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~~

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, ~~2021~~2022

☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐ 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~~001-41227

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, AZArizona		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 each exchange on which registered
Common Stock, $0.00001 par value	~~Trading symbol(s)~~CISO	~~Name of exchange on which registered~~
~~None~~	~~N/A~~The Nasdaq Stock Market LLC	~~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,~~12, 2022, there were ~~117,729,971~~138,585,388 shares of the registrant’s common stock outstanding.

CERBERUS CYBER SENTINEL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE ~~THREE AND SIX MONTHS~~QUARTERLY PERIOD ENDED JUNE 30, ~~2021 AND 2020~~2022

TABLE OF CONTENTS

		Page
		~~Page~~
PART I. FINANCIAL INFORMATION		4

ITEM 1.	Financial Statements (unaudited)	34

	Condensed Consolidated Balance Sheets ~~as of June 30, 2021 (unaudited) and December 31, 2020~~	34

	Condensed Consolidated Statements of Operations ~~for the Three~~ and ~~Six Months Ended June 30, 2021 and 2020 (unaudited)~~Comprehensive Loss	45

	Condensed Consolidated Statements of Changes in Stockholders’ ~~Deficit for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)~~Equity	56

	Condensed Consolidated Statements of Cash Flows ~~for the Six Months Ended June 30, 2021 and 2020 (unaudited)~~	76

	Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~	78

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3729

ITEM 4.	Controls and Procedures	3829

PART II. OTHER INFORMATION		3930

ITEM 1.	Legal Proceedings	3930

ITEM 1A.	Risk Factors	3930

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3930

ITEM 3.	Defaults Upon Senior Securities	3930

ITEM 4.	Mine Safety Disclosures	3930

ITEM 5.	Other Information	3930

ITEM 6.	Exhibits	4031

SIGNATURES		4132

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that reflect management’s current views with respect to future events and financial performance. These statements are based upon beliefs of, and information currently available to, us as of the date hereof, as well as estimates and assumptions made by us. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions identify forward-looking statements. Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to our business, industry, and our operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ materially from those anticipated, believed, estimated, expected, intended, or planned.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. 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.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Forward-looking statements made in this Quarterly Report on Form 10-Q include statements about:

●	our ability to achieve and sustain profitability of our existing lines of business and through our wholly owned subsidiaries;
●	our ability to raise sufficient capital to continue to acquire cybersecurity companies;
●	our ability to attract and retain 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 global cybersecurity consolidator;
●	our ability to attract and retain key technology or management personnel and to expand our management team;
●	the rate of growth and anticipated trends and challenges in our business and in the market for our services;
●	our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, and our ability to achieve and maintain future profitability;
●	sufficiency of cash and cash equivalent to meet our needs for at least the next 12 months;
●	our ability to attract and retain clients;
●	our ability to generate revenue and gross profit;
●	our ability to navigate through the increasingly complex cybersecurity regulatory environment;
●	beliefs and objectives for future operations;
●	our ability to stay in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States and internationally;
●	economic and industry trends or trend analysis; and
●	anticipated income tax rates, tax estimates and tax standards.

Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to our business, industry, and our operations and results of operations. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report may not occur, and actual results could differ materially and adversely from those implied in our forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or events and circumstances described in the forward-looking statements will be achieved or occur. Neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Except as required by law, we undertake no obligation to update any forward-looking statements after the date of this report to conform these statements to actual results. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements, which are only predictions and speak only as of the date hereof.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated Balance Sheets

(Unaudited)

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.~~

	June 30, 2022			December 31, 2021

ASSETS

Current Assets:
Cash and cash equivalents	$	8,768,520		$	2,725,035
Accounts receivable, net		4,912,065			4,840,802
Notes receivable, related party		1,006,848			1,090,903
Inventory		346,520			189,596
Prepaid expenses and other current assets		3,086,063			960,965
Contract asset		427,268			-
Total Current Assets		18,547,284			9,807,301

Property and equipment, net		2,968,786			2,394,424
Right of use asset, net		245,426			277,578
Intangible assets, net		8,156,166			6,540,269
Goodwill		58,515,259			16,792,535
Other assets		17,875			-

Total Assets	$	88,450,796		$	35,812,107

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	7,503,547		$	2,709,066
Deferred revenue		2,351,477			52,824
Settlement liability		-			470,000
Lease liability		116,091			196,472
Loans payable		6,280,988			213,199
Line of credit		369,829			-
Convertible notes payable		2,516,667			1,500,000
Note payable, related party		176,994			-
Total Current Liabilities		19,315,593			5,141,561

Long-term Liabilities:
Loans payable, net of current portion		3,094,155			5,284,301
Lease liability, net of current portion		135,380			88,040
Note payable, related party, net of current portion		202,437			-

Total Liabilities		22,747,565			10,513,902

Commitments and Contingencies		-

Stockholders’ Equity:
Common stock, $.00001 par value; 250,000,000 shares authorized; 137,097,860 and 125,852,971 shares issued and outstanding on June 30, 2022 and December 31, 2021, respectively		1,371			1,258
Additional paid-in capital		126,382,178			69,309,369
Accumulated translation adjustment		(1,298,269	)		-
Accumulated deficit		(59,382,049	)		(44,012,422	)
Total Stockholders’ Equity		65,703,231			25,298,205

Total Liabilities and Stockholders’ Equity	$	88,450,796		$	35,812,107

~~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.

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated STATEMENTS ~~of CHANGES IN STOCKHOLDERS’ EQUITY~~

~~FOR THE THREE~~OF OPERATIONS AND ~~SIX MONTHS ENDED JUNE 30, 2021 AND 2020~~COMPREHENSIVE LOSS

(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

	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
	Three Months Ended						Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021

Revenue:
Security managed services	$	10,376,169		$	2,077,351		$	18,428,394		$	3,967,055
Professional services		851,776			872,326			2,128,961			1,542,400
Total revenue		11,227,945			2,949,677			20,557,355			5,509,455

Cost of revenue:
Security managed services		3,765,426			340,460			6,368,350			534,127
Professional services		163,152			139,973			273,489			257,767
Cost of payroll		4,707,984			1,531,910			9,153,834			2,959,612
Stock based compensation		1,825,890			197,848			3,947,473			380,924
Total cost of revenue		10,462,452			2,210,191			19,743,146			4,132,430
Total gross profit		765,493			739,486			814,209			1,377,025

Operating expenses:
Professional fees		945,148			244,261			1,568,209			401,615
Advertising and marketing		240,504			172,468			395,845			217,695
Selling, general and administrative		4,468,415			1,682,879			9,171,958			3,170,520
Stock based compensation		2,404,049			693,278			4,969,559			1,348,964
Total operating expenses		8,058,116			2,792,886			16,105,571			5,138,794

Loss from operations		(7,292,623	)		(2,053,400	)		(15,291,362	)		(3,761,769	)

Other income (expense):
Other income		17,425			2,179			29,968			2,384
Interest expense, net		(64,648	)		(65,641	)		(108,233	)		(134,336	)

Total other income (expense)		(47,223	)		(63,462	)		(78,265	)		(131,952	)

Net loss		(7,339,846	)		(2,116,862	)		(15,369,627	)		(3,893,721	)
Foreign currency translation adjustment		(2,200,710	)		-			(1,298,269	)		-

Comprehensive loss	$	(9,540,556	)	$	(2,116,862	)	$	(16,667,896	)	$	(3,893,721	)

Net loss per common share - basic and diluted	$	(0.05	)	$	(0.02	)	$	(0.11	)	$	(0.03	)

Weighted average shares outstanding - basic		136,127,157			117,729,971			134,738,684			117,081,360

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated STATEMENTS ~~OF CASH FLOWS~~of CHANGES IN STOCKHOLDERS’ EQUITY

(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


					Additional			Accumulated Other
	Common Stock				Paid-in			Comprehensive			Accumulated
	Shares		Amount		Capital			Gain/(Loss)			Deficit			Total

Balance at January 1, 2022		125,852,971	$	1,258	$	69,309,369		$	-		$	(44,012,422	)	$	25,298,205

Stock based compensation - stock options		-		-		8,179,332			-			-			8,179,332
Stock based compensation - common stock		434,000		4		737,696			-			-			737,700
Exercise of options		454,111		5		277,707			-			-			277,712
Stock issued for cash in public offering		2,060,000		21		9,521,777			-			-			9,521,798
Stock issued for True Digital acquisition		7,406,100		74		34,726,306			-			-			34,726,380
Stock issued for VelocIT acquisition		256,678		3		(3	)		-			-			-
Stock issued for Red74 acquisition		34,000		-		-			-			-			-
Stock issued for Creatrix acquisition		600,000		6		3,629,994			-			-			3,630,000
Stock issued for cash
Stock issued for cash, shares
Foreign currency translation		-		-		-			(1,298,269	)		-			(1,298,269	)
Net loss		-		-		-			-			(15,369,627	)		(15,369,627	)
Balance as of June 30, 2022		137,097,860	$	1,371	$	126,382,178		$	(1,298,269	)	$	(59,382,049	)	$	65,703,231

Balance at January 1, 2021		116,104,971	$	1,161	$	12,607,074			-		$	(4,866,772	)	$	7,741,463

Stock based compensation - stock options		-		-		1,729,888			-			-			1,729,888
Stock issued for cash		1,625,000		16		3,249,984			-			-			3,250,000
Net loss		-		-		-			-			(3,893,721	)		(3,893,721	)
Balance as of June 30, 2021		117,729,971	$	1,177	$	17,586,946		$	-		$	(8,760,493	)	$	8,827,630

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

(Unaudited)

	June 30, 2022			June 30, 2021
Cash flows from operating activities:
Net loss	$	(15,369,627	)	$	(3,893,721	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation - stock options		8,179,332			1,729,888
Loss on write-off of accounts receivable		-			15,264
Issuance of common stock for services		737,700			114,750
Non-cash interest expense		20,834			-
Depreciation and amortization		1,163,463			78,836
Right of use amortization		127,805			39,029
Amortization of debt discount		-			36,193
Gain on termination of operating lease		(22,289	)		-
Changes in operating assets and liabilities:
Accounts receivable, net		1,416,754			(617,769	)
Inventory		(199,559	)		-
Contract assets		(261,961	)		-
Prepaids and other current assets		(2,131,480	)		(160,527	)
Accounts payable and accrued expenses		2,675,346			48,760
Lease liability		120,536			(37,442	)
Settlement liability		(470,000	)		-
Deferred revenue		438,672			-

Net cash used in operating activities		(3,574,474	)		(2,646,739	)

Cash flows from investing activities:

Purchases of property and equipment		(200,504	)		-
Cash paid in acquisitions, net		(4,914,196	)		-

Net cash used in investing activities		(5,114,700	)		-

Cash flows from financing activities:
Proceeds from sale of common stock		9,521,798			3,250,000
Proceeds from stock option exercise		277,712			-
Proceeds from loan payable		5,000,000			-
Proceeds from convertible note payable		1,000,000			-
Proceeds from line of credit		86,585			221,346
Payment on line of credit		-			(224,346	)
Payment on loans payable		(895,053	)		(22,542	)
Payment on notes payable, related party		(184,758	)		(50,000	)
Payment of debt issuance cost		(25,000	)		-

Net cash provided by financing activities		14,781,284			3,174,458

Effect of exchange rates on cash and cash equivalents		(48,625	)		-

Net increase in cash and cash equivalents		6,043,485			527,719

Cash and cash equivalents - beginning of the period		2,725,035			5,197,030

Cash and cash equivalents - end of the period	$	8,768,520		$	5,724,749

Supplemental cash flow information:
Cash paid for:
Interest	$	91,234		$	91,490
Income taxes	$	-		$	-
Non-cash investing and financing activities:
Right of use asset and lease liability recorded upon adoption of ASC 842	$	226,941		$	175,759
Common stock issued in True Digital acquisition	$	34,726,380		$	-
Common stock issued in Creatrix acquisition	$	3,630,000		$	-
Common stock issued in VelocIT acquisition	$	-		$	-
Common stock issued in RED 74 acquisition	$	-		$	-

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~NOTE 1 –~~ ~~NATURE OF THE ORGANIZATION AND BUSINESS~~

~~Corporate History~~

Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to 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~~corporation (“Cerberus”), and its wholly owned subsidiaries, including GenResults, LLC, an Arizona limited liability company (“GenResults”), TalaTek, LLC, a ~~Stock Purchase Agreement with~~Virginia limited liability company (“TalaTek”), 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”), Catapult Acquisition Corporation, a New Jersey corporation (“VelocIT”), Southford Equities, Inc., a British Virgin Islands company (“Arkavia”), True Digital Security, Inc., a Delaware corporation (“True Digital”), RED74 LLC, a New Jersey limited liability company (“RED74”), Atlantic Technology Systems, Inc., a New Jersey corporation (“ATS”), Atlantic Technology Enterprises, Inc., a New Jersey corporation (“ATE” and ~~its sole member, pursuant to which Alpine became~~together with ATS, “Atlantic”), Creatrix, Inc., a ~~wholly owned subsidiary of the Company (the “Alpine Acquisition”~~Maryland corporation (“Creatrix”), and CyberViking, LLC, an Oregon limited liability company (“CyberViking”). ~~Under the terms of the Alpine Acquisition,~~Unless otherwise specified, all ~~issued and outstanding membership units~~dollar amounts are expressed in ~~Alpine were exchanged for an aggregate of~~ United States dollars.

~~900,000~~ ~~shares of the Company’s common stock.~~

NOTE 1 –ORGANIZATION AND BACKGROUND

~~Nature~~Description of the Business

~~Cerberus Sentinel is~~We are a ~~security services~~cybersecurity and compliance company comprised of highly trained and seasoned security professionals who work with clients ~~throughout the United States~~ to enhance or create a ~~continuously aware~~better cyber posture in their organization. We provide a full range of cybersecurity consulting and related services, encompassing all three pillars of compliance, cybersecurity, and culture. Our services include secured managed services, compliance services, security ~~culture. We do not sell~~operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, certified forensics, technical assessments, and 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.training.

~~We currently provide~~On January 5, 2022, we entered into a ~~multitude~~stock purchase agreement (the “True Digital Stock Purchase Agreement”) with certain stockholders of cybersecurity services including managed security service, cybersecurity consulting, technology consulting, compliance auditing, vulnerability assessment, penetration testing, security remediation, Security Operations Center (“SOC”True Digital and an agreement and plan of merger (the “True Digital Merger Agreement”) ~~set-up~~with True Digital and ~~consulting~~certain of its other stockholders. On January 19, 2022, the transactions contemplated by the True Digital Stock Purchase Agreement and ~~cybersecurity training. We differentiate ourselves from~~the True Digital Merger Agreement were consummated, with True Digital becoming a wholly owned subsidiary of our ~~competitors by staying technology agnostic. We believe that many cybersecurity service providers in the market today are committed~~company.

On January 18, 2022, we completed a $10,300,000 underwritten public offering of shares of our common stock, pursuant to ~~a specific technology solution~~ which ~~limits their service scope and ability to quickly respond to any emerging cybersecurity challenges.~~an aggregate of 2,060,000 shares of our common stock were issued (see Note 9). In addition, we granted the underwriter warrants to purchase an aggregate of 144,200 shares of our common stock (see Note 9). We intend to use the net proceeds from the offering to fund acquisitions, sales, marketing, and general corporate purposes. In connection with the public offering, our common stock was listed on The Nasdaq Stock Market LLC.

On June 1, 2022, we entered into a stock purchase agreement with the stockholders of Creatrix, pursuant to which Creatrix became our wholly owned subsidiary. Creatrix offers recognized expertise in identity management 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 scopewell as systems integration 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~~software engineering, and ~~maximizing their return on investment from information technology (“IT”)~~specializes in biometrics, vetting, credentialing, and ~~cybersecurity spending.~~case management.

~~Liquidity~~Basis of Presentation

~~The accompanying unaudited condensed consolidated~~Our 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 accordance with accounting principles generally accepted in the United States (“GAAP”) and include our accounts and the accounts of our subsidiaries. All material intercompany accounts and transactions have been eliminated.

Our interim financial statements are unaudited, and in our opinion, include all adjustments of a normal ~~course~~recurring nature necessary for the fair presentation of ~~business. At June 30, 2021,~~ the ~~Company had an accumulated deficit~~periods presented. The results for the interim periods are not necessarily indicative of ~~approximately $8,760,000~~the results to be expected for any subsequent period or for the year ending December 31, 2022. These unaudited financial statements and ~~working capital surplus of approximately $~~related notes should be read in conjunction with our audited financial statements for the year ended December 31, 2021.

~~3,532,000~~

. Reclassifications

~~For~~

Certain reclassifications have been made to the financial statements for the six months ended June 30, 2021 to conform to the ~~Company had a loss from operations of approximately $3,762,000and 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~~financial statements presentation for the six months ended June 30, ~~2021, the Company received $~~2022. These reclassifications had no effect on net loss or cash flows as previously reported.

~~3,250,000~~ ~~from private placements~~

Use of ~~the Company’s common stock.~~Estimates

~~Based on its current cash resources~~GAAP requires management to make estimates and ~~commitments,~~assumptions that affect the ~~Company believes it will be able to maintain its current planned development~~reported amounts in our financial statements. We periodically evaluate our estimates and ~~corresponding level of expenditure for at least twelve months from~~adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results could materially differ.

We believe the ~~date~~critical accounting policies discussed below affects our more significant judgments and estimates used in the preparation of the ~~issuance of these~~accompanying unaudited condensed consolidated financial ~~statements, although no assurance can be given that it will not need additional funds prior to~~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 ~~time.~~as expected volatility, risk-free interest rate, share price, and expected dividend rate.

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.

Revenue

~~The Company’s revenues are~~Our revenue is derived from two major types of services to clients: ~~Managed Services~~security managed services and ~~Consulting Services.~~professional services. With respect to ~~Managed Services, the Company provides~~security managed services, we provide 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~~professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.

~~Practical Expedients~~

~~As part~~Our revenue is categorized and disaggregated as reflected in our statement 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 contractoperations as ~~an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.~~follows:

~~Disaggregated Revenues~~Security Managed Services

~~Revenue consists~~Security managed services revenue primarily consist of compliance, security managed services, SOC managed services, and vCISO. We considered these services to be a single performance obligation, and revenue is recognized as services and materials are provided to 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
customer.

~~Contract Modifications~~Professional Services
~~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~~Professional services revenue primarily consists of ~~three months or less at the time of purchase~~technical assessments, incident response and forensics, training, and other cybersecurity services. We considered these services to be ~~cash equivalents.~~a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

Accounts Receivable

Accounts receivable are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts. ~~The Company~~We periodically ~~assesses its~~assess our accounts and other receivables for collectability on a specific identification basis. ~~The Company provides~~We provide 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~~We write off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of June 30, ~~2021,~~2022 and December 31, ~~2020, the Company’s~~2021, our allowance for doubtful accounts was $~~55,264~~180,691 and $~~40,000~~77,811, respectively.

9
~~Property and Equipment~~Inventory

~~Property~~Inventory consists of software licenses and computer equipment ~~are recorded at cost. Depreciation~~for sale to customers. Inventory is ~~computed~~measured using the ~~straight-line~~first-in, first-out method ~~over the estimated useful lives~~and stated at lower of ~~the related assets, generally between three and five years. Expenditures that enhance the useful lives~~cost or net realizable value as 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~~2022 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~~December 31, 2021. The value of ~~the identifiable net assets acquired. Goodwill~~inventories is ~~not amortized but is tested~~reduced for excess and obsolete inventories. We monitor inventory to identify events that would require impairment ~~at least annually at year end, at~~due to obsolete inventory and adjust 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 futureinventory when required. We recorded 0 inventory 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~~ losses for the six months ended June 30, ~~2021~~2022 and ~~2020, respectively, and are recorded in operating expenses on the unaudited condensed consolidated statements of operations.~~2021.

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~~(Level 1 measurement) and the lowest priority to unobservable inputs ~~(level~~(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~~For dilutive securities, all 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 and shares issuable upon conversion thereof have been excluded from ~~the Company’s~~our computation of net loss per common share for the ~~three and~~ six months ended June 30, ~~2021~~2022 and ~~2020.~~
11
2021.

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~~our 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

June 30, 2022

June 30, 2021

Stock options 36,114,487 25,843,700
Warrant 144,200 -
Convertible debt 430,718 1,500,000
Total 36,689,405 27,343,700
10

~~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~~Deferred Revenue

~~Leases~~Deferred revenue primarily consists of billings or payments received from customers in ~~which~~advance of revenue recognized for the ~~Company~~services provided to our customers or annual licenses and is recognized as services are performed or ratably over the ~~lessee are comprised of corporate offices and property and equipment. All~~life of the ~~leases are classified~~license. We generally invoice customers in advance or in milestone-based installments. Deferred revenue of $52,824 was recognized for the six months ended June 30, 2022, which was included in the deferred revenue balance 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~~December 31, 2021. As of June 30, 2022, deferred revenue related to such customer payments was $~~0.92~~2,351,477 ~~years.~~, all of which is expected to be recognized during the succeeding 12-month period and is therefore presented as current.

~~In accordance with ASC 842,~~ ~~Leases~~,Deferred revenue consisted of 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.following:
SCHEDULE OF DEFERRED REVENUE

June 30, 2022

December 31, 2021

Security managed services $ 2,172,302 $ 52,824
Professional services 179,175 -
Total deferred revenue $ 2,351,477 $ 52,824

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 and liabilities, 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~~We utilize 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~~We account 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~~2022 and December 31, ~~2020, the Company’s~~2021, our net deferred tax asset has been fully reserved.

For uncertain tax positions that meet a “more likely than not” threshold, ~~the Company recognizes~~we recognize the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. ~~The Company’s~~Our 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 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 us for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. We adopted the standard on January 1, 2022, and management noted that there is no material impact to the unaudited condensed consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in business combinations to be recognized in accordance with ASC Topic 606 as if the acquirer had originated the contracts. The ASU is applied prospectively and is effective for us for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that adopting this standard will have on the unaudited condensed consolidated financial statements.
All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to us.
11
NOTE 3 – ACQUISITIONS
True Digital Security, Inc.
On January 5, 2022, we entered into the ~~Company.~~True Digital Stock Purchase Agreement with certain stockholders of True Digital and the True Digital Merger Agreement with True Digital and certain of its other stockholders. On January 19, 2022, the transactions contemplated by the True Digital Stock Purchase Agreement and the True Digital Merger Agreement were consummated, with True Digital becoming a wholly owned subsidiary of our company (the “True Digital Acquisition”). True Digital’s outstanding common stock was exchanged for the right to receive an aggregate of $6,153,000 in cash and 8,229,000 shares of our common stock, subject to a 10% holdback. In the event that no claim is made by a Cerberus Indemnitee (as defined in the True Digital Merger Agreement) within one year from closing, then we shall pay the entire amount of the 10% holdback to the shareholders of True Digital.
Subsequent to the issuance of these financial statements, we expect 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.
The following table summarizes the preliminary 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

Consideration $ 40,879,380

Tangible assets acquired:
Cash 485,232
Accounts receivable 1,404,386
Contract assets 131,342
Prepaid expenses and other current assets 196,825
Property and equipment 906,006
Other assets 17,505
Total tangible assets 3,141,296

Estimated intangible assets acquired 1,913,800

Assumed liabilities:
Accounts payable and accrued expenses 1,283,003
Deferred revenue 1,956,600
Line of credit 283,244
Loans payable 181,741
Loans payable - shareholder 543,581
Total assumed liabilities 4,248,169

Net assets acquired 806,927

Goodwill (a) $ 40,072,453
(a) Goodwill and intangibles are not deductible for tax purposes.
12
Creatrix, Inc.
On June 1, 2022, we entered into a stock purchase agreement with the stockholders of Creatrix, pursuant to which Creatrix became our wholly owned subsidiary. We anticipate that this will expand our professional services offerings and capabilities. Creatrix offers recognized expertise in identity management as wells as systems integration and software engineering and specializes in biometrics, vetting, credentialing, and case management.
Subsequent to the issuance of these financial statements, we expect 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.
The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimate fair values as of the acquisition date, with the excess recorded to goodwill. During the measurement period, which will not exceed one year from closing, we will continue to obtain information to assist us in finalizing the acquisition date fair values. Any qualifying changes to our preliminary estimates will be recorded as adjustments to the respective assets and liabilities, with any residual amounts allocated to goodwill.
The following table summarizes the preliminary estimated acquisition date fair values of the assets acquired and liabilities assumed:
SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES

Consideration paid $ 3,630,000

Tangible assets acquired:
Cash 3,572
Accounts receivable 125,908
Contract assets 33,965
Prepaid expenses and other current assets 3,597
Total tangible assets 167,042

Estimated intangible assets acquired 720,400

Assumed liabilities:
Accounts payable and accrued expenses 48,001
Loans payable 56,687
Total assumed liabilities 104,688

Net assets acquired 782,754

Goodwill (a) $ 2,847,246
(a) Goodwill and intangibles are not deductible for tax purposes.
Pro forma financial information is not presented because the acquisitions were not material to our financial statements, individually or in the aggregate.
NOTE 34 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets ~~consist~~consisted of:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

June 30,
2021

December 31,
2020

June 30, 2022

December 31, 2021

Prepaid expenses $ 200,595 $ 128,398 $ 1,653,815 $ 441,259
Deferred cost of sales 729,664 12,239
Prepaid taxes 126,675 231,014
Prepaid insurance 71,221 13,746 391,194 46,751
Other current assets 30,855 -
Deferred interest 184,715 229,702
Total prepaid expenses and other current assets $ 302,671 $ 142,144 $ 3,086,063 $ 960,965
13

NOTE 45 – PROPERTY AND EQUIPMENT

Property and equipment ~~consists~~consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT

June 30,
2021

December 31,
2020

June 30, 2022

December 31, 2021

Computer equipment $ 15,735 $ 15,735 $ 612,612 $ 495,235
Vehicle 63,052 63,052
Building 1,107,769 1,047,020
Leasehold improvements 94,739 109,626
Vehicles 63,052 63,052
Furniture and fixtures 6,224 6,224 45,835 33,358
Software 10,092 10,092 1,529,412 748,599
Property and equipment, gross 95,103 95,103
Property and equipment gross 3,453,419 2,496,890
Less: accumulated depreciation (23,321 ) (14,473 ) (484,633 ) (102,466 )
Property and equipment, net $ 71,782 $ 80,630 $ 2,968,786 $ 2,394,424

Total depreciation expense was $~~4,424~~178,309 and $~~2,404~~4,424 for the three months ended June 30, 2022 and 2021, respectively, and ~~2020, respectively. Total depreciation expense~~ was $~~8,848~~332,383 and $~~3,308~~8,848 for the six months ended June 30, ~~2021~~2022, and ~~2020,~~2021, respectively.

NOTE 56 – INTANGIBLE ASSETS AND GOODWILL

The following table summarizes the changes in goodwill during the six months ended June 30, ~~2021:~~2022:
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
Balance December 31, 2021 $ 16,792,535
Acquisition of goodwill 42,919,699
Foreign currency translation adjustment (1,196,975 )
Ending balance, June 30, 2022⁽¹⁾ $ 58,515,259

⁽¹⁾ As of June 30, ~~2021, the Company has~~2022, we had not obtained a third-party valuation for the ~~December 16, 2020 acquisition~~acquisitions of ~~Alpine.~~True Digital and Creatrix. As such, the purchase price allocation disclosed in ~~the Company’s Annual~~this Quarterly Report ~~in Form 10-K~~ for ~~December 31, 2020, filed on March 31, 2021,~~True Digital and Creatrix may change, and, therefore, goodwill ~~resulting~~ from the ~~acquisition~~acquisitions may change.
13

The following table summarizes the identifiable intangible assets as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:
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.~~
Useful life
June 30, 2022

December 31, 2021

Tradenames – trademarks Indefinite $ 1,211,800 $ 1,211,800
Tradenames – trademarks 5 years 3,136,872 1,798,300
Customer base 5 - 10 years 1,836,606 1,650,000
Non-compete agreements 2 - 5 years 806,900 675,500
Intellectual property/technology 5 - 10 years 2,264,939 1,528,000
Identifiable intangible assets 9,257,117 6,863,600
Less accumulated amortization (1,100,951 ) (323,331 )
Total $ 8,156,166 $ 6,540,269

The weighted average remaining useful life of identifiable amortizable intangible assets remaining is ~~8.18~~ 4.47years.

Amortization of identifiable intangible assets for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021 was $~~34,994~~512,503 and $~~15,648~~34,994, ~~respectively. Amortization of identifiable intangible assets~~respectively, and was $817,467 and $69,988 for the six months ended June 30, ~~2021~~2022 and ~~2020, was $69,988~~ ~~and $31,296~~,2021, respectively.
14

The below table summarizes the future amortization expense for the remainder of ~~2021 following June 30, 2021,~~2022 and the next four years thereafter:
SCHEDULE OF FUTURE AMORTIZATION EXPENSE
Remainder of 2021 $ 69,987
2022 127,027

2022 (remainder of) $ 860,974
2023 113,427 1,704,567
2024 104,262 1,427,546
2025 76,767 1,377,196
2026 1,276,628
Thereafter 449,474 297,455
$ 940,944
Finite-lived intangible assets, net $ 6,944,366

NOTE 67 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses ~~consist~~consisted 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

June 30, 2022

December 31, 2021

Accounts payable $ 3,163,498 $ 1,700,260
Accrued payroll 1,470,348 482,588
Accrued expenses 2,391,785 513,718
Accrued commissions 465,416 -
Accrued interest – related party 12,500 12,500
Total accounts payable and accrued expenses $ 7,503,547 $ 2,709,066

~~Note 7 -~~ NOTE 8 – RELATED PARTY TRANSACTIONS

~~Note Payable~~Independent Consulting Agreement with Stephen Scott
In August 2020, we entered into an Independent Consulting Agreement with Stephen Scott, a Director of our company, with respect to advisory and consulting services relating to our strategic and business development, and sales and marketing. Mr. Scott receives a consulting fee of $11,500 per month for such services. During the three and six months ended June 30, 2022, we paid consulting fees to Mr. Scott in the amount of $34,500 and $69,000, respectively.
Managed Services Agreement with Hensley Beverage Company – Related Party

OnIn July 2021, we entered into a 1-year Managed Services Agreement with Hensley Beverage Company to provide secured managed services. We also may be engaged by Hensley Beverage Company from time to time to provide other related services outside the scope of the Managed Services Agreement. While the agreement provides for a term through 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~~agreement will continue until terminated by either party. For 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~~2022, we received $206,202 and ~~2020, respectively.~~$373,008 from Hensley Beverage Company for contracted services and had an outstanding receivable balance of $11,132 as of June 30, 2022.

~~Convertible~~ Note ~~Payable, Accounts~~ Receivable ~~and Revenue~~ – Related Party

~~On December 23, 2020, the Company issued~~Arkavia provided cash infusions to a related party to fund an intended wholly owned subsidiary, Arkavia Peru, for start-up and operational costs. As of June 30, 2022, the subsidiary has yet to be incorporated and as such, Arkavia has recorded the amount as a ~~convertible note in the principal~~receivable. The 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~~2022 is $1,006,848 and ~~December 31, 2020, respectively. See Note 11 for additional details.~~is considered short-term and non-interest bearing.

15
~~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 -~~ NOTE 9 – STOCKHOLDERS’ EQUITY

~~Equity Transactions During the Period~~
~~During the six months ended~~On June ~~30, 2021, the Company issued~~14, 2022, our Board of Directors approved and recommended that our stockholders approve (i) an ~~aggregate~~amended and restated certificate of ~~1,625,000~~incorporation to, among other things, (1) increase our authorized shares of common stock ~~with a fair~~from 250,000,000 to 300,000,000 and (2) authorize the issuance of 50,000,000 shares of preferred stock, par value of $~~2.00~~0.00001 per ~~share, respectively, to investors~~share; and (ii) increase the number of shares authorized 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 $46,000representing 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~~issuance under our 2019 Equity Incentive Plan from 25,000,000 to 60,000,000. On June 27, 2022, stockholders holding approximately 61.96% of our outstanding voting stock executed a written consent in lieu of a special meeting of stockholders approving such amended and restated certificate of incorporation and equity plan amendment (the ~~“2019 Plan”~~“Written Consent”). Pursuant to Rule 14c-2 of the Exchange Act, such amended and restated certificate of incorporation and such equity plan amendment will not become effective until at least 20 calendar days following the date on ~~June 6, 2019 and the~~which an information statement informing stockholders of the ~~Company holding a majority~~Written Consent is first mailed to our stockholders of ~~the outstanding shares~~record. As such, no effect 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~~such amendments 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 purchasedshown on the ~~open market.~~accompanying financial statements.
Options

~~The Company~~We granted stock options ~~for~~vesting solely upon the ~~purchase~~continued service of ~~1,400,000~~ ~~shares of common stock during~~ the ~~six months ended June 30, 2021.~~
~~The Company granted options for~~recipient. We recognize the ~~purchase of~~ ~~3,775,000~~ ~~shares of common stock during the six months ended June 30, 2020.~~
~~The weighted average~~accounting grant date fair value of ~~options issued and vested during~~equity-based awards as compensation expense over the ~~six months ended June 30, 2021 was $587,143~~ ~~and $243,534, respectively. The weighted average grant date fair value~~required service period of ~~non-vested options was $8,147,973~~ ~~at June 30, 2021.~~each award.
~~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:~~option activity:
~~SUMMARY~~SCHEDULE OF STOCK OPTIONS ~~TO PURCHASE SHARES OF COMMON STOCK OUTSTANDING AND EXERCISABLE~~ACTIVITY
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.~~
Shares
Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life (in years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2022 31,372,148 $ 1.84 - -
Granted 8,635,213 3.62 - -
Exercised (454,111 ) 0.61 - -
Expired or cancelled (3,438,763 ) 2.56 - -
Outstanding at June 30, 2022 36,114,487 $ 2.25 5.69 $ 61,600,311
Exercisable at June 30, 2022 18,472,112 $ 0.84 3.32 $ 51,129,643

Total compensation expense related to the options was $~~891,126~~ 3,572,189and $~~343,910~~ 891,126for the three months ended June 30, 2022 and 2021, respectively, and ~~2020, respectively. Total compensation expense related to the options was~~$8,179,332 and $1,729,888~~and $669,339~~ for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of June 30, ~~2021,~~2022, there was future compensation expense of $~~6,525,546~~ 44,979,761with a weighted average recognition period of 2.11years 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.Warrant Activity Summary

~~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.~~table summarizes warrant activity:
SCHEDULE OF STOCK WARRANT ACTIVITY
~~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.~~
Shares
Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life
(in years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2022 - $ - -                 -
Granted 144,200 5.00 4.51 -
Exercised - - - -
Expired or cancelled - - - -
Outstanding at June 30, 2022 144,200 $ 5.00 4.51 $ -
Exercisable at June 30, 2022 144,200 $ 5.00 4.51 $ -

16
~~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

Maxim Settlement Agreement
On October 27, 2020, we entered into an advisory agreement (the “Advisory Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which the parties agreed to certain compensation obligations in the form of our common stock, cash and future rights. Certain disputes arose between the parties regarding the duties and obligations pursuant to the Advisory Agreement, resulting in the parties entering into a settlement and release agreement on January 13, 2022. As a result, we recorded a settlement liability at December 31, 2021 of $470,000 and issued 400,000 shares of our common stock to Maxim, pursuant to the settlement. During the six months ended June 30, 2022, we paid $470,000 in cash.
Legal Claims

There are no material pending legal proceedings in which ~~the Company~~we or any of ~~its~~our subsidiaries is a party or in which any ~~director, officer~~of our directors, officers or ~~affiliate of the Company,~~affiliates, any owner of record or beneficially of more than 5% of any class of ~~its~~our voting securities, or security holder is a party adverse to us or has a material interest adverse to ~~the Company.~~us.
17
Indirect Taxes
We are subject to indirect taxation in some, but not all, of the various states and foreign jurisdictions in which we conduct business. Laws and regulations attempting to subject commerce conducted over the Internet to various indirect taxes are becoming more prevalent, both in the U.S. and internationally, and may impose additional burdens on us in the future. Increased regulation could negatively affect our business directly, as well as the business of our customers. Taxing authorities may impose indirect taxes on the Internet-related revenue we generated based on regulations currently being applied to similar, but not directly comparable industries. There are many transactions and calculations where the ultimate indirect tax determination is uncertain. In addition, domestic and international indirect taxation laws are complex and subject to change. We may be audited in the future, which could result in changes to our indirect tax estimates. We continually evaluate those jurisdictions in which nexus exists, and believe we maintain adequate indirect tax accruals.
As of June 30, 2022 and December 31, 2021, our accrual for estimated indirect tax liabilities was $633,672 and $99,088, respectively, reflecting our best estimate of the potential liability based on an analysis of our business activities, revenues subject to indirect taxes, and applicable regulations. Although we believe our indirect tax estimates and associated liabilities are reasonable, the final determination of indirect tax audits, litigation, or settlements could be materially different than the amounts established for indirect tax contingencies.

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~~ 0 ~~and $3,000~~ ~~outstanding, respectively.~~

Loans Payable
~~Technologyville, Inc.~~Loans payable was as follows:
SCHEDULE OF LOAN PAYABLE
Interest Rate Maturities
June 30, 2022

December 31, 2021

Term loans (US dollar denominated) 5.00% – 6.00% 2023 - 2027 $ 5,397,470 $ 478,712
Term loans (Chilean peso denominated) 3.48% - 7.14% 2023 - 2029 3,977,673 5,018,788
9,375,143 5,497,500
Less current portion (6,280,988 ) (213,199 )
Long term loans payable $ 3,094,155 $ 5,284,301
~~On April 29, 2019, Techville~~In June 2022, we entered into ~~a note payable with VCI Account Services, that subsequently was assigned to U.S. Bancorp,~~bridge loans, secured by substantially all of our assets, in the ~~original~~ principal amount of $~~59,905~~5,000,000 bearing an interest rate of 4.00~~. The note has~~% per annum payable monthly with a maturity date of ~~May 12, 2025~~December 14, 2022. These bridge loans are guaranteed by our assets. We recorded interest expense of $8,889 during the three and ~~bears interest at~~ ~~5.77%~~ ~~per annum. During the~~ six months ended June 30, ~~2021,~~2022, respectively.
17
Various subsidiaries in the ~~Company made cash payments of $2,925, of which $2,702~~ ~~and $222~~ ~~was attributed to~~United States are borrowers under certain term loans. These term loans require monthly principal and interest ~~respectively. The loan is collateralized~~payments. These term loans are secured by ~~a vehicle. There are no financial covenants requiring~~various assets owned by our subsidiaries. We recorded aggregate interest expense of these term loans of $11,358 and $51,987 for the ~~Company to maintain specific financial ratios. At~~three and six months ended June 30, ~~2021, $43,178~~ ~~was outstanding.~~2022, respectively.

~~On June 22, 2020,~~Our Chilean subsidiary, Arkavia, is the borrower 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,~~certain term loans denominated in Chilean Pesos. These term loans require monthly principal and interest ~~payments were deferred~~payments. These term loans are secured by various assets owned by our subsidiaries. We recorded aggregate interest expense on these term loans of $58,400 and $61,885 for ~~ten months. Techville applied for loan forgiveness on a timely basis,~~the three and atsix months ended June 30, ~~2021, $179,600~~ ~~was outstanding.~~2022, respectively.

~~GenResults, LLC~~
Debt Assumed through Acquisition
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~~As part of the ~~note. The outstanding principal balance~~True Digital Acquisition, we assumed $1,008,566 of ~~this loan~~debt previously held by True Digital. This debt was $~~9,787~~ ascomprised of ~~June 30, 2021~~a revolving line of credit and ~~December 31, 2020. At June 30, 2021 and December 31, 2020,~~four separate term loans. We repaid two of 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~~ four term loans during the six months ended June 30, ~~2021~~2022. The line of credit matured and ~~2020, respectively.~~
~~Cerberus Cyber Sentinel Corporation~~
~~On April 17, 2020, under~~was repaid in full on August 9, 2022, and the ~~U.S. Small Business Administration’s Paycheck Protection Program, Cerberus entered into a note payable with a financial institution for $530,000~~ ~~bearing~~outstanding term loans mature in May 2024 and February 2027. The line of credit had an interest atrate 1% 3.25% 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.~~
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~~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.~~annum.

Convertible ~~Note~~Notes Payable

~~On December 23, 2020, the Company~~In October 2021, we issued ~~to a related party lender~~ a convertible note ~~payable~~ in the principal amount of $~~3,000,000~~1,500,000~~. The convertible note bears interest at~~ 6% ~~per annum, with~~ bearing an ~~effective~~ interest rate ~~due to the if converted value of the note,~~ of ~~8.5%~~ 5.00% 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~~January 27, 2022, with a conversion price of $~~2.00~~ 5.00per share. ~~At December 31, 2020, the if converted value of~~On March 10, 2022, we entered into an amendment to the note atpursuant to which the ~~market price of $~~maturity date was extended to ~~2.05~~ October 27, 2022~~per share, would be $3,075,000~~. The ~~issuance~~outstanding principal 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~~ 1,500,000 at June 30, 2022. At June 30, 2022 and December 31, 2021, we recorded interest expense and accrued interest of $49,486and $~~90,500~~ 12,500, respectively, with respect to this note. We recorded interest expense of $18,493 and $~~for~~36,986 during the three and six months ended June 30, ~~2021.~~2022, respectively.

In June 2022, we entered into an unsecured convertible note in the principal amount of $1,000,000 bearing an interest rate of 5.00% per annum payable monthly with a maturity date of June 2023, with a conversion price of $7.65 per share. The outstanding principal of this note can be redeemed at any time by us or at maturity at 105%. At June 30, 2022, we recorded interest expense and accrued interest of $3,194 during the three and six months ended.
Future minimum payments under the above ~~notes~~line of credit and loans payable ~~for the remainder~~due as of ~~2021 following~~ June 30, ~~2021, and thereafter, and the amount of loans payable, net of current portion, are~~2022 were as follows:
SCHEDULE OF FUTURE MINIMUM PAYMENTS ~~UNDER NOTES PAYABLE~~FOR LONG TERM DEBT
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

2022 (remainder of) $ 7,309,895
2023 2,167,354
2024 909,814
2025 871,572
2026 507,925
Thereafter 928,676
Total future minimum payments 12,695,236
Less: discount (54,166 )
Long term debt 12,641,070
Less: current (9,344,478 )
Long term debt, net of current portion $ 3,296,592

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~~our 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~~Right of Use (“ROU”) assets and corresponding lease liabilities.

On January ~~1, 2021 and February 1, 2021, the Company~~19, 2022, we recognized additional ROU assets and lease liabilities of $~~37,932~~226,942 ~~and $137,826, respectively. The Company~~from the True Digital Acquisition. We elected to not recognize ROU assets and lease liabilities arising from office leases with initial terms of ~~twelve~~12 months or less (deemed immaterial) on the unaudited condensed consolidated balance sheets.
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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~~we will exercise that option.

When measuring lease liabilities for leases that were classified as operating leases, ~~the Company~~we discounted lease payments using ~~its~~our estimated incremental borrowing rate at January 1, ~~2021.~~2022. The weighted average incremental borrowing rate applied was6% 6.00%. As of June 30, ~~2021, the Company’s~~2022, our leases had a remaining weighted average term of ~~1.39~~1.00 years.

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Operating leases are included in the unaudited condensed consolidated balance sheets as follows:
~~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
Classification
June 30,
2022

December 31,
2021

Lease assets
Operating lease cost ROU assets Assets $ 245,426 $ 277,578
Total lease assets $ 245,426 $ 277,578

Lease liabilities
Operating lease liabilities, current Current liabilities $ 116,091 $ 196,472
Operating lease liabilities, non-current Liabilities 135,380 88,040
Total lease liabilities $ 251,471 $ 284,512
The components of lease costs, which are included in income from operations in our unaudited condensed consolidated statements of operations, were as follows:
SCHEDULE OF LEASE COST

Six Months Ended June 30,

2022 2021
Leases costs
Operating lease costs $ 226,079 $ 54,376
Total lease costs $ 226,079 $ 54,376

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~~2022 were as follows:
SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES

Fiscal Year Operating Leases Operating Leases
2021 (excluding the six months ended June 30, 2021) $ 54,620
2022 104,491
(Unaudited)
2022 (remainder of) $ 83,892
2023 77,091
2024 57,605
2025 54,389
Total future minimum lease payments 159,111 272,977
Amount representing interest (7,113 ) (21,506 )
Present value of net future minimum lease payments $ 151,988 $ 251,471
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NOTE 13 – ~~CONCENTRATION OF CREDIT RISK~~GEOGRAPHIC INFORMATION
~~Cash Deposits~~

~~Financial instruments that potentially subject~~Revenue by geography is based on 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,~~customer’s billing address and ~~December 31, 2020, the Company had approximately $4,761,000~~ ~~and $4,252,000, respectively, in excess of the FDIC insured limit.~~was as follows:
~~SCHEDULES~~SCHEDULE OF ~~CONCENTRATION OF RISK,~~REVENUE BY ~~RISK FACTOR~~GEOGRAPHY IS BASED ON CUSTOMERS BILLING ADDRESS
~~Revenues~~
2022 2021 2022 2021

Three Months Ended June 30,

Six Months Ended June 30,

2022 2021 2022 2021

U.S. $ 9,358,105 $ 2,949,677 $ 17,764,335 $ 5,509,455
Chile 1,869,840 - 2,793,020 -
Revenue $ 11,227,945 $ 2,949,677 $ 20,557,355 $ 5,509,455

~~One client accounted for~~ Property and equipment, net by geography was as follows:
~~30%~~SCHEDULE OF PROPERTY AND EQUIPMENT, NET BY GEOGRAPHIC AREAS ~~of revenue for the six months ended June 30, 2021~~.

June 30, 2022

December 31, 2021

U.S. $ 1,034,958 $ 95,069
Chile 1,933,828 2,299,355
Property and equipment net $ 2,968,786 $ 2,394,424

~~Two clients accounted for~~ ~~80%~~No other international country represented more than 10% of ~~revenue for the six months ended June 30, 2020, as set forth below:~~property and equipment, net in any period presented.
~~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 %
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~~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~~Acquisitions
In July 2022, we entered into a stock purchase agreement with CyberViking and its interest holders, pursuant to which we acquired all of ~~VelocIT~~the issued and outstanding units of CyberViking (the “CyberViking Acquisition”). We funded the acquisition through the issuance of 499,000 shares of our common stock.

~~On June 30, 2021,~~The purchase price of the ~~Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Catapult~~CyberViking 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”). Pursuantwill be allocated to the ~~Merger Agreement, Catapult agreed~~tangible and intangible assets acquired and liabilities assumed based on their fair values at the acquisition date. We are currently preparing the valuations and other procedures necessary to ~~merge with~~determine the purchase price allocation and ~~into Merger Sub (the “Merger”), with Merger Sub surviving~~will record our initial fair value estimates during the ~~Merger as a wholly-owned subsidiary of the Company.~~three months ending September 30, 2022.

~~On July 26, 2021,~~CyberViking is a company specializing in application security services, incident response, and threat hunting as well as the ~~Company, Merger Sub, VelocIT, the Catapult shareholders~~creation and ~~the Shareholder Representative entered into an Amended and Restated Agreement and Plan~~management 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~~ security operation centers.~~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~~.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Note Regarding Forward-Looking Statements~~
~~This~~The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements and related notes included in this Quarterly Report on Form 10-Q ~~includes a number~~and the audited financial statements and related notes and Management’s Discussion and Analysis of ~~forward-looking statements that reflect management’s current views with respect to future events~~Financial Condition and ~~financial performance.Forward-looking statements are projections in respect~~Results 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”~~Operations 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.2021.

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 operationsUnless otherwise indicated 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~~context requires otherwise, ~~indicated,~~ the terms ~~“Company,”~~ “we,” “us,” “our,” and ~~“our”~~“our company” refer to Cerberus Cyber Sentinel Corporation, a Delaware corporation (“Cerberus”), 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”), Catapult Acquisition Corporation, a New Jersey corporation (“VelocIT”), Southford Equities, Inc., a British Virgin Islands company (“Arkavia”), True Digital Security, Inc., a Delaware corporation (“True Digital”), RED74 LLC, a New Jersey limited liability company (“RED74”), Atlantic Technology Systems, Inc., a New Jersey corporation (“ATS”), Atlantic Technology Enterprises, Inc., a New Jersey corporation (“ATE” and together with ATS, “Atlantic”), Creatrix, Inc., a Maryland corporation (“Creatrix”), and CyberViking, LLC, an Oregon limited liability company (“CyberViking”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.
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~~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~~Second Quarter 2022 Highlights
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~~

AsOur operating results for 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.~~
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~~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 includingthree months ended June 30, 2022 included 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~~Total revenue increased by $8.3 million to $11.2 million for the ~~root cause for approximately 75% of cyber breach events by starting with a culture of security-forward thinking;~~three months ended June 30, 2022, as compared to the three months ended June 30, 2021.
● ~~Tools and technology provisioning offering: We provide technology-agnostic solutions catering~~Total gross profit increased to ~~a client’s existing products and~~$0.8 million for the three months ended June 30, 2022, as compared to ~~enhance~~ the ~~cyber defense system by making carefully selected additions without bias and to fit their financial profile;~~six months ended June 30, 2021.
● ~~Data and privacy offering: This ensures that a client’s data security and privacy are properly managed~~Cash used in operating activities decreased to ~~alleviate risks of data loss and breach;~~$0.6 million for the three months ended June 30, 2022, as compared to $3.0 million for the three months ended March 31, 2022.
● ~~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~~closed $6.0 million of short-term bridge loans in June 2022.
● ~~SOC services:~~ We ~~offer SOC-as-a-service,~~acquired Creatrix, 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.became our wholly owned subsidiary.

~~Consulting Services~~On June 14, 2022, we filed a Registration Statement on Form S-3 (as amended by Amendment No. 1 to Form S-3 filed with the U.S. Securities and Exchange Commission (“SEC”) on June 24, 2022, the “S-3 Registration Statement”) with the SEC, which was declared effective on June 27, 2022. The S-3 Registration Statement contains two prospectuses:
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~~A base prospectus that ~~focuses on~~covers the potential offering, issuance, and sale from time to time of our common stock, preferred stock, warrants, debt securities, and units in one or more offerings with a ~~business’ non-financial reporting controls related~~total value of up 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;$300,000,000; and
○● ~~The National Institute~~A sales agreement prospectus covering the potential offering, issuance, and sale from time to time of ~~Standards~~our common stock having an aggregate gross sales price of up to $100,000,000 pursuant to a sales agreement with B. Riley Securities, Inc., Stifel, Nicolaus & Company, Incorporated, 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.Boustead Securities, LLC.

2421
● 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~~2022 to the Three Months Ended June 30, ~~2020~~2021

Our financial results for the three months ended June 30, ~~2021~~2022 are summarized as follows in comparison to the three months ended June 30, ~~2020:~~2021:

~~For the Three Months Ended June 30, 2021~~

Three Months Ended
June 30,

2022 2021 Variance
Revenue:
Security managed services $ 10,376,169 $ 2,077,351 $ 8,298,818
Professional services 851,776 872,326 (20,550 )
Total revenue 11,227,945 2,949,677 8,278,268

Cost of revenue:
Security managed services 3,765,426 340,460 3,424,966
Professional services 163,152 139,973 23,179
Cost of payroll 4,707,984 1,531,910 3,176,074
Stock based compensation 1,825,890 197,848 1,628,042
Total cost of revenue 10,462,452 2,210,191 8,252,261
Total gross profit 765,493 739,486 26,007
Operating expenses:
Professional fees 945,148 244,261 700,887
Advertising and marketing 240,504 172,468 68,036
Selling, general, and administrative 4,468,415 1,682,879 2,785,536
Stock-based compensation 2,404,049 693,278 1,710,771
Total operating expenses 8,058,116 2,792,886 5,265,230

Loss from operations (7,292,623 ) (2,053,400 ) (5,239,223 )
Other income (expense):
Other income 17,425 2,179 15,246
Interest expense, net (64,648 ) (65,641 ) 993
Total other income (expense) (47,223 ) (63,462 ) 16,239
Net loss (7,339,846 ) (2,116,862 ) (5,222,984 )
Foreign currency translation adjustment (2,200,710 ) - (2,200,710 )
Comprehensive loss $ (9,540,556 ) $ (2,116,862 ) $ (7,423,694 )

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 )
Revenue
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~~Security managed services revenue increased by ~~$216,403,~~$8,298,818, or ~~40%~~399%, for the three months ended June 30, ~~2021,~~2022 as compared to the three months ended June 30, ~~2020,~~2021, due primarily to ~~one~~revenue acquired through our completion of six acquisitions over the ~~Company’s largest customers decreasing its required~~last 12 months and new and existing customer revenue growth.
Professional services revenue decreased by $20,550, or 2%, for the three months ended June 30, 2022 as compared to the three months ended June 30, ~~2020.~~
~~Revenues increased for TalaTek by $149,078, or 17%, for~~2021, due primarily to two large one-time projects in 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~~offset by acquisition and organic revenue ~~from a significant client~~growth 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.~~$134,000.

22
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~~Revenue

~~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~~Security managed services cost of ~~revenues~~revenue increased ~~for Cerberus~~ by ~~$208,802,~~$3,424,966, or ~~75%~~1,006%, for the three months ended June 30, ~~2021,~~2022 as compared to the three months ended June 30, ~~2020, and was~~2021, primarily ~~the result of an increase in employees~~ due to ~~Alpine’s employees being accounted for under Cerberus.~~our completion of six acquisitions over the last 12 months, which increased our revenues from hardware and software sales and their related costs.

~~Cost~~Professional services cost of ~~revenues~~revenue increased ~~for TalaTek~~ by ~~$112,670,~~$23,179, or ~~21%~~17%, for the three months ended June 30, ~~2021,~~2022 as compared to the three months ended June 30, ~~2020, as a result of an~~2021, due to our increase in ~~employees resulting in an increase in salaries.~~revenue from professional services from acquisitions completed over the last 12 months.

Cost of ~~revenues~~payroll cost of revenue increased ~~for Techville~~ by ~~$503,376~~$3,176,074, or 207%, for the three months ended June 30, ~~2021,~~2022 as compared to the three months ended June 30, ~~2020, which reflected only one month~~2021, due to headcount added primarily through our completion of ~~operations following consummation of~~six acquisitions over the ~~acquisition of Techville on May 25, 2020..~~last 12 months.

~~Cost of revenues for Clear Skies and Alpine were $328,995~~Stock-based compensation expenses increased by $1,628,042, or 823%, for the three months ended June 30, ~~2021. We did not recognize any costs of revenues for Clear Skies or Alpine for~~2022 as compared to the three months ended June 30, ~~2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively.~~2021, due to an increase of stock options awarded to our growing base of revenue generating employees.

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~~Professional fees increased ~~for Cerberus~~ by ~~$1,359,515~~$700,887, or ~~164%~~287%, for the three months ended June 30, 2022 as compared to three months ended June 30, 2021, due to an increase in accounting, legal, and other professional fees incurred related to our periodic SEC filings and our efforts to raise additional capital.
Advertising and marketing expenses increased by $68,036, or 39%, for the three months ended June 30, 2022 as compared to the three months ended June 30, ~~2020, primarily as a result of (i) an increase in payroll~~2021, due to ~~Alpine’s employees being accounted for under Cerberus, and (ii) an increase in stock-based compensation of $547,216 due~~our current marketing campaign initiatives to ~~an increase in stock option grants as a result of the Techville, Clear Skies, and Alpine acquisitions.~~stimulate organic revenue growth.

~~Operating~~Selling, general, and administrative expenses increased ~~for TalaTek~~ by ~~$160,322,~~$2,785,536, or ~~60%~~166%, for the three months ended June 30, ~~2021,~~2022 as compared to the three months ended June 30, ~~2020, as a result~~2021, primarily due to headcount added through our completion of ~~an increase in employees resulting in an increase in salaries.~~six acquisitions over the last 12 months and hiring of back office personnel to meet the current and expected growth needs of our business.

~~Operating~~Stock based compensation expenses increased ~~for Techville~~ by ~~$92,301,~~$1,710,771, or ~~61%~~247%, for the three months ended June 30, ~~2021,~~2022 as compared to the three months ended June 30, ~~2020, which reflected only one month~~2021, due to an increase in stock options awarded to employees as we continue to scale our back office to meet the growth needs of ~~operations following consummation of the acquisition of Techville on May 25, 2020. Approximately $105,402 was attributable~~our business and shares issued to ~~Techville’s administrative payroll and benefits.~~consultants for marketing services provided.
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~~2022 to the Six Months Ended June 30, ~~2020~~2021

Our financial results for the six months ended June 30, ~~2021~~2022 are summarized as follows in comparison to the six months ended June 30, ~~2020:~~2021:

~~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 )

Six Months Ended
June 30,

2022 2021 Variance
Revenue:
Security managed services $ 18,428,394 $ 3,967,055 $ 14,461,339
Professional services 2,128,961 1,542,400 586,561
Total revenue 20,557,355 5,509,455 15,047,900

Cost of revenue:
Security managed services 6,368,350 534,127 5,834,223
Professional services 273,489 257,767 15,722
Cost of payroll 9,153,834 2,959,612 6,194,222
Stock based compensation 3,947,473 380,924 3,566,549
Total cost of revenue 19,743,146 4,132,430 15,610,716
Total gross profit 814,209 1,377,025 (562,816 )
Operating expenses:
Professional fees 1,568,209 401,615 1,166,594
Advertising and marketing 395,845 217,695 178,150
Selling, general, and administrative 9,171,958 3,170,520 6,001,438
Stock-based compensation 4,969,559 1,348,964 3,620,595
Total operating expenses 16,105,571 5,138,794 10,966,777

Loss from operations (15,291,362 ) (3,761,769 ) (11,529,593 )
Other income (expense):
Other income 29,968 2,384 27,584
Interest expense, net (108,233 ) (134,336 ) 26,103
Total other income (expense) (78,265 ) (131,952 ) 53,687
Net loss (15,369,627 ) (3,893,721 ) (11,475,906 )
Foreign currency translation adjustment (1,298,269 ) - (1,298,269 )
Comprehensive loss $ (16,667,896 ) $ (3,893,721 ) $ (12,774,175 )

2923

~~For the Six Months Ended June 30, 2020~~Revenue

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~~Security managed services revenue increased by ~~$126,359,~~$14,461,339, or ~~14%~~365%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020,~~2021, due primarily to ~~one~~revenue acquired through our completion of six acquisitions over the ~~Company’s largest customers decreasing its required~~last 12 months and new and existing customer revenue growth.
Professional services ~~compared to the six months ended June 30, 2020.~~
~~Revenues~~revenue increased ~~for TalaTek~~ by ~~$413,007,~~$586,561, or ~~26%~~38%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020, as a result~~2021, due to revenue acquired through our completion of ~~(i) an increase in contract~~six acquisitions over the last 12 months and new and existing customer 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.~~growth.
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~~Revenue

~~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~~Security managed services cost of ~~revenues~~revenue increased ~~for Cerberus~~ by ~~$471,841,~~$5,834,223, or ~~92%~~1,092%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020,~~2021, due primarily to our completion of six acquisitions over the last 12 months, which increased our revenues from hardware and ~~was primarily the result of Alpine employees being accounted for under Cerberus.~~software sales and their related costs.

~~Cost~~Professional services cost of ~~revenues~~revenue increased ~~for TalaTek~~ by ~~$212,897,~~15,722, or ~~20%~~6%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020, as a result of an~~2021, due to our increase in ~~employees resulting in an increase in salaries.~~revenue from professional services from acquisitions completed over the last 12 months.

Cost of ~~revenues~~payroll cost of revenue increased ~~for Techville~~ by ~~$827,333,~~$6,194,222, or ~~2,053%~~209%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020, which reflected only one month~~2021, due to headcount added primarily through our completion of ~~operations following consummation of~~six acquisitions over the ~~acquisition of Techville on May 25, 2020.~~last 12 months.

~~Cost of revenues for Clear Skies and Alpine were $605,694~~Stock-based compensation expenses increased by $3,566,549, or 936%, for the six months ended June 30, ~~2021. We did not recognize any costs of revenues for Clear Skies or Alpine for~~2022 as compared to the six months ended June 30, ~~2020, because the acquisitions were consummated on August 1, 2020 and December 16, 2020, respectively.~~2021, due to an increase of stock options awarded to our growing base of revenue generating employees.

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~~Professional fees increased ~~for Cerberus~~ by ~~$2,178,432~~$1,166,594, or ~~131%~~290%, for the six months ended June 30, 2022 as compared to six months ended June 30, 2021, due to an increase in accounting, legal, and other professional fees incurred related to our periodic SEC filings and our efforts to raise additional capital.
Advertising and marketing expenses increased by $178,150, or 82%, for the six months ended June 30, 2022 as compared to the six months ended June 30, ~~2020, primarily as a result of (i) an increase in payroll~~2021, due to ~~Alpine’s employees being accounted for under Cerberus, and (ii) an increase in stock-based compensation of $1,060,549 due~~our current marketing campaign initiatives to ~~an increase in stock option grants as a result of the Techville, Clear Skies, and Alpine acquisitions.~~stimulate organic revenue growth.

~~Operating~~Selling, general, and administrative expenses increased ~~for TalaTek~~ by ~~$316,333,~~$6,001,438, or ~~56%~~189%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020, as a result~~2021, primarily due to headcount added through our completion of ~~an increase in employees resulting in an increase in salaries.~~six acquisitions over the last 12 months and hiring of back office personnel to meet the current and expected growth needs of our business.

24
~~Operating~~
Stock based compensation expenses increased ~~for Techville~~ by ~~$357,638,~~$3,620,595, or ~~238%~~268%, for the six months ended June 30, ~~2021,~~2022 as compared to the six months ended June 30, ~~2020, as a result of only having one month of operations~~2021, due to an increase in stock options awarded to employees as we continue to scale our back office to meet the ~~acquisition consummated on May 25, 2020. Approximately $329,000 was attributable~~growth needs of our business and shares issued to ~~Techville’s administrative payroll and benefits.~~consultants for marketing services provided.

~~Operating expenses for Clear Skies~~Liquidity and ~~Alpine were $293,819 for~~Capital Resources
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At June 30, 2022, we had an accumulated deficit of $59,382,049 and working capital deficit of $768,309. For the six months ended June 30, ~~2021.~~2022, we had a loss from operations of $15,369,627 and negative cash flows from operations of $3,574,474. Although we are showing positive revenue, gross profit is trending negatively primarily due to increased stock compensation related to sales activity. We ~~did not recognize any operating expenses for Clear Skies or Alpine for~~expect to incur further losses through the end of 2022.
To date we have funded operations primarily through the sale of equity in private placements, debt, and revenue generated by our services. During the six months ended June 30, ~~2020,~~2022, we received $9,521,798 from our public offering of our common stock, $5,975,000 in net proceeds from our bridge loans, and $277,712 from the exercise of stock options. On June 27, 2022, our Registration Statement on Form S-3 was declared effective, and we may offer and sell from time to time, in one or more series, any of our securities, for total gross proceeds up to $300,000,000. As of June 30, 2022, we had not sold any securities under our S-3 Registration Statement.
We believe that we have sufficient liquidity and capital resources to meet our requirements for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q, as well as our longer-term expected future cash requirements and obligations.
Our future capital requirements, both near-term and long-term, will depend on many factors, in addition to our recurring operating expenses, including our growth rate, the continued expansion of sales and marketing activities, the introduction of new and enhanced products and service offerings, and the costs of any future acquisitions in complementary businesses and technologies. To the extent existing cash and cash equivalents are not sufficient to fund future activities, we will seek to raise additional funds through equity, equity-linked, or debt financings. Any additional equity financing may be dilutive to our existing stockholders. We may enter into agreements or letters of intent with respect to potential investments in, or acquisitions of, complementary businesses, services, or technologies, which could also require us to seek additional equity financing, incur indebtedness, or use cash resources. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because ~~the acquisitions were consummated on August 1, 2020~~we lack sufficient capital, our business, operating results, and ~~December 16, 2020, respectively. Approximately $91,000 was attributable to Clear Skies and Alpine’s administrative payroll and benefits.~~financial condition would be adversely affected.

Working Capital (Deficit)/Surplus

Our working capital ~~surplus~~deficit as of June 30, ~~2021,~~2022, in comparison to our working capital surplus as of December 31, ~~2020,~~2021, is summarized as follows:

As of
June 30, December 31, As of
2021 2020
June 30,
2022

December 31, 2021

Current assets $ 7,636,759 $ 6,346,008 $ 18,547,284 $ 9,807,301
Current liabilities 4,105,124 3,863,594 19,315,593 5,141,561
Working capital surplus $ 3,531,635 $ 2,482,414
Working capital (deficit)/surplus $ (768,309 ) $ 4,665,740

The increase in current assets is primarily due to ~~increases~~an increase in cash and cash equivalents and ~~accounts receivable~~prepaid expenses and other current assets of ~~$527,719~~$6,043,485 and ~~$617,769,~~$2,131,480, respectively. The increase in current liabilities is primarily due to the increase in ~~stock~~accounts payable and ~~the~~accrued expense, deferred revenue, loans payable, current portion, and convertible notes payable of ~~lease liabilities of $114,750~~$2,675,346, $438,672, $6,067,789, and ~~$94,781,~~$1,016,667, respectively.

25
Cash Flows

Our cash flows for the six months ended June 30, ~~2021,~~2022, in comparison to our cash flows for the six months ended June 30, ~~2020,~~2021, 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

Six Months ended
June 30,

2022 2021
Net cash used in operating activities $ (3,574,474 ) �� $ (2,646,739 )
Net cash used in investing activities (5,114,700 ) -
Net cash provided by financing activities 14,781,284 3,174,458
Effect of exchange rates on cash and cash equivalents (48,625 ) -
Increase in cash $ 6,043,485 $ 527,719

Operating Activities

Net cash used in operating activities was $3,574,474 for the six months ended June 30, 2022 and was primarily due to cash used to fund a net loss of $15,369,627, adjusted for non-cash expenses in the aggregate of $10,206,845 and additional cash outlaid by changes in the levels of operating assets and liabilities, primarily as a result of an increase in current assets, and accounts payable and accrued liabilities. 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

Net cash used in investing activities of $5,114,700 for the six months ended June 30, 2022 and was primarily due to net cash paid in the True Digital acquisition. 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~~2022 was ~~$3,174,458,~~$14,781,284, which was primarily due to cash received from the sale of ~~the Company’s~~our common stock in our public offering of ~~$3,250,000.~~$9,521,798 and $5,975,000 in net proceeds from our bridge loans. Net cash provided by financing activities for the six months ended June 30, ~~2020~~2021 was ~~$841,907~~$3,174,458 and was primarily due to cash received from the sale of ~~the Company’s~~our 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.$3,250,000.

Effects of Inflation
We do not believe that inflation has had a material impact on our business, ~~revenues~~revenue, or operating results during the periods presented.
~~Significant~~Critical Accounting Policies and Estimates
Our ~~significant~~critical 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~~2022 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,~~2021, as filed with the SEC on ~~March 31, 2021.~~April 15, 2022.

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Our significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, and the valuation allowance related to our deferred tax assets. Certain of our estimates, including the carrying amount of intangible assets and goodwill, could be affected by external conditions, including those unique to us and general economic conditions. It is reasonably possible that these external factors could have an effect on our estimates and could cause actual results to differ from those estimates.
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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~~We allocate 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~~We include the results of operations of the business that ~~it has~~we have acquired in ~~its~~our 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.

Intangible Assets
Intangible assets are comprised of trademarks, customer bases, non-compete agreements, and intellectual property with original estimated useful lives with a range of 2 to 10 years. Once placed into service, we amortize the cost of intangible assets over their estimated useful lives on a straight-line basis.
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 the reporting unit level 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.

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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
Stock-Based Compensation
We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. Awards granted to directors are treated on the same basis as awards granted to employees.
Revenue Recognition

~~The Company’s~~Our agreements with ~~its~~ clients are primarily service contracts that range in duration from a few months to one year. ~~The Company recognizes~~We recognize 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~~we are 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~~we can identify each party’s rights regarding the distinct services to be transferred (“performance obligations”);
● ~~the Company~~we can determine the transaction price for the services to be transferred; and
● the contract has commercial substance, and it is probable that ~~the Company~~we 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~~our contracts, ~~the Company receives~~we receive non-refundable upfront payments. ~~The Company does~~We do not adjust the promised amount of consideration for the effects of a significant financing component since ~~the Company expects,~~we expect, 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~~Our credit terms to clients generally average ~~thirty~~30 days, although in some cases payments are required in 15 days.

~~The Company does~~We do not disclose the value of unsatisfied performance obligations for contracts with original expected duration of one year or less.

~~Disaggregation~~Our revenue is categorized and disaggregated as reflected in our statement of ~~Revenue~~operations as follows:

~~Revenue consists of the following by service offering for the six months ended June 30, 2021:~~Security Managed Services.

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
Security managed services revenue primarily consist of compliance, security managed services, SOC managed services, and vCISO. We considered these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.

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Professional Services.

~~Revenue~~Professional services revenue primarily 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 oftechnical assessments, incident response and forensics, training, and other cybersecurity services. We considered these services to be a ~~significant financing component since the Company expects, at contract inception, that~~single performance obligation, and revenue is recognized in 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.performance obligations are satisfied.

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.~~2022.
Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, ~~revenues~~revenue or expenses, results of operations, liquidity, capital expenditures, or capital ~~resources that is material to stockholders.~~resources.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Not Applicable. As~~Because we are a smaller reporting company, we are not required to provide the information ~~required~~called for 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”))~~Act) that are designed to ~~ensure~~provide reasonable assurance 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 and evaluating our 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~~recognizes that 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. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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, as of June 30, 2022, our disclosure controls and procedures were not effective due to the material ~~weakness(es)~~weaknesses in internal control over financial reporting described below. Thus there remains a reasonable possibility that a material misstatement of our interim financial statements will not be prevented or detected on a timely basis. This does not include an evaluation by our registered public accounting firm regarding our internal control over financial reporting. Accordingly, we cannot provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, to allow our principal financial and executive officers to make timely decisions regarding required disclosures as of June 30, 2022.
Our management’s evaluation was based on the following material weaknesses in our ~~annual report~~internal control over financial reporting which, existed as of December 31, 2021 and which continue to exist, as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021:
● Lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner; and
● Lack of documentation on policies and procedures that are critical to the accomplishment of financial reporting objectives.
29
A material weakness is a control deficiency or combination of control deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. As a company with limited accounting resources, a significant amount of management’s time and attention has been and will be diverted from our business to ensure compliance with these regulatory requirements.

~~Our management~~Management’s Plan to Remediate the Material Weaknesses
We are implementing measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:
● Identifying gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and
● Developing policies and procedures on internal control over financial reporting and monitoring the effectiveness of operations on existing controls and procedures.
We 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 iswe are committed to taking further action and implementing additional enhancements or improvements, as necessary and ~~as funds allow.~~in accordance with financial and budgetary considerations.

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,~~2022, 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~~a party to 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.legal proceedings.

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~~
Economic conditions in the U.S and international economies may adversely impact our business operating on operating results.
We have disclosed under the heading “Risk Factors” ~~section of~~in our Annual Report on Form 10-K for the year ended December 31, ~~2020, as~~2021, filed with the SEC on ~~March 31,~~April 15, 2022, risk factors that materially affect our business, financial condition, or results of operations. There have been no material changes from the risk factors previously disclosed, except as follows:
General macro-economic conditions, such as a rise in interest rates, inflation in the cost of goods and services including labor, a recession or an economic slowdown in the United States or internationally, including as a result of continuing uncertainty from the COVID-19 pandemic or the Russia-Ukraine military conflict, could adversely affect demand for our services and make it difficult to accurately forecast and plan our future business activities. U.S. and global markets have recently been experiencing volatility and disruption due to new interest rate and inflation increases as well as the continued escalation of geopolitical tensions. For example, inflation in the United States began to rise in the second half of 2021 and has continued to rise in ~~addition~~the first half of 2022. Although our business has not yet been materially negatively impacted by such inflationary pressures, we cannot be certain that neither we nor our customers will be materially impacted by continued pressures. Additionally, on February 24, 2022, Russian troops engaged in a full-scale military invasion of Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, it could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. Additionally, the military conflict in Ukraine has led to sanctions and other ~~information contained in those reports~~penalties being levied by the United States, European Union and ~~in this quarterly report in evaluating~~other countries against Russia, and other potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the ~~Company and its business before purchasing shares of our common stock. The Company’s business, operating results~~resulting sanctions could adversely affect the global economy and financial ~~condition~~markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. We do not have employees or facilities in Russia or Ukraine, nor do we have customers and contractors in these locations. Our business has not yet been materially negatively impacted by this military conflict to date. However, we cannot be certain that this will not impact our position in the credit market or our ability to acquire cybersecurity businesses in the short and long term.
To the extent conditions in the domestic and global economy change, our business could be harmed as current and potential customers may reduce or postpone spending or choose not to purchase or renew our services, which they may consider discretionary. If our customers face decreased consumer demand, increased regulatory burdens, or more limited access to international markets, we may face a decline in the demand for our services and our operating results could be adversely ~~affected due to any of those risks.~~impacted.

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.None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

3930
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
Exhibit Incorporated by Reference
Number
Exhibit Description Form Exhibit Filing Date
3.1* Amended and Restated Certificate of Incorporation of the Registrant
10.3#* 2019 Equity Incentive Plan, as amended
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
32.1 Section 1350 Certification of Principal Executive Officer
32.2 Section 1350 Certification of Principal Financial Officer
101.INS* Inline XBRL Instance Document
101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith.
**In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
~~# Management~~#Management contracts and compensatory plans and ~~arrangements required to be filed as exhibits pursuant to Item 15(b) of this report~~arrangements.

4031
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:~~ Date: August ~~13, 2021~~12, 2022

By: /s/ ~~Deb~~Debra L. Smith
~~Deb~~Debra L. Smith
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
~~Date:~~ Date: August ~~13, 2021~~12, 2022
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	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

	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

	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

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.

	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


Consideration	$	40,879,380

Tangible assets acquired:
Cash		485,232
Accounts receivable		1,404,386
Contract assets		131,342
Prepaid expenses and other current assets		196,825
Property and equipment		906,006
Other assets		17,505
Total tangible assets		3,141,296

Estimated intangible assets acquired		1,913,800

Assumed liabilities:
Accounts payable and accrued expenses		1,283,003
Deferred revenue		1,956,600
Line of credit		283,244
Loans payable		181,741
Loans payable - shareholder		543,581
Total assumed liabilities		4,248,169

Net assets acquired		806,927

Goodwill (a)	$	40,072,453


Consideration paid	$	3,630,000

Tangible assets acquired:
Cash		3,572
Accounts receivable		125,908
Contract assets		33,965
Prepaid expenses and other current assets		3,597
Total tangible assets		167,042

Estimated intangible assets acquired		720,400

Assumed liabilities:
Accounts payable and accrued expenses		48,001
Loans payable		56,687
Total assumed liabilities		104,688

Net assets acquired		782,754

Goodwill (a)	$	2,847,246

	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Prepaid expenses	$	200,595	$	128,398	$	1,653,815	$	441,259
Deferred cost of sales						729,664		12,239
Prepaid taxes						126,675		231,014
Prepaid insurance		71,221		13,746		391,194		46,751
Other current assets		30,855		-
Deferred interest						184,715		229,702
Total prepaid expenses and other current assets	$	302,671	$	142,144	$	3,086,063	$	960,965

Balance December 31, 2020⁽¹⁾	$	4,101,369
Acquisition of goodwill		-
Impairment		-
Ending balance, June 30, 2021⁽¹⁾	$	4,101,369

Balance December 31, 2021	$	16,792,535
Acquisition of goodwill		42,919,699
Foreign currency translation adjustment		(1,196,975	)
Ending balance, June 30, 2022⁽¹⁾	$	58,515,259

	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

Remainder of 2021	$	69,987
2022		127,027

2022 (remainder of)			$	860,974
2023		113,427		1,704,567
2024		104,262		1,427,546
2025		76,767		1,377,196
2026				1,276,628
Thereafter		449,474		297,455
	$	940,944
Finite-lived intangible assets, net			$	6,944,366

	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

				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

				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

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2022		31,372,148		$	1.84		-		-
Granted		8,635,213			3.62		-		-
Exercised		(454,111	)		0.61		-		-
Expired or cancelled		(3,438,763	)		2.56		-		-
Outstanding at June 30, 2022		36,114,487		$	2.25		5.69	$	61,600,311
Exercisable at June 30, 2022		18,472,112		$	0.84		3.32	$	51,129,643

	Interest Rate	Maturities		June 30, 2022			December 31, 2021

Term loans (US dollar denominated)	5.00% – 6.00%		2023 - 2027	$	5,397,470		$	478,712
Term loans (Chilean peso denominated)	3.48% - 7.14%		2023 - 2029		3,977,673			5,018,788
					9,375,143			5,497,500
Less current portion					(6,280,988	)		(213,199	)
Long term loans payable				$	3,094,155		$	5,284,301

		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


2022 (remainder of)	$	7,309,895
2023		2,167,354
2024		909,814
2025		871,572
2026		507,925
Thereafter		928,676
Total future minimum payments		12,695,236
Less: discount		(54,166	)
Long term debt		12,641,070
Less: current		(9,344,478	)
Long term debt, net of current portion	$	3,296,592

	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

	Classification	June 30, 2022		December 31, 2021
Lease assets
Operating lease cost ROU assets	Assets	$	245,426	$	277,578
Total lease assets		$	245,426	$	277,578

Lease liabilities
Operating lease liabilities, current	Current liabilities	$	116,091	$	196,472
Operating lease liabilities, non-current	Liabilities		135,380		88,040
Total lease liabilities		$	251,471	$	284,512


	Six Months Ended June 30,
	2022		2021
Leases costs
Operating lease costs	$	226,079	$	54,376
Total lease costs	$	226,079	$	54,376


Fiscal Year	Operating Leases			Operating Leases
2021 (excluding the six months ended June 30, 2021)	$	54,620
2022		104,491
				(Unaudited)
2022 (remainder of)				$	83,892
2023					77,091
2024					57,605
2025					54,389
Total future minimum lease payments		159,111			272,977
Amount representing interest		(7,113	)		(21,506	)
Present value of net future minimum lease payments	$	151,988		$	251,471

	June 30, 2022		December 31, 2021

U.S.	$	1,034,958	$	95,069
Chile		1,933,828		2,299,355
Property and equipment net	$	2,968,786	$	2,394,424

●	~~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.~~

●	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~~Total revenue increased by $8.3 million to $11.2 million for the ~~root cause for approximately 75% of cyber breach events by starting with a culture of security-forward thinking;~~three months ended June 30, 2022, as compared to the three months ended June 30, 2021.
	●	~~Tools and technology provisioning offering: We provide technology-agnostic solutions catering~~Total gross profit increased to ~~a client’s existing products and~~$0.8 million for the three months ended June 30, 2022, as compared to ~~enhance~~ the ~~cyber defense system by making carefully selected additions without bias and to fit their financial profile;~~six months ended June 30, 2021.
	●	~~Data and privacy offering: This ensures that a client’s data security and privacy are properly managed~~Cash used in operating activities decreased to ~~alleviate risks of data loss and breach;~~$0.6 million for the three months ended June 30, 2022, as compared to $3.0 million for the three months ended March 31, 2022.
	●	~~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~~closed $6.0 million of short-term bridge loans in June 2022.
	●	~~SOC services:~~ We ~~offer SOC-as-a-service,~~acquired Creatrix, 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.became our wholly owned subsidiary.

●	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~~A base prospectus that ~~focuses on~~covers the potential offering, issuance, and sale from time to time of our common stock, preferred stock, warrants, debt securities, and units in one or more offerings with a ~~business’ non-financial reporting controls related~~total value of up 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;$300,000,000; and
	○●	~~The National Institute~~A sales agreement prospectus covering the potential offering, issuance, and sale from time to time of ~~Standards~~our common stock having an aggregate gross sales price of up to $100,000,000 pursuant to a sales agreement with B. Riley Securities, Inc., Stifel, Nicolaus & Company, Incorporated, 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.Boustead Securities, LLC.

●	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.

	Three Months Ended June 30,
	2022			2021			Variance
Revenue:
Security managed services	$	10,376,169		$	2,077,351		$	8,298,818
Professional services		851,776			872,326			(20,550	)
Total revenue		11,227,945			2,949,677			8,278,268

Cost of revenue:
Security managed services		3,765,426			340,460			3,424,966
Professional services		163,152			139,973			23,179
Cost of payroll		4,707,984			1,531,910			3,176,074
Stock based compensation		1,825,890			197,848			1,628,042
Total cost of revenue		10,462,452			2,210,191			8,252,261
Total gross profit		765,493			739,486			26,007
Operating expenses:
Professional fees		945,148			244,261			700,887
Advertising and marketing		240,504			172,468			68,036
Selling, general, and administrative		4,468,415			1,682,879			2,785,536
Stock-based compensation		2,404,049			693,278			1,710,771
Total operating expenses		8,058,116			2,792,886			5,265,230

Loss from operations		(7,292,623	)		(2,053,400	)		(5,239,223	)
Other income (expense):
Other income		17,425			2,179			15,246
Interest expense, net		(64,648	)		(65,641	)		993
Total other income (expense)		(47,223	)		(63,462	)		16,239
Net loss		(7,339,846	)		(2,116,862	)		(5,222,984	)
Foreign currency translation adjustment		(2,200,710	)		-			(2,200,710	)
Comprehensive loss	$	(9,540,556	)	$	(2,116,862	)	$	(7,423,694	)