218,933
    
    
    
    426,864
    
    
    
    (207,931
    )
    
    
    (48.7
    %)PMX
    
    
    
    
    
    
    96,008
    
    
    
    (96,008
    )
    
    
    $
    3,656,683
    
    
    $
    4,169,479
    
    
    $
    (512,796
    )
    
    
    (12.3
    %)
  Other income and expense
  Three Months Ended
    
    
    Three Months Ended
    
    
    (Increase)September 30, 2009
    
    
    September 30, 2008
    
    
    DecreaseHolding Company
    
    $
    (547,172
    )
    
    $
    (515,790
    )
    
    $
    (31,382
    )
    
    
    (6.1
    %)Safety
    
    
    (60,266
    )
    
    
    (83,945
    )
    
    
    23,679
    
    
    
    28.2
    %Nexus
    
    
    2,225
    
    
    
    (6,167
    )
    
    
    8,392
    
    
    
    136.1
    %$
    (605,213
    )
    
    $
    (605,902
    )
    
    $
    689
    
    
    
    0.1
    %
 Three Months Ended
    
    
    Three Months Ended
    
    
    (Increase)September 30, 2009
    
    
    September 30, 2008
    
    
    DecreaseInterest expense
    
    $
    (489,792
    )
    
    $
    (501,652
    )
    
    $
    11,860
    
    
    
    2.4
    %Amortization of
debt
offering costs
    
    
    (135,592
    )
    
    
    (123,093
    )
    
    
    (12,499
    )
    
    
    (10.2
    %)Amortization of
debt discount
    
    
    (12,019
    )
    
    
    (12,018
    )
    
    
    (1
    )
    
    
    Interest and other
income
    
    
    32,190
    
    
    
    30,861
    
    
    
    1,329
    
    
    
    4.3
    %$
    (605,213
    )
    
    $
    (605,902
    )
    
    $
    689
    
    
    
    0.1
    %
  - 16 -




---



##### 



Net loss
  Liquidity And Capital Resources
   Cash Flows From Operating Activities
  Cash Flows From Investing Activities
  Cash Flows From Financing Activities
   - 17 -




---



##### 



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  Equity Market Risks
  Contract Risks
  Credit Risks
  Foreign Exchange Rate Risks
    - 18 -




---



##### 



Item 4(T).
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls over Financial Reporting
  PART II. OTHER INFORMATION.
 Item 1.
    
    Legal Proceedings.
  Item 1A.
    
    Risk Factors.
  Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  Item 3.
    
    Defaults Upon Senior Securities.
  Item 4.
    
    Submission of Matters to a Vote of Security Holders.
  Item 5.
    
    Other Information.
   - 19 -




---



##### 



Item 6.
    
    Exhibits.
 Exhibits.
 Exhibit
    
    Description31.1
    
    Certification of Principal Executive Officer
Pursuant to Securities Exchange Act Rule 13a-14(a)
As Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*31.2
    
    Certification of Principal Financial Officer
Pursuant to Securities Exchange Act Rule 13a-14(a)
As Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*32.1
    
    Certification of Principal Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*32.2
    
    Certification of Principal Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
 
 *
    
    Exhibit filed with this Quarterly Report  - 20 -




---



##### 



SIGNATURES
  HOMELAND SECURITY CAPITAL CORPORATIONDate:   November 16, 2009
    /s/ Michael T. BriganteMichael T. Brigante(Authorized Officer and Principal Financial Officer)  - 21 -