(Registrant’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 :
Common
stock, par value $0.001 per share.
(Title of
class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o No o
Indicate
by check mark if there is disclosure of delinquent filers in response to Item
405 of Regulation S-K contained herein and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “large accelerated filer,”“accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o Accelerated
filer o
Non-accelerated filer o Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No
x
The
aggregate market value of the voting stock held by non-affiliates of the issuer
as of April 30, 2009 was $2,578,652.
This
second amendment on Form 10-K/A (“Amendment No. 2”) amends SteelCloud, Inc.’s
(the “Company”) Annual Report on Form 10-K for
the fiscal year
ended October 31, 2009, which was filed
with the Securities and Exchange Commission (the "Commission") on February 5,2010 (the "2009 Form 10-K"), and amended on February 12, 2010 (“Amendment No.
1”). This Amendment No. 2 is being filed to revise Item 9A(T) –
Controls and Procedures, for certain comments received by the Company from the
Commission.
The
Company is also filing as exhibits to this Amendment No. 2 the certifications
required under Section 302 of the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley”). Because no financial statements are contained
within this Amendment No. 2, the Company is not including certifications
pursuant to Section 906 of Sarbanes-Oxley.
This
Amendment No. 2 is not intended to update any other information presented in the
2009 Form 10-K and Amendment No.1, except with respect to the address of the
Company set forth on the cover page, Item 9A(T) – Controls and Procedures, and
Item 15 - Exhibits. Accordingly, this Amendment No. 2 should be
read in conjunction with the 2009 Form 10-K, Amendment No. 1 and the Company’s
other filings made with the Commission subsequent to the 2009 Form
10-K.
ITEM
9A(T). CONTROLS AND PROCEDURES
(A)
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(f)
under the Securities Exchange Act of 1934, as amended) (the “Disclosure
Controls”) as of the end of the period covered by this Annual
Report. The Disclosure Controls evaluation was done under the
supervision and with the participation of management, including our Principal
Executive Officer (“PEO”) and Principal Financial Officer (the “PFO” and
together with the PEO, the “Certifying Officers”).
Attached
as exhibits to this Annual Report are certifications of the Certifying Officers,
which are required in accordance with Rule 13a-14 of the Exchange
Act. This “Controls and Procedures” section includes the information
concerning the controls evaluation referred to in the certifications and it
should be read in conjunction with the certifications for a more complete
understanding of the topics presented.
The
Certifying Officers have evaluated the effectiveness of our disclosure controls
and procedures, as of October 31, 2009, the period covered by this Annual Report
on Form 10-K. Based upon this evaluation, our Certifying Officers concluded that
our Disclosure Controls were not effective as of the end of October 31, 2009. In
making this evaluation, the Certifying Officers considered, among other matters,
the material weakness in our internal control over financial reporting described
below.
(B)
INTERNAL CONTROL OVER FINANCIAL REPORTING
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting.
The term
“internal control over financial reporting” is defined as a process designed by,
or under the supervision of, our Certifying Officers, or persons performing
similar functions, and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
·
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets,
·
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures are being made
only in accordance with authorizations of our management and directors,
and
·
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, or use or disposition of our assets that could
have a material effect on our financial
statements.
Under the
supervision of our Certifying Officers, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of October 31,2009 using the criteria established in Internal Control—Integrated Framework
(the “Framework”) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). This evaluation included review of the
documentation of controls, evaluation of the design effectiveness of controls,
testing of the operating effectiveness of controls and a conclusion on this
evaluation. Based on this evaluation, our management concluded our internal
control over financial reporting was not effective as of October 31,2009.
A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis. In our assessment of the
effectiveness of our internal control over financial reporting as of October 31,2009, we determined that there were control deficiencies that when aggregated
constituted a material weakness, such as:
·
Inadequate
staffing resulting in a lack of proper review and monitoring controls over
financial reporting,
·
Inadequate
segregation of duties and effective risk assessment,
and
·
Inadequate
review and evaluation of transactions in the third quarter of fiscal year
2009 leading to a correction of an error for an impairment charge upon our
ultimate evaluation in the fourth quarter of fiscal year
2009.
During
the course of our fiscal year, primarily in the second half, we had a number of
both voluntary and involuntary reductions of staff. Due to strategic
business decisions, we decided to discontinue our computer integration business
in the third quarter of fiscal 2009. As the year progressed and these
events unfolded, we were aware of the growing concern over how a reduction of
staff would impact our internal controls, especially with regards to a lack of
proper review and monitoring controls and the segregation of
duties.
These
control deficiencies resulted in a reasonable possibility that a material
misstatement of the annual or interim financial statements would not have been
prevented or detected on a timely basis. As a result of the material
weakness described above, we concluded that we did not maintain effective
internal control over financial reporting as of October 31, 2009 based on
criteria established in the Framework. Our new management, board of directors
and audit committee are currently evaluating remediation plans for the above
deficiencies. During the period covered by this annual report on
Form 10-K, we have not been able to remediate the weaknesses described above.
However, we plan to take steps to enhance and improve the design of
our internal control over financial reporting. Our proposed plans
are set out below under the heading, “Management’s Remediation
Initiatives”.
Management’s
Remediation Initiatives
Although
we have been unable to meet the COSO standards because of our limited financial
resources, we are committed to improving our internal control over financial
reporting and disclosure controls and procedures. We plan to
remediate this material weakness through, to the extent possible, the
implementation of procedures to assure adequate review and evaluation of
transactions. Further, concurrent with having sufficient capital
resources (which we estimate to be an equity or debt investment of approximately
$1,000,000) we will seek to hire additional qualified staff or obtain qualified
external support, which we believe will permit us to have significantly improved
review and monitoring controls over financial reporting as well as adequate
segregation of duties and effective risk assessment. We are currently
exploring various alternatives for maximizing our resource utilization as well
as aligning our current business model with the COSO standards.
During
our fiscal year ended October 31, 2009 a number of our accounting personnel left
our employment and were not replaced, including the departure of our Controller
in the fourth quarter of fiscal 2009. In addition, our Chief Financial Officer
resigned on November 30, 2009 and we retained a new Principal Financial Officer
immediately. These changes have impacted our internal controls, such as the
segregation of duties and lack of review and monitoring controls over financial
reporting, which has resulted in a material weakness in internal controls
over financial reporting and management’s conclusion that our internal controls
over financial reporting were not effective as of October 31, 2009.
As
discussed above, we conducted an evaluation of the effectiveness of our internal
control over financial reporting during our most recent fiscal quarter ending
October 31, 2009 using the criteria established in the Framework.
Based on our evaluation using the criteria established, our
management concluded that our internal controls over financial reporting were
not effective as of October 31, 2009.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
*31.2
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this Second Amended Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant
to and in accordance with the requirements of the Securities Exchange Act of
1934, this Second Amended Annual Report has been signed by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
