Enigma Software Group, Inc. Announces Financial Results for Third Quarter and Nine Months, Fiscal 2005


NEW YORK, Nov. 10, 2005 (PRIMEZONE) -- Enigma Software Group, Inc. (OTCBB:ENGM) ("Enigma") today announced its financial results for the third quarter of fiscal 2005, which ended September 30, 2005 and also for the nine-month period then ended. Enigma, which formerly had been known as Maxi Group, Inc., ("Maxi") is a developer of an Internet-based search network and downloadable security software products.



                     Summary Financial Results
                     -------------------------
 
                      Quarter     Quarter     Nine Months  Nine Months 
 ($ in thousands,      Ended       Ended         Ended       Ended
 except per share    Sept. 30,   Sept. 30,     Sept. 30,    Sept. 30,
 data)                  2005        2004         2005          2004
                      -------     -------      --------      -------

 Total Revenue         $ 251      $     2      $ 21,721      $     11
 Operating (Loss)
  Income               ($241)     ($1,510)     $ 19,385      ($11,420)
 Net Income (Loss)     ($197)     ($1,572)     $ 10,500      ($11,627)
 Net (Loss) Income
  Per Share            ($0.01)    ($ 0.11)     $   0.66      ($  0.79)
 Net Cash (Used in)
  Provided by
  Operating
  Activities           ($  4)     ($  295)     ($   160)     $  2,199

Total revenue for the third quarter of fiscal 2005 was $251,000, compared to $2,000 for the third quarter of fiscal 2004. For the nine month period of fiscal 2005, total revenue was $21.7 million, compared to $11,000 for the comparable prior year period. These increases of $249,000 and $21.710 million are almost entirely a result of our accounting policy for revenue recognition with respect to license fees generated from the sales of downloadable software products.

Revenue recognition requirements in the software industry are very complex and require us to make some estimates. Generally cash is received at the time of sale, but recognition of the revenue from the sale is deferred. For a full understanding of our accounting policy, the reader is urged to review our public filings, which are available online at http://www.sec.gov.

Net cash used in operating activities was $4,000 for the third quarter of fiscal 2005, compared to $295,000 for the third quarter of fiscal 2004. For the nine month period, net cash used in operating activities was $160,000 as compared to net cash provided by operating activities of $2.2 million for the prior year period. Cash at September 30, 2005 totaled $443,000. This compares to $2.7 million at September 30, 2004, which included $1.0 million of restricted cash. At December 31, 2004, cash and restricted cash totaled $1.6 million, of which $1.0 million was restricted. The decrease in restricted cash from December 31, 2004 to September 30, 2005 contributed substantially to funding operations for the first nine months of fiscal 2005, without which Enigma would have reported net cash used in operating activities of approximately $1.2 million.

For the third quarter of fiscal 2005 there was an operating loss $241,000, compared to an operating loss of $1.5 million for the third quarter of fiscal 2004. For the nine month period of fiscal 2005, operating income was $19.4 million, compared to an operating loss of $11.4 million for the comparable prior year period. The increases in operating income for each period resulted from both our accounting policy for revenue recognition (referred to above), as well substantial decreases in operating expenses, as we have both decreased our marketing costs and restructured our company.

The net loss for the third quarter of fiscal 2005 was $197,000, equivalent to $0.01 per common share, which compares to a net loss of $1.6 million for the third quarter of fiscal 2004, which was equivalent to $(0.11) per common share. For the nine month period of fiscal 2005, net income was $10.5 million, equivalent to $0.66 per common share and as compared to a net loss of $11.6 million for the comparable prior year period, which was equivalent to $(0.79) per common share.

ABOUT ENIGMA SOFTWARE GROUP, INC.

Enigma develops and markets digital products and services for the consumer market. Enigma is known mostly for its Anti Spyware software product SpyHunter. SpyHunter is distributed exclusively over the Internet by download. Enigma owns and operates several websites, including the Internet search engine www.adorons.com. Enigma Software operates within the United States with a worldwide customer base.

This release contains forward-looking statements relating to the development of Enigma Software Group, Inc.'s products and services and future operating results, including statements regarding Enigma Software Group's software, that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect Enigma Software Group Inc.'s actual results include the progress and costs of the development of our products and services and the timing of market acceptance of those products and services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Enigma Software Group, Inc. undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.



 
                          Enigma Software Group, Inc.
                            Condensed Balance Sheet
                              September 30, 2005
                                 (unaudited)

 ASSETS
 Current assets:
    Cash and cash equivalents                        $   442,626
    Accounts receivable                                  162,875
    Tax refund receivable                                240,615
    Prepaid expenses and other                    
     current assets                                       39,318
                                                     -----------
                                                  
      Total current assets                               885,434
                                                  
  Property and equipment, net                            353,788
  Security deposit                                        84,458
                                                     ------------
                                                  
  Total Assets                                       $ 1,323,680
                                                     ============
                                                  
  LIABILITIES AND STOCKHOLDERS'                   
   EQUITY                                           
  Current Liabilities:                            
    Accounts payable and accrued                  
     expenses                                        $    69,813
    Income taxes payable                                 397,368
    Deferred revenue                                     698,294
                                                     -----------
                                                  
      Total current liabilities                        1,165,475
                                                     -----------
                                                  
  Commitments and contingencies                   
                                                  
  STOCKHOLDERS' EQUITY                            
  Common stock, par value $0.001,                 
   100,000,000 shares authorized;                 
   16,243,267 issued and                          
   outstanding                                            16,243
  Additional paid-in capital                             (55,502)
  Retained earnings                                      197,464
                                                     -----------
                                                  
     Total stockholders' equity                          158,205
                                                     -----------
                                                  
  Total Liabilities and                           
  Stockholders' Equity                               $ 1,323,680
                                                     ============



                     Enigma Software Group, Inc.
                 Condensed Statements of Operations
      For the three-month and nine month periods ended September  30,
                            (unaudited)

                      Three Month Periods       Nine Month Periods
                      ended September 30,       ended September 30,
                       2005         2004        2005           2004
                   ----------   -----------  ------------ ------------
 Revenues:
  Sales of software
   products        $  231,256         --     $ 21,631,433         --
  Commission 
   income and 
   advertising
   revenues            19,491   $     2,298        89,825   $   11,383
                   ----------   -----------  ------------ ------------
   Total revenues     250,747         2,298    21,721,258       11,383
                   ----------   -----------  ------------ ------------
 Expenses:
  Marketing and
   selling             42,583       763,701       283,452    7,335,745
  General and
   administrative     408,642       726,484     1,932,234    4,030,540
  Depreciation 
   and amortization    40,261        21,756       120,784       65,268
                   ----------   -----------  ------------ ------------

   Total costs 
    and expenses      491,486     1,511,941     2,336,470   11,431,553
                   ----------   -----------  ------------ ------------

 Operating income
  (loss)             (240,739)   (1,509,643)   19,384,788  (11,420,170)
 Other income             --          5,255           238        5,739
 Interest income        2,427         4,837         9,973       13,486
                   ----------   -----------  ------------ ------------

 Income (loss) before 
  income tax
  provision          (238,312)   (1,499,551)   19,394,999  (11,400,945)
 Income tax 
  (benefit)
  provision           (41,002)       72,284     8,895,165      225,647
                   ----------   -----------  ------------ ------------

 Net (loss) 
  income           $ (197,310)  $(1,571,835)  $10,499,834 $(11,626,592)
                   ==========   ===========  ============ ============

 Basic net (loss)
  /income per common
  share               $ (0.01)    $  (0.11)       $  0.66     $  (0.79)
 Diluted net (loss) 
  /income per common 
  share               $ (0.01)    $  (0.11)       $  0.66     $  (0.79)

 Weighted average 
  shares 
  outstanding:
      Basic        16,243,267    14,650,001    15,974,578   14,650,001
      Diluted      16,243,267    14,650,001    15,974,578   14,650,001


                         Enigma Software Group, Inc.
                    Condensed Statements of Cash Flows
               For the nine-month periods ended September 30,
                               (unaudited)

                                       2005                 2004
                                   ------------         ------------
 Cash flows from operating 
   activities:
  Net Income (loss)                $ 10,499,834         $(11,626,592)
  Adjustments to reconcile                           
   net income (loss) to net                          
   cash (used in) provided                           
   by operating activities:                          
    Interest income on                               
     officer's loan                        (819)                --    
    Depreciation and                                 
     amortization                       120,784               65,268
    Write off of excess                              
     property & equipment,                           
     net                                  4,446                 --
    Changes in:                                      
     Restricted cash                  1,004,640             (885,745)
     Accounts receivable               (149,934)             292,569
     Prepaid expenses and                            
      other current assets              130,180              (11,222)
     Security Deposit                       --               (73,202)     
     Deferred tax asset               8,495,000                  --
     Accounts payable and                            
      accrued expenses                 (194,767)            (163,032)
     Income taxes payable               397,368                  -- 
     Deferred revenue               (20,466,275)          14,601,337
                                   ------------         ------------
                                                     
      Net cash (used in)                             
       provided by                                   
       operating activities            (159,543)           2,199,381
                                   ------------         ------------
                                                     
 Cash flows from investing                           
 activities:                                         
  Purchase of property and                           
   equipment                            (13,808)            (348,523)
  Proceeds from disposition                          
    of property and                                  
    equipment                               243                 --
                                   ------------         ------------
                                                     
     Net cash used in                                
      investing activities              (13,565)            (348,523)
                                   ------------         ------------
                                                     
 Cash flows from financing activities:                                         
  Loans to shareholders and                          
   related parties net of                            
   repayment                               --               (107,650)     
  Repayment of bank                                  
   overdraft                               --                (58,007)     
                                                        ------------
                                                     
   Net cash used in                                  
    financing activities                   --               (165,657)     
                                                        ------------
                                                     
 Net (decrease)/increase in                          
  cash and cash equivalents            (173,108)           1,685,201
 Cash and cash equivalents                           
  - beginning of period                 615,734                 --
                                   ------------         ------------
 Cash and cash equivalents                           
  - end of period                  $    442,626         $  1,685,201
                                   ============         ============
                                                     
  Non-cash transaction:                              
   Common shares redeemed in 
    connection with repayment
    of loan and interest by
    shareholder                   $    123,485                 --     
                                           


            

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