CISO Global, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _________ to _________ Commission file number: 000-56059 CERBERUS CYBER SENTINEL CORPORATION (Exact name of registrant as specified in its charter) Delaware 83-4210278 (State or other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 6900 E. Camelback Road , Suite 240 , Scottsdale , AZ 85251 (Address of Principal Executive Offices) (Zip Code) (480) 389-3444 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading symbol(s) Name of exchange on which registered None N/A N/A 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 13, 2021, there were 117,729,971 shares of the registrant’s common stock outstanding. CERBERUS CYBER SENTINEL CORPORATION FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements 3 Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited) 4 Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited) 6 Notes to Condensed Consolidated Financial Statements (unaudited) 7 ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 37 ITEM 4. Controls and Procedures 38 PART II. OTHER INFORMATION 39 ITEM 1. Legal Proceedings 39 ITEM 1A. Risk Factors 39 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 ITEM 3. Defaults Upon Senior Securities 39 ITEM 4. Mine Safety Disclosures 39 ITEM 5. Other Information 39 ITEM 6. Exhibits 40 SIGNATURES 41 2 PART I – FINANCIAL INFORMATION Item 1. Financial Statements CERBERUS CYBER SENTINEL CORPORATION and subsidiaries CONDENSED Consolidated Balance Sheets June 30, December 31, 2021 2020 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 5,724,749 $ 5,197,030 Accounts receivable, net of allowances for doubtful accounts of $ 55,264 and $ 40,000 , respectively 1,609,339 1,006,834 Prepaid expenses and other current assets 302,671 142,144 Total Current Assets 7,636,759 6,346,008 Property and equipment, net of accumulated depreciation of $ 23,321 and $ 14,473 , respectively 71,782 80,630 Right of use asset, net 150,155 13,426 Intangible assets, net of accumulated amortization of $ 186,456 and $ 116,468 , respectively 2,035,444 2,105,432 Goodwill 4,101,369 4,101,369 Total Assets $ 13,995,509 $ 12,646,865 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued expenses $ 858,564 $ 809,804 Stock payable 160,750 46,000 Lease liability 103,770 8,989 Loans payable 9,451 9,405 Line of credit - 3,000 Convertible note payable, net of debt discount, related party 2,962,802 2,926,609 Note payable - related party 9,787 59,787 Total Current Liabilities 4,105,124 3,863,594 Long-term Liabilities: Loans payable, net of current portion 1,014,527 1,037,115 Lease liability, net of current portion 48,228 4,693 Total Liabilities 5,167,879 4,905,402 Commitments and Contingencies - Stockholders’ Equity: Common stock, $ .00001 par value; 250,000,000 shares authorized; 117,729,971 and 116,104,971 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively 1,177 1,161 Additional paid-in capital 17,586,946 12,607,074 Accumulated deficit ( 8,760,493 ) ( 4,866,772 ) Total Stockholders’ Equity 8,827,630 7,741,463 Total Liabilities and Stockholders’ Equity $ 13,995,509 $ 12,646,865 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 3 CERBERUS CYBER SENTINEL CORPORATION and subsidiaries CONDENSED Consolidated STATEMENTS OF OPERATIONS (Unaudited) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 For the Three Months Ended For the Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Revenue: Managed services $ 554,768 $ 616,344 $ 995,185 $ 754,257 Consulting services 2,394,909 934,143 4,514,270 1,864,451 Total revenue 2,949,677 1,550,487 5,509,455 2,618,708 Cost of revenue: Managed services 264,452 26,167 458,119 45,137 Consulting services 215,982 205,877 333,776 321,724 Cost of payroll 1,531,910 626,457 2,959,612 1,266,881 Total cost of revenue 2,012,344 858,501 3,751,507 1,633,742 Total gross profit 937,333 691,986 1,757,948 984,966 Operating expenses: Professional fees 244,261 204,956 401,615 401,310 Advertising and marketing 172,468 45,708 217,695 73,570 Selling, general and administrative 1,667,614 634,078 3,155,255 1,214,276 Stock based compensation 891,126 343,910 1,729,888 669,339 Loss on write-off of account receivable 15,264 15,000 15,264 15,000 Total operating expenses 2,990,733 1,243,652 5,519,717 2,373,495 Loss from operations ( 2,053,400 ) ( 551,666 ) ( 3,761,769 ) ( 1,388,529 ) Other income (expense): Other income 2,179 10,000 2,384 10,000 Interest expense, net ( 65,641 ) ( 4,437 ) ( 134,336 ) ( 6,718 ) Total other income (expense) ( 63,462 ) 5,563 ( 131,952 ) 3,282 Loss before provision for income taxes ( 2,116,862 ) ( 546,103 ) ( 3,893,721 ) ( 1,385,247 ) Provision for income taxes - - - - Net loss $ ( 2,116,862 ) $ ( 546,103 ) $ ( 3,893,721 ) $ ( 1,385,247 ) Net loss per common share - basic $ ( 0.02 ) $ ( 0.00 ) $ ( 0.03 ) $ ( 0.01 ) Net loss per common share - diluted $ ( 0.02 ) $ ( 0.00 ) $ ( 0.03 ) $ ( 0.01 ) Weighted average shares outstanding - basic 117,729,971 109,604,497 117,081,360 108,847,565 Weighted average shares outstanding - diluted 117,729,971 109,604,497 117,081,360 108,847,565 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 4 CERBERUS CYBER SENTINEL CORPORATION and subsidiaries CONDENSED Consolidated STATEMENTS of CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited) Shares Amount Capital Earnings Stock Total Additional Common Stock Paid-in Retained Treasury Shares Amount Capital Earnings Stock Total Balance at January 1, 2021 116,104,971 $ 1,161 $ 12,607,074 $ ( 4,866,772 ) $ - $ 7,741,463 Stock based compensation - stock options - - 838,762 - - 838,762 Stock issued for cash 1,625,000 16 3,249,984 - - 3,250,000 Return of treasury stock to authorized capital Return of treasury stock to authorized capital, shares Stock issued for Technologyville acquisition Stock issued for Technologyville acquisition, shares Net loss - - - ( 1,776,859 ) - ( 1,776,859 ) Balance as of March 31, 2021 117,729,971 1,177 16,695,820 ( 6,643,631 ) - 10,053,366 Balance as of March 31, 2021 117,729,971 1,177 16,695,820 ( 6,643,631 ) - 10,053,366 Stock based compensation - stock options - - 891,126 - - 891,126 Net loss - - - ( 2,116,862 ) - ( 2,116,862 ) Balance as of June 30, 2021 117,729,971 $ 1,177 $ 17,586,946 $ ( 8,760,493 ) $ - $ 8,827,630 Balance at January 1, 2020 107,912,500 $ 1,139 $ 7,770,902 $ ( 1,453,510 ) $ ( 2,400,000 ) $ 3,918,531 Stock based compensation - stock options - - 325,429 - - 325,429 Stock issued for cash 350,000 4 139,996 - - 140,000 Return of treasury stock to authorized capital - ( 60 ) ( 2,399,940 ) - 2,400,000 - Net loss - - - ( 839,144 ) - ( 839,144 ) Balance as of March 31, 2020 108,262,500 1,083 5,836,387 ( 2,292,654 ) - 3,544,816 Balance as of March 31, 2020 108,262,500 1,083 5,836,387 ( 2,292,654 ) - 3,544,816 Stock based compensation - stock options - - 343,910 - - 343,910 Stock issued for Technologyville acquisition 3,392,271 34 1,356,874 - - 1,356,908 Net loss - - - ( 546,103 ) - ( 546,103 ) Balance as of June 30, 2020 111,654,771 $ 1,117 $ 7,537,171 $ ( 2,838,757 ) $ - $ 4,699,531 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 5 CERBERUS CYBER SENTINEL CORPORATION and subsidiaries CONDENSED Consolidated STATEMENTS OF CASH FLOWS (Unaudited) June 30, 2021 June 30, 2020 Cash flows from operating activities: Net loss $ ( 3,893,721 ) $ ( 1,385,247 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation - stock options 1,729,888 669,339 Loss on write-off of accounts receivable 15,264 15,000 Issuance of common stock for services 114,750 22,000 Depreciation and amortization 78,836 34,676 Right of use amortization 39,029 1,492 Amortization of debt discount 36,193 - Changes in operating assets and liabilities: Accounts receivable, net ( 617,769 ) ( 209,278 ) Other current assets ( 160,527 ) ( 176,744 ) Accounts payable and accrued expenses 48,760 223,615 Lease liability ( 37,442 ) ( 1,407 ) Deferred revenue - 66,434 Net cash used in operating activities ( 2,646,739 ) ( 740,120 ) Cash flows from investing activities: Cash acquired in acquisitions - 65,037 Net cash provided by investing activities - 65,037 Cash flows from financing activities: Proceeds from sale of common stock 3,250,000 140,000 Proceeds from PPP loans - 709,600 Proceeds from line of credit 221,346 60,000 Payment on line of credit ( 224,346 ) ( 66,705 ) Payment on loans payable ( 22,542 ) ( 988 ) Payment on notes payable, related party ( 50,000 ) - Net cash provided by financing activities 3,174,458 841,907 Net increase in cash and cash equivalents 527,719 166,824 Cash and cash equivalents - beginning of the period 5,197,030 1,876,645 Cash and cash equivalents - end of the period $ 5,724,749 $ 2,043,469 Supplemental cash flow information: Cash paid for: Interest $ 91,490 $ 169 Income taxes $ - $ 5,882 Non-cash investing and financing activities: Right of use asset and lease liability recorded $ 175,758 $ 19,393 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 6 CERBERUS CYBER SENTINEL CORPORATION and subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS Corporate History Cerberus Cyber Sentinel Corporation (“Cerberus Sentinel,” “Cerberus,” or the “Company”) was formed on March 5, 2019 as a Delaware corporation. The Company’s principal offices are located at 6900 E. Camelback Road, Suite 240, Scottsdale, AZ 85258. Effective May 25, 2020, the Company entered into a Stock Purchase Agreement with Technologyville, Inc., an Illinois corporation (“Techville”), and its sole shareholder, pursuant to which Techville became a wholly owned subsidiary of the Company (the “Techville Acquisition”). Under the terms of the Techville Acquisition, all issued and outstanding common stock of Techville was exchanged for an aggregate of 3,392,271 shares of the Company’s common stock. Effective August 1, 2020, the Company entered into a Stock Purchase Agreement with Clear Skies Security, LLC, a Georgia limited liability company (“Clear Skies”), and its equity holders, pursuant to which Clear Skies became a wholly owned subsidiary of the Company (the “Clear Skies Acquisition”). Under the terms of the Clear Skies Acquisition, all issued and outstanding equity securities in Clear Skies were exchanged for an aggregate of 2,330,000 shares of the Company’s common stock. Effective December 16, 2020, the Company entered into an Agreement and Plan of Merger with Alpine Security, LLC, an Illinois limited liability company (“Alpine”), and its sole member, pursuant to which Alpine became a wholly owned subsidiary of the Company (the “Alpine Acquisition”). Under the terms of the Alpine Acquisition, all issued and outstanding membership units in Alpine were exchanged for an aggregate of 900,000 shares of the Company’s common stock. Nature of the Business Cerberus Sentinel is a security services company comprised of security professionals who work with clients throughout the United States to create a continuously aware security culture. We do not sell cybersecurity products. We position the Company as a trusted cybersecurity advisor and are committed to delivering tailored security solutions to organizations of different sizes and across all geographies and industries to fit their budgetary needs and limit their cyber threat exposure. We currently provide a multitude of cybersecurity services including managed security service, cybersecurity consulting, technology consulting, compliance auditing, vulnerability assessment, penetration testing, security remediation, Security Operations Center (“SOC”) set-up and consulting and cybersecurity training. We differentiate ourselves from our competitors by staying technology agnostic. We believe that many cybersecurity service providers in the market today are committed to a specific technology solution which limits their service scope and ability to quickly respond to any emerging cybersecurity challenges. In addition, as we continue to serve our clients within our existing capacities, we plan to continue making strategic acquisitions of small-to-medium-sized engineer-led cybersecurity service firms to continue to expand our service scope and geographical coverage. We believe that having a world-class technology team with multi-faceted expertise is key to providing technology agnostic solutions to our clients and maximizing their return on investment from information technology (“IT”) and cybersecurity spending. Liquidity The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At June 30, 2021, the Company had an accumulated deficit of approximately $ 8,760 ,000 and working capital surplus of approximately $ 3,532,000 . For the six months ended June 30, 2021, the Company had a loss from operations of approximately $ 3,762 ,000 and negative cash flows from operations of approximately $ 2,647 ,000 . Although the Company is showing positive revenues and gross profit trends, the Company expects to incur further losses through the end of 2021. 7 To date the Company has been funding operations primarily through the sale of equity in private placements and revenues generated by the Company’s services. During the six months ended June 30, 2021, the Company received $ 3,250,000 from private placements of the Company’s common stock. Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development and corresponding level of expenditure for at least twelve months from the date of the issuance of these unaudited condensed consolidated financial statements, although no assurance can be given that it will not need additional funds prior to such time. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial information as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 has been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for such periods. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021. Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, GenResults, LLC (“GenResults”), TalaTek, Inc. (“TalaTek”), Techville, Clear Skies, and Alpine. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassifications Certain reclassifications have been made to the financial statements for the three and six months ended June 30, 2020 to conform to the financial statements presentation for the three and six months ended June 30, 2021. These reclassifications had no effect on net loss or cash flows as previously reported. Use of Estimates Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company believes the critical accounting policies discussed below affect its more significant judgments and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements. Significant estimates include the allowance for doubtful accounts, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the estimated fair value of assets acquired, liabilities assumed and stock issued in business combinations and assumptions used in the Black-Scholes-Merton pricing model, such as expected volatility, risk-free interest rate, and expected divided rate. 8 Revenue The Company’s revenues are derived from two major types of services to clients: Managed Services and Consulting Services. With respect to Managed Services, the Company provides culture education and enablement, tools and technology provisioning, data and privacy monitoring, regulations and compliance monitoring, remote infrastructure administration, and cybersecurity services including, but not limited to, antivirus and patch management. With respect to Consulting Services, the Company provides cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions. Practical Expedients As part of Accounting Standards Codification (“ASC”) 606, the Company has adopted several practical expedients including the following: (i) the Company has determined that it need not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised service to the customer and when the customer pays for that service will be one year or less and (ii) the Company recognizes any incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Disaggregated Revenues Revenue consists of the following by service offering for the six months ended June 30, 2021: SCHEDULE OF DISAGGREGATION OF REVENUES Managed Services Consulting Services Total Primary Sector Markets Public $ - $ 2,019,470 $ 2,019,470 Private 920,674 2,224,751 3,145,425 Not-for-Profit 74,511 270,049 344,560 $ 995,185 $ 4,514,270 $ 5,509,455 Major Service Lines Gap and Risk Assessment $ - $ 4,185,885 $ 4,185,385 Managed Security Services - - - Tech Connect 977,090 - 977,090 Hardware - 320,833 320,833 Other 18,095 7,552 25,647 $ 995,185 $ 4,514,270 $ 5,509,455 Revenue consists of the following by service offering for the six months ended June 30, 2020: Managed Services Consulting Services Total Primary Sector Markets Public $ 3,250 $ 1,593,598 $ 1,596,848 Private 740,849 268,259 1,009,108 Not-for-Profit 10,158 2,594 12,752 $ 754,257 $ 1,864,451 $ 2,618,708 Major Service Lines Gap and Risk Assessment $ - $ 1,803,928 $ 1,803,928 Managed Security Services 657,226 - 657,226 Tech Connect 96,771 22,263 119,034 Hardware - 13,253 13,253 Other 260 25,007 25,267 $ 754,257 $ 1,864,451 $ 2,618,708 9 Contract Modifications There were no contract modifications during the six months ended June 30, 2021. Contract modifications are not routine in the performance of the Company’s contracts. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Accounts Receivable Accounts receivable are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts. The Company periodically assesses its accounts and other receivables for collectability on a specific identification basis. The Company provides for allowances for doubtful receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of June 30, 2021, and December 31, 2020, the Company’s allowance for doubtful accounts was $ 55,264 and $ 40,000 , respectively. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally between three and five years. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Computer equipment costs for the Company are capitalized, as incurred, and depreciated on a straight-line basis over three years. TalaTek capitalizes all equipment costs over $ 5,000 and depreciates these costs on a straight-line basis over three years. Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation is removed from the accounts and the resulting gain or loss, if any, is reflected in results of operations. Impairment of Long-Lived Assets The Company reviews long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. During the three and six months ended June 30, 2021, the Company did not record a loss on impairment. Intangible Assets The Company records its intangible assets at cost in accordance with ASC 350, Intangibles – Goodwill and Other . Finite-lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. 10 Goodwill Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit level (See Note 5). Advertising and Marketing Costs The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $ 172,468 and $ 45,708 for the three months ended June 30, 2021 and 2020, respectively, and are recorded in operating expenses on the unaudited condensed consolidated statements of operations. Advertising and marketing expenses were $ 217,695 and $ 73,570 for the six months ended June 30, 2021 and 2020, respectively, and are recorded in operating expenses on the unaudited condensed consolidated statements of operations. Fair Value Measurements As defined in ASC 820, Fair Value Measurements and Disclosures , fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement. Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques. Net Loss per Common Share Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. All vested outstanding options are considered potentially outstanding common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, the options have been excluded from the Company’s computation of net loss per common share for the three and six months ended June 30, 2021 and 2020. 11 The following tables summarize the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less than the average market price of the common shares: SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE CALCULATION June 30, 2021 June 30, 2020 Stock Options 25,843,700 20,820,000 Convertible Debt 1,500,000 - Total 27,343,700 20,820,000 Stock-based Compensation The Company applies the provisions of ASC 718, Compensation - Stock Compensation , which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the statements of operations. For stock options issued to employees and members of the board of directors for their services, the Company estimates the grant date fair value of each option using the Black-Scholes-Merton option pricing model. The use of the Black-Scholes-Merton option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised. Due to the Company’s limited history and lack of public trading volume for its common stock, the Company used the average of historical share prices of similar companies within its industry to calculate volatility for use in the Black-Scholes-Merton option pricing model. Pursuant to Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting , the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718. The Company uses valuation methods and assumptions to value stock options that are in line with the process for valuing employee stock options noted above. Leases Leases in which the Company is the lessee are comprised of corporate offices and property and equipment. All of the leases are classified as operating leases. The Company leases multiple office spaces with a remaining weighted average term of 1.42 years. The Company leases a vehicle with a remaining term of 0.92 years. In accordance with ASC 842, Leases , the Company recognized a right-of-use (“ROU”) asset and corresponding lease liability on its unaudited condensed consolidated balance sheet for long-term office leases and a vehicle operating lease agreement. See Note 12 – Leases for further discussion, including the impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 12 The Company utilizes ASC 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At June 30, 2021 and December 31, 2020, the Company’s net deferred tax asset has been fully reserved. For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations when a determination is made that such expense is likely. Recently Issued Accounting Standards All newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company. NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS June 30, 2021 December 31, 2020 Prepaid expenses $ 200,595 $ 128,398 Prepaid insurance 71,221 13,746 Other current assets 30,855 - Total prepaid expenses and other current assets $ 302,671 $ 142,144 NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consists of the following: SCHEDULE OF PROPERTY AND EQUIPMENT June 30, 2021 December 31, 2020 Computer equipment $ 15,735 $ 15,735 Vehicle 63,052 63,052 Furniture and fixtures 6,224 6,224 Software 10,092 10,092 Property and equipment, gross 95,103 95,103 Less: accumulated depreciation ( 23,321 ) ( 14,473 ) Property and equipment, net $ 71,782 $ 80,630 Total depreciation expense was $ 4,424 and $ 2,404 for the three months ended June 30, 2021 and 2020, respectively. Total depreciation expense was $ 8,848 and $ 3,308 for the six months ended June 30, 2021 and 2020, respectively. NOTE 5 – INTANGIBLE ASSETS AND GOODWILL The following table summarizes the changes in goodwill during the six months ended June 30, 2021: SCHEDULE OF CHANGES IN GOODWILL Balance December 31, 2020 (1) $ 4,101,369 Acquisition of goodwill - Impairment - Ending balance, June 30, 2021 (1) $ 4,101,369 (1) As of June 30, 2021, the Company has not obtained a third-party valuation for the December 16, 2020 acquisition of Alpine. As such, the purchase price allocation disclosed in the Company’s Annual Report in Form 10-K for December 31, 2020, filed on March 31, 2021, may change and, therefore, goodwill resulting from the acquisition may change. 13 The following table summarizes the identifiable intangible assets as of June 30, 2021 and December 31, 2020: SUMMARY OF IDENTIFIABLE INTANGIBLE ASSETS Useful life 2021 2020 Tradenames – trademarks (1) Indefinite $ 1,094,500 $ 1,094,500 Customer base (1) 15 years 370,000 370,000 Non-compete agreements (1) 5 years 236,400 236,400 Intellectual property/technology (1) 10 years 521,000 521,000 Identifiable intangible assets 2,221,900 2,221,900 Less accumulated amortization ( 186,456 ) ( 116,468 ) Total $ 2,035,444 $ 2,105,432 (1) These intangible assets were acquired in the acquisitions of TalaTek, Techville and Clear Skies. The weighted average remaining useful life of identifiable amortizable intangible assets remaining is 8.18 years. Amortization of identifiable intangible assets for the three months ended June 30, 2021 and 2020, was $ 34,994 and $ 15,648 , respectively. Amortization of identifiable intangible assets for the six months ended June 30, 2021 and 2020, was $ 69,988 and $ 31,296 , respectively. The below table summarizes the future amortization expense for the remainder of 2021 following June 30, 2021, and the next four years thereafter: SCHEDULE OF FUTURE AMORTIZATION EXPENSE Remainder of 2021 $ 69,987 2022 127,027 2023 113,427 2024 104,262 2025 76,767 Thereafter 449,474 $ 940,944 NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following amounts: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES June 30, 2021 December 31, 2020 Accounts payable $ 476,797 $ 328,368 Accrued payroll 193,786 39,670 Accrued expenses 147,124 417,832 Accrued commissions 17,703 - Accrued interest – related party 23,154 23,934 Total accounts payable and accrued expenses $ 858,564 $ 809,804 14 Note 7 - RELATED PARTY TRANSACTIONS Note Payable – Related Party On December 31, 2018, GenResults entered into an unsecured note payable with Jemmett Enterprises, LLC which is controlled by the Company’s Chief Executive Officer and is the Company’s majority stockholder, in the original principal amount of $ 200,000 . The note has a maturity date of June 15, 2021 , and bears an interest rate at 6 % per annum. The outstanding principal balance of this loan was $ 9,787 and $ 59,787 as of June 30, 2021 and December 31, 2020 (See Note 11). On May 30, 2021 the Company paid $ 50,000 towards the outstanding principal balance of the note. At June 30, 2021 and December 31, 2020, the Company has recorded accrued interest of $ 23,154 and $ 23,934 , respectively, with respect to this note payable. The Company has recorded interest expense of $ 1,426 and $ 3,060 during the three months ended June 30, 2021 and 2020, respectively. The Company has recorded interest expense of $ 4,409 and $ 5,689 during the six months ended June 30, 2021 and 2020, respectively. Convertible Note Payable, Accounts Receivable and Revenue – Related Party On December 23, 2020, the Company issued to a related party a convertible note in the principal amount of $ 3,000,000 bearing interest at 6 % per annum, payable at maturity, with a maturity date of December 31, 2021 and a conversion price of $2.00 per share. The outstanding principal balance of this loan was $ 3,000,000 at June 30, 2021 and December 31, 2020, respectively. See Note 11 for additional details. At June 30, 2021, the Company had $ 29,321 in outstanding accounts receivable from a related party. In addition, during the six months ended June 30, 2021, the Company generated $ 122,791 in revenues from the related party. Agreement with Eventus Consulting, P.C. On November 8, 2019, the Company entered into a financial consulting agreement with Eventus Consulting, P.C., an Arizona corporation, (“Eventus”), of which Neil Reithinger, Chief Financial Officer advisor to the Company, is the sole shareholder, pursuant to which Eventus provides financial and accounting consulting services to the Company. In consideration for Eventus’ services, the Company agreed to pay Eventus according to its standard hourly rate structure. The term of the agreement is perpetual unless otherwise terminated upon thirty days’ notice by either Eventus or the Company. For the six months ended June 30, 2021, Eventus was paid $ 82,557 and was owed $ 37,543 for accrued and unpaid services under the financial consulting agreement at June 30, 2021. Note 8 - STOCKHOLDERS’ EQUITY Equity Transactions During the Period During the six months ended June 30, 2021, the Company issued an aggregate of 1,625,000 shares of common stock with a fair value of $ 2.00 per share, respectively, to investors for cash proceeds of $ 3,250,000 . Stock Payable On January 16, 2020, the Company entered into a consulting agreement, with Eskenzi PR Limited (“Eskenzi”). As per the agreement, Eskenzi will provide various marketing and public relations services to the Company. The initial term of the agreement was for twelve months and automatically renews for an additional twelve months unless either the Company or Eskenzi provides at least three months advance written notice of termination. On January 16, 2021, the consulting agreement was automatically renewed per the terms of the agreement. Upon execution of the consulting agreement the Company was to issue 120,000 shares of the Company’s restricted common stock, valued at $ 48,000 to Eskenzi. Upon the renewal of the consulting agreement the Company was to issue 312,000 shares of the Company’s restricted stock, valued at $ 639,600 . As of June 30, 2021, these shares have yet to be issued. As such, the Company recorded a stock payable in the amount of $ 160,750 and $ 46,000 representing the fair value of services performed through the six months and year ended June 30, 2021 and December 31, 2020, respectively. See Note 9 for disclosure of additional equity related transactions. Note 9 – STOCK-BASED COMPENSATION The Company accounts for its stock-based compensation in accordance with the fair value recognition provisions of ASC 718. 15 2019 Equity Incentive Plan The Board of Directors approved the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) on June 6, 2019 and the stockholders of the Company holding a majority of the outstanding shares of common stock of the Company approved and adopted the 2019 Plan. The maximum number of shares of the Company’s common stock that may be issued under the Company’s 2019 Plan is 25,000,000 shares. The 2019 Plan has a term of ten years from the date it was adopted. Shares issued under the 2019 Plan shall be made available from (i) authorized but unissued shares of common stock, (ii) common stock held in treasury of the Company, or (iii) previously issued shares of common stock reacquired by the Company, including shares purchased on the open market. Options The Company granted options for the purchase of 1,400,000 shares of common stock during the six months ended June 30, 2021. The Company granted options for the purchase of 3,775,000 shares of common stock during the six months ended June 30, 2020. The weighted average grant date fair value of options issued and vested during the six months ended June 30, 2021 was $ 587,143 and $ 243,534 , respectively. The weighted average grant date fair value of non-vested options was $ 8,147,973 at June 30, 2021. The weighted average grant date fair value of options issued during the six months ended June 30, 2020 was $ 165,982 . The weighted average non-vested grant date fair value of non-vested options was $ 1,785,954 at June 30, 2020. Compensation-based stock option activity for qualified and unqualified stock options is summarized as follows: SCHEDULE OF STOCK OPTION ACTIVITY Weighted Average Shares Exercise Price Outstanding at January 1, 2021 24,573,700 $ 0.86 Granted 1,400,000 2.00 Exercised - - Expired or cancelled ( 130,000 ) 0.54 Outstanding at June 30, 2021 25,843,700 $ 0.92 The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable at June 30, 2021: SUMMARY OF OPTIONS TO PURCHASE SHARES OF COMMON STOCK OUTSTANDING AND EXERCISABLE Weighted- Weighted- Average Average Outstanding Remaining Life Exercise Number Exercise Prices Options In Years Price Exercisable $ 0.38 3,000,000 3.12 $ 0.38 2,666,667 0.40 3,600,000 3.06 0.40 2,750,000 0.50 11,626,000 3.63 0.50 6,977,417 2.00 6,277,700 4.39 2.00 66,667 2.05 1,340,000 4.41 2.05 - 25,843,700 3.72 $ 0.92 12,460,751 16 The compensation expense attributed to the issuance of the options is recognized ratably over the vesting period. Options granted under the 2019 Plan are exercisable for a specified period, generally five to ten years from the grant date and generally vest over three to four years from the grant date. Total compensation expense related to the options was $ 891,126 and $ 343,910 for the three months ended June 30, 2021 and 2020, respectively. Total compensation expense related to the options was $ 1,729,888 and $ 669,339 for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, there was future compensation expense of $ 6,525,546 with a weighted average recognition period of 2.11 years related to the options. The aggregate intrinsic value totaled $ 186,672,318 and $ 95,695,130 , for total outstanding and exercisable options, respectively, and was based on the Company’s estimated fair value of the common stock of $ 8.14 as of June 30, 2021, which is the aggregate fair value of the common stock that would have been received by the option holders had all option holders exercised their options as of that date, net of the aggregate exercise price. On February 1, 2021, the Company granted options to purchase 500,000 shares of the Company’s common stock to an employee, with an exercise price of $ 2.00 per share. The options for 30 % of the shares vest on the one-year anniversary of the grant date and then monthly over the subsequent two-year period. The options issued were valued using the Black-Scholes-Merton option pricing model under the following assumptions: stock price - $ 2.05 ; strike price - $ 2.00 ; expected volatility – 74 % ; risk free interest rate – 0.42 % ; dividend rate – 0 % ; and expected term – 3.53 years. On February 1, 2021, the Company granted options to purchase 200,000 shares of the Company’s common stock to a board member, with an exercise price of $ 2.00 per share. The options vest monthly over a two-year period. The options issued were valued using the Black-Scholes-Merton option pricing model under the following assumptions: stock price - $ 2.05 ; strike price - $ 2.00 ; expected volatility – 74 % ; risk free interest rate – 0.42 % ; dividend rate – 0 % ; and expected term – 3.25 years. On February 8, 2021, the Company granted options to purchase 500,000 shares of the Company’s common stock to an employee, with an exercise price of $ 2.00 per share. The options for 30 % of the shares vest on the one-year anniversary of the grant date and then monthly over the subsequent two-year period. The options issued were valued using the Black-Scholes-Merton option pricing model under the following assumptions: stock price - $ 2.05 ; strike price - $ 2.00 ; expected volatility – 74 % ; risk free interest rate – 0.48 % ; dividend rate – 0 % ; and expected term – 3.53 years. On May 5, 2021, the Company granted options to purchase 200,000 shares of the Company’s common stock to an employee, with an exercise price of $ 2.00 per share. The options vest monthly over a two-year period. The options issued were valued using the Black-Scholes-Merton option pricing model under the following assumptions: stock price - $ 2.25 ; strike price - $ 2.00 ; expected volatility – 73 % ; risk free interest rate – 0.80 % ; dividend rate – 0 % ; and expected term – 3.25 years. NOTE 10 – COMMITMENTS AND CONTINGENCIES Legal Claims There are no material pending legal proceedings in which the Company or any of its subsidiaries is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of its voting securities, or security holder is a party adverse to us or has a material interest adverse to the Company. 17 NOTE 11 – LOANS PAYABLE AND LINES OF CREDIT Lines of Credit TalaTek, Inc. On July 29, 2019, TalaTek entered into a secured line of credit with SunTrust Bank (“SunTrust”) for $ 500,000 . The line of credit bears interest at LIBOR plus 2.25 % . The line of credit is an open-end revolving line of credit and may be terminated at any time by SunTrust without notice to TalaTek. At June 30, 2021, no amounts were drawn on the line of credit. Technologyville, Inc. On August 24, 2017, Techville entered into a secured revolving line of credit with Wintrust Bank (“Wintrust”) for $ 75,000 . The line of credit bears interest at 1.99 % for the first twelve (12) months, then Prime plus 2 % , with a floor rate of 6 % and a maturity date of August 24, 2021 . The interest rate at June 30, 2021 was 6 % . The line of credit is collateralized by all of Techville’s assets. There are no financial covenants requiring the Company to maintain specific financial ratios. During the six months ended June 30, 2021 Techville drew $ 221,346 against the line of credit and made payments of $ 224,346 . At June 30, 2021 and December 31, 2020 there was zero and $ 3,000 outstanding, respectively. Loans Payable Technologyville, Inc. On April 29, 2019, Techville entered into a note payable with VCI Account Services, that subsequently was assigned to U.S. Bancorp, in the original principal amount of $ 59,905 . The note has a maturity date of May 12, 2025 and bears interest at 5.77 % per annum. During the six months ended June 30, 2021, the Company made cash payments of $ 2,925 , of which $ 2,702 and $ 222 was attributed to principal and interest, respectively. The loan is collateralized by a vehicle. There are no financial covenants requiring the Company to maintain specific financial ratios. At June 30, 2021, $ 43,178 was outstanding. On June 22, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Techville entered into a note payable with a financial institution for $ 179,600 bearing interest at 1 % per annum and a maturity date of June 22, 2025 . Pursuant to the note, principal and interest payments were deferred for ten months. Techville applied for loan forgiveness on a timely basis, and at June 30, 2021, $ 179,600 was outstanding. GenResults, LLC On December 31, 2018, GenResults entered into an unsecured note payable with Jemmett Enterprises, LLC, the Company’s majority stockholder that is controlled by the Company’s Chief Executive Officer, in the original principal amount of $ 200,000 . The note has a maturity date of June 15, 2021 , and bears interest at 6 % per annum. On May 30, 2021 the Company paid $50,000 towards the outstanding principal balance of the note. The outstanding principal balance of this loan was $ 9,787 as of June 30, 2021 and December 31, 2020. At June 30, 2021 and December 31, 2020, the Company has recorded accrued interest of $ 23,154 and $ 23,934 , respectively, with respect to this note payable. The Company has recorded interest expense of $ 1,426 and $ 3,060 during the three months ended June 30, 2021 and 2020, respectively. The Company has recorded interest expense of $ 4,409 and $ 5,689 during the six months ended June 30, 2021 and 2020, respectively. Cerberus Cyber Sentinel Corporation On April 17, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Cerberus entered into a note payable with a financial institution for $ 530,000 bearing interest at 1 % per annum and a maturity date of April 17, 2022 . Pursuant to the note, principal and interest payments were deferred for six months. The Company applied for loan forgiveness on a timely basis, and at June 30, 2021, $ 530,000 was outstanding. Clear Skies Security LLC On May 8, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Clear Skies entered into a loan payable with a financial institution for $ 134,200 bearing interest at 1 % per annum and a maturity date of May 8, 2022 . Pursuant to the loan, principal and interest payments were deferred for six months. Clear Skies applied for loan forgiveness on a timely basis, and at June 30, 2021, $ 134,200 was outstanding. 18 Alpine Security, LLC On April 18, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Alpine entered into a loan payable with a financial institution for $ 137,000 bearing interest at 1 % per annum and a maturity date of April 8, 2022 . Pursuant to the loan, principal and interest payments were deferred for six months. Alpine applied for loan forgiveness on a timely basis, and at June 30, 2021, $ 137,000 was outstanding. Convertible Note Payable On December 23, 2020, the Company issued to a related party lender a convertible note payable in the principal amount of $ 3,000,000 . The convertible note bears interest at 6 % per annum, with an effective interest rate, due to the if converted value of the note, of 8.5 % per annum, payable at maturity with a maturity date of December 31, 2021. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the holder, at a conversion price of $ 2.00 per share. At December 31, 2020, the if converted value of the note, at the market price of $ 2.05 per share, would be $ 3,075,000 . The issuance of the note resulted in a discount from the beneficial conversion feature totaling $ 75,000 . Total straight-line amortization of this discount totaled $ 36,998 during the six months ended June 30, 2021 and has a remaining amortization period of 0 .50 years. Total interest expense on the note was $ 45,500 and $ 90,500 for the three and six months ended June 30, 2021. Future minimum payments under the above notes payable for the remainder of 2021 following June 30, 2021, and thereafter, and the amount of loans payable, net of current portion, are as follows: SCHEDULE OF FUTURE PAYMENTS UNDER NOTES PAYABLE June 30, 2021 2021 $ 3,019,238 2022 1,014,527 Total future minimum payments 4,033,765 Less: discount ( 37,198 ) Loans payable 3,996,567 Less: current ( 2,982,040 ) Loans payable, noncurrent $ 1,014,527 NOTE 12 – LEASES A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. All of the Company’s leases are classified as operating leases. With the adoption of Topic 842, operating lease agreements are required to be recognized on the condensed consolidated balance sheet as ROU assets and corresponding lease liabilities. On January 1, 2021 and February 1, 2021, the Company recognized additional ROU assets and lease liabilities of $ 37,932 and $ 137,826 , respectively. The Company elected to not recognize ROU assets and lease liabilities arising from office leases with initial terms of twelve months or less (deemed immaterial) on the unaudited condensed consolidated balance sheets. ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at January 1, 2021. The weighted average incremental borrowing rate applied was 6 % . As of June 30, 2021, the Company’s leases had a remaining weighted average term of 1.39 years. 19 The following table presents net lease cost and other supplemental lease information: SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION Six Months Ended June 30, 2021 Lease cost Operating lease cost (cost resulting from lease payments) $ 41,504 Short term lease cost 12,872 Net lease cost $ 54,376 Operating lease – operating cash flows (fixed payments) $ 41,504 Operating lease – operating cash flows (liability reduction) $ 37,442 Non-current leases – right of use assets $ 150,155 Current liabilities – operating lease liabilities $ 103,770 Non-current liabilities – operating lease liabilities $ 48,228 Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the six months ended June 30, 2021, are as follows: SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES Fiscal Year Operating Leases 2021 (excluding the six months ended June 30, 2021) $ 54,620 2022 104,491 Total future minimum lease payments 159,111 Amount representing interest ( 7,113 ) Present value of net future minimum lease payments $ 151,988 NOTE 13 – CONCENTRATION OF CREDIT RISK Cash Deposits Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 . As of June 30, 2021, and December 31, 2020, the Company had approximately $ 4,761,000 and $ 4,252,000 , respectively, in excess of the FDIC insured limit. SCHEDULES OF CONCENTRATION OF RISK, BY RISK FACTOR Revenues One client accounted for 30 % of revenue for the six months ended June 30, 2021 . Two clients accounted for 80 % of revenue for the six months ended June 30, 2020, as set forth below: Client A 59 % Client B 21 % Accounts Receivable One client accounted for 16 % of the accounts receivable as of June 30, 2021. Three clients accounted for 70 % of the accounts receivable as of June 30, 2020, as set forth below: Client A 32 % Client B 20 % Client C 18 % 20 Accounts Payable Two vendors accounted for 32 % of the accounts payable as of June 30, 2021, as set forth below: Vendor A 18 % Vendor B 14 % Three vendors accounted for 44 % of the accounts payable as of June 30, 2020, as set forth below. Vendor A 17 % Vendor B 14 % Vendor C 13 % NOTE 14 – SUBSEQUENT EVENTS Acquisition of VelocIT On June 30, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Catapult Acquisition Merger Sub, LLC (“Merger Sub”), Catapult Acquisition Corporation d/b/a VelocIT (“VelocIT”), the shareholders of Catapult Acquisition Corporation (the “Catapult Shareholders”) and Derek Hahn, in his capacity as the shareholder representative (the “Shareholder Representative”). Pursuant to the Merger Agreement, Catapult agreed to merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a wholly-owned subsidiary of the Company. On July 26, 2021, the Company, Merger Sub, VelocIT, the Catapult shareholders and the Shareholder Representative entered into an Amended and Restated Agreement and Plan of Merger to provide, among other things, that Merger Sub would merge with and into VelocIT, with VelocIT surviving the Merger as a wholly-owned subsidiary of the Company. All issued and outstanding shares of common stock of VelocIT immediately prior to the Effective Time were converted into the right to receive an aggregate of up to 2,566,778 shares of common stock of the Company, subject to a holdback of 256,678 shares of Company stock. The effective date was August 2, 2021. Subsequent to June 30, 2021, the Company received approval from the U.S. Small Business Adminitstration’s Paycheck Protection Program for the forgiveness of its outstanding $ 801,200 in PPP loans. Subsequent to June 30, 2021, the Company granted options to purchase an aggregate of 854,340 of the Company’s common stock, with exercise prices ranging from $ 3.05 to $ 6.75 per share to various employees. The options vest at a one-year cliff and then monthly over the subsequent 36 months . 21 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2021, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation: ● our ability to achieve and sustain profitability of the existing lines of business through expansion; ● our ability to raise sufficient capital to acquire world-class engineer-owned cybersecurity companies; ● our ability to attract and retain world-class cybersecurity talent; ● our ability to identify potential acquisition targets within predetermined parameters; ● our ability to successfully execute acquisitions, integrate the acquired businesses and create synergies as a nationwide cybersecurity consolidator; ● our ability to attract and retain key technology or management personnel and to expand our management team; ● the accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and needs for additional financing; ● business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as the outbreak of COVID-19 or any of its variants); ● our ability to attract and retain clients; and ● our ability to navigate through the increasingly complex cybersecurity regulatory environment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in the future operating results over time, except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to Cerberus Cyber Sentinel Corporation, a Delaware corporation, and its wholly owned subsidiaries including GenResults, LLC, an Arizona limited liability company (“GenResults”), TalaTek, LLC, a Virginia limited liability company (“TalaTek”), Technologyville, Inc., an Illinois corporation (“Techville”), Clear Skies Security, LLC, a Georgia limited liability company (“Clear Skies”), and Alpine Security, LLC, an Illinois limited liability company (“Alpine”). Unless otherwise specified, all dollar amounts are expressed in United States dollars. 22 Corporate History Cerberus Cyber Sentinel Corporation (“Cerberus Sentinel”) was formed on March 5, 2019 as a Delaware corporation. Our principal offices are located at 6900 E. Camelback Road, Suite 240, Scottsdale, AZ 85251. Effective May 25, 2020, we entered into a Stock Purchase Agreement with Techville and its sole shareholder, pursuant to which Techville became a wholly owned subsidiary of the Company (the “Techville Acquisition”). Under the terms of the Techville Acquisition, all issued and outstanding common stock of Techville was exchanged for an aggregate of 3,392,271 shares of our common stock. Effective August 1, 2020, we entered into a Stock Purchase Agreement with Clear Skies and its equity holders, pursuant to which Clear Skies became a wholly owned subsidiary of the Company (the “Clear Skies Acquisition”). Under the terms of the Clear Skies Acquisition, all issued and outstanding equity securities in Clear Skies were exchanged for an aggregate of 2,330,000 shares of our common stock. On December 16, 2020, we entered into an Agreement and Plan of Merger pursuant to which Alpine became a wholly owned subsidiary of the Company. All units representing membership interests of Alpine issued and outstanding were converted into 900,000 shares of our common stock. Our Business We are a security services company comprised of highly trained security professionals who work with clients to create a continuously aware security culture. We do not sell cybersecurity products. We position ourselves as a trusted cybersecurity advisor and are committed to delivering tailored security solutions to organizations of different sizes and across all geographies and industries to fit their budgetary needs and limit their cyber threat exposure. We currently provide a multitude of cybersecurity services including managed security service, cybersecurity consulting, technology consulting, compliance auditing, vulnerability assessment, penetration testing, security remediation, Security Operations Center (“SOC”) set-up and consulting and cybersecurity training. We differentiate ourselves from competitors by staying technology agnostic. We believe that many cybersecurity service providers in the market today are committed to a specific technology solution which limits their service scope and ability to quickly respond to any emerging cybersecurity challenges. In addition, as we continue to serve our clients within our existing capacities, we plan to continue making strategic acquisitions of small-to-medium-sized engineer-led cybersecurity service businesses to continue to expand our service scope and geographical coverage. We believe that having a world-class technology team with multi-faceted expertise is key to providing technology agnostic solutions to our clients and maximizing their return on investment from cybersecurity and information technology (“IT”) spending. Cybersecurity Market As the world has become increasingly connected through the Internet and the Internet of Things (“IoT”), cyberattacks have prevailed and evolved over the years, in different forms, causing uncontainable threats to the integrity and privacy of enterprise and personal data and resulted in significant economic losses globally. In response to the increasing economic damage caused by heightened cybersecurity risks, regulatory bodies have pushed the implementation of new cybersecurity legislations, and cyber insurance companies have increased minimum cybersecurity requirements. We believe that we are well positioned in a fast-growing industry to provide businesses with a wide scope of cybersecurity services and with significant opportunities for growth. Service Offering We currently offer two major types of services to clients: Managed Services and Consulting Services. 23 Managed Services Our Managed Services focus on a holistic approach to cybersecurity based on an upfront gap analysis of our clients’ existing cybersecurity practices. We provide multiple offerings in the managed service portfolio including the following: ● CISO-as-a-service: Many companies need cybersecurity services but do not have the capital resources or knowledge base to hire a Chief Information Security Officer (“CISO”). We offer this service to companies on an ongoing consulting basis as a resource to augment their management team. CISO-as-a-service includes road mapping the future needs for the client and providing our knowledge and expertise to help them achieve their security needs; ● Culture education and enablement offering: This targets the root cause for approximately 75% of cyber breach events by starting with a culture of security-forward thinking; ● Tools and technology provisioning offering: We provide technology-agnostic solutions catering to a client’s existing products and to enhance the cyber defense system by making carefully selected additions without bias and to fit their financial profile; ● Data and privacy offering: This ensures that a client’s data security and privacy are properly managed to alleviate risks of data loss and breach; ● Regulations and compliance offering: We evaluate a client’s policies and procedures and implement the appropriate compliance framework based on the latest industry regulations and obligations; and ● SOC services: We offer SOC-as-a-service, which is a subscription-based service that manages and monitors client’s logs, devices, clouds, network and assets for possible cyber threats. This service provides the clients with the knowledge and skills necessary to combat cybersecurity threats. Consulting Services Our consulting services include a wide array of tailored solutions for organizations of all sizes. Our in-depth industry expertise allows us to act as the trusted advisor of our clients to help them lower their risk profile, minimize cost impact to organizations and meet regulatory compliance demands. We specialize in: ● Cybersecurity consulting: Bringing the culture of cybersecurity to a client’s leadership team and penetrating throughout the organization is a critical first step of building any cybersecurity system. Through our consulting service, we dive in both at the cultural and technical aspects of cybersecurity within the organization. We help our clients build effective policies and best practices, design or enhance a cybersecurity system and train the executive management team so that the culture at the top is set to facilitate diligent implementation of cybersecurity awareness. ● Compliance auditing: We provide auditing services under several compliance frameworks as follows: ○ Service Organization 2 – This is an auditing procedure that focuses on a business’ non-financial reporting controls related to security, availability, processing, integrity, confidentiality, and privacy of a system; ○ Payment Card Industry Data Security Standard– This is a standard administered by the Payment Card Industry Security Standards Council; ○ Health Insurance Portability and Accountability Act of 1996 and The Health Information Technology for Economic and Clinical Health Act of 2009 – These are laws regulated by the Department of Health and Human Services to secure the privacy and confidentiality of protected health information; ○ HITRUST CSF – This is a comprehensive security framework developed by the Health Information Trust Alliance in collaboration with healthcare, technology and information security leaders, to create, access, store and exchange sensitive and/or regulated data; and ○ The National Institute of Standards and Technology – This was formally known as the National Bureau of Standards, which is a federal agency that promotes and maintains measurement standards while encouraging and assisting industry and science to develop and use these standards. 24 ● Gap and risk assessment: We perform security risk gap analysis and advanced threat intelligence and analytics to identify potential areas of security risk and monitor potential breaches on a frequent basis. Evaluating all aspects of the business from executive management, finance, legal, human resources, compliance, operations and then IT. This is to ensure the organization has a holistic understanding of their company’s security posture. ● Penetration testing: We offer network and application-level penetration testing performed through industry tools and verified by certified security experts. At the network level, we conduct network scans for clients at pre-defined intervals based on their preference. Subsequent automatic scans are performed at the same IP address. We also make further attempts to exploit any vulnerability found by the network scan to eliminate false positives. At the application level, we utilize techniques such as parameter tampering, cookie poisoning, session hijacking, user privilege escalation, credential manipulation, forceful browsing, backdoors and debug options, configuration subversion, input validation bypass, SQL injection, and cross-site scripting to assess the application for known vulnerabilities. Significant Developments During the Quarter Appointment of Director On May 5, 2021, our Board of Directors appointed Kiki VanDeWeghe as a director. Mr. VanDeWeghe, 62, is an American former professional basketball player, coach and executive in the National Basketball Association. He has served as the Executive Vice President, Basketball Operations of the National Basketball Association since 2013. Prior to that, Mr. VanDeWeghe was the general manager of the Denver Nuggets and the New Jersey Nets, and a head coach of the New Jersey Nets. Prior to that he played professionally for the Los Angeles Clippers, New York Knicks, Portland Trail Blazers and the Denver Nuggets. Mr. VanDeWeghe attended UCLA where he received a degree in Economics. Mr. VanDeWeghe is qualified for service as a director of the Company due to his business acumen and experience as an organizational leader. Appointment of Chief Financial Officer On June 18, 2021, the Board of Directors appointed Deb Smith as Chief Financial Officer. Ms. Smith, 51, has served as Executive Vice President of Finance and Accounting at the Company since February 2021. Prior to joining the Company, Ms. Smith served as Executive Vice President of Finance at Arrivia Inc. from January 2020 to February 2021 and Controller and, subsequently, Chief Accounting Officer at BeyondTrust from October 2016 to January 2020. Ms. Smith received a Bachelor of Science degree in Accounting, Summa Cum Laude, from DeVry University and a Master’s degree in Counseling with Honors from Argosy University. Results of Operations Comparison of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020 Our financial results for the three months ended June 30, 2021 are summarized as follows in comparison to the three months ended June 30, 2020: For the Three Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Revenue $ 322,378 $ 1,005,652 $ 735,685 $ 885,962 $ 2,949,677 Cost of revenue 485,860 653,814 543,673 328,997 2,012,344 Gross profit (163,482 ) 351,838 192,012 556,965 937,333 Operating expenses 2,187,169 425,945 242,676 134,943 2,990,733 Operating income (loss) (2,350,651 ) (74,107 ) (50,664 ) 422,022 (2,053,400 ) Other income (expense) (62,730 ) 4 (186 ) (550 ) (63,462 ) Loss before income taxes $ (2,413,381 ) $ (74,103 ) $ (50,850 ) 421,472 $ (2,116,862 ) 25 For the Three Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Revenue $ 538,781 $ 856,574 $ 155,132 $ - $ 1,550,487 Cost of revenue 277,060 541,144 40,297 - 858,501 Gross profit 261,721 315,430 114,835 - 691,986 Operating expenses 827,656 265,623 150,373 - 1,243,652 Operating loss (565,935 ) 49,807 (35,538 ) - (551,666 ) Other income (expense) 6,629 35 (1,101 ) - 5,563 Loss before income taxes $ (559,306 ) $ 49,842 $ (36,639 ) $ - $ (546,103 ) Variance Cerberus TalaTek Techville Other (1) Total Revenue $ (216,403 ) $ 149,078 $ 580,553 $ 885,962 $ 1,399,190 Cost of revenue 208,800 112,670 503,376 328,997 1,153,843 Gross profit (425,203 ) 36,408 77,177 556,965 245,347 Operating expenses 1,359,513 160,322 92,303 134,943 1,747,081 Operating loss (1,784,716 ) (123,914 ) (15,126 ) 422,022 (1,501,734 ) Other expense (69,359 ) (31 ) 915 (550 ) (69,025 ) Loss before income taxes $ (1,854,075 ) $ (123,945 ) $ (14,211 ) $ 421,472 $ (1,570,759 ) (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the three months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. Revenues For the Three Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Managed services $ 17,791 $ 204 $ 536,773 $ - $ 554,768 Consulting services 304,587 1,005,448 198,912 885,962 2,394,909 Total revenue $ 322,378 $ 1,005,652 $ 735,685 $ 885,962 $ 2,949,677 For the Three Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Managed services $ 521,577 $ 158 $ 94,609 $ - $ 616,344 Consulting services 17,204 856,416 60,523 - 934,143 Total revenue $ 538,781 $ 856,574 $ 155,132 $ - $ 1,550,487 Variance Cerberus TalaTek Techville Other (1) Total Managed services $ (503,786 ) $ 46 $ 442,164 $ - $ (61,576 ) Consulting services 287,383 149,032 138,389 885,962 1,460,766 Total revenue $ (216,403 ) $ 149,078 $ 580,553 $ 885,962 $ 1,399,190 (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the three months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. 26 Revenues decreased for Cerberus by $216,403, or 40%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to one of the Company’s largest customers decreasing its required services as compared to the three months ended June 30, 2020. Revenues increased for TalaTek by $149,078, or 17%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, as a result of (i) an increase in contract revenue from a significant client of approximately $113,000 and (ii) various contracts that were active during the three months ended June 30, 2021 that were entered into subsequent to June 30, 2020. Revenues increased for Techville by $580,553 for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, as a result of Techville only having one month of operations due to the acquisition consummated on May 25, 2020. Approximately $537,000 was a result of Techville’s managed service offerings and approximately $200,000 was a result of Techville’s miscellaneous hardware sales associated with Techville’s consulting service offerings. Revenues for Clear Skies and Alpine were $885,962 for the three months ended June 30, 2021. We did not recognize any revenue attributable to Clear Skies or Alpine during the three months ended June 30, 2020, because of the acquisitions consummated on August 1, 2020 and December 16, 2020, respectively. Virtually all of these revenues were a result of Clear Skies’ and Alpine’s gap and risk assessment offerings. Expenses Cost of Revenues For the Three Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Managed services $ - $ - $ 264,452 $ - $ 264,452 Consulting services 154,483 33,587 - 27,912 215,982 Cost of payroll 331,378 620,228 279,221 301,083 1,531,910 Total cost of revenue $ 485,861 $ 653,815 $ 543,673 $ 328,995 $ 2,012,344 For the Three Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Managed services $ (14,130 ) $ - $ 40,297 $ - $ 26,167 Consulting services 122,979 82,898 - - 205,877 Cost of payroll 168,210 458,247 - - 626,457 Total cost of revenue $ 277,059 $ 541,145 $ 40,297 $ - $ 858,501 Variance Cerberus TalaTek Techville Other (1) Total Managed services $ 14,130 $ - $ 224,155 $ - $ 238,285 Consulting services 31,504 (49,311 ) - 27,912 10,105 Cost of payroll 163,168 161,981 279,221 301,083 905,453 Total cost of revenue $ 208,802 $ 112,670 $ 503,376 $ 328,995 $ 1,153,843 (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the three months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. 27 Cost of revenues increased for Cerberus by $208,802, or 75%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, and was primarily the result of an increase in employees due to Alpine’s employees being accounted for under Cerberus. Cost of revenues increased for TalaTek by $112,670, or 21%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, as a result of an increase in employees resulting in an increase in salaries. Cost of revenues increased for Techville by $503,376 for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, which reflected only one month of operations following consummation of the acquisition of Techville on May 25, 2020.. Cost of revenues for Clear Skies and Alpine were $328,995 for the three months ended June 30, 2021. We did not recognize any costs of revenues for Clear Skies or Alpine for the three months ended June 30, 2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively. Operating Expenses For the Three Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Professional fees $ 232,445 $ 405 $ 4,530 $ 6,881 $ 244,261 Advertising and marketing 118,270 27,833 86 26,279 172,468 Selling, general and administrative 930,064 397,707 238,060 101,783 1,667,614 Stock based compensation 891,126 - - - 891,126 Loss on write-off of account receivable 15,264 - - - 15,264 Total operating expenses $ 2,187,169 $ 425,945 $ 242,676 $ 134,943 $ 2,990,733 For the Three Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Professional fees $ 186,504 $ 1,902 $ 16,550 $ - $ 204,956 Advertising and marketing 16,024 29,684 - - 45,708 Selling, general and administrative 266,216 234,037 133,825 - 634,078 Stock based compensation 343,910 - - - 343,910 Loss on write-off of account receivable 15,000 - - - 15,000 Total operating expenses $ 827,654 $ 265,623 $ 150,375 $ - $ 1,243,652 Variance Cerberus TalaTek Techville Other (1) Total Professional fees $ 45,941 $ (1,497 ) $ (12,020 ) $ 6,881 $ 39,305 Advertising and marketing 102,246 (1,851 ) 86 26,279 126,760 Selling, general and administrative 663,848 163,670 104,235 101,783 1,033,536 Stock based compensation 547,216 - - - 547,216 Loss on write-off of account receivable 264 - - - 264 Total operating expenses $ 1,359,515 $ 160,322 $ 92,301 $ 134,943 $ 1,747,081 (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the three months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. 28 Operating expenses increased for Cerberus by $1,359,515 or 164%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily as a result of (i) an increase in payroll due to Alpine’s employees being accounted for under Cerberus, and (ii) an increase in stock-based compensation of $547,216 due to an increase in stock option grants as a result of the Techville, Clear Skies, and Alpine acquisitions. Operating expenses increased for TalaTek by $160,322, or 60%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, as a result of an increase in employees resulting in an increase in salaries. Operating expenses increased for Techville by $92,301, or 61%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, which reflected only one month of operations following consummation of the acquisition of Techville on May 25, 2020. Approximately $105,402 was attributable to Techville’s administrative payroll and benefits. Operating expenses for Clear Skies and Alpine were $134,943 for the three months ended June 30, 2021. We did not recognize any operating expenses for Clear Skies or Alpine for the three months ended June 30, 2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively. Approximately $91,000 was attributable to Clear Skies and Alpine’s administrative payroll and benefits. Comparison of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020 Our financial results for the six months ended June 30, 2021 are summarized as follows in comparison to the six months ended June 30, 2020: For the Six Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Revenue $ 760,138 $ 1,990,086 $ 1,305,975 $ 1,453,256 $ 5,509,455 Cost of revenue 983,707 1,294,476 867,630 605,694 3,751,507 Gross profit (223,569 ) 695,610 438,345 847,562 1,767,948 Operating expenses 3,840,969 876,916 508,013 293,819 5,519,717 Operating income (loss) (4,064,538 ) (181,306 ) (69,668 ) 553,743 (3,761,769 ) Other income (expense) (129,480 ) 10 (595 ) (1,887 ) (131,952 ) Loss before income taxes $ (4,194,018 ) $ (181,296 ) $ (70,263 ) 551,856 $ (3,893,721 ) 29 For the Six Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Revenue $ 886,497 $ 1,577,079 $ 155,132 $ - $ 2,618,708 Cost of revenue 511,867 1,081,578 40,297 - 1,633,742 Gross profit 374,630 495,501 114,835 - 984,966 Operating expenses 1,662,539 560,583 150,373 - 2,373,495 Operating loss (1,287,909 ) (65,082 ) (35,538 ) - (1,388,529 ) Other income (expense) 4,310 73 (1,101 ) - 3,282 Loss before income taxes $ (1,283,599 ) $ (65,009 ) $ (36,639 ) $ - $ (1,385,247 ) Variance Cerberus TalaTek Techville Other (1) Total Revenue $ (126,359 ) $ 413,007 $ 1,150,843 $ 1,453,256 $ 2,890,747 Cost of revenue 471,840 212,898 827,333 605,694 2,117,765 Gross profit (598,199 ) 200,109 323,510 847,562 772,982 Operating expenses 2,178,430 316,333 357,640 293,819 3,146,222 Operating loss (2,776,629 ) (116,224 ) (34,130 ) 553,743 (2,373,240 ) Other expense (133,790 ) (63 ) 506 (1,887 ) (135,234 ) Loss before income taxes $ (2,910,419 ) $ (116,287 ) $ (33,624 ) $ 551,856 $ (2,508,474 ) (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the six months ended June30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. Revenues For the Six Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Managed services $ 17,791 $ 303 $ 977,091 $ - $ 995,185 Consulting services 742,347 1,989,783 328,884 1,453,256 4,514,270 Total revenue $ 760,138 $ 1,990,086 $ 1,305,975 $ 1,453,256 $ 5,509,455 For the Six Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Managed services $ 659,388 $ 260 $ 94,609 $ - $ 754,257 Consulting services 227,109 1,576,819 60,523 - 1,864,451 Total revenue $ 886,497 $ 1,577,079 $ 155,132 $ - $ 2,618,708 Variance Cerberus TalaTek Techville Other (1) Total Managed services $ (641,597 ) $ 43 $ 882,482 $ - $ 240,928 Consulting services 515,238 412,964 268,361 1,453,256 2,649,819 Total revenue $ (126,359 ) $ 413,007 $ 1,150,843 $ 1,453,256 $ 2,890,747 (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the six months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. 30 Revenues decreased for Cerberus by $126,359, or 14%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, due to one of the Company’s largest customers decreasing its required services compared to the six months ended June 30, 2020. Revenues increased for TalaTek by $413,007, or 26%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as a result of (i) an increase in contract revenue from a significant client of approximately $88,000 and (ii) various contracts that were active during the six months ended June 30, 2021 that were entered into subsequent to June 30, 2020. Revenues increased for Techville by $1,150,843, or 742%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, which reflected only one month of operations following consummation of the acquisition of Techville on May 25, 2020. Approximately $977,000 was a result of Techville’s managed service offerings and approximately $329,000 was a result of Techville’s miscellaneous hardware sales associated with Techville’s consulting service offerings.. Revenues for Clear Skies and Alpine were $1,453,256 for the six months ended June 30, 2021. We did not recognize any revenue attributable to Clear Skies or Alpine during the six months ended June 30, 2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively. Virtually all of these revenues were a result of Clear Skies’ and Alpine’s gap and risk assessment offerings. Expenses Cost of Revenues For the Six Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Managed services $ - $ - $ 458,119 $ - $ 458,119 Consulting services 213,953 68,579 - 51,244 333,776 Cost of payroll 769,754 1,225,897 409,511 554,450 2,959,612 Total cost of revenue $ 983,707 $ 1,294,476 $ 867,630 $ 605,694 $ 3,751,507 For the Six Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Managed services $ 4,840 $ - $ 40,297 $ - $ 45,137 Consulting services 149,465 172,259 - - 321,724 Cost of payroll 357,561 909,320 - - 1,266,881 Total cost of revenue $ 511,866 $ 1,081,579 $ 40,297 $ - $ 1,633,742 Variance Cerberus TalaTek Techville Other (1) Total Managed services $ (4,840 ) $ - $ 417,822 $ - $ 412,982 Consulting services 64,488 (103,680 ) - 51,244 12,052 Cost of payroll 412,193 316,577 409,511 554,450 1,692,731 Total cost of revenue $ 471,841 $ 212,897 $ 827,333 $ 605,694 $ 2,117,765 (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the six months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. 31 Cost of revenues increased for Cerberus by $471,841, or 92%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, and was primarily the result of Alpine employees being accounted for under Cerberus. Cost of revenues increased for TalaTek by $212,897, or 20%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as a result of an increase in employees resulting in an increase in salaries. Cost of revenues increased for Techville by $827,333, or 2,053%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, which reflected only one month of operations following consummation of the acquisition of Techville on May 25, 2020. Cost of revenues for Clear Skies and Alpine were $605,694 for the six months ended June 30, 2021. We did not recognize any costs of revenues for Clear Skies or Alpine for the six months ended June 30, 2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively. Operating Expenses For the Six Months Ended June 30, 2021 Cerberus TalaTek Techville Other (1) Total Professional fees $ 367,809 $ 766 $ 9,184 $ 23,856 $ 401,615 Advertising and marketing 126,700 56,714 1,437 32,844 217,695 Selling, general and administrative 1,601,308 819,436 497,392 237,119 3,155,255 Stock based compensation 1,729,888 - - - 1,729,888 Loss on write-off of account receivable 15,264 - - - 15,264 Total operating expenses $ 3,840,969 $ 876,916 $ 508,013 $ 293,819 $ 5,519,717 For the Six Months Ended June 30, 2020 Cerberus TalaTek Techville Other (1) Total Professional fees $ 381,755 $ 3,005 $ 16,550 $ - $ 401,310 Advertising and marketing 21,462 52,108 - - 73,570 Selling, general and administrative 574,981 505,470 133,825 - 1,214,276 Stock based compensation 669,339 - - - 669,339 Loss on write-off of account receivable 15,000 - - - 15,000 Total operating expenses $ 1,662,537 $ 560,583 $ 150,375 $ - $ 2,373,495 Variance Cerberus TalaTek Techville Other (1) Total Professional fees $ (13,946 ) $ (2,239 ) $ (7,366 ) $ 23,856 $ 305 Advertising and marketing 105,238 4,606 1,437 32,844 144,125 Selling, general and administrative 1,026,327 313,966 363,567 237,119 1,940,979 Stock based compensation 1,060,549 - - - 1,060,549 Loss on write-off of account receivable 264 - - - 264 Total operating expenses $ 2,178,432 $ 316,333 $ 357,638 $ 293,819 $ 3,146,222 (1) Based on the insignificant nature of the operational activities of Clear Skies and Alpine in comparison to the entity as a whole during the six months ended June 30, 2021, the Company has combined them into one category, titled Other, for the purposes of this presentation. 32 Operating expenses increased for Cerberus by $2,178,432 or 131%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, primarily as a result of (i) an increase in payroll due to Alpine’s employees being accounted for under Cerberus, and (ii) an increase in stock-based compensation of $1,060,549 due to an increase in stock option grants as a result of the Techville, Clear Skies, and Alpine acquisitions. Operating expenses increased for TalaTek by $316,333, or 56%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as a result of an increase in employees resulting in an increase in salaries. Operating expenses increased for Techville by $357,638, or 238%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as a result of only having one month of operations due to the acquisition consummated on May 25, 2020. Approximately $329,000 was attributable to Techville’s administrative payroll and benefits. Operating expenses for Clear Skies and Alpine were $293,819 for the six months ended June 30, 2021. We did not recognize any operating expenses for Clear Skies or Alpine for the six months ended June 30, 2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively. Approximately $91,000 was attributable to Clear Skies and Alpine’s administrative payroll and benefits. Working Capital Surplus Our working capital surplus as of June 30, 2021, in comparison to our working capital surplus as of December 31, 2020, is summarized as follows: As of June 30, December 31, 2021 2020 Current assets $ 7,636,759 $ 6,346,008 Current liabilities 4,105,124 3,863,594 Working capital surplus $ 3,531,635 $ 2,482,414 The increase in current assets is primarily due to increases in cash and cash equivalents and accounts receivable of $527,719 and $617,769, respectively. The increase in current liabilities is primarily due to the increase in stock payable and the current portion of lease liabilities of $114,750 and $94,781, respectively. Cash Flows Our cash flows for the six months ended June 30, 2021, in comparison to our cash flows for the six months ended June 30, 2020, can be summarized as follows: Six months ended June 30, 2021 2020 Net cash used in operating activities $ (2,646,739 ) $ (740,120 ) Net cash provided by investing activities - 65,037 Net cash provided by financing activities 3,174,458 841,907 Increase in cash $ 527,719 $ 166,824 33 Operating Activities Net cash used in operating activities was $2,646,739 for the six months ended June 30, 2021 and was primarily due to cash used to fund a net loss of $3,893,721, adjusted for non-cash expenses in the aggregate of $2,013,960 and additional cash outlaid by changes in the levels of operating assets and liabilities, primarily as a result of an increase in accounts receivable. Net cash used in operating activities was $740,120 for the six months ended June 30, 2020 and was primarily due to cash used to fund a net loss of $1,385,247, adjusted for non-cash expenses in the aggregate of $742,507, partially offset by cash generated by changes in the levels of operating assets and liabilities, primarily as a result of an increase in accounts payable. Investing Activities There was no cash used in or provided by investing activities for the six months ended June 30, 2021. Net cash provided by investing activities of $65,037 for the six months ended June 30, 2020, was due to cash acquired in the Techville Acquisition. Financing Activities Net cash provided by financing activities for the six months ended June 30, 2021 was $3,174,458, which was primarily due to cash received from the sale of the Company’s common stock of $3,250,000. Net cash provided by financing activities for the six months ended June 30, 2020 was $841,907 and was due to cash received from the sale of the Company’s common stock of $140,000 and proceeds from PPP loans of $709,600. Liquidity The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At June 30, 2021, the Company had an accumulated deficit of approximately $8,760,000 and working capital surplus of approximately $3,532,000. For the six months ended June 30, 2021, the Company had a loss from operations of approximately $3,762,000 and negative cash flows from operations of approximately $2,647,000. Although the Company is showing positive revenues and gross profit trends, the Company expects to incur further losses through the end of 2021. To date the Company has been funding operations primarily through the sale of equity in private placements and revenues generated by the Company’s services. During the six months ended June 30, 2021, the Company received $3,250,000 from private placements of the Company’s common stock. Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development and corresponding level of expenditure for at least twelve months from the date of the issuance of these unaudited condensed consolidated financial statements, although no assurance can be given that it will not need additional funds prior to such time. Effects of Inflation We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented. Significant Accounting Policies and Estimates Our significant accounting policies are more fully described in the notes to our condensed consolidated financial statements included herein for the quarter and six months ended June 30, 2021 and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 31, 2021. 34 Fair Value Measurement The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in the valuation of an asset or liability. It establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below: Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Business Combination The Company allocates the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Direct transaction costs associated with the business combination are expensed as incurred. The allocation of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. The Company includes the results of operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss. Goodwill Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit. Impairment of Long-lived Assets We will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. 35 Revenue Recognition The Company’s agreements with its clients are primarily service contracts that range in duration from a few months to one year. The Company recognizes revenue when control of these services is transferred to the client for an amount, referred to as the transaction price, which reflects the consideration to which the Company is expected to be entitled in exchange for those goods or services. A contract with a client exists only when: ● the parties to the contract have approved it and are committed to perform their respective obligations; ● the Company can identify each party’s rights regarding the distinct services to be transferred (“performance obligations”); ● the Company can determine the transaction price for the services to be transferred; and ● the contract has commercial substance, and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the client. For the majority of its contracts, the Company receives non-refundable upfront payments. The Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between the time of transfer of the promised goods or services to the client and the time the client pays for these goods or services to be generally one year or less. The Company’s credit terms to clients generally average thirty days, although in some cases payments are required in 15 days. The Company does not disclose the value of unsatisfied performance obligations for contracts with original expected duration of one year or less. Disaggregation of Revenue Revenue consists of the following by service offering for the six months ended June 30, 2021: Managed Services Consulting Services Total Primary Sector Markets Public $ - $ 2,019,470 $ 2,019,470 Private 920,674 2,224,751 3,145,425 Not-for-Profit 74,511 270,049 344,560 $ 995,185 $ 4,514,270 $ 5,509,455 Major Service Lines Gap and Risk Assessment $ - $ 4,185,885 $ 4,185,885 Managed Security Services - - - Tech Connect 977,090 - 977,090 Hardware - 320,833 320,833 Other 18,095 7,552 25,647 $ 995,185 $ 4,514,270 $ 5,509,455 36 Revenue consists of the following by service offering for the six months ended June 30, 2020: Managed Services Consulting Services Total Primary Sector Markets Public $ 3,250 $ 1,593,598 $ 1,596,848 Private 740,849 268,259 1,009,108 Not-for-Profit 10,158 2,594 12,752 $ 754,257 $ 1,864,451 $ 2,618,708 Major Service Lines Gap and Risk Assessment $ - $ 1,803,928 $ 1,803,928 Managed Security Services 657,226 - 657,226 Tech Connect 96,771 22,263 119,034 Hardware - 13,253 13,253 Other 260 25,007 25,267 $ 754,257 $ 1,864,451 $ 2,618,708 Practical Expedients As part of ASC 606, the Company has adopted several practical expedients including the following: (i) the Company has determined that it need not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised service to the customer and when the customer pays for that service will be one year or less and (ii) the Company recognizes any incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Reimbursed Expenses The Company includes reimbursed expenses in revenues and costs of revenue as the Company is primarily responsible for fulfilling the promise to provide the specified service, including the integration of the related services into a combined output to the client, which are inseparable from the integrated service. These costs include such items as consumables, transportation and travel expenses, over which the Company has discretion in establishing prices. Costs of Revenue Costs of revenue include (i) compensation and benefits for billable employees and consultants directly involved with delivering services offerings and engagements; (ii) consumables used for the services; and (iii) other expenses directly related to service contracts such as professional services, meals and travel expenses. Volatility in Stock-Based Compensation The volatility is based on historical volatilities of companies in comparable stages as well as the historical volatility of companies in the industry and, by statistical analysis of the daily share-pricing model. The volatility of stock-based compensation at any point in time is based on historical volatility of similar companies in the industry for the last two to five years. New and Recently Adopted Accounting Pronouncements Any new and recently adopted accounting pronouncements are more fully described in Note 2 to our unaudited condensed consolidated financial statements herein for the quarter ended June 30, 2021. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable. As a smaller reporting company, we are not required to provide the information required by this Item. 37 Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective due to the material weakness(es) in internal control over financial reporting disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2020. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. Changes in Internal Control Over Financial Reporting During the quarter ended June 30, 2021, our additional finance and accounting staff that we hired in the first quarter of this year continued to positively impact our segregation of duties. In addition, during the six months ended June 30, 2021, we established an audit committee. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2021, other than those noted above, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. 38 PART II – OTHER INFORMATION Item 1. Legal Proceedings We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. Item 1A. Risk Factors An investment in our common stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 31, 2021, in addition to other information contained in those reports and in this quarterly report in evaluating the Company and its business before purchasing shares of our common stock. The Company’s business, operating results and financial condition could be adversely affected due to any of those risks. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the three months ended June 30, 2021, there were no sales of equity securities during the period covered by this report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company. Item 3. Defaults upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable. Item 5. Other Information None. 39 Item 6. Exhibits Incorporated by Reference Exhibit Number Exhibit Description Form Exhibit Filing Date 3.1 Certificate of Incorporation of Cerberus Cyber Sentinel Corporation filed March 5, 2019 10-12G 3.1 10/2/2019 3.2 Certificate of Amendment of Certificate of Incorporation of Cerberus Cyber Sentinel Corporation filed April 17, 2019 10-12G 3.2 10/2/2019 3.3 Certificate of Amendment of Certificate of Incorporation of the Registrant effective September 26, 2019 10-12G 3.3 10/2/2019 3.4 By-laws of the Registrant 10-12G 3.4 10/2/2019 4.1 Form of Common Stock Certificate of the Registrant 10-K 4.1 3/30/20 4.2 Description of Securities Registered under Section 12 of the Exchange Act 10-K 4.2 3/30/20 31.1* Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer 31.2* Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer and Principal Accounting Officer 32.1** Section 1350 Certification of Principal Executive Officer 32.2** Section 1350 Certification of Principal Financial Officer and Principal Accounting Officer 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *Filed herewith. **In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. # Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(b) of this report 40 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CERBERUS CYBER SENTINEL CORPORATION By: /s/ David G. Jemmett David G. Jemmett Chief Executive Officer (Principal Executive Officer) Date: August 13, 2021 By: /s/ Deb Smith Deb Smith Chief Financial Officer (Principal Financial Officer) Date: August 13, 2021 41