Paradigm Holdings, Inc. (OTCOB: PDHO) ("Paradigm" or the "Company"), a provider of comprehensive information technology and cyber security solutions for federal government enterprises, today provided an update for the first quarter ended March 31, 2011.

First Quarter 2011 Highlights:

  • Revenues increased by 66.5% to $12.5 million compared to the first quarter of 2010
  • Gross profit increased by 41.6% to $2.3 million compared to the first quarter of 2010
  • EBITDA increased by 181% to $0.9 million, or 7% of revenues
  • Net loss of $0.09 per diluted share driven by non-cash items

Peter B. LaMontagne, Paradigm President and CEO, stated, "We are excited about demonstrating improved financial performance and achieving an even stronger position in our core markets for cybersecurity and mission critical infrastructure. We believe that making our customers' missions and our employees our top priority is distinguishing us from our competition and enabling us to exhibit increasing growth and profitability."

Richard Sawchak, Chief Financial Officer, stated, "The increase in revenues experienced over the previous three quarters coupled with associated increases in gross profits and careful containment of our operating expenses has enabled us to significantly increase our profitability and improve the fundamentals of our balance sheet. We believe that these positive financial performance measures will enable us to continue on our trajectory and achieve our strategic business goals."

The Company's EBITDA was $0.9 million during the quarter ended March 31, 2011, as compared to approximately $0.3 million for the same period of 2010. The Company defines EBITDA as earnings before interest, taxes, changes in the fair value of put warrants, depreciation and amortization, stock compensation and restructuring expenses which include the basket allowed under our senior credit facility and other actual restructuring costs. EBITDA is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), and should not be considered in isolation of, or as a substitute for, earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. The Company believes the presentation of EBITDA is relevant and useful by enhancing the readers' ability to understand the Company's operating performance. The Company's management utilizes EBITDA as a means to measure performance. The Company's measurements of EBITDA may not be comparable to similar titled measures reported by other companies. The table below reconciles EBITDA, a non-GAAP measure, to net loss for the three months ended March 31, 2011 and 2010.

  Quarter Ended March 31
2011   2010
Net Loss $   (2,798,257 ) $   (540,278 )
 
Adjustments:
Income Tax (Benefit) Expense (55,191 ) 42,876
Interest Expense, net 769,252 555,199
Change in Fair Value of Put Warrants 2,775,460 (13,193 )
Depreciation & Amortization 104,524 104,557
Stock Compensation 69,765 83,617
Restructuring Expenses 33,958 86,886
           
EBITDA $   899,511   $   319,664  

Revenue for the first quarter of 2011 was $12.5 million, compared to $7.5 million for the first quarter of 2010. The increase in revenue was attributable to an increase in our federal service contract revenue of $1.0 million driven by the expansion of existing service contracts and new contract wins in the cybersecurity practice area and an increase in new contract wins in the mission critical infrastructure practice area of $4.4 million, which was partially offset by a reduction in revenue on a federal repair and maintenance contract of $0.4 million. Net loss for the first quarter of 2011 was $2.8 million, or $0.09 per share, versus a net loss of $0.5 million, or $0.01 per share, in the first quarter of 2010. The increased net loss is attributable to the change in fair value of put warrants of $2.8 million and higher interest expenses of $0.2 million, which were partially offset by better operating income of $0.7 million.

The Company had a $5.3 million working capital deficit and approximately $2.7 million outstanding on its line of credit with Silicon Valley Bank as of March 31, 2011.

For additional details, please refer to the Company's quarterly report on Form 10-Q as filed with the SEC.

About Paradigm Holdings, Inc.

Paradigm Holdings, Inc., (www.paradigmsolutions.com) is a provider of information technology (IT) and business solutions for U.S. Federal Government enterprises. Paradigm specializes in comprehensive information assurance solutions involving cyber security and forensics as well as continuity of operations and disaster recovery planning. The Company also provides systems engineering and IT infrastructure support solutions. Headquartered in Rockville, Maryland, the Company currently employs approximately 200 people.

Safe Harbor Statement

This press release may contain forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections. Paradigm assumes no obligation to update the information contained in this press release. Future results for Paradigm may be affected by its ability to continue to implement its government technology solutions, its dependence on the federal government and state and local governments and other federal government contractors as its major customers, timely passage of components of the federal budget, timely obligations of funding by the federal and state governments, its dependence on procuring, pricing and performing short-term government contracts, its dependence on hiring and retaining qualified professionals, potential fluctuations in its quarterly operating results, including seasonal impacts, its dependence on certain key employees and its ability to timely and effectively integrate the businesses it may acquire. For further information about forward-looking statements and other Paradigm specific risks and uncertainties please refer to recent SEC filings for Paradigm, which are available at www.sec.gov.

 
PARADIGM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
   
March 31, 2011 December 31, 2010
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 224,852 $ 94,746
Accounts receivable -- contracts, net 4,736,470 5,333,319
Costs and earnings in excess of billings on uncompleted contracts 2,460,493 3,398,380
Restricted Cash 4,000,000 4,000,000
Prepaid expenses 620,016 1,214,542
Deferred income tax assets 104,561 50,837
Other current assets   779,441   842,717
Total current assets 12,925,833 14,934,541
Property and equipment, net 85,132 102,838
Goodwill 3,991,605 3,991,605
Intangible assets, net 463,227 550,045
Deferred financing costs, net 345,425 444,252
Deferred income tax assets, net of current portion 744,958 693,720
Other non-current assets   177,502   266,778
Total Assets $ 18,733,682 $ 20,983,779
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable -- line of credit

$

2,730,222

$

3,084,681

Note payable -- promissory note 3,952,053 3,877,124
Accounts payable and accrued expenses 3,359,372 5,371,557
Accrued salaries and related liabilities 1,650,232 1,811,553
Corporate income tax payable 3,707 114,294

Mandatorily redeemable preferred stock - $.01 par value, 10,000,000
shares authorized, 6,115 shares issued and outstanding as of March 31,
2011 and December 31, 2010, respectively

6,431,031 600,000
Other current liabilities   121,512   176,669
Total current liabilities 18,248,129 15,035,878
Long-term liabilities
Other non-current liabilities 75,312 67,365
Mandatorily redeemable preferred stock, noncurrent portion -- 5,517,263
Put warrants   3,178,066   402,606
Total liabilities 21,501,507 21,023,112
Commitments and contingencies
Stockholders' equity

Common stock - $.01 par value, 250,000,000 shares authorized,
44,671,598 shares issued, of which 13,848,183 shares are held in the
treasury as of March 31, 2011 and December 31, 2010, respectively

308,236 308,236
Additional paid-in capital 4,057,301 3,987,536
Accumulated deficit   (7,133,362 )   (4,335,105 )
Total stockholders' (deficit) equity   (2,767,825 )   (39,333 )
Total liabilities and stockholders' equity $ 18,733,682 $ 20,983,779
 
 
PARADIGM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended
March 31,   March 31,
2011 2010
Contract Revenue
Service contracts $ 6,461,513 $ 5,472,860
Repair and maintenance contracts   6,061,010     2,049,845  
Total contract revenue   12,522,523     7,522,705  
Cost of revenue
Service contracts 4,855,592 4,213,366
Repair and maintenance contracts   5,326,587     1,656,811  
Total cost of revenue   10,182,179     5,870,177  
Gross margin 2,340,344 1,652,528
Selling, general and administrative   1,649,080     1,607,924  
Income from operations   691,264     44,604  
Other income (expense)
Interest income 10,703 8
Change in fair value of put warrants (2,775,460 ) 13,193
Interest expense - mandatorily redeemable preferred stock (501,042 ) (446,343 )
Interest expense   (278,913 )   (108,864 )
Total other expense   (3,544,712 )   (542,006 )
Loss from operations before income taxes (2,853,448 ) (497,402 )
(Benefit) provision for income taxes   (55,191 )   42,876  
Net loss attributable to common shareholders $ (2,798,257 ) $ (540,278 )
 
Weighted average number of common shares:
Basic 30,823,415 41,243,027
Diluted 30,823,415 41,243,027
 
Basic and diluted net loss per common share $ (0.09 ) $ (0.01 )

Paradigm Solutions Corporation
Richard Sawchak, 240-283-3404