SOURCE: SteelCloud, Inc.

March 20, 2008 18:38 ET

SteelCloud Announces First Quarter 2008 Results and Conference Call

Company Posts Significant Improvement Over Q1 2007

HERNDON, VA--(Marketwire - March 20, 2008) - SteelCloud, Inc. (NASDAQ: SCLD), a manufacturer of embedded integrated computing systems for the industrial automation marketplace, today reported financial results for its first quarter 2008 which ended January 31, 2008.

First quarter revenues increased 31% to approximately $5.8 million in fiscal 2008 compared to $4.4 million in the first quarter in 2007. The net loss was approximately ($676,000) or ($.05) per share for the first quarter in 2008 compared to a net loss of ($971,000) or ($.07) per share for the same period in 2007.

"Our first quarter is typically our most challenging and cyclic," said Bob Frick, SteelCloud CEO and President. "Revenue growth is our highest priority and focus for fiscal 2008. As I have previously discussed, our goal for 2008 is to grow at a rate greater than our market segment which is 8 to 10% annually. Our first quarter results exceed that goal and are a significant improvement over Q1 2007. We remain on plan to continue this improvement throughout the fiscal year and to accomplish a profitable 2008."

First Quarter Highlights:

--  Revenues increased over 31%; Core business integrator and ISV revenues
    increased by 59%
    
--  Operating expenses decreased 17%
    
--  Generated a net increase in cash of $43,000
    
--  Cash balance at January 31, 2008 was $2.7 million
    
--  Working capital was $3.2 million
    

Quarterly Conference Call

The Company will hold a conference call at 10:00 AM EDT on Monday March 24, 2008 to discuss the first quarter results. Robert Frick, SteelCloud President and Chief Executive Officer, will host the call. For investors interested in listening to the earnings call, please dial 866-901-2585, for international calls dial 404-835-7099 and reference SteelCloud. A recording of the earnings call will be available until 11:59 PM EDT, April 4, 2008, and will be accessible by dialing 866-211-4755 (USA) or 404-835-7050 (International) and keying in 4804300#. Press 4 to listen, enter confirmation: 200803183105370#.

About the Company

SteelCloud is a manufacturer of embedded integrated computing systems for the industrial automation marketplace. The Company designs and manufactures specialized servers and appliances for federal integrators, software vendors and volume users. For both the government and commercial markets the Company delivers integration services and software focused on risk management and network management solutions. The Company's ISO 9001:2000 certified Quality Management System provides procedures for continuous quality improvement in all aspects of its business. Over its nearly 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.

"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: 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 the Company's stock; and the risk factors set forth from time to time in the Company'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.
                  CONDENSED CONSOLIDATED BALANCE SHEET

                                                  October 31,  January 31,
                                                     2007         2008
                                                  -----------  -----------
                    ASSETS                                     (unaudited)
Current assets
 Cash and cash equivalents                        $ 2,622,654  $ 2,665,204
 Accounts receivable, net                           2,625,372    2,446,242
 Inventory, net                                     1,178,395    2,930,519
 Prepaid expenses and other current assets            255,924      231,227
 Deferred contract costs                               83,753       71,078
                                                  -----------  -----------
Total current assets                                6,766,098    8,344,270

Property and equipment, net                           802,288      740,774
Equipment on lease, net                               323,904      250,144
Other assets                                           44,053       50,456
                                                  -----------  -----------

Total assets                                      $ 7,936,343  $ 9,385,644
                                                  ===========  ===========

       LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
 Accounts payable                                 $ 1,789,329  $ 3,260,459
 Accrued expenses                                   1,158,641    1,789,674
 Notes payable, current                                12,842       10,808
 Unearned revenue                                      98,255       70,021
                                                  -----------  -----------
Total current liabilities                           3,059,067    5,130,962

Long-term liabilities
 Notes payable, long-term                              15,442       13,591
 Other, including severance obligations               154,520      146,556
                                                  -----------  -----------
Total long-term liabilities                           169,962      160,147

Stockholders’ equity
   Preferred stock, $.001 par value: 2,000,000
    shares authorized, no shares issued and
    outstanding at October 31, 2007 and January
    31, 2008                                                -            -
   Common stock, $.001 par value: 50,000,000
    shares authorized, 14,716,934 and 14,716,934
    shares issued at October 31, 2007 and January
    31, 2008, respectively                             14,717       14,717
   Additional paid in capital                      50,234,099   50,297,367
   Treasury stock, 400,000 shares at October 31,
    2007 and January 31, 2008                      (3,432,500)  (3,432,500)
   Accumulated deficit                            (42,109,002) (42,785,049)
                                                  -----------  -----------
Total stockholders’ equity                          4,707,314    4,094,535
                                                  -----------  -----------

Total liabilities and stockholders’ equity        $ 7,936,343  $ 9,385,644
                                                  ===========  ===========




                            STEELCLOUD, INC.
      UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                     Three Months Ended
                                                        January 31,
                                                  ------------------------
                                                      2007        2008
                                                   (restated)
                                                  -----------  -----------

Revenues
  Products                                        $ 3,890,161  $ 5,253,027
  Services                                            532,906      553,445
                                                  -----------  -----------
Total revenues                                      4,423,067    5,806,472
                                                  -----------  -----------

Cost of revenues
  Products                                          3,316,233    4,615,803
  Services                                            371,078      440,309
                                                  -----------  -----------
Total cost of revenues                              3,687,311    5,056,112
                                                  -----------  -----------

Gross profit                                          735,756      750,360

Selling and marketing                                 418,109      320,244
Research and product development                      142,827      198,225
General and administrative                          1,160,403      914,353
                                                  -----------  -----------

(Loss) from operations                               (985,583)    (682,462)

Interest income (expense), net                         14,223        6,415
                                                  -----------  -----------

(Loss) before income taxes                           (971,360)    (676,047)

Provision for income taxes                                  -            -
                                                  -----------  -----------

Net (loss)                                           (971,360)    (676,047)
                                                  ===========  ===========

(Loss) per share (basic and diluted):
Basic and diluted (loss) per share                $     (0.07) $     (0.05)

Weighted-average shares outstanding, basic and
 diluted                                           14,262,176   14,316,934