10KSB/A 1 v077005_10ksba.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________

FORM 10-KSB/A
(Amendment No. 2)
(Mark One)
þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
for the fiscal year ended December 31, 2006

OR

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-50561
 
ENIGMA SOFTWARE GROUP, INC.
(Name of Small Business Issuer in Its Charter)
 
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  
20-2675930
(I.R.S. Employer
Identification No.)
     
2 Stamford Landing, Suite 100, Stamford, CT
(Address of Principal Executive Offices)
  
06902
(Zip Code)
 
(888) 360-0646
(Issuer's Telephone Number, Including Area Code)
 
Securities registered under Section 12(b) of the Exchange Act: None
 
Securities registered under Section 12(g) of the Exchange Act: 
 
Title of Each Class
 
Common Stock, $.001 Par Value
  
Name of Each Exchange on Which Registered
 
Over-the-Counter Bulletin Board
 
Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
¨

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 þ No ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
 
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State issuer’s revenues for its most recent fiscal year.  $1,327,481
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days. $ 1,550,768 as of March 21, 2007.
 
APPLICABLE ONLY TO CORPORATE REGISTRANTS
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. 4,191,266 shares of Common Stock, $0.001 par value, outstanding as of May 1, 2007.
 
Transitional Small Business Disclosure Format (Check One):
Yes ¨ No þ


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Explanatory Note
 
This Form 10-KSB/A (Amendment No. 2) filing amends Item 8A, Controls and Procedures, of the Form 10-KSB/A filed by Enigma Software Group, Inc. (the “Company”) on May 1, 2007. These amendments pertain specifically to the Company's evaluation of its disclosure controls and procedures.



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Item 8A. Controls and Procedures
 
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act of 1934 are recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

As noted in the Company’s interim filings, a material weakness in the Company’s internal controls over financial reporting existed as of June 30, 2006, and September 30, 2006 with regard to our design and maintenance of adequate controls over the preparation, review, presentation and disclosure of amounts included in our Balance Sheet and Statements of Operations and Cash Flows, which resulted in misstatements therein.  The impact of the issuance of secured convertible debentures and the related warrants, and the proceeds therefrom, were not appropriately classified as liabilities on the Balance Sheet and the related fair value adjustments on the Statement of Operations and financing cash inflows and outflows on the Statement of Cash Flows. In addition, the beneficial conversion feature of the convertible preferred stock was not appropriately classified on the Balance Sheet and the related accretion adjustment on the Statement of Operations and financing cash inflows and outflows on the Statement of Cash Flows. Finally, Temporary and Permanent equity as they relate to the convertible preferred stock were misstated. In connection with our material weakness regarding our design and maintenance of adequate controls, during the fourth quarter, the Company requested and received counsel from its independent public accountants concerning the appropriate financial disclosure and treatment of derivative securities. In addition, the Company, including the Company’s CFO, reviewed literature detailing the proper disclosure and treatment pertaining to the accounting of these derivative securities. During the fourth quarter, and as a result of the aforementioned, the Company’s CEO and CFO concluded that the preparation of financial statements with respect to such misstatements have been corrected in the restated financial statements included herein, and that the Company has eliminatd the material weakness relating to our design and maintenance of adequate controls.

A material weakness in the Company’s disclosure controls and procedures existed as of December 31, 2006, due to the Company’s limited number of employees. With regard to such personnel, there was a weakness as a result of the limited segregation of duties amongst our employees. As a result, our CEO and CFO determined that the Company’s disclosure controls and procedures were not effective as of the period ended December 31, 2006.

Changes in Internal Control Over Financial Reporting

As disclosed above, during the fourth quarter, the Company took steps to correct the preparation of our financial statements, and the Company’s CEO and CFO concluded that these changes eliminated the material weakness relating to our design and maintenance of adequate controls. Thus, there were changes in our internal control over financial reporting during the fourth quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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Item 8B. Other Information.
 
None.


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SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




Date: May 29, 2007
    
 
Enigma Software Group, Inc.
     
 
By
  /s/ Alvin Estevez               
 
 
Alvin Estevez
 
 
President and Chief Executive Officer
     


In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature
  
Title
Date
       
       
/s/ Alvin Estevez
 
President and Chief Executive Officer
May 29, 2007
Alvin Estevez
 
(Principal Executive Officer)
 
       
/s/ Colorado Stark
  
Executive Chairman
May 29, 2007
Colorado Stark
      
       
/s/ Richard M. Scarlata
  
Chief Financial Officer and Treasurer
May 29, 2007
Richard M. Scarlata
  
(Principal Financial Officer)
 
       
/s/ Edwin J. McGuinn, Jr.
  
Director
May 29, 2007
Edwin J. McGuinn, Jr.
      



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