**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q/A**

**Amendment No. 2**

**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe Quarterly Period Ended September 30, 2006**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition periodfrom          to**

**Commissionfile number 000-30617**

**GlobalSCAPE, Inc.**

(Exact name of registrantas specified in its charter)

| **Delaware**                              |   | **74-2785449**       |
|-------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of          |   | (I.R.S. Employer     |
| incorporation or  organization)           |   | Identification  No.) |
|                                      |   |                 |
| **6000  Northwest Parkway, Suite 100**    |   | ** **           |
| **San  Antonio, Texas**                   |   | **78249**            |
| (Address of  principal executive offices) |   | (Zip Code)           |

 

**(210) 308-8267**

(Registrant’s telephonenumber, including area code)

Securities registered pursuant to Section 12(b) of theAct:

**None**

Securities registeredpursuant to Section 12(g) of the Act:

| **Common Stock, par value  $0.001 per share** |
|-----------------------------------------------|
| (Title of Class)                              |

 

Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports) and (2) has been subjectto such filing requirements for the past 90 days.   Yes  x   No  o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act (check one):

Large Acceleratedfiler o    Acceleratedfiler o    Non-Acceleratedfiler x

Indicate by check mark if the registrant is a shellcompany (as defined in Rule 12b-2 of the Act).   o  Yes   x  No

The aggregate market value of the registrant’soutstanding common stock held by non-affiliates was approximately $46,171,345as of the last business day of the registrant’s most recently completedthird  fiscal quarter, based upon the closing sales price of $3.05 per share on such date on the NASD’s OTC Bulletin Board.

Asof November  13, 2006, there were 15,138,146 shares of common stockoutstanding.

 

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EXPLANATORYNOTE

This amendment(this “Second Amendment”) amends the Quarterly Report on Form 10-Q for thequarterly period ended September 30, 2006, filed on November 13, 2006 (the “OriginalFiling”) and later amended by the filing of an amendment on Form 10-Q/A onDecember 13, 2006.  GlobalSCAPE, Inc.(the “Company” or “GlobalSCAPE”) has filed this Second Amendment to revise Item4 in response to a request from the Securities and Exchange Commission thatGlobalSCAPE clarify language used in Item 4 of the Original Filing, aspreviously amended.  Pursuant to Rule12b-15 under the Securities Exchange Act of 1934, as amended, the complete textof Item 4 as amended is set forth below. The remainder of the Original Filing,as previously amended, is unchanged and is not reproduced in this SecondAmendment. This Second Amendment speaks as of the filing date of the OriginalFiling and reflects only the changes discussed above.  No other information included in the OriginalFiling, as previously amended, including GlobalSCAPE’s financial statements andthe footnotes thereto, has been modified or updated in any way.  This Second Amendment should be read togetherwith other documents that GlobalSCAPE has filed with the Securities and ExchangeCommission subsequent to the filing of the Original Filing.

**Item 4.  *Controls andProcedures***

During a test byour independent auditors, PMB Helin Donovan, L.L.P. (formerly Helin Donovan,Trubee & Wilkerson),  of our first quarter 2006 financial statements,the independent auditors discovered an order that included maintenance and support but with respect to which nodeferred revenue was reflected.  Further testing by GlobalSCAPE personnelfound other transactions with a similar discrepancy.  Based upon these discoveries, we evaluatedthe design and operation of our disclosure controls and procedures as ofDecember 31, 2005 to determine whether they were effective in ensuring that wedisclose the required information in a timely manner and in accordance with theSecurities Exchange Act of 1934, as amended, or the Exchange Act, and the rulesand forms of the Securities and Exchange Commission.  Management, including our principal executiveofficer and principal financial officer, supervised and participated in theevaluation.  Our principal executiveofficer and principal financial officer concluded, based on their review, that:

·                  Wehad previously maintained product pricing & identification information inthe product catalog of the order processing system for individual products andbundles of products, or bundles,  whichbecame the line items on customer orders and invoices.

·                  Thenew product setup process was designed to use a “Products” form to add newsoftware products to the product catalog. The “Products” form contained logic that automatically designated 100%of the revenue from the sale of the product to be treated as deferred revenueonly when the product was classified as “Support” and 0% when the sale wasdesignated as “Product”.  In the case ofsales of bundled products and maintenance, the default could be changed from100% to the appropriate percentage to reflect the split between maintenancesales and product sales.

·                  Forexpediency, Product Catalog information from existing products (whichhistorically had either a small or no maintenance and support component) wereused as templates to create Product Catalog entries for new products bundleswhich have a much more significant sales and maintenance component, thusby-passing the “Product” form and its associated edits.

·                  Inthe instances discovered by our evaluation, the template used for several newbundled products was created from a template which did not reflect maintenance(i.e. 0% allocated to deferred revenue). Therefore,  the sales orderprocess reported an incorrect revenue allocation between maintenance and othersales amounts when it used the template to allocate revenue betweenmaintenance (which leads to deferred revenue being recorded) and softwareproduct sales (which have nomaintenance component).

Our evaluation wasconcluded in late April 2006, after the filing of our 10-K for the 2005 fiscalyear but before the filing of our 10-Q for the quarter ended March 31,2006.  As a result of our evaluation, weconcluded that our first quarter financial statements for 2006 would requireapproximately a $50,000 adjustment.  Thatcorrection was made before closing the quarter books and prior to any publicreporting of our financial results for that period.  We further concluded that the issue firstoccurred in the third quarter of 2005, which would require a revenuereclassification in 2005 of approximately $154,000.  Following discussions regarding the matterwith our independent auditors, the amount

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of the2005 adjustment was deemed to be “not material” by our independentauditors.  However, in order to providethe utmost transparency with respect to our financial statements we decided torestate voluntarily our 2005 financial results. That restatement occurred by the filing of a Form 10-K/A for our 2005fiscal year on May 3, 2006.  Thecorrection to our controls and procedures was accomplished by developing a newwritten procedure for new product set up which specifies the use of the “Products”form which provides for the proper allocation between current and deferred revenue.  The new procedure was developed byGlobalSCAPE in mid-April 2006 and approved by GlobalSCAPE’s independentauditors following testing of the procedure. The procedure was implemented in late April 2006 after its approval byGlobalSCAPE and its testing by GlobalSCAPE’s auditors and will be ongoing.

Based upon thecorrective action taken, the immaterial nature of the adjustment required to bemade to our financial statements included in our Form 10-K for the fiscal yearended December 31, 2005, our restatement of our 2005 financial results throughthe filing of a report on Form 10-K/A, and the fact that corrections were madeto subsequent financial results prior to their public disclosure, our principalexecutive officer and principal financial officer were able to conclude thatour financial statements for our 2005 fiscal year, as included in our report onForm 10-K, as amended, and the subsequent fiscal periods covered by ourquarterly reports on Form 10-Q fairly present in all material respects thefinancial condition, results of operations and cash flows of GlobalSCAPE.

As of the end ofthe period covered by this report, our principal executive officer andprincipal financial officer carried out an evaluation of the effectiveness ofGlobalSCAPE’s “disclosure controls and procedures” (as defined in theSecurities Exchange Act of 1934 Rules 13a-15(e)and 15d-15(e)) and concludedthat the disclosure controls and procedures, as corrected in connection withthe investigation discussed above, were effective and designed to ensure thatmaterial information relating to GlobalSCAPE and our consolidated subsidiarieswhich is required to be included in our periodic Securities and ExchangeCommission filings would be made known to them by others within those entities. There were no changes in our internal controls over financial reporting duringthe period covered by this report that could materially affect, or arereasonably likely to materially affect, our financial reporting.

There were nochanges in our internal control over financial reporting during the last fiscalyear and/or up to and including the date of this filing that we believematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting, except for improvements in theinternal controls to strengthen the process of capturing and reporting ofdeferred revenue, all of which were made prior to the beginning of our fiscalquarter ending September 30, 2006.

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**SIGNATURE**

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.
| Date:  January 29,  2007 |   | GLOBALSCAPE, INC. |                                  |
|-----------------------------------------|--------|-------------------|---------------------------------------|
|                                    |   |              |                                  |
|                                    |   |              |                                  |
|                                    |   |              |                                  |   |
|                                    |   | By:               |  /s/ CHARLES  R. POOLE           |   |
|                                    |   |              | Charles R. Poole                      |   |
|                                    |   |              | President and Chief Executive Officer |   |
|                                    |   |              |                                  |
|                                    |   |              |                                  |
|                                    |   |              |                                  |   |
|                                    |   | By:               |  /s/ BERNARD  N. SCHNEIDER       |   |
|                                    |   |              | Bernard N. Schneider                  |   |
|                                    |   |              | Chief Financial Officer               |   |

 

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