SteelCloud Announces Third Quarter 2009 Results

• Press Release
• Source: SteelCloud, Inc.
• On 10:22 pm EDT, Monday September 14, 2009

HERNDON, Va., Sept. 14 /PRNewswire-FirstCall/ -- SteelCloud, Inc. (Nasdaq: SCLD - News), a leading integrator of mobility computing appliance solutions, today reported financial results for its third quarter 2009 which ended July 31, 2009. During the third quarter, the Company sold its hardware integration business. As such, the results associated with the integration business have been reflected as discontinued operations in the financial statements. The SteelWorks Mobile and professional services are reflected as continuing operations.

Third quarter revenues from continuing operations decreased 69% to approximately $282,000 during the third quarter of fiscal 2009 as compared to $903,000 during the third quarter in 2008. The net loss from continuing operations was approximately ($700,000) or ($.05) per share for the third quarter in 2009 compared to a net loss of ($1,018,000) or ($.09) per share for the same period in 2008. Net loss from discontinued operations was approximately ($198,000) or ($.01) per share for the quarter ended July 31, 2009 compared to income from discontinued operations of $388,000 or $.03 per share for the same period in fiscal 2008.

Third Quarter Highlights:

• In June, the Company's board members each made an equity investment in the Company
• The Company executed a loan of $250,000 with Caledonia Capital in July for working capital purposes
• SteelCloud sold its integration business
• The Company announced that it had signed an OEM agreement with Dell, whereby Dell would build and support its SteelWorks branded appliance
• SteelCloud announced deliveries of its SteelWorks® FedMobile to multiple domestic and international DoD installations
• Product revenues increased 55% in Q3 2009 compared to Q3 2008
• Gross profit percentage increased to 42% in Q3 2009 compared to 21% in Q3 2008
• Operating expenses decreased 34% in Q3 2009 from Q3 2008

"While our third quarter results met our expectations, it is easy to see that our business has been substantially affected by the downturn in the economy and the shedding of our hardware integration business," said Brian Hajost, SteelCloud President and CEO. "We took decisive steps during the quarter to restructure our Company, reducing headcount, and refocusing our resources on market opportunities for our proprietary BlackBerry-related software and appliances. With the elimination of our hardware integration business and the signing of the Dell OEM agreement, SteelCloud is now squarely focused on penetrating the BlackBerry market with our software and appliance products."

Quarterly Conference Call

The Company will hold a conference call at 10:00 AM ET on Tuesday, September 15, 2009 to discuss the third quarter results. Brian Hajost, SteelCloud President and Chief Executive Officer, will host the call. For investors interested in listening to the earnings call, please dial 866-939-3921, or for international callers, dial 678-302-3550 and reference SteelCloud. A recording of the earnings call will be available until 11:59 PM ET, September 25, 2009, and will be accessible by dialing 866-939-0581 (USA) or 678-302-3540 and keying in 4804300#. Press 4 to listen, enter confirmation: 20090902419971#.

About the Company

SteelCloud is a developer and integrator of mobility computing appliance solutions. The Company designs, architects and develops specialized appliance solutions for mobile computing technologies including the BlackBerry Enterprise Server technology from Research In Motion. For both commercial and government markets, the Company delivers integrated hardware/software appliance solutions that focus on ease of deployment, policy compliance, and high availability. Over its 20-year history, the Company has won numerous awards for technical excellence and customer satisfaction. The Company can be reached at (703) 674 5500. Additional information is available at www.steelcloud.com. Email: info@steelcloud.com.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Except for historical information, all of the statements, expectations and assumptions contained in the foregoing are forward looking statements that involve a number of risks and uncertainties. It is possible that the assumptions made by management are not necessarily the most likely and may not materialize. In addition, other important factors that could cause actual results to differ materially include the following: SteelCloud's ability to obtain financing in the short term, risks associated with the integration of business following an acquisition, business conditions and the amount of growth in the computer industry and general economy; competitive factors; ability to attract and retain personnel, including key sales and management personnel; the price of SteelCloud's stock; and the risk factors set forth from time to time in SteelCloud's SEC reports, including but not limited to its annual report on Form 10-K and its quarterly reports on Forms 10-Q; and any reports on Form 8K. SteelCloud takes no obligation to update or correct forward-looking statements.

                                  STEELCLOUD, INC
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                                                  October 31,     July 31,
                                                     2008          2009
                                                     ----          ----
                         ASSETS                                 (unaudited)
    Current assets
       Cash and cash equivalents                    $752,351      $366,210
       Accounts receivable, net                    1,571,673       202,201
       Inventory, net                                521,920       111,457
       Prepaid expenses and other current assets     130,446       249,362
       Deferred contract costs                             -        38,140
                                                          --        ------
    Total current assets                           2,976,390       967,370

    Property and equipment, net                      626,440       477,643
    Equipment on lease, net                          442,099         1,818
    Other assets                                       7,020        11,102
                                                       -----        ------

    Total assets                                  $4,051,949    $1,457,933
                                                  ==========    ==========

          LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
       Accounts payable                             $718,316      $614,365
       Accrued expenses                              561,009       224,078
       Notes payable, current                          7,538       176,910
       Unearned revenue                                8,882            96
                                                       -----            --
    Total current liabilities                      1,295,745     1,015,449

    Long-term liabilities
       Notes payable, long-term                        7,903             -
       Other long-term                               132,055       223,906
                                                     -------       -------
    Total long-term liabilities                      139,958       223,906

    Stockholders' equity
         Preferred stock, $.001 par value:
          2,000,000 shares authorized, no
          shares issued and outstanding at
          October 31, 2008 and July 31, 2009               -             -
         Common stock, $.001 par value:
          50,000,000 shares authorized,
          15,138,376 and 15,733,376 shares
          issued at October 31, 2008 and July
          31, 2009, respectively                      15,138        15,733
         Additional paid in capital               50,902,172    51,256,046
         Treasury stock, 400,000 shares at
          October 31, 2008 and July 31, 2009      (3,432,500)   (3,432,500)
         Accumulated deficit                     (44,868,564)  (47,620,701)
                                                 -----------   -----------
    Total stockholders' equity                     2,616,246       218,578
                                                   ---------       -------

    Total liabilities and stockholders' equity    $4,051,949    $1,457,933
                                                  ==========    ==========



                                  STEELCLOUD, INC
                UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                           Three Months Ended      Nine Months Ended
                                July 31,               July 31,
                           ------------------      -----------------
                            2008       2009         2008        2009
                            ----       ----         ----        ----

    Revenues
       Products           $57,228     $88,518   $1,863,083     $188,319
       Services           846,215     193,187    1,954,564      971,945
                          -------     -------    ---------      -------
    Total revenues        903,443     281,705    3,817,647    1,160,264

    Cost of revenues
       Products            34,152      35,502    1,569,694       87,226
       Services           675,966     126,997    1,596,479      740,555
                          -------     -------    ---------      -------
    Total cost of
     revenues             710,118     162,499    3,166,173      827,781

    Gross profit          193,325     119,206      651,474      332,483

    Selling and
     marketing            248,557     153,412      640,738      369,276
    Research and
     product
     development           58,066      53,637      179,523      151,869
    General and
     administrative       899,042     591,397    2,635,418    1,886,485
    Severance and
     restructuring              -           -            -       73,205
                                -           -            -       ------

     Operating loss
      from continuing
      operations       (1,012,340)   (679,240)  (2,804,205)  (2,148,352)

    Interest (expense)
     income, net           (5,825)    (20,761)       5,417      (20,351)
                           ------     -------        -----      -------

    Loss from
     continuing
     operations before
     income taxes      (1,018,165)   (700,001)  (2,798,788)  (2,168,703)

    Provision
     (benefit) for
     income taxes        (312,096)          -      393,596            -
                         --------          --      -------           --

    Loss from
     continuing
     operations        (1,330,261)   (700,001)  (2,405,192)  (2,168,703)

    Discontinued
     Operations:

    Loss from disposal
     of discontinued
     operations (net
     of applicable
     taxes of $0)               -     (19,565)           -      (19,565)


    Income (loss) from
     discontinued
     operations, net
     of tax               388,575    (178,868)     797,350     (563,869)
                          -------    --------      -------     --------


    Income (loss) from
     discontinued
     operations, net
     of tax               388,575    (198,433)     797,350     (583,434)

    Net loss            $(941,686)  $(898,434) $(1,607,842) $(2,752,137)
                        =========   =========  ===========  ===========

    Basic and diluted
     (loss) income per
     share:
       Continuing
        Operations         $(0.09)     $(0.05)      $(0.17)      $(0.14)
       Discontinued
        Operations           0.03       (0.01)        0.06        (0.04)
                             ----       -----         ----        -----
       Net loss            $(0.06)     $(0.06)      $(0.11)      $(0.18)
                           ======      ======       ======       ======

    Weighted-average
     shares
     outstanding:
    Basic              14,595,649  15,140,024   14,426,565   14,903,494
    Diluted            14,595,649  15,140,024   14,426,565   14,903,494

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