UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 0-24015
 
 STEELCLOUD, INC.
  VIRGINIA
    
    54-1890464(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
 
   þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ




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##### 



SteelCloud, Inc.
Form 10-Q Index
for the Quarterly period ended April 30, 2008
 PART I. FINANCIAL INFORMATION
    
    
    1ITEM 1.
    
    FINANCIAL STATEMENTS
    
    
    1ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    2ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    12ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    12PART II. OTHER INFORMATION
    
    
    15ITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    15ITEM 1A.
    
    RISK FACTORS
    
    
    15ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    15ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    15ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    15ITEM 5.
    
    OTHER INFORMATION
    
    
    15ITEM 6.
    
    EXHIBITS
    
    
    15SIGNATURES
    
    
    16
 i




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##### 



PART I. FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 Index to Financial Statements
 Condensed Consolidated Balance Sheet
    
    
    F-1Unaudited Condensed Consolidated Statements of Operations
    
    
    F-2Unaudited Condensed Consolidated Statements of Cash Flows
    
    
    F-3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    F-4
 1




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##### 



STEELCLOUD, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
 October 31,
    
    
    April 30,2007
    
    
    2008(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    2,622,654
    
    
    $
    4,707,128Accounts receivable, net
    
    
    2,625,372
    
    
    
    2,046,124Inventory, net
    
    
    1,178,395
    
    
    
    1,596,955Deferred contract costs
    
    
    83,753
    
    
    
    45,123Prepaid expenses and other current assets
    
    
    255,924
    
    
    
    220,530Total current assets
    
    
    6,766,098
    
    
    
    8,615,860Property and equipment, net
    
    
    802,288
    
    
    
    708,678Equipment on lease, net
    
    
    323,904
    
    
    
    191,696Other assets
    
    
    44,053
    
    
    
    25,054Total assets
    
    $
    7,936,343
    
    
    $
    9,541,288LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,789,329
    
    
    $
    4,365,090Notes payable, current
    
    
    12,842
    
    
    
    8,775Unearned revenue
    
    
    98,255
    
    
    
    56,466Accrued expenses and other current liabilities
    
    
    1,158,641
    
    
    
    754,715Total current liabilities
    
    
    3,059,067
    
    
    
    5,185,046Long-term liabilitiesNotes payable, long-term
    
    
    15,442
    
    
    
    11,717Other, including severance obligations
    
    
    154,520
    
    
    
    129,675Total long-term liabilities
    
    
    169,962
    
    
    
    141,392Stockholders equityPreferred stock, $.001 par value: 2,000,000
shares authorized, no shares
issued and outstanding at October 31, 2007
and April 30, 2008
    
    
    
    
    
    
    Common stock, $.001 par value: 50,000,000
shares authorized, 14,716,934 and
14,731,449 shares issued at October 31,
2007 and April 30, 2008, respectively
    
    
    14,717
    
    
    
    14,731Additional paid in capital
    
    
    50,234,099
    
    
    
    50,407,777Treasury stock, 400,000 shares at October
31, 2007 and April 30, 2008
    
    
    (3,432,500
    )
    
    
    (3,432,500
    )Accumulated deficit
    
    
    (42,109,002
    )
    
    
    (42,775,158
    )Total stockholders equity
    
    
    4,707,314
    
    
    
    4,214,850Total liabilities and stockholders equity
    
    $
    7,936,343
    
    
    $
    9,541,288
 The Accompanying Notes Are an Integral Part of these Condensed Consolidated Financial Statements
 F-1




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##### 



STEELCLOUD, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    Six Months EndedApril 30,
    
    April 30,2007
    
    2008
    
    2007
    
    2008(restated)
    
    
    
    
    
    (restated)RevenuesProducts
    
    $
    4,395,910
    
    
    $
    7,827,740
    
    
    $
    8,286,071
    
    
    $
    13,080,767Services
    
    
    440,933
    
    
    
    556,894
    
    
    
    973,839
    
    
    
    1,110,339Total revenues
    
    
    4,836,843
    
    
    
    8,384,634
    
    
    
    9,259,910
    
    
    
    14,191,106Cost of revenuesProducts
    
    
    3,342,499
    
    
    
    6,435,320
    
    
    
    6,658,732
    
    
    
    11,051,123Services
    
    
    283,443
    
    
    
    480,204
    
    
    
    654,521
    
    
    
    920,513Total cost of revenues
    
    
    3,625,942
    
    
    
    6,915,524
    
    
    
    7,313,253
    
    
    
    11,971,636Gross profit
    
    
    1,210,901
    
    
    
    1,469,110
    
    
    
    1,946,657
    
    
    
    2,219,470Selling and marketing
    
    
    336,645
    
    
    
    281,718
    
    
    
    754,754
    
    
    
    601,962Research and product development
    
    
    151,770
    
    
    
    208,888
    
    
    
    294,597
    
    
    
    407,113General and administrative
    
    
    1,136,276
    
    
    
    973,440
    
    
    
    2,296,679
    
    
    
    1,887,793(Loss) income from operations
    
    
    (413,790
    )
    
    
    5,064
    
    
    
    (1,399,373
    )
    
    
    (677,398
    )Interest income, net
    
    
    11,467
    
    
    
    4,827
    
    
    
    25,690
    
    
    
    11,242(Loss) income before income taxes
    
    
    (402,323
    )
    
    
    9,891
    
    
    
    (1,373,683
    )
    
    
    (666,156
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (402,323
    )
    
    $
    9,891
    
    
    $
    (1,373,683
    )
    
    $
    (666,156
    )(Loss)income per share (basic and
diluted):Basic and diluted (loss) income per
share
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    $
    (0.10
    )
    
    $
    (0.05
    )Weightedaverage shares outstanding:Basic
    
    
    14,275,372
    
    
    
    14,323,458
    
    
    
    14,268,627
    
    
    
    14,320,179Diluted
    
    
    14,275,372
    
    
    
    14,667,606
    
    
    
    14,268,627
    
    
    
    14,320,179
 The Accompanying Notes Are an Integral Part of these Condensed Consolidated Financial Statements
 F-2




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##### 



STEELCLOUD, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedApril 30,2007
    
    2008(restated)Operating activitiesNet (loss)
    
    $
    (1,373,683
    )
    
    $
    (666,156
    )Adjustments to reconcile net (loss) to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    299,850
    
    
    
    252,956Stock-based compensation
    
    
    214,752
    
    
    
    163,519Deferred tax expense
    
    
    40,000
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    921,877
    
    
    
    579,248Inventory
    
    
    (178,019
    )
    
    
    (418,560
    )Deferred contract costs
    
    
    6,218
    
    
    
    38,630Prepaid expenses and other assets
    
    
    (108,428
    )
    
    
    54,393Accounts payable
    
    
    (480,117
    )
    
    
    2,575,761Unearned revenue
    
    
    292,853
    
    
    
    (48,852
    )Accrued expenses and other liabilities
    
    
    (220,786
    )
    
    
    (421,708
    )Net cash (used in) provided by operating activities
    
    
    (585,483
    )
    
    
    2,109,231Investing activitiesPurchase of property and equipment
    
    
    (210,160
    )
    
    
    (27,138
    )Net cash (used in) investing activities
    
    
    (210,160
    )
    
    
    (27,138
    )Financing activitiesProceeds from exercise of common stock options
    
    
    
    
    
    
    10,173Payments on notes payable
    
    
    (7,628
    )
    
    
    (7,792
    )Net cash (used) provided by financing activities
    
    
    (7,628
    )
    
    
    2,381Net (decrease) increase in cash and cash equivalents
    
    
    (803,271
    )
    
    
    2,084,474Cash and cash equivalents at beginning of period
    
    
    3,655,163
    
    
    
    2,622,654Cash and cash equivalents at end of period
    
    $
    2,851,892
    
    
    $
    4,707,128Supplemental cash flow informationInterest paid
    
    $
    665
    
    
    $
    5,756Income taxes paid
    
    $
    
    
    
    $
    
 The Accompanying Notes Are an Integral Part of these Condensed Consolidated Financial Statements
 F-3




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##### 



STEELCLOUD, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Nature of Business and Basis of Presentation
        F-4




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##### 



STEELCLOUD, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 2. Restatement of Previously Issued Financial Statements
    Three Months Ended April 30, 2007As Previously
    
    RestatementReported
    
    Adjustments
    
    RestatedRevenue
    
    $
    4,836,843
    
    
    $
    
    
    
    $
    4,836,843Gross profit
    
    
    1,517,869
    
    
    
    (306,968
    )
    
    
    1,210,901Net (loss) income available to common
shareholders
    
    
    (292,999
    )
    
    
    (109,324
    )
    
    
    (402,323
    )Per Share DataNet (loss) earnings per share, basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
  Six Months Ended April 30, 2007As Previously
    
    RestatementReported
    
    Adjustments
    
    RestatedRevenue
    
    $
    9,259,910
    
    
    $
    
    
    
    $
    9,259,910Gross profit
    
    
    2,303,884
    
    
    
    (357,227
    )
    
    
    1,946,657Net (loss) income available to common
shareholders
    
    
    (1,429,154
    )
    
    
    55,471
    
    
    
    (1,373,683
    )Per Share DataNet (loss) earnings per share, basic and diluted
    
    $
    (0.10
    )
    
    $
    
    
    
    $
    (0.10
    )
 F-5




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##### 



STEELCLOUD, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 3. Recently Issued Accounting Pronouncements
  Fair Value
Measurements
 The Fair Value Option
for Financial Assets and Financial Liabilities
 4. Significant Customers
  5. Stock-based Compensation
  F-6




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##### 



STEELCLOUD, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 6. Equity
 Warrants
  Restricted Stock
  7. Debt
  8. Unearned Revenue and Deferred Contract Costs
  9. Inventories
  October 31,
    
    
    April 30,2007
    
    
    2008Raw materials
    
    $
    758,154
    
    
    $
    1,154,011Work in process
    
    
    290,603
    
    
    
    194,741Finished goods
    
    
    129,638
    
    
    
    248,203$
    1,178,395
    
    
    $
    1,596,955
 F-7




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##### 



STEELCLOUD, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 10. Earnings per Share
  11. Income Tax
     12. Reclassification
 .
 F-8




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##### 



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
   OVERVIEW
  Evolution of the Company
  Federal Integrator and ISV Business
   2




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##### 



SteelWorks Mobile Blackberry Enterprise Server
  IT Services
  3




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##### 



Research and Product Development
  Significant Customer Contract
  GSA Contract
  Notices from Nasdaq
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  4




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##### 



Recently Issued Accounting Pronouncements
       5




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##### 



RESULTS OF OPERATIONS
  Net Revenue Discussion:
  Three Months Ended April 30,2007 (restated)
    
    
    2008
    
    
    Increase (decrease)% of Net
    
    
    
    
    
    
    % of NetDollars
    
    
    Revenues
    
    
    Dollars
    
    
    Revenues
    
    
    Dollars
    
    
    PercentageProducts
    
    $
    4,395,910
    
    
    
    90.88
    %
    
    $
    7,827,740
    
    
    
    93.36
    %
    
    $
    3,431,830
    
    
    
    78.07
    %Services
    
    
    440,933
    
    
    
    9.12
    %
    
    
    556,894
    
    
    
    6.64
    %
    
    
    115,961
    
    
    
    26.30
    %Total net revenues
    
    $
    4,836,843
    
    
    
    100.00
    %
    
    $
    8,384,634
    
    
    
    100.00
    %
    
    $
    3,547,791
    
    
    
    73.35
    %
   Gross Profit Discussion:
  Three Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Gross
    
    
    
    
    
    % of GrossDollars
    
    Profit
    
    Dollars
    
    Profit
    
    Dollars
    
    PercentageProducts
    
    $
    1,053,411
    
    
    
    86.99
    %
    
    $
    1,392,420
    
    
    
    94.78
    %
    
    $
    339,009
    
    
    
    32.18
    %Products  GP%
    
    
    23.96
    %
    
    
    
    
    
    
    17.79
    %Services
    
    
    157,490
    
    
    
    13.01
    %
    
    
    76,690
    
    
    
    5.22
    %
    
    
    (80,800
    )
    
    
    (51.30
    )%Services  GP%
    
    
    35.72
    %
    
    
    
    
    
    
    13.77
    %Total gross profit
    
    $
    1,210,901
    
    
    
    100.00
    %
    
    $
    1,469,110
    
    
    
    100.00
    %
    
    $
    258,209
    
    
    
    21.32
    %Total  GP%
    
    
    25.03
    %
    
    
    
    
    
    
    17.52
    %
  6




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##### 



Operating Expense Discussion:
  Three Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Net
    
    
    
    
    
    % of NetDollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageSelling and marketing
    
    $
    336,645
    
    
    
    6.96
    %
    
    $
    281,718
    
    
    
    3.36
    %
    
    $
    (54,927
    )
    
    
    (16.32
    )%Research and product
development
    
    
    151,770
    
    
    
    3.14
    %
    
    
    208,888
    
    
    
    2.49
    %
    
    
    57,118
    
    
    
    37.63
    %General and administrative
    
    
    1,136,276
    
    
    
    23.49
    %
    
    
    973,440
    
    
    
    11.61
    %
    
    
    (162,836
    )
    
    
    (14.33
    )%Total operating expenses
    
    $
    1,624,691
    
    
    
    33.59
    %
    
    $
    1,464,046
    
    
    
    17.46
    %
    
    $
    (160,645
    )
    
    
    (9.89
    )%
    7




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##### 



Interest Income Discussion:
  Three Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Net
    
    
    
    
    
    % of NetDollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageInterest income, net
    
    $
    11,467
    
    
    
    0.24
    %
    
    $
    4,827
    
    
    
    0.06
    %
    
    
    ($6,640
    )
    
    
    (57.91
    )%
  Net (Loss) Income Discussion:
  Three Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Net
    
    
    
    
    
    % of NetDollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageNet (loss)/income
    
    $
    (402,323
    )
    
    
    (8.32
    )%
    
    $
    9,891
    
    
    
    0.12
    %
    
    $
    412,214
    
    
    
    102.46
    %
   Net Revenue Discussion:
  Six Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Net
    
    
    
    
    
    % of NetDollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageProducts
    
    $
    8,286,071
    
    
    
    89.48
    %
    
    $
    13,080,767
    
    
    
    92.18
    %
    
    $
    4,794,696
    
    
    
    57.86
    %Services
    
    
    973,839
    
    
    
    10.52
    %
    
    
    1,110,339
    
    
    
    7.82
    %
    
    
    136,500
    
    
    
    14.02
    %Total net revenues
    
    $
    9,259,910
    
    
    
    100.00
    %
    
    $
    14,191,106
    
    
    
    100.00
    %
    
    $
    4,931,196
    
    
    
    53.25
    %
 8




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##### 



Gross Profit Discussion:
  Six Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Gross
    
    
    
    
    
    % of GrossDollars
    
    Profit
    
    Dollars
    
    Profit
    
    Dollars
    
    PercentageProducts
    
    $
    1,627,339
    
    
    
    83.60
    %
    
    $
    2,029,644
    
    
    
    91.45
    %
    
    $
    402,305
    
    
    
    24.72
    %Products  GP%
    
    
    19.64
    %
    
    
    
    
    
    
    15.52
    %Services
    
    
    319,318
    
    
    
    16.40
    %
    
    
    189,826
    
    
    
    8.55
    %
    
    
    (129,492
    )
    
    
    (40.55
    )%Services  GP%
    
    
    32.79
    %
    
    
    
    
    
    
    17.10
    %Total gross profit
    
    $
    1,946,657
    
    
    
    100.00
    %
    
    $
    2,219,470
    
    
    
    100.00
    %
    
    $
    272,812
    
    
    
    14.01
    %Total  GP%
    
    
    21.02
    %
    
    
    
    
    
    
    15.64
    %
   9




---



##### 



Operating Expense Discussion:
  Six Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Net
    
    
    
    
    
    % of NetDollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageSelling and marketing
    
    $
    754,754
    
    
    
    8.15
    %
    
    $
    601,962
    
    
    
    4.24
    %
    
    $
    (152,792
    )
    
    
    (20.24
    )%Research and product
development
    
    
    294,597
    
    
    
    3.18
    %
    
    
    407,113
    
    
    
    2.87
    %
    
    
    112,516
    
    
    
    38.19
    %General and
administrative
    
    
    2,296,679
    
    
    
    24.80
    %
    
    
    1,887,793
    
    
    
    13.30
    %
    
    
    (408,886
    )
    
    
    (17.80
    )%Total operating
expenses
    
    $
    3,346,030
    
    
    
    36.13
    %
    
    $
    2,896,868
    
    
    
    20.41
    %
    
    $
    (449,162
    )
    
    
    13.42
    %
    Interest Income Discussion:
  Six Months Ended April 30,2007 (restated)
    
    2008
    
    Increase (decrease)% of Net
    
    
    
    
    
    % of NetDollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageInterest income, net
    
    $
    25,690
    
    
    
    0.28
    %
    
    $
    11,242
    
    
    
    0.08
    %
    
    $
    (14,448
    )
    
    
    (56.24
    )%
 10




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##### 



Net (Loss) Discussion:
  Six Months Ended April 30,2007 (restated)
    
    2008% of Net
    
    
    
    
    
    % of Net
    
    Increase (decrease)Dollars
    
    Revenues
    
    Dollars
    
    Revenues
    
    Dollars
    
    PercentageNet (loss)
    
    $
    (1,373,683
    )
    
    
    (14.83
    )%
    
    $
    (666,156
    )
    
    
    (4.69
    )%
    
    $
    (707,527
    )
    
    
    (51.51
    )%
  LIQUIDITY AND CAPITAL RESOURCES
      11




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##### 



Contractual Obligations and Commercial Commitments:
  Contractual Obligations
    
    Payments Due by PeriodTotal
    
    
    Less than 1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    After 5 yearsNotes payable
    
    $
    20,492
    
    
    $
    8,775
    
    
    $
    11,717
    
    
    
    
    
    
    
    Operating leases
    
    
    2,057,482
    
    
    
    543,071
    
    
    
    617,774
    
    
    
    537,982
    
    
    
    358,655Employment agreements
    
    
    1,144,167
    
    
    
    475,000
    
    
    
    669,167
    
    
    
    
    
    
    
    Total
    
    $
    3,222,141
    
    
    $
    1,026,846
    
    
    $
    1,298,658
    
    
    $
    537,982
    
    
    $
    358,655
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of the Companys Disclosure Controls and Internal Controls
   
    
    The material weakness in our internal control over financial reporting that existed
as of October 31, 2007 and that, we believe, continued to exist as of April 30, 2008;
and
 12




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##### 




    
    Managements conclusion, as reported in Item 9A of our Annual Report on Form 10-K
for the fiscal year ended October 31, 2007, that our internal control over financial
reporting was not effective as of October 31, 2007; and the conclusion of our CEO and
CFO, as reported in Item 9A of our Annual Report on Form 10-K for the fiscal year ended
October 31, 2007, that our disclosure controls and procedures as of October 31, 2007
were not effective.
   
    
    Lack of effective policies and procedures surrounding the review and determination
of manufacturing costs which should have been allocated to inventory and cost of goods
sold which contributed to the understatement of inventory and cost of goods sold and
overstatement of general and administrative expenses.
   
    
    Developed and implemented policies and procedures to identify and properly allocate
manufacturing cost to inventory costs of goods sold.
    
    Established new key controls and strengthened existing controls surrounding the review and
approval of our financial statements and disclosures. Specifically, we enhanced certain key
controls around the analysis of new accounts and identification of significant variances in
existing accounts.
    
    Enhanced processes and controls within our financial statement close process, including
the preparation and review of a financial statement disclosure and Generally Accepted
Accounting Principles (GAAP) checklist for all of our SEC filings. This checklist will be
reviewed on a quarterly basis by financial management and our Disclosure Committee
specifically as it applies to the application of, and compliance with, GAAP.
 13




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##### 




    
    Strengthened our review of all financial statement filings and supporting details,
including (i) review of the financial statement disclosure and GAAP checklist discussed
above and (ii) requiring financial management review and approval of all supporting
documentation associated with the financial statements.
   Limitations
  Changes in Internal Controls over Financial Reporting
  14




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##### 



PART II. OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
   ITEM 1A. RISK FACTORS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5. OTHER INFORMATION
  ITEM 6. EXHIBITS
 Exhibit 11.1
    
    Statement of computation of earnings per share.Exhibit 31.1
    
    Certification of Chief Executive Officer and President
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes  Oxley Act of 2002.Exhibit 32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes  Oxley Act of 2002.
 15




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##### 



SIGNATURES
  June 13, 2008
    STEELCLOUD, INC.By:
    /s/ Robert E. Frick.Name:
    Robert E. FrickTitle:
    Chief Executive Officer and PresidentBy:
    /s/ Kevin MurphyName:
    Kevin MurphyTitle:
    Chief Financial Officer 16