CISO Global, Inc. 10-Q

Item 1. Financial Statements CERBERUS CYBER SENTINEL CORPORATION and subsidiaries CONDENSED Consolidated Balance Sheets September 30, December 31, 2021 2020 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 2,729,579 $ 5,197,030 Accounts receivable, net of allowances for doubtful accounts of $ 76,200 and $ 40,000 , respectively 2,268,833 1,006,834 Prepaid expenses and other current assets 485,617 142,144 Total Current Assets 5,484,029 6,346,008 Property and equipment, net of accumulated depreciation of $ 30,310 and $ 14,473 , respectively 89,401 80,630 Right of use asset, net 268,096 13,426 Intangible assets, net of accumulated amortization of $ 226,964 and $ 116,468 , respectively 2,359,402 2,105,432 Goodwill 20,695,024 4,101,369 Total Assets $ 28,895,952 $ 12,646,865 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued expenses $ 1,494,159 $ 809,804 Stock payable 79,950 46,000 Lease liability, current portion 166,709 8,989 Loans payable, current portion 115,981 9,405 Line of credit - 3,000 Convertible note payable, net of debt discount, related party 2,981,401 2,926,609 Note payable, related party - 59,787 Total Current Liabilities 4,838,200 3,863,594 Long-term Liabilities: Loans payable, net of current portion 443,373 1,037,115 Lease liability, net of current portion 107,899 4,693 Total Liabilities 5,389,472 4,905,402 Commitments and Contingencies - - Stockholders’ Equity: Common stock, $ .00001 par value; 250,000,000 shares authorized; 120,529,649 and 116,104,971 shares issued and outstanding on September 30, 2021 and December 31, 2020, respectively 1,205 1,161 Additional paid-in capital 34,518,667 12,607,074 Accumulated deficit ( 11,013,392 ) ( 4,866,772 ) Total Stockholders’ Equity 23,506,480 7,741,463 Total Liabilities and Stockholders’ Equity $ 28,895,952 $ 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) For the Three Months Ended For the Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Revenue: Security managed services $ 3,099,753 $ 1,683,733 $ 6,979,146 $ 3,612,489 Professional services 645,255 325,865 2,275,437 1,015,816 Total revenue 3,745,008 2,009,598 9,254,583 4,628,305 Cost of revenue: Security managed services 650,955 423,784 1,326,788 726,614 Professional services 234,326 18,962 350,388 82,992 Cost of payroll 2,093,072 868,810 5,052,684 2,135,691 Total cost of revenue 2,978,353 1,311,556 6,729,860 2,945,297 Total gross profit 766,655 698,042 2,524,723 1,683,008 Operating expenses: Professional fees 293,408 284,511 695,023 685,821 Advertising and marketing 254,026 30,488 471,721 104,058 Selling, general and administrative 2,085,720 1,020,765 5,241,095 2,235,041 Stock based compensation 1,251,635 392,661 2,981,523 1,062,000 Loss on write-off of account receivable 40,264 - 55,528 15,000 Total operating expenses 3,925,053 1,728,425 9,444,890 4,101,920 Loss from operations ( 3,158,398 ) ( 1,030,383 ) ( 6,920,167 ) ( 2,418,912 ) Other income (expense): Other income 169 751 2,553 10,751 Interest expense, net ( 75,470 ) ( 5,567 ) ( 209,806 ) ( 12,285 ) PPP loan forgiveness 980,800 - 980,800 - Total other income (expense) 905,499 ( 4,816 ) 773,547 ( 1,534 ) Net loss $ ( 2,252,899 ) $ ( 1,035,199 ) $ ( 6,146,620 ) $ ( 2,420,446 ) Net loss per common share - basic $ ( 0.02 ) $ ( 0.01 ) $ ( 0.05 ) $ ( 0.02 ) Net loss per common share - diluted $ ( 0.02 ) $ ( 0.01 ) $ ( 0.05 ) $ ( 0.02 ) Weighted average shares outstanding - basic 118,856,026 113,174,336 117,801,672 110,305,671 Weighted average shares outstanding - diluted 118,856,026 113,174,336 117,801,672 110,305,671 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’ DEFICIT (Unaudited) Additional Common Stock Paid-in Accumulated Treasury Shares Amount Capital Deficit 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 Stock based compensation - shares Stock based compensation - shares, shares Stock issued for VelocIT acquisition Stock issued for VelocIT acquisition, shares Return of treasury stock to authorized capital 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 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 Stock based compensation - stock options - - 1,251,635 - - 1,251,635 Stock based compensation - shares 232,900 2 279,443 - - 279,445 Stock issued for VelocIT acquisition 2,566,778 26 15,400,643 - - 15,400,669 Net loss - - - ( 2,252,899 ) - ( 2,252,899 ) Balance as of September 30, 2021 120,529,649 $ 1,205 $ 34,518,667 $ ( 11,013,392 ) $ - $ 23,506,480 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 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 Stock based compensation - stock options - - 392,661 - - 392,661 Common shares issued for cash 325,000 3 649,997 - - 650,000 Stock issued for Clear Skies acquisition 2,330,000 23 931,977 - - 932,000 Net loss - - - ( 1,035,199 ) - ( 1,035,199 ) Balance as of September 30, 2020 114,309,771 $ 1,143 $ 9,511,806 $ ( 3,873,956 ) $ - $ 5,638,993 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) September 30, 2021 September 30, 2020 Cash flows from operating activities: Net loss $ ( 6,146,620 ) $ ( 2,420,446 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation - stock options 2,981,523 1,062,000 Loss on write-off of accounts receivable 55,528 15,000 Issuance of common stock for services 313,395 34,000 Depreciation and amortization 131,403 55,365 Right of use amortization 75,842 3,729 Amortization of debt discount 54,792 - Forgiveness of PPP Loan ( 980,800 ) Changes in operating assets and liabilities: Accounts receivable, net ( 355,946 ) ( 191,958 ) Other current assets ( 305,532 ) ( 77,083 ) Accounts payable and accrued expenses ( 66,311 ) 364,961 Lease liability ( 69,586 ) ( 3,544 ) Net cash used in operating activities ( 4,312,312 ) ( 1,157,976 ) Cash flows from investing activities: Cash acquired in acquisitions 662,176 254,180 Net cash provided by investing activities 662,176 254,180 Cash flows from financing activities: Proceeds from sale of common stock 3,250,000 790,000 Proceeds from PPP loans - 709,600 Proceeds from line of credit 221,346 60,000 Payment on line of credit ( 224,346 ) ( 93,705 ) Payment on loans payable ( 2,004,528 ) ( 2,737 ) Payment on notes payable, related party ( 59,787 ) - Distributions to member - ( 20,000 ) Net cash provided by financing activities 1,182,685 1,443,158 Net increase (decrease) in cash and cash equivalents ( 2,467,451 ) 539,362 Cash and cash equivalents - beginning of the period 5,197,030 1,876,645 Cash and cash equivalents - end of the period $ 2,729,579 $ 2,416,007 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 $ 330,512 $ 19,393 Forgiveness of PPP Loan $ 980,800 $ - Common shares issued in Technologyville acquisition $ - $ 1,356,908 Common shares issued in Clear Skies acquisition $ - $ 932,000 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. Effective August 12, 2021, the Company entered into an Agreement and Plan of Merger with Catapult Acquisition Corporation, a New Jersey corporation (“VelocIT”), and its equity holders, pursuant to which VelocIT became a wholly owned subsidiary of the Company (the “Catapult Acquisition”). Under the terms of the Catapult Acquisition, all issued and outstanding equity secruities in VelocIT were exchanged for an aggregate of 2,566,778 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. 7 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 September 30, 2021, the Company had an accumulated deficit of $ 11,013,392 and working capital surplus of approximately $ 646,000 . For the nine months ended September 30, 2021, the Company had a loss from operations of approximately $ 6,920,167 and negative cash flows from operations of approximately $ 4,312,312 . 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 nine months ended September 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 September 30, 2021, and for the three and nine months ended September 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 nine months ended September 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, Alpine, and VelocIT. 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 nine months ended September 30, 2020, to conform to the financial statements presentation for the three and nine months ended September 30, 2021. These reclassifications had no effect on net loss or cash flows as previously reported. 8 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 option pricing model, such as expected volatility, risk-free interest rate, and expected divided rate. 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 nine months ended September 30, 2021: SCHEDULE OF DISAGGREGATION OF REVENUES Security Managed Services Professional Services Total Primary Sector Markets Public $ 3,179,047 $ 44,579 $ 3,223,626 Private 3,607,146 2,178,545 5,785,691 Not-for-Profit 192,953 52,313 245,266 $ 6,979,146 $ 2,275,437 $ 9,254,583 Major Service Lines Compliance $ 3,336,795 $ - $ 3,336,795 Secured Managed Services 3,134,269 - 3,134,269 SOC Managed Services 352,535 - 352,535 vCISO 155,547 - 155,547 Technical Assessments - 1,844,496 1,844,496 Forensics & I/R - 265,567 265,567 Training - 149,529 149,529 Other CyberSecurity Services - 15,845 15,845 $ 6,979,146 $ 2,275,437 $ 9,254,583 9 Revenue consists of the following by service offering for the nine months ended September 30, 2020: Security Managed Services Professional Services Total Primary Sector Markets Public $ 2,498,371 $ 5,068 $ 2,503,439 Private 1,024,744 1,001,748 2,026,492 Not-for-Profit 89,374 9,000 98,374 $ 3,612,489 $ 1,015,816 $ 4,628,305 Major Service Lines Compliance $ 2,519,958 $ - $ 2,519,958 Secured Managed Services 752,371 - 752,371 SOC Managed Services 301,760 - 301,760 vCISO 38,400 - 38,400 Technical Assessments - 190,825 190,825 Forensics & I/R - 554,069 554,069 Training - 58,625 58,625 Other CyberSecurity Services - 212,297 212,297 $ 3,612,489 $ 1,015,816 $ 4,628,305 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 September 30, 2021, and December 31, 2020, the Company’s allowance for doubtful accounts was $ 76,200 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 are 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 nine months ended September 30, 2021, the Company did not record a loss on impairment. 10 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. 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 6). Advertising and Marketing Costs The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $ 254,026 and $ 30,488 for the three months ended September 30, 2021 and 2020, respectively, and are recorded in operating expenses on the unaudited condensed consolidated statements of operations. Advertising and marketing expenses were $ 471,721 and $ 104,058 for the nine months ended September 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). 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. 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 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. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted 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 nine months ended September 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 September 30, 2021 September 30, 2020 Stock Options 27,680,040 21,435,700 Convertible Debt 1,500,000 - Total 29,180,040 21,435,700 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 option pricing model. The use of the Black-Scholes 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 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 1.17 years. The Company leases a vehicle with a remaining term of 0.67 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 financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities, including tax loss and credit carry forwards, 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 September 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 In March 2021, the FASB issued ASU No. 2021-03, Intangibles – Goodwill and Other (Topic 350). ASU 2021-03 requires an entity to identify and evaluate goodwill impairment triggering events when they occur to determine whether it is more likely than not that the fair value of a reporting unit (or entity, if the entity has elected the accounting alternative for amortizing goodwill and chosen that option) is less than its carrying amount. If an entity determines that it is more likely than not that the goodwill is impaired. It must test goodwill for impairment using the triggering event date as the measurement date. An entity is required to disclose the amount assigned to goodwill in total and by major business combination, or by reorganization event resulting in fresh-start reporting. Also, the entity must disclose the weighted average amortization period in total and the amortization period by major business combination, or by reorganization event resulting in fresh-start reporting. ASU 2021-03 was effective for the Company on January 1, 2021 and did not have a significant impact on our unaudited condensed consolidated financial statements. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the Emerging Issues Task Force). The ASU requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. Under the ASU, an issuer determines the accounting for the modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt, or for other reasons. The ASU is applied prospectively and is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that adopting this standard will have on the unaudited condensed consolidated financial statements. All newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company. NOTE 3 – ACQUISITIONS Catapult Acquisition Corporation On August 12, 2021, the Company effected an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Catapult Acquisition Merger Sub, LLC (“Merger Sub”), Catapult Acquisition Corporation (d/b/a VelocIT) (“VelocIT”), the shareholders of VelocIT and Derek Hahn, in his capacity as the shareholder representative. Pursuant to the Merger Agreement, the Merger Sub merged with and into VelocIT, with VelocIT surviving the Merger as a wholly-owned subsidiary of the Company (the “VelocIT Acquisition”). At the effective time of the VelocIT Acquisition, VelocIT’s outstanding common stock was exchanged for 2,566,778 shares of the Company’s common stock. 13 Immediately following the VelocIT Acquisition, the Company had 120,296,749 shares of common stock issued and outstanding. The pre-acquisition stockholders of the Company retained an aggregate of 117,729,971 shares, representing approximately 98 % ownership of the post-acquisition company. Therefore, upon consummation of the VelocIT Acquisition, there was no change in control. The Company accounted for this transaction in accordance with the acquisition method of accounting for business combinations. Assets and liabilities of the acquired business were included in the consolidated balance sheet as of September 30, 2021, based on the respective estimated fair value on the date of acquisition as determined in a purchase price allocation using available information and making assumptions management believed are reasonable. Per ASC 805, Business Combinations , the measurement period is the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination. The measurement period shall not exceed one year from the acquisition date. The Company has identified the acquisition date as August 12, 2021 . Subsequent to the issuance of these financial statements, the Company expects to obtain a third-party valuation on the fair value of the assets acquired, including identifiable intangible assets, and the liabilities assumed for use in the purchase price allocation. During the period subsequent to the effective date of the acquisition, VelocIT recorded revenue of $ 985,146 and a net loss of $ 1,695,276 for the period from August 12, 2021 to September 30, 2021. The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and the liabilities assumed as of the transaction date: SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES August 12,2021 Consideration paid $ 15,400,668 Tangible assets acquired: Cash 662,176 Accounts receivable 961,581 Prepaid expenses 37,941 Property and equipment 24,608 Capitalizable expenses 5,091 Total tangible assets 1,691,397 Intangible assets acquired: Intellectual property 134,445 Total intangible assets 134,445 Assumed liabilities: Accounts payable 528,571 Accrued expenses 222,095 Loans payable 1,071,313 SBA loan payoff 1,426,850 Total assumed liabilities 3,248,829 Net liabilities assumed ( 1,422,987 ) Goodwill (a.)(b.) $ 16,823,655 a. Goodwill is the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. In accordance with applicable accounting standards, goodwill is not amortized but instead is tested for impairment at least annually or more frequently if certain indicators are present. Goodwill and intangibles are not deductible for tax purposes. b. Goodwill represents expected synergies from the merger of operations and intangible assets that do not qualify for separate recognition. Cerberus and VelocIT are both cybersecurity service providers. The acquisition of VelocIT provided Cerberus potential sales synergies resulting from Cerberus’ access to VelocIT’s current client-base to offer additional services. These items will be assigned a fair value upon the completion of the third-party valuation and are not expected to change significantly. 14 NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS September 30, 2021 December 31, 2020 Prepaid expenses $ 398,712 $ 128,398 Prepaid insurance 56,125 13,746 Other current assets 30,780 - Total prepaid expenses and other current assets $ 485,617 $ 142,144 NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consists of the following: SCHEDULE OF PROPERTY AND EQUIPMENT September 30, 2021 December 31, 2020 Computer equipment $ 15,735 $ 15,735 Vehicle 63,052 63,052 Furniture and fixtures 30,832 6,224 Software 10,092 10,092 Property and equipment, gross 119,711 95,103 Less: accumulated depreciation ( 30,310 ) ( 14,473 ) Property and equipment, net $ 89,401 $ 80,630 Total depreciation expense was $ 6,989 and $ 5,361 for the three months ended September 30, 2021 and 2020, respectively. Total depreciation expense was $ 15,837 and $ 8,668 for the nine months ended September 30, 2021 and 2020, respectively. NOTE 6 – INTANGIBLE ASSETS AND GOODWILL The following table summarizes the changes in goodwill during the nine months ended September 30, 2021: SCHEDULE OF CHANGES IN GOODWILL Balance December 31, 2020 $ 4,101,369 Acquisition of goodwill 16,823,655 Impairment - Reclassification based on valuation report (1) ( 230,000 ) Ending balance, September 30, 2021 (2) $ 20,695,024 (1) Subsequent to September 30, 2021, the Company 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, changed and, therefore, goodwill changed. (2) As of September 30, 2021, the Company had not obtained a third-party valuation for the August 12, 2021, acquisition of VelocIT. As such, the purchase price allocation disclosed in this Quarterly Report for September 30, 2021, may change and, therefore, goodwill from the acquisition may change. 15 The following table summarizes the identifiable intangible assets as of September 30, 2021, and December 31, 2020: SUMMARY OF IDENTIFIABLE INTANGIBLE ASSETS Useful life September 30, 2021 December 31, 2020 Tradenames – trademarks (1) Indefinite $ 1,211,800 $ 1,094,500 Customer base (1) 15 years 384,000 370,000 Non-compete agreements (1) 5 years 242,100 236,400 Intellectual property/technology (1) 10 years 748,466 521,000 Identifiable intangible assets 2,586,366 2,221,900 Less accumulated amortization ( 226,964 ) ( 116,468 ) Total $ 2,359,402 $ 2,105,432 (1) These intangible assets were acquired in the acquisitions of TalaTek, Techville, Clear Skies, Alpine and VelocIT. The weighted average remaining useful life of identifiable amortizable intangible assets remaining is 8.24 years. Amortization of identifiable intangible assets for the three months ended September 30, 2021 and 2020, was $ 40,506 and $ 15,648 , respectively. Amortization of identifiable intangible assets for the nine months ended September 30, 2021 and 2020, was $ 110,495 and $ 46,944 , respectively. The below table summarizes the future amortization expense for the remainder of 2021 and the next four years thereafter: SCHEDULE OF FUTURE AMORTIZATION EXPENSE 2 2021 Remainder of 2021 $ 51,709 2022 153,554 2023 125,086 2024 127,939 2025 100,444 Thereafter 588,869 Future Amortization Expense $ 1,147,602 NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following amounts: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES September 30, 2021 December 31, 2020 Accounts payable $ 788,268 $ 328,368 Accrued payroll 408,602 39,670 Accrued expenses 265,532 417,832 Accrued commissions 26,678 - Accrued interest – related party 5,079 23,934 Total accounts payable and accrued expenses $ 1,494,159 $ 809,804 NOTE 8 - RELATED PARTY TRANSACTIONS Note Payable – Related Party 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. There was no remaining balance at September 30, 2021, The outstanding principal balance of this loan was $ 9,787 at December 31, 2020. At September 30, 2021, and December 31, 2020, the Company has recorded accrued interest of $ 5,079 and $ 23,934 , respectively, with respect to this note payable. The Company has recorded interest expense related to this note of $ 186 and $ 3,669 during the three months ended September 30, 2021 and 2020, respectively, and $ 4,595 and $ 9,358 during the nine months ended September 30, 2021 and 2020, respectively. 16 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 September 30, 2021, and December 31, 2020, respectively. See Note 12 for additional details. At September 30, 2021, the Company had $ 48,270 in outstanding accounts receivable from a related party. In addition, during the nine months ended September 30, 2021, the Company generated $ 305,127 in revenues from the related party. Note 9 - STOCKHOLDERS’ EQUITY Equity Transactions During the Period During the nine months ended September 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 . On August 12, 2021, the Company issued an aggregate of 2,566,778 shares of common stock with a fair value of $ 6.00 per share, to VelocIT pursuant to the Acquisition (See Note 3). On August 16, 2021, the Company issued an aggregate of 232,900 shares of common stock with a fair value of $ 2.05 per share to a consultant for services rendered (See Note 10). 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 , for a two-year period. On August 16, 2021, the Company issued 232,900 shares of vested common stock under the consulting agreement. As of September 30, 2021, 39,000 of vested shares have yet to be issued. As such, the Company recorded a stock payable in the amount of $ 79,950 and $ 46,000 representing the fair value of services performed through the nine months and year ended September 30, 2021 and December 31, 2020, respectively. See Note 10 for disclosure of additional equity related transactions. Note 10 – StocK-BASED COMPENSATION 2019 Equity Incentive Plan The Board of Directors and stockholders of the Company approved the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) on June 6, 2019. 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 3,236,340 shares of common stock during the nine months ended September 30, 2021. The Company granted options for the purchase of 4,390,700 shares of common stock during the nine months ended September 30, 2020. 17 In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions: SCHEDULE OF BLACK-SCHOLES STOCK OPTIONS GRANTED For the Nine Months Ended For the Nine Months Ended September 30, 2021 September 30, 2020 Risk free interest rate 0.42 % - 0.86 % 0.22 % - 0.33 % Contractual term (years) 5.00 5.00 Expected volatility 73.43 % - 83.28 % 73.61 % - 73.93 % The total weighted average grant date fair value of options issued and vested during the nine months ended September 30, 2021, was $ 1,554,909 and $ 267,818 , respectively. The weighted average grant date fair value of non-vested options was $ 15,713,025 at September 30, 2021. The total weighted average grant date fair value of options issued during the nine months ended September 30, 2020, was $ 157,384 . The weighted average non-vested grant date fair value of non-vested options was $ 1,871,528 at September 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 3,236,340 2.40 Exercised - - Expired or cancelled ( 130,000 ) 0.54 Outstanding at September 30, 2021 27,680,040 $ 1.04 The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable at September 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 2.87 $ 0.38 3,000,000 0.40 3,600,000 2.81 0.40 3,000,000 0.50 12,026,000 3.36 0.50 8,081,238 2.00 6,277,700 4.14 2.00 108,333 2.05 1,857,000 4.28 2.05 - 3.05 170,000 4.83 3.05 - 3.60 155,000 4.83 3.60 - 4.00 499,340 4.83 4.00 - $ 6.75 95,000 4.82 6.75 - 27,680,040 3.52 $ 1.03 14,189,571 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. 18 Total compensation expense related to the options was $ 1,251,635 and $ 392,661 for the three months ended September 30, 2021 and 2020, respectively. Total compensation expense related to the options was $ 2,981,523 and $ 1,062,000 for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there was future compensation expense of $ 12,863,247 with a weighted average recognition period of 2.58 years related to the options. The aggregate intrinsic value totaled $ 129,067,956 and $ 75,702,225 , for total outstanding and exercisable options, respectively, and was based on the Company’s estimated fair value of the common stock of $ 5.80 as of September 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. Options Pending As of September 30, 2021, the Company has approximately 3,400,000 options to be awarded to employees upon their acceptance of employment. The majority of these employees work for VelocIT. The options will be granted with an exercise price equal to the trading price on the date of grant, and will be valued utilizing a Black-Scholes valuation. The expense will be amortized over the term of the options vesting period, although the amount of the expense has yet to be determined. NOTE 11 – 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. NOTE 12 – 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 September 30, 2021, the line of credit remained open and 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 a maximum amount of $ 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 line of credit was collateralized by all of Techville’s assets. During the nine months ended September 30, 2021, Techville drew $ 221,346 against the line of credit and made payments of $ 224,346 . At September 30, 2021, and December 31, 2020, there was $ - and $ 3,000 outstanding, respectively, and has expired. 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 nine months ended September 30, 2021, the Company made cash payments of $ 8,580 , of which $ 8,054 and $ 526 was attributed to principal and interest, respectively. The loan is collateralized by a vehicle. At September 30, 2021, $ 37,826 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 September 30, 2021, the total amount due of $ 179,600 had been forgiven. 19 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 had a maturity date of June 15, 2021 , and bore interest at 6 % per annum. There was no remaining balance at September 30, 2021, The outstanding principal balance of this loan was $ 9,787 at December 31, 2020. At September 30, 2021, and December 31, 2020, the Company has recorded accrued interest of $ 5,079 and $ 23,934 , respectively, with respect to this note payable. The Company has recorded interest expense related to this note of $ 186 and $ 3,669 during the three months ended September 30, 2021 and 2020, respectively, and $ 4,595 and $ 9,358 during the nine months ended September 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 September 30, 2021, the total amount due of $ 530,000 had been forgiven. 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 September 30, 2021, the total amount due of $ 134,200 had been forgiven. 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 September 30, 2021, the total amount due of $ 137,000 had been forgiven. Catapult Acquisition Corp. On July 9, 2016, Catapult Acquistion Corp. entered into several seller notes payable with shareholders of VelocIT. The total borrowing amount was $ 600,000 and each loan bears interest at 5 % per annum with a maturity date of July 31, 2023 . Pursuant to the terms of the loans, principal and interest payments were deferred for two years on three of the loans, making up $ 150,000 of the $ 600,000 total amount borrowed. The amount outstanding as of September 30, 2021, was $ 559,354 . 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 $ 56,501 during the nine months ended September 30, 2021, and has a remaining amortization period of 0.25 years. Total interest expense on the note was $ 46,000 and $ 135,000 for the three and nine months ended September 30, 2021. 20 Future minimum payments under the above notes payable for the remainder of 2021 and thereafter and the amount of loans payable, net of current portion, are as follows: SCHEDULE OF FUTURE PAYMENTS UNDER NOTES PAYABLE Sep. 30, 2021 2021 $ 3,000,000 2022 559,354 Total future minimum payments 3,559,354 Less: discount ( 18,599 ) Loans payable 3,540,755 Less: current ( 3,097,382 ) Loans payable, noncurrent $ 443,373 NOTE 13 – LEASES 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, February 1, 2021, and August 12, 2021, the Company recognized additional ROU assets and lease liabilities of $ 37,932 , $ 137,826 and 154,767 , 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 September 30, 2021, the Company’s leases had a remaining weighted average term of 1.15 years. The following table presents net lease cost and other supplemental lease information: SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION Nine Months Ended September 30, 2021 Lease cost Operating lease cost (cost resulting from lease payments) $ 80,251 Short term lease cost 29,329 Net lease cost $ 109,580 Operating lease – operating cash flows (fixed payments) $ 80,251 Operating lease – operating cash flows (liability reduction) $ 72,639 Non-current leases – right of use assets $ 268,096 Current liabilities – operating lease liabilities $ 166,709 Non-current liabilities – operating lease liabilities $ 107,899 Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the nine months ended September 30, 2021, are as follows: SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES Sep. 30, 2021 Fiscal Year Operating Leases 2021 (excluding the nine months ended September 30, 2021) $ 44,638 2022 178,273 2023 66,738 Total future minimum lease payments 289,649 Amount representing interest ( 15,041 ) Present value of net future minimum lease payments $ 274,608 21 NOTE 14 – 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 September 30, 2021, and December 31, 2020, the Company had approximately $ 1,788,000 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 26 % of revenue for the nine months ended September 30, 2021. Two clients accounted for 68 % of revenue for the nine months ended September 30, 2020, as set forth below: Client A 52 % Client B 16 % Accounts Receivable Two clients accounted for 27 % of the accounts receivable as of September 30, 2021, as set forth below: Client A 15 % Client B 12 % Two clients accounted for 56 % of the accounts receivable as of September 30, 2020, as set forth below: Client A 29 % Client B 27 % Accounts Payable Two vendors accounted for 21 % of the accounts payable as of September 30, 2021, as set forth below: Vendor A 11 % Vendor B 10 % Two vendors accounted for 40 % of the accounts payable as of September 30, 2020, as set forth below. Vendor A 26 % Vendor B 14 % NOTE 15 – SUBSEQUENT EVENTS Atlantic Technology Systems, Inc. Acquisition On October 1, 2021, the Company entered into a Stock Purchase Agreement (the “Agreement”) by and among the Company, Atlantic Technology Systems, Inc. (“ATS”) and Atlantic Technology Enterprises, Inc. (“ATE”) (collectively, “Atlantic”) and James Montagne, the sole shareholder of ATS, and James Montagne and Miriam Montagne as the sole shareholders of ATE (the “Shareholder”). Pursuant to the Agreement, the Company purchased from the Shareholder all of the outstanding shares of Atlantic, with ATE and ATS becoming wholly-owned subsidiaries of the Company. The aggregate purchase price for the Atlantic shares was 200,000 shares of the Company’s common stock, par value $ 0.00001 , and $ 75,000 in cash. Furthermore, the Shareholder shall receive an additional 100,000 shares of the Company’s common stock based upon Atlantic achieving certain revenue and earnings thresholds and an additional $ 150,000 in cash upon the Company listing to a national exchange. Convertible Note Issuance On October 27, 2021, the Company issued a 5% Unsecured Convertible Note (the “Note”) to Neil Stinchcombe (the “Lender”), in consideration of the Lender lending the Company $ 1,500,000 (the “Principal Amount”) to provide funding for the Company’s prospective acquisitions and other general corporate purposes. The Principal Amount, together with accrued and unpaid interest, is due on January 27, 2022 (the “Maturity Date”), with no prepayment option. Interest is calculated at 6% per annum (based on a 360-day year) and is payable monthly. The Maturity Date may be extended at the Company’s election to April 27, 2022. 22