UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, ~~2022~~2023

☐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: 001-41227

~~CERBERUS CYBER SENTINEL CORPORATION~~CISO GLOBAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

83-4210278

(State or other Jurisdiction of

of Incorporation or Organization)

(I.R.S. Employer

Identification No.)

6900 E. Camelback Road, Suite ~~240~~900, Scottsdale, Arizona		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		CISO		The Nasdaq Stock Market LLC

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 November ~~14, 2022,~~13, 2023, there were ~~146,253,545~~180,176,477 shares of the registrant’s common stock outstanding.

~~CERBERUS CYBER SENTINEL CORPORATION~~CISO GLOBAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2022~~2023

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION		45

ITEM 1.	Financial Statements (unaudited)	4

	~~Condensed Consolidated Balance Sheets~~	4

	~~Condensed Consolidated Statements of Operations and Comprehensive Loss~~	5

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of ~~Changes in Stockholders’ Equity~~Operations and Comprehensive Loss	6

	Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholders’ Equity	7

	Condensed Consolidated Statements of Cash Flows	8

	Notes to Condensed Consolidated Financial Statements	89

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2320

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3127

ITEM 4.	Controls and Procedures	3128

PART II. OTHER INFORMATION		3229

ITEM 1.	Legal Proceedings	3229

ITEM 1A.	Risk Factors	3229

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3329

ITEM 3.	Defaults Upon Senior Securities	3329

ITEM 4.	Mine Safety Disclosures	3329

ITEM 5.	Other Information	3329

ITEM 6.	Exhibits	3429

SIGNATURES		3530

FORWARD-LOOKING STATEMENTS

~~This~~The information contained in this report should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form ~~10-Q includes a number of forward-looking~~10-Q. Certain statements made in this report are “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~~significantly 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.

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

●	that we continually seek to identify and acquire cybersecurity talent to expand our service scope and geographical coverage to provide the best possible service for our clients;

●	our belief that our cash balance as of the date of this filing, together with anticipated revenues, will be sufficient to meet our anticipated cash requirement for the near term;

●	the doubt about our ability to continue as a going concern;

●	our efforts to developing our business, reducing overhead costs, and capital raising;

●	our plan to improve our liquidity by a planned reduction in overhead costs and actively pursuing additional debt and/or equity financing through discussions with investment bankers and private investors;

●	our estimate for indirect tax liabilities; and

●	our expectation that we will incur further losses through the end of 2023.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, any of which may cause our 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 by these forward-looking statements. These risks may cause our or our industry’s actual results, levels of activity, or performance to be materially different from any future results, levels of activity, or performance expressed or implied by these forward-looking statements.

Our consolidated 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 consolidated 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 consolidated 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 expand our professional services offerings and capabilities;~~
	●	~~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;~~
	●	~~our beliefs regarding the timing of rebranding and marketing efforts;~~
	●	~~our beliefs regarding the sufficiency of our liquidity and capital resources; 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~~CISO GLOBAL, INC. and subsidiaries

CONDENSED Consolidated Balance Sheets

(Unaudited)

September 30, December 31,
2022 2021

ASSETS

Current Assets:
Cash and cash equivalents $ 4,888,333 $ 2,725,035
Accounts receivable, net 5,763,431 4,840,802
Notes receivable, related party - 1,090,903
Inventory 336,527 189,596
Prepaid expenses and other current assets 3,456,400 960,965
Contract asset 495,374 -
Total Current Assets 14,940,065 9,807,301

Property and equipment, net 4,460,763 2,394,424
Right of use asset, net 316,698 277,578
Intangible assets, net 7,650,150 6,540,269
Goodwill 74,094,780 16,792,535
Other assets 17,068 -

Total Assets $ 101,479,524 $ 35,812,107

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and accrued expenses $ 6,700,021 $ 2,709,066
Deferred revenue 3,074,173 52,824
Settlement liability - 470,000
Lease liability 163,233 196,472
Loans payable 7,235,352 213,199
Convertible notes payable 1,050,000 1,500,000
Total Current Liabilities 18,222,779 5,141,561

Long-term Liabilities:
Loans payable, net of current portion 4,465,244 5,284,301
Lease liability, net of current portion 167,462 88,040
Convertible notes payable, net of current portion 1,500,000 -

Total Liabilities 24,355,485 10,513,902

Commitments and Contingencies - -

Stockholders’ Equity:
Common stock, $.00001 par value; 300,000,000 shares authorized; 145,945,679 and 125,852,971 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively 1,459 1,258
Preferred stock, $.00001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding on September 30, 2022 and December 31, 2021 - -
Additional paid-in capital 147,215,998 69,309,369
Accumulated translation adjustment (2,207,256 ) -
Accumulated deficit (67,886,162 ) (44,012,422 )
Total Stockholders’ Equity 77,124,039 25,298,205

Total Liabilities and Stockholders’ Equity $ 101,479,524 $ 35,812,107

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

~~CERBERUS CYBER SENTINEL CORPORATION and subsidiaries~~

~~CONDENSED Consolidated STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS~~

~~(Unaudited)~~

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Revenue:
Security managed services $ 10,061,304 $ 3,099,753 $ 28,489,698 $ 6,979,146
Professional services 1,191,728 645,255 3,320,689 2,275,437
Total revenue 11,253,032 3,745,008 31,810,387 9,254,583

Cost of revenue:
Security managed services 4,310,378 650,955 10,678,728 1,326,788
Professional services 182,413 234,326 455,902 350,388
Cost of payroll 4,978,768 2,093,072 14,132,602 5,052,684
Stock based compensation 857,950 312,909 4,805,423 745,381
Total cost of revenue 10,329,509 3,291,262 30,072,655 7,475,241
Total gross profit 923,523 453,746 1,737,732 1,779,342

Operating expenses:
Professional fees 624,391 293,408 2,192,600 695,023
Advertising and marketing 245,495 254,026 641,340 471,721
Selling, general and administrative 6,684,747 2,125,984 15,856,705 5,296,623
Stock based compensation 1,791,724 938,726 6,761,283 2,236,142
Total operating expenses 9,346,357 3,612,144 25,451,928 8,699,509

Loss from operations (8,422,834 ) (3,158,398 ) (23,714,196 ) (6,920,167 )

Other income (expense):
Other income 29,968 169 134,447 2,553
Interest expense, net (108,233 ) (75,470 ) (293,991 ) (209,806 )
PPP loan forgiveness - 980,800 - 980,800

Total other income (expense) (78,265 ) 905,499 (159,544 ) 773,547

Net loss (8,501,099 ) (2,252,899 ) (23,873,740 ) (6,146,620 )
Foreign currency translation adjustment (908,987 ) - (2,207,256 ) -

Comprehensive loss $ (9,410,086 ) $ (2,252,899 ) $ (26,080,996 ) $ (6,146,620 )

Net loss per common share - basic and diluted $ (0.06 ) $ (0.02 ) $ (0.17 ) $ (0.05 )

Weighted average shares outstanding - basic 142,295,780 117,729,971 136,764,168 117,081,360

	September 30,			December 31,
	2023			2022

ASSETS

Current Assets:
Cash and cash equivalents	$	770,480		$	1,833,163
Accounts receivable, net		6,070,619			7,862,297
Inventory		72,572			11,803
Prepaid cost of revenue		2,989,300			2,634,667
Prepaid expenses and other current assets		1,422,164			1,724,650
Contract asset		264,776			332,215
Total Current Assets		11,589,911			14,398,795

Property and equipment, net		3,983,840			4,680,495
Right of use asset, net		824,178			255,687
Intangible assets, net		4,164,782			8,475,229
Goodwill		35,557,637			76,664,017
Other assets		19,375			22,592

Total Assets	$	56,139,723		$	104,496,815

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	13,161,294		$	8,310,337
Deferred revenue		4,863,166			4,472,140
Lease liability		161,154			121,731
Loans payable		3,727,647			7,758,831
Convertible notes payable		1,050,000			2,550,000
Total Current Liabilities		22,963,261			23,213,039

Long-term Liabilities:
Loans payable, net of current portion		3,277,174			4,243,802
Convertible notes payable, related party		5,000,000			-
Lease liability, net of current portion		706,903			159,205
Deferred tax liability		-			435,678

Total Liabilities		31,947,338			28,051,724

Commitments and Contingencies		-			-

Stockholders’ Equity:
Common stock, $.00001 par value; 300,000,000 shares authorized; 178,176,477 and 146,395,807 issued and outstanding at September 30, 2023 and December 31, 2022, respectively		1,782			1,464
Preferred stock, $.00001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		-			-
Additional paid-in capital		170,365,244			153,168,984
Accumulated other comprehensive income		1,290,578			1,062,247
Accumulated deficit		(147,465,219	)		(77,787,604	)
Total Stockholders’ Equity		24,192,385			76,445,091

Total Liabilities and Stockholders’ Equity	$	56,139,723		$	104,496,815

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

~~CERBERUS CYBER SENTINEL CORPORATION~~CISO GLOBAL, INC. and subsidiaries

CONDENSED Consolidated STATEMENTS OF OPERATIONS

(Unaudited)

	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022

Revenue:
Security managed services	$	12,266,690		$	10,061,304		$	37,623,328		$	28,489,698
Professional services		1,798,431			1,191,728			5,693,468			3,320,689
Total revenue		14,065,121			11,253,032			43,316,796			31,810,387

Cost of revenue:
Security managed services		5,574,180			4,310,378			18,444,204			10,678,728
Professional services		234,549			182,413			683,582			455,902
Cost of payroll		5,458,001			4,978,768			16,514,436			14,132,602
Stock based compensation		317,851			857,950			3,783,116			4,805,423
Total cost of revenue		11,584,581			10,329,509			39,425,338			30,072,655
Total gross profit		2,480,540			923,523			3,891,458			1,737,732

Operating expenses:
Professional fees		745,426			624,391			3,086,365			2,192,600
Advertising and marketing		119,814			245,495			288,984			641,340
Selling, general and administrative		5,557,328			6,684,747			21,178,969			15,856,705
Stock based compensation		677,231			1,791,724			6,421,245			6,761,283
Impairment of goodwill		-			-			41,038,172			-
Total operating expenses		7,099,799			9,346,357			72,013,735			25,451,928

Loss from operations		(4,619,259	)		(8,422,834	)		(68,122,277	)		(23,714,196	)

Other income (expense):
Other income		(121,689	)		29,968			(68,470	)		134,447
Interest expense, net		(766,315	)		(108,233	)		(1,922,546	)		(293,991	)

Total other income (expense)		(888,004	)		(78,265	)		(1,991,016	)		(159,544	)

Loss before income taxes		(5,507,263	)		(8,501,099	)		(70,113,293	)		(23,873,740	)

Benefit from income taxes		-			-			(435,678	)		-

Net loss		(5,507,263	)		(8,501,099	)		(69,677,615	)		(23,873,740	)
Foreign currency translation adjustment		(1,392,395	)		(908,987	)		228,331			(2,207,256	)

Comprehensive loss	$	(6,899,658	)	$	(9,410,086	)	$	(69,449,284	)	$	(26,080,996	)

Net loss per common share - basic and diluted	$	(0.03	)	$	(0.06	)	$	(0.44	)	$	(0.17	)

Weighted average shares outstanding - basic		178,077,576			142,295,780			159,391,428			136,764,168
Weighted average shares outstanding - diluted		178,077,576			142,295,780			159,391,428			136,764,168

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

CISO GLOBAL, INC. and subsidiaries

CONDENSED Consolidated STATEMENTS of CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Accumulated
Additional Other
Common Stock Preferred Stock Paid-in Comprehensive Accumulated
Shares Amount 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 - - - - 10,432,048 - - 10,432,048
Stock based compensation - common stock 736,819 7 - - 1,592,977 - - 1,592,984
Stock issued for cash 304,608 3 - - 1,040,962 - - 1,040,965
Exercise of options 2,459,809 25 - - 1,359,239 - - 1,359,264
Stock issued for cash in public offering 2,060,000 21 - - 9,521,777 - - 9,521,798
Stock issued for True Digital acquisition 8,229,000 82 - - 34,726,298 - - 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 CyberViking acquisition 499,000 5 - - 1,836,315 - - 1,836,320
Stock issued for CUATROi acquisition 2,166,922 22 - - 6,847,452 - - 6,847,474
Stock issued for NLT acquisition 2,745,872 27 - - 6,919,570 - - 6,919,597
Foreign currency translation - - - - - (2,207,256 ) - (2,207,256 )
Net loss - - - - - - (23,873,740 ) (23,873,740 )
Balance at September 30, 2022 145,945,679 $ 1,459 - $ - $ 147,215,998 $ (2,207,256 ) $ (67,886,162 ) $ 77,124,039

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 based compensation - common stock 232,900 2 - - - - - 2
Stock issued for cash 1,625,000 16 - - 3,249,984 - - 3,250,000
Stock issued for VelocIT acquisition 2,310,100 23 - - 13,603,924 - - 13,603,947
Replacement options issued in VelocIT acquisition - - - - 6,861,203 - - 6,861,203
Net loss - - - - - - (6,146,620 ) (6,146,620 )
Balance at September 30, 2021 120,272,971 $ 1,202 - $ - $ 38,052,073 $ - $ (11,013,392 ) $ 27,039,883

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

~~CERBERUS CYBER SENTINEL CORPORATION and subsidiaries~~

~~CONDENSED Consolidated STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

September 30, 2022 September 30, 2021
Cash flows from operating activities:
Net loss $ (23,873,740 ) $ (6,146,620 )
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation - stock options 10,432,048 2,981,523
Loss on write-off of accounts receivable - 55,528
Issuance of common stock for services 1,134,658 313,395
Non-cash interest expense 60,651 54,792
Depreciation and amortization 2,138,493 131,403
Right of use amortization 184,167 75,842
Gain on disposal of property and equipment 12,000 -
Forgiveness of PPP Loan - (980,800 )
Gain on termination of operating lease (22,289 ) -
Changes in operating assets and liabilities:
Accounts receivable, net 887,816 (355,946 )
Inventory (106,246 ) -
Contract assets (330,067 ) -
Prepaids and other current assets (1,952,488 ) (305,532 )
Accounts payable and accrued expenses 3,003,623 (66,311 )
Lease liability (154,816 ) (69,586 )
Settlement liability (470,000 ) -
Deferred revenue 1,205,893 -

Net cash used in operating activities (7,850,297 ) (4,312,312 )

Cash flows from investing activities:

Purchases of property and equipment (510,973 ) -
Cash (paid)/acquired in acquisitions, net (5,533,244 ) 662,176

Net cash (used in)/provided by investing activities (6,044,217 ) 662,176

Cash flows from financing activities:
Proceeds from sale of common stock 10,562,763 3,250,000
Proceeds from stock option exercise 1,359,264 -
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 (369,829 ) (224,346 )
Payment on loans payable (1,575,510 ) (2,004,528 )
Payment on notes payable, related party - (59,787 )
Payment of debt issuance cost (25,000 ) -

Net cash provided by financing activities 16,038,273 1,182,685

Effect of exchange rates on cash and cash equivalents 19,539 -

Net increase in cash and cash equivalents 2,163,298 (2,467,451 )

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

Cash and cash equivalents - end of the period $ 4,888,333 $ 2,729,579

Supplemental cash flow information:
Cash paid for:
Interest $ 224,813 $ 91,490
Income taxes $ - $ -
Non-cash investing and financing activities:
Right of use asset and lease liability recorded upon adoption of ASC 842 $ 476,986 $ 330,512
Forgiveness of PPP Loan $ - $ 980,800
Common stock issued in VelocIT acquisition $ - $ 13,603,947
Common stock issued in RED 74 acquisition $ - $ -
Common stock issued in True Digital acquisition $ 34,726,380 $ -
Common stock issued in Creatrix acquisition $ 3,630,000 $ -
Common stock issued in CyberViking acquisition $ 1,836,320 $ -
Common stock issued in CUATROi acquisition $ 6,847,474 $ -
Common stock issued in NLT Secure acquisition $ 6,919,597 $ -


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

Balance at January 1, 2023		146,395,807	$	1,464		-		-	$	153,168,984		$	1,062,247		$	(77,787,604	)	$	76,445,091

Stock based compensation - stock options		-		-		-		-		9,190,027			-			-			9,190,027
Stock based compensation - common stock		3,500,000		35		-		-		733,465			-			-			733,500
Stock issued for cash		26,739,853		268		-		-		6,681,930			-			-			6,682,198
Exercise of options		1,040,817		10		-		-		491,843			-			-			491,853
Stock issued for SB Cyber acquisition		500,000		5		-		-		98,995			-			-			99,000
Foreign currency translation		-		-		-		-		-			228,331			-			228,331
Net loss		-		-		-		-		-			-			(69,677,615	)		(69,677,615	)
Balance at September 30, 2023		178,176,477	$	1,782		-	$	-	$	170,365,244		$	1,290,578		$	(147,465,219	)	$	24,192,385

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

Stock based compensation - stock options		-		-		-		-		10,432,048			-			-			10,432,048
Stock based compensation - common stock		736,819		7		-		-		1,592,977			-			-			1,592,984
Stock issued for cash		304,608		3		-		-		1,040,962			-			-			1,040,965
Exercise of options		2,459,809		25		-		-		1,359,239			-			-			1,359,264
Stock issued for cash in public offering		2,060,000		21		-		-		9,521,777			-			-			9,521,798
Stock issued for True Digital acquisition		8,229,000		82		-		-		34,726,298			-			-			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 CyberViking acquisition		499,000		5		-		-		1,836,315			-			-			1,836,320
Stock issued for CUATROi acquisition		2,166,922		22		-		-		6,847,452			-						6,847,474
Stock issued for NLT Secure acquisition		2,745,872		27		-		-		6,919,570			-			-			6,919,597
Foreign currency translation		-		-		-		-		-			(2,207,256	)		-			(2,207,256	)
Net loss		-		-		-		-		-			-			(23,873,740	)		(23,873,740	)
Balance at September 30, 2022		145,945,679	$	1,459		-	$	-	$	147,215,998		$	(2,207,256	)	$	(67,886,162	)	$	77,124,039
Balance		145,945,679	$	1,459		-	$	-	$	147,215,998		$	(2,207,256	)	$	(67,886,162	)	$	77,124,039

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

~~CERBERUS CYBER SENTINEL CORPORATION~~CISO GLOBAL, INC. and subsidiaries

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

(Unaudited)

	September 30, 2023			September 30, 2022
	Nine Months Ended
	September 30, 2023			September 30, 2022
Cash flows from operating activities:
Net loss	$	(69,677,615	)	$	(23,873,740	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation - stock options		9,190,027			10,432,048
Stock based compensation - common stock		733,500			1,134,658
Depreciation and amortization		2,411,989			2,138,493
Right of use amortization		165,291			184,167
Other		93,199			50,362
Impairment of intangible assets		3,023,709			-
Impairment of goodwill		40,651,586			-
Changes in operating assets and liabilities:
Accounts receivable, net		1,689,837			887,816
Inventory		(66,296	)		(106,246	)
Contract assets		67,440			(330,067	)
Prepaids and other current assets		(232,829	)		(1,952,488	)
Accounts payable and accrued expenses		5,129,336			3,003,623
Lease liability		(307,816	)		(154,816	)
Settlement liability		-			(470,000	)
Deferred revenue		424,144			1,205,893

Net cash used in operating activities		(6,704,498	)		(7,850,297	)

Cash flows from investing activities:

Purchases of property and equipment		(166,278	)		(510,973	)
Cash (paid)/acquired in acquisitions, net		30,430			(5,533,244	)

Net cash used in investing activities		(135,848	)		(6,044,217	)

Cash flows from financing activities:
Proceeds from sale of common stock		6,682,198			10,562,763
Proceeds from stock option exercise		491,853			1,359,264
Proceeds from loan payable		4,448,641			5,000,000
Proceeds from convertible notes payable, related party		5,000,000			-
Proceeds from convertible note payable		1,050,000			1,000,000
Proceeds from line of credit		173,477			86,585
Payment on line of credit		(174,547	)		-
Payment on loans payable		(9,206,420	)		(369,829	)
Payment on notes payable, related party		-			(1,575,510	)
Payment of convertible note payable		(2,550,000	)		-
Payment of debt issuance cost		(137,500	)		(25,000	)

Net cash provided by financing activities		5,777,702			16,038,273

Effect of exchange rates on cash and cash equivalents		(39	)		19,539

Net (decrease)/increase in cash and cash equivalents		(1,062,683	)		2,163,298

Cash and cash equivalents - beginning of the period		1,833,163			2,725,035

Cash and cash equivalents - end of the period	$	770,480		$	4,888,333

Supplemental cash flow information:
Cash paid for:
Interest	$	2,094,020		$	224,813
Income taxes	$	-		$	-
Supplemental disclosure of non-cash transactions:
Operating lease assets obtained in exchange for operating lease obligations	$	733,782		$	476,986
Common stock issued in VelocIT acquisition	$	-		$	-
Common stock issued in RED 74 acquisition	$	-		$	-
Common stock issued in NLT Secure acquisition	$	-		$	6,919,597
Common stock issued in SB Cyber acquisition	$	99,000		$	-
Common stock issued in acquisition	$	99,000		$	-

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

CISO GLOBAL, INC. and subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to ~~Cerberus Cyber Sentinel Corporation,~~CISO Global, Inc., 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”), Alpine Security, LLC, an Illinois limited liability company (“Alpine”), Catapult Acquisition Corporation, a New Jersey corporation (“VelocIT”), Ocean Point 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”), CyberViking, LLC, an Oregon limited liability company (“CyberViking”), Servicios Informaticos CUATROi, S.P.A., a Chilean corporation, Comercializadora CUATROi S.P.A., a Chilean corporation CUATROi Peru, S.A.C., a Peruvian corporation, and CUATROi S.A.S., a Colombian corporation (collectively “CUARTOi”), NLT Networks, S.P.A., a Chilean corporation; NLT Tecnologias, Limitada, a Chilean corporation, and NLT Servicios Profesionales, S.P.A., a Chilean corporation (collectively “NLT”), White and Blue Solutions, LLC, a Florida limited liability company (“W&B” and together with NLT, “NLT Secure”).subsidiaries. Unless otherwise specified, all dollar amounts are expressed in United States dollars.

NOTE 1 –ORGANIZATION OF BUSINESS AND ~~BACKGROUND~~GOING CONCERN

Description of the Business

We are a cybersecurity and compliance company comprised of highly trained and seasoned security professionals who work with clients to ~~enhance or create a better cyber posture in~~improve their ~~organization.~~cybersecurity posture. We provide a full range of cybersecurity consulting and related services, encompassing ~~all three pillars of compliance, cybersecurity,~~strategy and ~~culture.~~risk, cyber defense operations, architecture and engineering, and readiness and resiliency. Our services include secured managed services, compliance services, security operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, ~~certified~~digital forensics, technical assessments, and cybersecurity training. Our goal is to create a culture of security and to help quantify, define, and capture a return on investment from information technology and cybersecurity spending.

~~On January 5, 2022, we entered into a stock purchase agreement (the “True Digital Stock Purchase Agreement”) with certain stockholders~~We believe that culture is the foundation of ~~True Digital~~every successful cybersecurity and an agreement and plan of merger (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.

~~On January 18, 2022, we completed a $10,300,000~~ ~~underwritten public offering of shares of our common stock, pursuant to which an aggregate of~~ ~~2,060,000~~ ~~shares of our common stock were issued. In addition, we granted the underwriter warrants to purchase an aggregate of~~ ~~144,200~~ shares of our common stock. We used 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 we acquired all~~compliance program, as it affects every area of the ~~issued~~business, from policies and ~~outstanding capital stock~~practices to technology settings and configurations. To deliver that outcome, we offer a holistic approach that provides these services in a unified way from a dedicated team of ~~Creatrix, with Creatrix becoming~~subject matter experts. In contrast to the majority of cybersecurity firms that are focused on a ~~wholly owned subsidiary~~specific technology or service, we seek to differentiate ourselves by focusing on leveraging teams of ~~our company. Creatrix offers recognized expertise in identity management~~highly sought-after practitioners, as well as ~~systems integration~~designing best-in-class solutions to accompany them. We continually seek to identify and ~~software engineering,~~acquire cybersecurity talent to expand our service scope and ~~specializes~~geographical coverage to provide the best possible service for our clients.

We believe that bringing together a world-class team of technological experts with multi-faceted expertise in ~~biometrics, vetting, credentialing,~~the critical aspects of cybersecurity is key to providing solutions to our clients. As we help them build cyber resilience, we recognize that today’s business environment suffers from widespread cybersecurity ineffectiveness due to key challenges in attracting and ~~case management.~~

~~On July 1, 2022, we entered into~~retaining cybersecurity talent. This workforce shortfall drives consistent demand for both cybersecurity expertise and cutting edge, automated solutions that can supplement in-house teams’ existing capabilities. Our goal is to leverage thought leadership and innovation to help our clients create a stock purchase agreement with CyberViking and its interest holders, pursuant to which we acquired all of the issued and outstanding units of CyberViking, with CyberViking becoming a wholly owned subsidiary of our company. CyberViking specializes in application security services, incident response, and threat hunting as well as the creation and managementculture of security ~~operation centers.~~

~~On August 25, 2022, we entered into~~across their people, processes, and technologies, helping them quantify, define, and capture a ~~stock purchase agreement with CUATROi~~return on investment from information technology and ~~its partners, pursuant to which we acquired all of the issued~~cybersecurity spending. Our brand is founded on and ~~outstanding units of CUATROi, with CUATROi becoming~~rallies around a ~~wholly owned subsidiary of our company. CUATROi~~simple truth that experts learn through experience, “Cyber security is a ~~cloud, managed services provider & cybersecurity company with offices in South America.~~Culture, not a Product™.”

On September 1, 2022, we entered into a stock purchase agreement with NLT Secure and its interest holders, pursuant to which we acquired all of the issued and outstanding units of NLT Secure, with NLT Secure becoming a wholly owned subsidiary of our company. NLT Secure provides a broad range of security solutions and managed services to organizations throughout South America.

Basis of Presentation

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), the instructions to Form 10-Q pursuant to regulations of the SEC, 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 recurring nature necessary for the fair presentation of the periods presented. The results for the interim periods are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, ~~2022.~~2023. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with our audited financial statements for the year ended December 31, ~~2021.~~2022.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2023, we incurred a net loss of $69,677,615 and had negative cash flows from operations of $6,704,498. At September 30, 2023, we had total current assets of $11,589,911 and total current liabilities of $22,963,261, resulting in a working capital deficit of $11,373,350. At September 30, 2023, we had cash and cash equivalents of $770,480.

Based on our current business plan, we believe our cash balance as of the date of this filing, together with anticipated revenues, will be sufficient to meet our anticipated cash requirement for the near term. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about our ability to continue as a going concern for one year from the date the unaudited condensed consolidated financial statements are issued.

Our existence is dependent upon our ability to develop profitable operations. We are devoting substantially all of our efforts to developing our business, reducing overhead costs, and raising capital, although there can be no assurance that our efforts will be successful. No assurance can be given that our actions will result in profitable operations or the resolution of liquidity problems. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result should we be unable to continue as a going concern.

In order to improve our liquidity, in addition to a planned reduction in overhead costs, we are actively pursuing additional debt and/or equity financing through discussions with investment bankers and private investors. There can be no assurance that we will be successful in our efforts to secure additional financing.

The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.

Reclassifications

~~Certain reclassifications~~Reclassifications of certain immaterial prior period amounts have been made to ~~the financial statements for the nine months ended September 30, 2021 to~~ conform to the ~~financial statements presentation for the nine months ended September 30, 2022. These reclassifications had no effect on net loss or cash flows as previously reported.~~current period presentation.

Use of Estimates

GAAP requires management to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements. We periodically evaluate our estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results could materially differ.

We believe the critical accounting policies discussed below affects our more significant judgments and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements. Significant estimates include the allowance for doubtful accounts, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the estimated fair value of assets acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue

Our revenue is derived from two major types of services to clients: security managed services and professional services. With respect to 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 professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.

Our revenue is categorized and disaggregated as reflected in our unaudited condensed consolidated statement of operations as follows:

Security Managed Services

Security managed services revenue primarily consists 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.

Professional Services

Professional services revenue primarily consists of technical assessments, incident response and forensics, training, and other cybersecurity services. We considered these services to be 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. We periodically assess our accounts and other receivables for collectability on a ~~specific identification~~current expected credits loss basis. 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. We write off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our allowance for doubtful accounts was $~~308,560~~224,629 and $~~77,811~~270,011, respectively.

Inventory

Inventory consists of ~~software licenses and~~ computer equipment for sale to customers. Inventory is measured using the first-in, first-out method and stated at lower of cost or net realizable value as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. The value of inventories is reduced for excess and obsolete inventories. We monitor inventory to identify events that would require impairment due to obsolete inventory and adjust the value of inventory when required. We recorded no inventory impairment losses for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.

~~Fair Value Measurements~~

~~As defined in ASC (“Accounting Standards Codification”) 820,~~ ~~Fair Value Measurements and Disclosures~~, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

~~Level 1:~~	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. 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. For dilutive securities, all outstanding options, ~~are~~warrants, and convertible debt is considered potentially outstanding common stock. The dilutive effect, if any, of stock options and warrants 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 our computation of net loss per common share for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.

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 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

	September 30, 2022		September 30, 2021		September 30, 2023		December 31, 2022
Stock options		34,856,288		27,680,040		33,820,457		36,397,521
Warrant		144,200		-
Warrants						744,200		144,200
Convertible debt		430,718		1,500,000		4,166,667		430,718
Total		35,431,206		29,180,040		38,731,324		36,972,439

Deferred Revenue

Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the services provided to our customers or annual licenses and is recognized as services are performed or ratably over the life of the license. We generally invoice customers in advance or in milestone-based installments. Deferred revenue of $~~52,824~~3,629,416 was recognized as revenue for the nine months ended September 30, ~~2022,~~2023, which was included in the deferred revenue balance as of December 31, ~~2021.~~2022. As of September 30, ~~2022,~~2023, deferred revenue ~~related to such customer payments was $3,074,173, all of which~~ is expected to be recognized during the succeeding 12-month period and is therefore presented as current.

Deferred revenue consisted of the following:

SCHEDULE OF DEFERRED REVENUE

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
Security managed services	$	2,038,072	$	52,824	$	4,131,529	$	3,609,087
Professional services		1,036,101		-		731,637		863,053
Total deferred revenue	$	3,074,173	$	52,824	$	4,863,166	$	4,472,140

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities, including tax loss and credit carry forwards, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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. 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 September 30, ~~2022 and December 31, 2021,~~2023, our net deferred tax asset has been fully ~~reserved.~~reserved due to our current period impairment, we expect to be in a net deferred tax asset position in Chile, and a valuation allowance has been recorded for this jurisdiction during the current period.

For uncertain tax positions that meet a “more likely than not” threshold, we recognize the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.~~

~~NOTE 3 –~~ ~~ACQUISITIONS~~

~~True Digital Security, Inc.~~

On January 5, 2022, we entered into the 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 $~~6,153,000~~ ~~in cash and~~ ~~8,229,000~~ ~~shares of our common stock.~~

~~The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and the liabilities assumed as of the transaction date:~~

~~SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES~~

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

Intangible assets acquired:
Tradename - trademarks 1,744,200
Intellectual property 1,137,000
Non-competes 124,900
Total intangible assets 3,006,100

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 1,899,227

Goodwill (a) $ 38,980,153

~~(a)~~

~~Goodwill and intangibles are not deductible for tax purposes.~~

~~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.

~~The following table summarizes the 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

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

Net assets acquired 62,354

Goodwill (a) $ 3,567,646

~~(a)~~

~~Goodwill is not deductible for tax purposes.~~

~~CyberViking, LLC.~~

On July 1, 2022, we entered into a stock purchase agreement with CyberViking and its interest holders, pursuant to which we acquired all of the issued and outstanding units of CyberViking, with CyberViking becoming a wholly owned subsidiary of our company. We anticipate that this will expand our professional services offerings and capabilities. CyberViking specializes in application security services, incident response, and threat hunting as well as the creation and management of security operation centers.

~~We did not acquire assets nor assume liabilities in our purchase of CyberViking, as a result the $1,836,320~~ ~~of consideration paid is recognized as goodwill. The goodwill is not deductible for tax purposes.~~

~~CUATROi.~~

On August 25, 2022, we entered into a stock purchase agreement with CUATROi and its partners, pursuant to which CUATROi became our wholly owned subsidiary. We anticipate that this will expand our professional services offerings and capabilities. CUATROi is a cloud, managed services provider & cybersecurity company with offices in South America.

The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated 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 $ 6,847,474

Tangible assets acquired:
Cash 77,804
Accounts receivable 478,210
Prepaid expenses and other current assets 51,464
Property and equipment 434,816
Total tangible assets 1,042,294

Assumed liabilities:
Accounts payable and accrued expenses 242,830
Loans payable 850,199
Total assumed liabilities 1,093,029

Net liabilities assumed 50,735

Goodwill (a) $ 6,898,209

~~(a)~~

~~Goodwill and intangibles are not deductible for tax purposes.~~

~~NLT Secure~~

On September 1, 2022, we entered into a stock purchase agreement with NLT Secure and its interest holders, pursuant to which we acquired all of the issued and outstanding units of NLT Secure with them becoming a wholly owned subsidiary of our company. We anticipate that this will expand our professional services offerings and capabilities. NLT Secure provides a broad range of security solutions and managed services to organizations throughout South America.

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 $ 6,919,597

Tangible assets acquired:
Cash 48,858
Accounts receivable 66,972
Prepaid expenses and other current assets 154,300
Property and equipment 1,071,401
Total tangible assets 1,341,531

Assumed liabilities:
Accounts payable and accrued expenses 791,228
Loans payable 1,778,591
Total assumed liabilities 2,569,819

Net liabilities assumed 1,228,288

Goodwill (a) $ 8,147,885

~~(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 43 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted ~~of:~~of the following:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
Prepaid expenses	$	1,363,761	$	441,259	$	572,285	$	987,651
Deferred cost of sales		1,090,066		12,239
Prepaid taxes		347,189		231,014		785,456		572,645
Prepaid insurance		333,635		46,751		64,423		164,354
Deferred interest		321,749		229,702
Total prepaid expenses and other current assets	$	3,456,400	$	960,965	$	1,422,164	$	1,724,650

NOTE 54 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	September 30, 2022			December 31, 2021			September 30, 2023			December 31, 2022
Computer equipment	$	1,068,918		$	495,235		$	1,284,250		$	1,264,713
Building		2,111,698			1,047,020			1,697,296			1,776,040
Leasehold improvements		85,800			109,626			522,255			541,647
Vehicles		87,323			63,052			-			28,229
Furniture and fixtures		140,008			33,358			166,210			151,142
Software		1,591,450			748,599			1,721,170			1,667,283
Property and equipment gross		5,085,197			2,496,890			5,391,181			5,429,054
Less: accumulated depreciation		(624,434	)		(102,466	)		(1,407,341	)		(748,559	)
Property and equipment, net	$	4,460,763		$	2,394,424		$	3,983,840		$	4,680,495

Total depreciation expense was $~~186,738~~220,703 and $~~6,989~~186,738 for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and was $~~519,121~~762,514 and $~~15,837~~519,121 for the nine months ended September 30, ~~2022,~~2023 and ~~2021,~~2022, respectively.

1512

NOTE 65 –INTANGIBLE ASSETS AND GOODWILL

Goodwill

During the quarterly period ended September 30, 2023, our share price reduction was determined to be an indicator of impairment under ASC 350 of our two reporting units, United States and Latin America. We performed an ongoing assessment to consider whether events or circumstances had occurred that could more likely than not reduce the fair value of a reporting unit below its carrying value. The valuation limitation from our recent share price decline caused us to perform an interim goodwill impairment test as of September 30, 2023.

Based on the results of this testing, we did not record a pre-tax, non-cash impairment charge related to the United States reporting unit and Latin America reporting unit, respectively, for the three-months ended September 30, 2023. For the nine-months ended September 30, 2023, we recorded $31,776,819 and $9,261,353 of pre-tax, non-cash impairment charges related to the United States reporting unit and Latin America reporting units, respectively. This charge is recorded as Impairment of goodwill on the Consolidated Statements of Operations and Comprehensive Loss. The overall enterprise fair value was limited by the recent decline in our share price. The reduction in fair value for the reporting units, and corresponding impairment charge, was primarily driven by an increase in the discount rate arising from higher equity premiums that reflect significant uncertainty surrounding our company and a decrease in forecasted near-term cashflows of our reporting units.

As part of our quantitative testing process for goodwill of the reporting units, we estimated fair values using a revenue multiple analysis, a form of the income approach, from the perspective of a market participant. Significant assumptions used in the revenue multiple approach are revenue growth rates and revenue multiples of key comparable companies within our industry.

The following table summarizes the changes in goodwill during the nine months ended September 30, ~~2022:~~2023:

SCHEDULE OF CHANGES IN GOODWILL

Balance December 31, 2021 $ 16,792,535
Acquisition of goodwill 59,430,213
Foreign currency translation adjustment (2,127,968 )
Ending balance, September 30, 2022⁽¹⁾ $ 74,094,780

⁽¹⁾	As of September 30, 2022, we had not obtained a third-party valuation for the acquisitions of CUATROi and NLT Secure. As such, the purchase price allocation disclosed in this Quarterly Report for CUATROi and NLT Secure may change, and, therefore, goodwill from the acquisitions may change.

Balance December 31, 2022	$	76,664,017
Impairment		(41,038,172	)
Foreign currency translation adjustment		(68,208	)
Ending balance, September 30, 2023	$	35,557,637

The ~~following~~remaining balance of goodwill for the reporting units continue to be at risk for future impairment. There continues to be uncertainty surrounding the factors impacting our business, and a sustained downturn, significantly extended recovery, or a change in long-term revenue growth or profitability for our reporting units could increase the likelihood of an additional future impairment. Additionally, changes in market participant assumptions or further share price reductions could increase the likelihood of further future impairment.

Intangible Assets

We performed an interim impairment test of our intangible assets based upon the conditions that precipitated the interim goodwill impairment test described above.

Based on the results of this testing, we recorded pre-tax, non-cash impairment charges totaling zero and $3,116,039 for the three and nine-months ended September 30, 2023, respectively, related to our customer base, intellectual property, tradenames-trademarks and non-compete, which is included in the net carry amount of intangibles in the table ~~summarizes~~below. These charges were recorded in Selling, general and administrative expenses on the ~~identifiable~~Consolidated Statement of Operations and Comprehensive Loss.

Fair values used in testing for potential impairment of our intangible assets are calculated using a discounted cash flows method by applying estimated cash flows from our forecasted revenue and expenses of the business that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market participant discount rate.

There is uncertainty surrounding the revenue growth factors for these assets and a change in the long-term revenue growth rate or increase in the discount rate assumption could increase the likelihood of a future impairment.

Following the recognition of the impairment losses, the affected assets had an aggregate carrying value of $483,738 as of September 30, ~~2022 and December 31, 2021:~~2023.

Intangible assets, net are summarized as follows:

SUMMARY OF IDENTIFIABLE INTANGIBLE ASSETS

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	September 30, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradenames – trademarks	$	4,024,463	$	(2,124,575	)	$	1,899,888
Customer base		1,191,491		(610,927	)		580,564
Non-compete agreements		665,855		(590,003	)		75,852
Intellectual property/technology		2,562,917		(954,439	)		1,608,478
Intangible Asset	$	8,444,726	$	(4,279,944	)	$	4,164,782

								Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
								December 31, 2022
	Useful life	September 30, 2022			December 31, 2021			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradenames – trademarks	1-5 years	$	4,649,220		$	3,010,100		$	4,744,409	$	(1,167,476	)	$	3,576,933
Customer base	5 - 10 years		1,522,131			1,650,000			2,949,143		(449,565	)		2,499,578
Non-compete agreements	2 - 5 years		759,850			675,500			796,583		(436,611	)		359,972
Intellectual property/technology	5 - 10 years		2,605,406			1,528,000			2,659,391		(620,645	)		2,038,746
Identifiable intangible assets			9,536,607			6,863,600
Less: accumulated amortization			(1,886,457	)		(323,331	)
Total		$	7,650,150		$	6,540,269
Intangible Asset								$	11,149,526	$	(2,674,297	)	$	8,475,229

The weighted average remaining useful life of identifiable amortizable intangible assets remaining is ~~4.23~~3.29 ~~years.~~

~~During the third quarter~~years as of 2022, as the result of rebranding and expected future marketing of our products and services, we made the decision to phase out certain indefinite-lived tradenames from acquired subsidiaries. We believe the phase-out and integration of the rebranding and marketing will be completed no later than JuneSeptember 30, ~~2024, and expect to recognize $1,211,800~~ ~~of amortization expense from tradenames previously held as indefinite-lived.~~2023.

Amortization of identifiable intangible assets for the three months ended September 30, ~~2022~~2023 and ~~2021~~2022 was $~~797,703~~384,126 and $~~40,506~~797,703, respectively, and was $~~1,615,170~~1,655,911 and $~~110,495~~1,615,170 for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~The below table summarizes~~Based on the balance of intangible assets at September 30, 2023, expected future amortization expense ~~for the remainder of 2022 and the next four years thereafter:~~is as follows:

SCHEDULE OF FUTURE AMORTIZATION EXPENSE

2022 (remainder of) $ 667,397
2023 2,341,057
2024 1,623,017
2025 1,434,081
2026 1,334,585
Thereafter 250,013
Finite-lived intangible assets, net $ 7,650,150


2023 (remainder of)	$	397,060
2024		1,323,051
2025		1,134,113
2026		1,020,342
2027		290,216
Future Amortization Expense	$	4,164,782

NOTE 76 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following amounts:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,
2023 December 31,
2022
Accounts payable $ 8,631,762 $ 5,267,492
Accrued payroll and bonuses 1,883,593 1,274,919
Accrued expenses 2,251,244 1,296,382
Accrued commissions 93,449 305,768
Accrued interest 301,246 165,776
Total accounts payable and accrued expenses $ 13,161,294 $ 8,310,337

September 30, 2022 December 31, 2021
Accounts payable $ 4,309,601 $ 1,700,260
Accrued payroll 1,040,353 482,588
Accrued expenses 1,016,663 513,718
Accrued commissions 320,904 -
Accrued interest – related party 12,500 12,500
Total accounts payable and accrued expenses $ 6,700,021 $ 2,709,066

Note 87 – RELATED PARTY TRANSACTIONS

Independent Consulting Agreement with Stephen Scott

In August 2020, we entered into an Independent Consulting Agreement with Stephen Scott, a ~~Director~~then 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.

In July 2023, we entered into an Independent Consulting Agreement with Mr. Scott to provide, on a non-exclusive basis, advisory and consulting services relating to our strategic and business development, intellectual property development, banking relationships, and strategic M&A for a period of one year. Mr. Scott will receive a consulting fee of $15,000 per month for such services under the terms of this agreement. During the three and nine months ended September 30, ~~2022,~~2023, we paid consulting fees to Mr. Scott in the amount of $~~34,500~~45,000 and $~~103,500~~114,000, respectively. Mr. Scott resigned from his position as a director of our company in May 2023. Mr. Scott remains a significant stockholder of our company due to his beneficial ownership.

Managed Services Agreement with Hensley Beverage Company – Related Party

In 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, 2021, the agreement will continue until terminated by either party. For the three and nine months ended September 30, ~~2022,~~2023, we received $~~206,818~~416,058 and $~~579,826~~923,150, respectively, from Hensley Beverage Company for contracted services, and had an outstanding receivable balance of $176,944 and $39,615 as of September 30, ~~2022.~~2023 and 2022, respectively. Andy McCain, a director of our company, is President and Chief Operating Officer of Hensley & Company, the parent company of Hensley Beverage Company.

Convertible Note ~~Receivable – Related Party~~Payable with Hensley & Company

~~Arkavia provided cash infusions~~In March 2023, we issued an unsecured convertible note to a related party to fund a wholly owned subsidiary, Arkavia Peru, for start-up and operational costs. The subsidiary is incorporated and as such, the assets, liabilities and operation results of Arkavia Peru are includedHensley & Company in the ~~condensed consolidated financial statements.~~principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $1.20 per share. During the three and nine months ended September 30, 2023, we recorded interest expense of $125,000 and $263,888, respectively. At September 30, ~~2022,~~ no ~~amount remains outstanding.~~2023, we had accrued interest of $263,888. Mr. McCain, a director of our company, is President and Chief Operating Officer of Hensley & Company.

Note 98 – STOCKHOLDERS’ EQUITY

~~On June 14, 2022, our Board~~In May 2023, we completed a $4,000,000 registered direct offering of ~~Directors approved and recommended that our stockholders approve (a) an amended and restated certificate of incorporation to, among other things, (i) increase our authorized~~ shares of our common stock, ~~from~~pursuant to which an aggregate ~~250,000,000~~ to ~~300,000,000~~ ~~and (ii) authorize the issuance of~~ ~~50,000,000~~20,000,000 shares of ~~preferred~~our common stock ~~par value~~were issued. In addition, we granted the placement agent warrants to purchase 600,000 shares of our common stock. We have used the net proceeds from the offering to repay $~~0.00001~~2.0 ~~per share;~~million in outstanding principal of short-term indebtedness and ~~(b) increase~~for general corporate purposes.

For the ~~number~~nine months ended September 30, 2023, we sold 6,739,853 shares of ~~shares authorized~~our common stock for ~~issuance~~net proceeds of $3,283,165 through our at-the-market offering under our S-3 Registration Statement.

Our 2023 Equity Incentive Plan (the “2023 Plan”), which replaces 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 ~~“Written Consent”~~“2019 Plan”)~~. Pursuant to Rule 14c-2 of the Exchange Act, such amended and restated certificate of incorporation~~, became effective on ~~August 8, 2022~~September 13, 2023. The total number of shares of our common stock reserved and available for delivery under the 2023 Plan at any time during the term of the 2023 Plan will be 40,000,000 shares plus any shares remaining available for delivery under the 2019 Plan on the effective date of the 2023 Plan. As of the effective date of the 2023 Plan, there were 21,839,752 shares remaining available for delivery under the 2019 Plan. Therefore, as of September 13, 2023, there were an aggregate of 61,839,752 shares reserved and available for delivery under the 2023 Plan. In addition, to the extent that any stock options pursuant to the 2019 Plan expire, terminate, or are canceled or forfeited under the terms of the 2019 Plan, the shares of common stock reserved for issuance pursuant to such ~~equity plan amendment became effective on August 7, 2022.~~stock options will become available for issuance under the 2023 Plan.

Options

We granted stock options vesting solely upon the continued service of the recipient. We recognize the accounting grant date fair value of equity-based awards as compensation expense over the required service period of each award.

The following table summarizes stock option activity:

SCHEDULE OF STOCK OPTIONS ACTIVITY

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2023		36,397,521		$	2.45		-		-
Granted		4,414,833			0.40		-		-
Exercised		(1,040,817	)		0.48		-		-
Expired or cancelled		(5,951,080	)		2.99		-		-
Outstanding at September 30, 2023		33,820,457		$	2.12		4.78	$	70,000
Exercisable at September 30, 2023		22,812,881		$	1.80		3.34	$	70,000

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 13,745,513 3.40 - -
Exercised (2,459,809 ) 0.55 - -
Expired or cancelled (7,801,564 ) 3.12 - -
Outstanding at September 30, 2022 34,856,288 2.30 5.74 39,981,362
Exercisable at September 30, 2022 18,189,900 $ 1.05 3.55 $ 35,988,384

Total compensation expense related to the options was $~~2,252,716~~554,249 and $~~1,251,635~~2,252,716 for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and $~~10,432,048~~9,190,027 and $~~2,981,523~~10,432,048 for the nine months ended September 30 ~~2022~~2023 and ~~2021,~~2022, respectively. As of September 30, ~~2022,~~2023, there was future compensation expense of $~~49,608,286~~21,175,369 with a weighted average recognition period of ~~3.12~~2.09 years related to the options.

Warrant Activity Summary

The following table summarizes warrant activity:

SCHEDULE OF STOCK WARRANT ACTIVITY

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value		Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2022		-	$	-		-	$	-
Outstanding at January 1, 2023										144,200	$	5.00		4.06	$	-
Granted		144,200		5.00		4.26		-		600,000		0.25		5.00		-
Exercised		-		-		-		-		-		-		-		-
Expired or cancelled		-		-		-		-		-		-		-		-
Outstanding at September 30, 2022		144,200		5.00		4.26		-
Exercisable at September 30, 2022		144,200	$	5.00		4.26	$	-
Outstanding at September 30, 2023										744,200	$	1.17		4.37	$	-
Exercisable at September 30, 2023										744,200	$	1.17		4.37	$	-

NOTE 109 – 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 nine months ended September 30, 2022, we paid $470,000~~ ~~in cash to Maxim.~~

Legal Claims

There are no material pending legal proceedings in which we or any of our subsidiaries isare a party or in which any of our directors, officers or affiliates, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to ~~us.~~us.

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 United States 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 September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our accrual for estimated indirect tax liabilities was $~~216,906~~556,151 and $~~99,088~~409,187, 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 1110 – LOANS PAYABLE AND LINES OF CREDIT

Loans Payable

Loans payable was as follows:

SCHEDULE OF LOAN PAYABLE

	Interest Rate		Maturities		September 30, 2022			December 31, 2021			Interest Rate			Maturities		September 30, 2023			December 31, 2022

Term loans (US dollar denominated)	5.00% – 6.00	%		2023 - 2027	$	5,639,096		$	478,712			5.00% – 155.11	%		2023 - 2027	$	1,934,663		$	5,461,520
Term loans (Chilean peso denominated)	3.48% - 19.20	%		2022 - 2031		6,061,500			5,018,788			3.48% - 7.14	%		2023 - 2029		5,070,158			6,541,113
						11,700,596			5,497,500								7,004,821			12,002,633
Less current portion						(7,235,352	)		(213,199	)
Less, current portion																	(3,727,647	)		(7,758,831	)
Long term loans payable					$	4,465,244		$	5,284,301							$	3,277,174		$	4,243,802

In June 2022, we entered into a bridge ~~loans,~~loan, secured by substantially all of our assets, in the principal amount of $5,000,000 bearing an interest rate of 4.00% per annum payable monthly with a maturity date of December 14, 2022, which was extended to March 14, 2023. We did not repay this bridge loan on the maturity date, which resulted in an event of default under the terms thereof. As a result, the interest rate applicable to amounts due under this bridge loan increased from 4.00% to 7.50%. ~~These~~This bridge ~~loans are guaranteed by our assets.~~loan was repaid in full on March 20, 2023. We recorded interest expense of $~~51,111~~zero and $~~60,000~~116,667 during the three months and nine months ended September 30, ~~2022,~~2023, respectively.

Various subsidiaries in the United States are borrowers under certain unsecured term loans. These term loans require monthly principal and interest payments. ~~These term loans are secured by various assets owned by our subsidiaries.~~ We recorded aggregate interest expense ofon these term loans of $~~13,985~~8,536 and $~~65,972~~47,015 for the three and nine months ended September 30, ~~2022,~~2023, respectively. Accrued interest as of September 30, 2023 was zero. The aggregate effective interest rate of the term loans is 9.87%.

Our ~~Chilean subsidiary, Arkavia, is~~Latin America subsidiaries are the ~~borrower~~borrowers under certain term loans denominated in Chilean Pesos. These term loans require monthly principal and interest payments. These term loans are secured by various assets owned by our subsidiaries. We recorded aggregate interest expense on these term loans of $~~40,711~~141,269 and $~~102,596~~396,679 for the three and nine months ended September 30, ~~2022,~~2023. Accrued interest as of September 30, 2023 was zero. The aggregate effective interest rate of the term loans is 9.11%.

In March 2023, we entered into a Cash Advance Agreement, pursuant to which we received gross proceeds of $2,000,000 and paid $87,500 in upfront fees. The terms of the Cash Advance Agreement call for us to remit aggregate weekly payments of $99,398 until such time as we have repaid $2,870,000. The effective interest rate of the Cash Advance Agreement is 155.11%. This Cash Advance Agreement is secured by the accounts receivable of CISO Global Inc. and our wholly owned subsidiaries, Talatek, LLC and True Digital Security, Inc. We recorded interest expense of $237,964 and $822,017 for the three and nine months ended September 30, 2023, respectively.

In August 2023, we entered into a second Cash Advance Agreement, pursuant to which we received gross proceeds of $2,000,000

and paid $50,000

~~Debt Assumed through Acquisition~~

~~As part~~ in upfront fees. The terms of the Cash Advance Agreement call for us to remit weekly payments of $80,588 until such time as we have repaid $2,740,000. The effective interest rate of the Cash Advance Agreement is 112.00%. This Cash Advance Agreement is secured by the accounts receivable of CISO Global Inc. and our wholly owned subsidiaries, Talatek, LLC and True Digital ~~Acquisition, we assumed~~Security, Inc. We recorded interest expense of $~~1,008,566~~226,164 ~~of debt previously held by True Digital. This debt was comprised of a revolving line of credit~~for the three and ~~four separate term loans. We repaid three of the four term loans during the~~ nine months ended September 30, ~~2022. The line of credit matured and was repaid in full on August 9, 2022, and the outstanding term loan matures in February 2027. The line of credit had an interest rate~~ ~~3.25%~~ ~~per annum.~~

~~We assumed $2,716,167~~ of debt held by CUATROi and NLT Secure as part of their respective acquisitions, which was comprised of multiple separate terms loan secured by the assets of CUATROi and NLT Secure. These loans mature through November 2031 and had interest rates between ~~3.48%~~ ~~and~~ ~~19.20%~~.2023.

Convertible Notes Payable

In October 2021, we issued a convertible note to Neil Stinchcombe in the principal amount of $1,500,000 bearing an interest rate of 5.00% per annum payable at maturity with a maturity date of January 27, 2022, with a conversion price of $5.00 per share. On ~~October 21,~~March 10, 2022, we entered into an amendment to the note pursuant to which the maturity date was extended to ~~December~~October 27, 2022. In March 2023, we entered into a letter agreement with Neil Stinchcombe to resolve certain payment terms of his convertible note. We agreed to repay the principal amount of the note in three equal installments of $500,000 on each of March 31, April 28, and May 31, 2023,. with accrued interest to be paid on May 31, 2023. The ~~outstanding~~ principal amount of this note, plus all accrued interest was repaid in full as of June 30, 2023. At December 31, 2022, we had accrued interest of $~~1,500,000~~119,007. We recorded interest income of zero atand interest expense of $632 during the three and nine months ended September 30, ~~2022.~~2023.

In June 2022, we ~~entered into~~issued 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~~7.83 per share. The outstanding principal of this note can be redeemed at any time by us or at maturity at 105%. At maturity in June 2023, we repaid the unpaid accrued interest on this convertible note and rolled the principal amount of $1,050,000 into a new convertible note with the lender. We recorded interest expense of zero and $22,101 for the three and nine months ended September 30, 2023.

In June 2023, we issued an unsecured convertible note in the principal amount of $1,050,000 bearing an interest rate of 10.00% per annum payable monthly. The principal amount, together with accrued and unpaid interest is due on June 7, 2024. At anytime prior to or on the maturity date, the holder is permitted to convert all of the outstanding principal amount into 4.20%of ~~this note was~~the authorized units of our wholly owned subsidiary vCISO, LLC. We recorded interest expense of $~~1,000,000~~27,603 atand $33,083 for the three and nine months ended September 30, ~~2022.~~2023. At September 30, 2023 we had accrued interest of $33,083.

In March 2023, we issued an unsecured convertible note to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $1.20 per share. During the three and nine months ended September 30, 2023, we recorded interest expense of $125,000 and $263,888, respectively. At September 30, 2023, we had accrued interest of $263,888. Mr. McCain, a director of our company, is President and Chief Operating Officer of Hensley & Company.

Future minimum payments under the above ~~line of credit~~loans payable and ~~loans~~convertible notes payable due as of September 30, ~~2022~~2023 were as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT


2022 (remainder of)	$	5,815,709
2023		4,341,115
2023 (remainder of)				$	1,504,990
2024		1,231,461			4,187,156
2025		1,007,017			6,024,936
2026		601,371			524,275
2027					287,141
Thereafter		1,253,923			570,624
Total future minimum payments		14,250,596			13,099,122
Less: discount					(44,301	)
Total					13,054,821
Less: current		(8,285,352	)		(4,777,647	)
Long term debt, net of current portion	$	5,965,244		$	8,277,174

NOTE 1211 – LEASES

~~All of our leases are classified as operating leases. With the adoption of Topic 842,~~We have entered into various non-cancellable operating lease agreements ~~are required~~for certain offices. These leases currently have lease periods expiring between 2023 and 2028. The lease agreements may include one or more options to renew. Renewals were not assumed in our determination of the lease term unless the renewals were deemed to be ~~recognized on the condensed consolidated balance sheet as Right~~reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of ~~Use (“ROU”) assets~~lease costs, weighted-average lease term, and ~~corresponding lease liabilities.~~

~~On January 19, 2022, we recognized additional ROU assets and lease liabilities of $226,942~~ from the True Digital Acquisition. We elected to not recognize ROU assets and lease liabilities arising from office leases with initial terms of 12 months or less (deemed immaterial) on the unaudited condensed consolidated balance sheets.

ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that we will exercise that option.discount rates are detailed below.

When measuring lease liabilities for leases that were classified as operating leases, we discounted lease payments using our estimated incremental borrowing rate at ~~January 1, 2022.~~the commencement date of each lease. The weighted average incremental borrowing rate applied was ~~6.00%~~9.99%. As of September 30, ~~2022,~~2023, our leases had a remaining weighted average term of ~~2.45~~3.96 years.

Operating leases are included in the unaudited condensed ~~consolidated balance sheets~~Consolidated Balance Sheets as follows:

SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION

	Classification	September 30, 2023		December 31, 2022
Lease assets
Operating lease cost ROU assets	Assets	$	824,178	$	255,687
Total lease assets		$	824,178	$	255,687

Lease liabilities
Operating lease liabilities, current	Current liabilities	$	161,154	$	121,731
Operating lease liabilities, non-current	Liabilities		706,903		159,205
Total lease liabilities		$	868,057	$	280,936

Classification September 30, 2022 December 31, 2021
Lease assets
Operating lease cost ROU assets Assets $ 316,698 $ 277,578
Total lease assets $ 316,698 $ 277,578

Lease liabilities
Operating lease liabilities, current Current liabilities $ 163,233 $ 196,472
Operating lease liabilities, non-current Liabilities 167,462 88,040
Total lease liabilities $ 330,695 $ 284,512

The components of lease costs, which are included in ~~income~~loss from operations in our unaudited condensed consolidated ~~statements~~Statements of ~~operations,~~Operations, were as follows:

SCHEDULE OF LEASE COST

	2022		2021		2023		2022
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2023		2022
Leases costs
Operating lease costs	$	277,842	$	54,376	$	196,642	$	277,842
Short term lease cost						78,307		-
Total lease costs	$	277,842	$	54,376	$	274,949	$	277,842

Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the nine months ended September 30, ~~2022~~2023 were as follows:

SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES

Fiscal Year	Operating Leases
2023 (remainder of)	$	73,996
2024		294,383
2025		252,513
2026		199,177
2027		205,145
Thereafter		51,661
Total future minimum lease payments		1,076,875
Amount representing interest		208,818
Present value of net future minimum lease payments	$	868,057

Fiscal Year Operating Leases
2022 (remainder of) $ 61,394
2023 120,268
2024 106,639
2025 64,332
Total future minimum lease payments 352,633
Amount representing interest (21,938 )
Present value of net future minimum lease payments $ 330,695

NOTE 12 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Although we deposit cash with multiple banks, these deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may generally be redeemed upon demand and bear minimal risk.

No single customer represented over 10% of our total revenue for any period presented.

NOTE 13 – GEOGRAPHIC INFORMATION

Revenue by geography is based on the customer’s billing address and was as follows:

SCHEDULE OF REVENUE BY GEOGRAPHY IS BASED ON CUSTOMERS BILLING ADDRESS

2022 2021 2022 2021
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021

U.S. $ 9,000,560 $ 3,745,008 $ 26,764,895 $ 9,254,583
Chile 2,148,503 - 4,941,523 -
All other countries 103,969 - 103,969 -
Revenue $ 11,253,032 $ 3,745,008 $ 31,810,387 $ 9,254,583

~~No other international country represented more than 10% of revenue in any period presented.~~

	2023		2022		2023		2022
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

U.S.	$	8,835,728	$	9,000,560	$	25,921,186	$	26,764,895
Chile		5,157,981		2,148,503		16,840,734		4,941,523
All other countries		71,412		103,969		554,876		103,969
Revenue	$	14,065,121	$	11,253,032	$	43,316,796	$	31,810,387

Property and equipment, net by geography was as follows:

SCHEDULE OF PROPERTY AND EQUIPMENT, NET BY GEOGRAPHIC AREAS

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022

U.S.	$	1,164,643	$	95,069	$	1,181,275	$	1,198,057
Chile		3,294,765		2,299,355		2,801,543		3,480,911
All other countries		1,355		-		1,022		1,527
Property and equipment net	$	4,460,763	$	2,394,424	$	3,983,840	$	4,680,495

No other international country represented more than 10% of property and equipment, net in any period presented.

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents AOCI activity in equity:

SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE INCOME

	Foreign Currency Translation Adjustments		Total AOCI

Balance as of December 31, 2022	$	1,062,247	$	1,062,247
Other comprehensive income		228,331		228,331
Amounts reclassified from AOCI		-		-
Balance as of September 30, 2023	$	1,290,578	$	1,290,578

NOTE 1415 – SUBSEQUENT EVENTS

On ~~October 21, 2022,~~November 9, 2023, we and our US subsidiaries entered into ~~an amendment on our convertible note~~a Business Loan and Security Agreement (the “Loan Agreement” with ~~an outstanding balance of $1,500,000~~LendSpark Corporation (the “Lender”), pursuant to which we obtained a loan with a principal amount of $2,200,000 (the “Loan”) from the ~~maturity~~Lender. Pursuant to the Loan Agreement, we paid the Lender a $44,000 origination fee. The Loan bears interest at a rate of 53.44% per annum and is payable in 52 weekly installments of $53,731, commencing on November 16, 2023. We may prepay the Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Loan, or $594,000. If the Loan is prepaid in full prior to the 90-day anniversary of the date ~~was extended to~~ of the Loan Agreement, the total interest is reduced as follows: (i) if the Loan is repaid within 30 days, the total amount of interest due will be $~~December 31, 2023~~464,000, (ii) if the Loan is repaid within 60 days, the total amount of interest due will be $508,000, and (iii) if the Loan is repaid within 90 days, the total amount of interest due will be $552,000.

Pursuant to the Loan Agreement, we granted the Lender a security interest in all if its assets and the assets of our US subsidiaries (the “Collateral”). Upon the occurrence of an event of default, the Lender may, among other things, accelerate the Loan and declare all obligations immediate due and payable or take possession of the Collateral.

The proceeds from the Loan were used to repay in full the amount owed under Cash Advance Agreement with Cedar Advance, LLC that we entered into in March 2023.

In connection with Loan, we entered into a Fee Agreement (the “Fee Agreement”) with the Lender pursuant to which we issued 2,000,000 shares of our common stock, par value $0.00001 per share (the “Shares”) as partial consideration for the Lender’s agreement to enter into the Loan Agreement and extend credit to us. Pursuant to the Fee Agreement, if we repay the Loan in full by (i) December 9, 2023, the Lender will return all of the Shares to us, (ii) January 8, 2023, the Lender will return 1,500,000 of the Shares to us and (iii) February 8, 2024, the Lender will return 1,000,000 of the Shares to us. The Fee Agreement contains customary representations, warranties, agreements and obligations of the parties.

2219

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed ~~consolidated~~ financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to ~~Cerberus Cyber Sentinel Corporation,~~CISO Global Inc., 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”), Alpine Security, LLC, an Illinois limited liability company (“Alpine”), Catapult Acquisition Corporation, a New Jersey corporation (“VelocIT”), Ocean Point 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”), CyberViking, LLC, an Oregon limited liability company (“CyberViking”), Servicios Informaticos CUATROi, S.P.A., a Chilean corporation, Comercializadora CUATROi S.P.A., a Chilean corporation CUATROi Peru, S.A.C., a Peruvian corporation, and CUATROi S.A.S., a Colombian corporation (collectively “CUARTOi”), NLT Networks, S.P.A., a Chilean corporation, NLT Tecnologias, Limitada, a Chilean corporation and NLT Servicios Profesionales, S.P.A., a Chilean corporation (collectively “NLT”), White and Blue Solutions, LLC, a Florida limited liability company (“W&B” and together with NLT, “NLT Secure”).subsidiaries. Unless otherwise specified, all dollar amounts are expressed in ~~United States~~U.S. dollars.

Third Quarter ~~2022~~2023 Highlights

Our operating results for the ~~three~~nine months ended September 30, ~~2022~~2023 included the following:

	●	Total revenue increased by ~~$7.5~~$11.5 million to ~~$11.3~~$43.3 million for the ~~three~~nine months ended September 30, ~~2022,~~2023, as compared to the ~~three~~nine months ended September 30, ~~2021.~~2022.
	●	Total gross profit increased ~~by $0.5 million~~ to ~~$0.9~~$3.9 million for the ~~three~~nine months ended September 30, ~~2022,~~2023, as compared to $1.7 million the ~~three~~nine months ended September 30, ~~2021.~~
	●	~~We acquired CyberViking, CUATROi, and NLT Secure, each of which became our wholly owned subsidiaries.~~2022.

Results of Operations

Comparison of the Three Months Ended September 30, ~~2022~~2023 to the Three Months Ended September 30, ~~2021~~2022

Our financial results for the three months ended September 30, ~~2022~~2023 are summarized as follows in comparison to the three months ended September 30, ~~2021:~~2022:

	Three Months Ended September 30,									Three Months Ended September 30,
	2022			2021			Variance			2023			2022			Variance
Revenue:
Security managed services	$	10,061,304		$	3,099,753		$	6,961,551		$	12,266,690		$	10,061,304		$	2,205,386
Professional services		1,191,728			645,255			546,473			1,798,431			1,191,728			606,703
Total revenue		11,253,032			3,745,008			7,508,024			14,065,121			11,253,032			2,812,089

Cost of revenue:
Security managed services		4,310,378			650,955			3,659,423			5,574,180			4,310,378			1,263,802
Professional services		182,413			234,326			(51,913	)		234,549			182,413			52,136
Cost of payroll		4,978,768			2,093,072			2,885,696			5,458,001			4,978,768			479,233
Stock based compensation		857,950			312,909			545,041			317,851			857,950			(540,099	)
Total cost of revenue		10,329,509			3,291,262			7,038,247			11,584,581			10,329,509			1,255,072
Total gross profit		923,523			453,746			469,777			2,480,540			923,523			1,557,017
Operating expenses:
Professional fees		624,391			293,408			330,983			745,426			624,391			121,035
Advertising and marketing		245,495			254,026			(8,531	)		119,814			245,495			(125,681	)
Selling, general, and administrative		6,684,747			2,125,984			4,558,763			5,557,328			6,684,747			(1,127,419	)
Stock-based compensation		1,791,724			938,726			852,998
Stock based compensation											677,231			1,791,724			(1,114,493	)
Total operating expenses		9,346,357			3,612,144			5,734,213			7,099,799			9,346,357			(2,246,558	)

Loss from operations		(8,422,834	)		(3,158,398	)		(5,264,436	)		(4,619,259	)		(8,422,834	)		3,803,575
Other income (expense):
Other income		29,968			169			29,799			(121,689	)		29,968			(151,657	)
Interest expense, net		(108,233	)		(75,470	)		(32,763	)		(766,315	)		(108,233	)		(658,082	)
PPP loan forgiveness		-			980,800			(980,800	)

Total other income (expense)		(78,265	)		905,499			(983,764	)		(888,004	)		(78,265	)		(809,739	)
Net loss		(8,501,099	)		(2,252,899	)		(6,248,200	)
Foreign currency translation adjustment		(908,987	)		-			(908,987	)
Comprehensive loss	$	(9,410,086	)	$	(2,252,899	)	$	(7,157,187	)

Loss before income taxes										$	(5,507,263	)	$	(8,501,099	)	$	2,993,836

Revenue

Security managed services revenue increased by ~~$6,961,551,~~$2,205,386, or ~~225%~~22%, for the three months ended September 30, ~~2022~~2023 as compared to the three months ended September 30, ~~2021,~~2022, primarily due ~~primarily~~ to revenue acquired through our completion of ~~eight~~two acquisitions over the last 12 months and new and existing customer revenue growth.

Professional services revenue increased by ~~$546,473,~~$606,703, or ~~85%~~51%, for the three months ended September 30, ~~2022~~2023 as compared to the three months ended September 30, ~~2021,~~2022, primarily due ~~primarily~~ to revenue acquired through our ~~recent~~completion of two acquisitions ~~in Latin America.~~over the last 12 months and new and existing customer revenue growth.

Expenses

Cost of Revenue

Security managed services cost of revenue increased by ~~$3,659,423,~~$1,263,802, or ~~562%~~29%, for the three months ended September 30, ~~2022~~2023 as compared to the three months ended September 30, ~~2021,~~2022, primarily due to our completion of ~~eight~~two acquisitions over the last 12 ~~months, which increased our revenues from hardware and software sales and their related costs.~~months.

Professional services cost of revenue ~~decreased~~increased by ~~$51,913,~~$52,136, or ~~22%~~29%, for the three months ended September 30, ~~2022~~2023 as compared to the three months ended September 30, ~~2021,~~2022, due to our ~~increased use of internal resources for delivery of our services.~~increase in revenue from professional services from two acquisitions completed over the last 12 months.

Cost of payroll ~~cost of revenue~~ increased by ~~$2,885,696,~~$479,233, or ~~138%~~10%, for the three months ended September 30, ~~2022~~2023 as compared to the three months ended September 30, ~~2021,~~2022, due to headcount added primarily through our completion of ~~eight~~two acquisitions over the last 12 months.

Stock-based compensation expenses ~~increased~~decreased by ~~$545,041,~~$540,099, or ~~174%~~63%, for the three months ended September 30, ~~2022~~2023 as compared to the three months ended September 30, ~~2021,~~2022, due to ~~an increase~~the timing of ~~stock~~recognition of the reversal of expense for options ~~awarded to our growing base of revenue generating~~forfeited by former employees.

Operating Expenses

Professional fees increased by ~~$330,983,~~$121,035, or ~~113%~~19%, for the three months ended September 30, ~~2022~~2023 as compared to three months ended September 30, ~~2021,~~2022, due to a increase in accounting, legal, and other professional fees.

Advertising and marketing expenses decreased by $125,681, or 51%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, due to utilization of more internal marketing resources.

Selling, general, and administrative expenses decreased by $1,127,419, or 17%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to a decrease in insurance costs and also cost reductions in software resulting from increase purchasing power with vendors.

Stock based compensation expenses decreased by $1,114,493, or 62%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, due to the timing of recognition of the reversal of expense for options forfeited by former employees.

Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Our financial results for the nine months ended September 30, 2023 are summarized as follows in comparison to the nine months ended September 30, 2022:

	Nine Months Ended September 30,
	2023			2022			Variance
Revenue:
Security managed services	$	37,623,328		$	28,489,698		$	9,133,630
Professional services		5,693,468			3,320,689			2,372,779
Total revenue		43,316,796			31,810,387			11,506,409

Cost of revenue:
Security managed services		18,444,204			10,678,728			7,765,476
Professional services		683,582			455,902			227,680
Cost of payroll		16,514,436			14,132,602			2,381,834
Stock based compensation		3,783,116			4,805,423			(1,022,307	)
Total cost of revenue		39,425,338			30,072,655			9,352,683
Total gross profit		3,891,458			1,737,732			2,153,726
Operating expenses:
Professional fees		3,086,365			2,192,600			893,765
Advertising and marketing		288,984			641,340			(352,356	)
Selling, general, and administrative		21,178,969			15,856,705			5,322,264
Stock based compensation		6,421,245			6,761,283			(340,038	)
Impairment of goodwill		41,038,172			-			41,038,172
Total operating expenses		72,013,735			25,451,928			46,561,807

Loss from operations		(68,122,277	)		(23,714,196	)		(44,408,081	)
Other income (expense):
Other income		(68,470	)		134,447			(202,917	)
Interest expense, net		(1,922,546	)		(293,991	)		(1,628,555	)

Total other income (expense)		(1,991,016	)		(159,544	)		(1,831,472	)

Loss before income taxes	$	(70,113,293	)	$	(23,873,740	)	$	(46,239,553	)

Revenue

Security managed services revenue increased by $9,133,630, or 32%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to revenue acquired through our completion of two acquisitions over the last 12 months and new and existing customer revenue growth.

Professional services revenue increased by $2,372,779, or 71%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to revenue acquired through our completion of two acquisitions over the last 12 months and new and existing customer revenue growth.

Expenses

Cost of Revenue

Security managed services cost of revenue increased by $7,765,476, or 73%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to our completion of two acquisitions over the last 12 months.

Professional services cost of revenue increased by $227,680, or 50%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, due to our increase in revenue from professional services from two acquisitions completed over the last 12 months.

Cost of payroll increased by $2,381,834, or 17%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, due to headcount added primarily through our completion of two acquisitions over the last 12 months.

Stock-based compensation expenses decreased by $1,022,307, or 21%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, due to the timing of recognition of the reversal of expense for options forfeited by former employees.

Operating Expenses

Professional fees increased by $893,765, or 41%, for the nine months ended September 30, 2023 as compared to nine months ended September 30, 2022, 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 decreased by ~~$8,531,~~$352,356, or 3%55%, for the ~~three~~nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, ~~as compared to the three months ended September 30, 2021,~~ due to ~~our increased use~~utilization of more internal ~~resources for advertising and~~ marketing ~~activities.~~resources.

Selling, general, and administrative expenses increased by ~~$4,558,763,~~$5,322,264, or ~~214%~~34%, for the ~~three~~nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, ~~as compared to the three months ended September 30, 2021,~~ primarily due to our analysis of our carrying amount of intangible assets being impaired and headcount added through our completion of ~~eight~~two acquisitions over the last 12 months.

~~Stock-based~~Stock based compensation ~~expenses increased~~expense decreased by ~~$852,998,~~$340,038, or 91%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, due to an increase in stock options awarded to employees through the completion of eight acquisitions over the last 12 months and shares issued to consultants for marketing services provided.

~~Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021~~

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

Nine Months Ended September 30,
2022 2021 Variance
Revenue:
Security managed services $ 28,489,698 $ 6,979,146 $ 21,510,552
Professional services 3,320,689 2,275,437 1,045,252
Total revenue 31,810,387 9,254,583 22,555,804

Cost of revenue:
Security managed services 10,678,728 1,326,788 9,351,940
Professional services 455,902 350,388 105,514
Cost of payroll 14,132,602 5,052,684 9,079,918
Stock based compensation 4,805,423 745,381 4,060,042
Total cost of revenue 30,072,655 7,475,241 22,597,414
Total gross profit 1,737,732 1,779,342 (41,610 )
Operating expenses:
Professional fees 2,192,600 695,023 1,497,577
Advertising and marketing 641,340 471,721 169,619
Selling, general, and administrative 15,856,705 5,296,623 10,560,082
Stock-based compensation 6,761,283 2,236,142 4,525,141
Total operating expenses 25,451,928 8,699,509 16,752,419

Loss from operations (23,714,196 ) (6,920,167 ) (16,794,029 )
Other income (expense):
Other income 134,447 2,553 131,894
Interest expense, net (293,991 ) (209,806 ) (84,185 )
PPP loan forgiveness - 980,800 (980,800 )
Total other income (expense) (159,544 ) 773,547 (933,091 )
Net loss (23,873,740 ) (6,146,620 ) (17,727,120 )
Foreign currency translation adjustment (2,207,256 ) - (2,207,256 )
Comprehensive loss $ (26,080,996 ) $ (6,146,620 ) $ (19,934,376 )

~~Revenue~~

~~Security managed services revenue increased by $21,510,552, or 308%~~5%, for the nine months ended September 30, ~~2022~~2023 as compared to the nine months ended September 30, ~~2021,~~2022, due ~~primarily~~ to ~~revenue acquired through our completion~~the timing of ~~eight acquisitions over~~recognition of the ~~last 12 months and new and existing customer revenue growth.~~reversal of expense for options forfeited by former employees.

~~Professional services revenue~~Impairment of goodwill increased by ~~$1,045,252,~~$41,038,172, or ~~46%~~100%, for the nine months ended September 30, ~~2022~~2023 as compared to the nine months ended September 30, ~~2021, due to revenue acquired through our completion of eight acquisitions over the last 12 months.~~

~~Expenses~~

~~Cost of Revenue~~

~~Security managed services cost of revenue increased by $9,351,940, or 705%, for the nine months ended September 30,~~ 2022, as compared to the nine months ended September 30, 2021, due primarily to our completion of eight acquisitions over the last 12 months, which increased our revenues from hardware and software sales and their related costs.

~~Professional services cost of revenue increased by $105,514, or 30%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021,~~ due to our ~~increase in revenue from professional services from acquisitions completed over the last 12 months.~~analysis of our carrying amount of goodwill being impaired.

Cost of payroll cost of revenue increased by $9,079,918, or 180%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, due to headcount added primarily through our completion of eight acquisitions over the last 12 months.

Stock-based compensation expenses increased by $4,060,042, or 545%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, due to an increase of stock options awarded to our growing base of revenue generating employees.

~~Operating Expenses~~

Professional fees increased by $1,497,577, or 215%, for the nine months ended September 30, 2022 as compared to nine months ended September 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 $169,619, or 36%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, due to our current marketing campaign initiatives to stimulate organic revenue growth, and an increased effort to utilize more internal resources for advertising and marketing activities.

Selling, general, and administrative expenses increased by $10,560,082, or 199%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, primarily due to headcount added through our completion of eight acquisitions over the last 12 months.

Stock-based compensation expenses increased by $4,525,141, or 202%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, due to an increase in stock options awarded to employees through the completion of eight acquisitions over the last 12 months and shares issued to consultants for marketing services provided.

Liquidity and 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 September 30, 2022, we had an accumulated deficit of $67,886,162 and working capital deficit of $3,282,714.~~ For the nine months ended September 30, ~~2022,~~2023, we ~~had~~incurred a net loss ~~from operations~~ of ~~$23,714,196~~$69,677,615 and negative cash flows from operations of ~~$7,850,297. Although we are showing positive revenue, gross profit has remained flat primarily due to increased stock compensation related to sales activity. We~~$6,704,498 and expect to incur further losses through the end of ~~2022.~~2023. In the report accompanying our financial statements for the year ended December 31, 2022, our independent auditors stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so based on our recurring losses from operations and need to raise additional capital. These condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.

To date we have funded operations primarily through the sale of equity in private placements, debt, and revenue generated by our services. During the nine months ended September 30, 2022, we received $10,562,763 from our public offerings of our common stock, $5,975,000 in net proceeds from our bridge loans, and $1,359,264 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 September 30, ~~2022,~~2023, we had ~~$298,921,085~~$291,351,048 of available funding ~~from~~under our S-3 Registration ~~Statement.~~Statement from which we may issue our securities to fund current and future operations, assuming there is adequate demand for our securities.

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 we lack sufficient capital, our business, operating results, and financial condition would be adversely affected.

Working Capital ~~(Deficit)/Surplus~~Deficit

Our working capital deficit as of September 30, ~~2022,~~2023, in comparison to our working capital ~~surplus~~deficit as of December 31, ~~2021,~~2022, is summarized as follows:

	As of					As of
	September 30,			December 31,		September 30,			December 31,
	2022			2021		2023			2022
Current assets	$	14,940,065		$	9,807,301	$	11,589,911		$	14,398,795
Current liabilities		18,222,779			5,141,561		22,963,261			23,213,039
Working capital (deficit)/surplus	$	(3,282,714	)	$	4,665,740
Working capital deficit						$	(11,373,350	)	$	(8,814,244	)

The ~~increase~~decrease in current assets is primarily due to ~~an increase~~a decrease in cash, ~~and cash equivalents,~~ accounts receivable and prepaid expenses of $1,062,683, $1,791,678 and ~~other current assets of $2,163,298, $922,629, and $2,495,435,~~$302,486, respectively. ~~The increase in current~~Current liabilities ~~is primarily~~remained consistent due to ~~the~~an increase in accounts payable and accrued ~~expense, deferred revenue,~~expenses of $4,850,957, offset by a decrease in loans payable ~~current portion,~~ and convertible notes payable of ~~$3,990,955, $3,021,349, $7,022,153,~~$4,031,184 and ~~$1,050,000,~~$1,500,000, respectively.

Cash Flows

Our cash flows for the nine months ended September 30, ~~2022,~~2023, in comparison to our cash flows for the nine months ended September 30, ~~2021, can be~~2022, is summarized as follows:

	Nine Months ended September 30,						Nine Months ended September 30,
	2022			2021			2023			2022
Net cash used in operating activities	$	(7,850,297	)	$	(4,312,312	)	$	(6,704,498	)	$	(7,850,297	)
Net cash used in investing activities		(6,044,217	)		662,176			(135,848	)		(6,044,217	)
Net cash provided by financing activities		16,038,273			1,182,685			5,777,702			16,038,273
Effect of exchange rates on cash and cash equivalents		19,539			-			(39	)		19,539
Increase in cash	$	2,163,298		$	(2,467,451	)
(Decrease)/Increase in cash							$	(1,062,683	)	$	2,163,298

Operating Activities

Net cash used in operating activities was $6,704,498 for the nine months ended September 30, 2023 and was primarily due to cash used to fund a net loss of $69,677,615, adjusted for non-cash expenses in the aggregate of $56,269,301 and additional cash inflow by changes in the levels of operating assets and liabilities, primarily as a result of a decrease in accounts receivable and increases in deferred revenue and accounts payable and accrued expenses. Net cash used in operating activities was $7,850,297 for the nine months ended September 30, 2022 and was primarily due to cash used to fund a net loss of $23,873,740, adjusted for non-cash expenses in the aggregate of $13,939,728, 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 $4,312,312 for the nine months ended September 30, 2021 and was primarily due to cash used to fund a net loss of $6,146,620, adjusted for non-cash expenses in the aggregate of $2,631,683, 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 $135,848 for the nine months ended September 30, 2023 was due to purchases of property and equipment. Net cash used in investing activities of $6,044,217 for the nine months ended September 30, 2022 and was primarily due to net cash paid in the acquisition of True Digital ~~acquisition. Net cash from investing activities for the nine months ended September 30, 2021 was due to cash acquired from the VelocIT acquisition which was financed with equity consideration.~~Security, Inc.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 was $5,777,702, which was primarily due to net cash received from the sale of our common stock of $6,682,198, $4,448,641 in net proceeds from our loans payable, and $6,050,000 in proceeds from convertible notes payable, offset by aggregate repayments on loans payable and convertible notes payable of $11,756,420. Net cash provided by financing activities for the nine months ended September 30, 2022 was $16,038,273 which was primarily due to cash received from the sale of our common stock in our public offerings of $10,562,763 and $5,975,000 in net proceeds from our bridge loans. ~~Net~~

Based on our current business plan, we believe our cash ~~provided by financing activities~~balance as of the date of this filing, together with anticipated revenues, will be sufficient to meet our anticipated cash requirement for the ~~nine months ended September 30, 2021 was $1,182,685 and was primarily due~~near term. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about our ability to ~~cash received~~continue as a going concern for one year from the ~~sale of our common stock of $3,250,000, offset by $2,064,315 of loan repayments.~~

~~Effects of Inflation~~date the condensed consolidated financial statements are issued.

Our existence is dependent upon our ability to develop profitable operations. We are devoting substantially all of our efforts to developing our business, reducing overhead costs, and raising capital, although there can be no assurance that our efforts will be successful. No assurance can be given that our actions will result in profitable operations or the resolution of liquidity problems. The accompanying condensed consolidated financial statements do not ~~believe~~include any adjustments that ~~inflation has had~~might result should we be unable to continue as a ~~material impact on~~going concern.

In order to improve our ~~business, revenue,~~ liquidity, in addition to a planned reduction in overhead costs, we are actively pursuing additional debt and/or ~~operating results during~~equity financing through discussions with investment bankers and private investors. There can be no assurance that we will be successful in our efforts to secure additional financing.

The financial statements do not include any adjustments relating to the ~~periods presented.~~recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.

Critical Accounting Policies and Estimates

Our critical accounting policies are more fully described in the notes to our condensed consolidated financial statements included herein for the quarter and nine months ended September 30, ~~2022~~2023 and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as filed with the SEC on ~~April 15, 2022.~~March 31, 2023.

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~~allowance for doubtful accounts, the carrying value of intangible assets and ~~useful lives of long-lived assets, stock-based compensation,~~goodwill, deferred tax asset and ~~the~~ valuation allowance, ~~related to our deferred tax assets.~~the estimated fair value of assets acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate. 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 materially differ from those estimates.

2825

~~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

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. We include the results of operations of the business that we have acquired in 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 12 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 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~~revenue multiple approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. ~~The discounted cash flow approach uses expected future operating results.~~ Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.

Impairment of ~~Long-lived~~Long-Lived Assets

We will periodically evaluate the carrying value of long-lived assets to be held and used ~~at least annually during the fourth quarter~~ when events and circumstances warrant such a ~~review.~~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.

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~~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.~~date. Awards granted to directors are treated on the same basis as awards granted to employees.

Revenue Recognition

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

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

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

Security Managed ~~Services.~~Services

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

Professional ~~Services.~~Services

Professional services revenue primarily consists of technical assessments, incident response and forensics, training, and other cybersecurity services. We ~~considered~~consider these services to be a single performance obligation, and revenue is recognized in the period in which the 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 as of and for the quarter ended September 30, 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, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

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 Exchange Act) that are designed to 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 principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable 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, our principal executive officer and principal financial officer concluded that, as of September 30, ~~2022,~~2023, our disclosure controls and procedures were not effective due to the material 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 independent 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 September 30, ~~2022.~~2023.

Our management’s evaluation was based on the following material weaknesses in our internal control over financial reporting, which existed as of December 31, ~~2021~~2022 and which continue to exist, as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021:~~2022:

	●	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.

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.

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 we are committed to taking further action and implementing additional enhancements or improvements, as necessary and in accordance with financial and budgetary considerations.

Changes in Internal Control Over Financial Reporting

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 September 30, ~~2022,~~2023, other than those noted above, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not a party to any material legal proceedings.

Item 1A. Risk Factors

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on ~~April 15, 2022,~~March 31, 2023, 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:~~disclosed.

~~Economic conditions in the U.S and international economies may adversely impact our business operating on operating results.~~

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 have remained at high levels through the third quarter 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. This military conflict has led to sanctions and other penalties being levied by the United States and European Union, and other countries against Russia, and other potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial 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 impacted.

Uncertain and adverse economic conditions may also lead to a decline in the ability of our customers to use or access credit, which could adversely affect our business. In addition, changing economic conditions may also adversely affect third parties with which we have entered into relationships and upon which we depend in order to grow our business. As a result, we may be unable to continue to grow in the event of future economic slowdowns.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

On November 9, 2023, we and our US subsidiaries entered into a Business Loan and Security Agreement (the “Loan Agreement” with LendSpark Corporation (the “Lender”), pursuant to which we obtained a loan with a principal amount of $2,200,000 (the “Loan”) from the Lender. Pursuant to the Loan Agreement, we paid the Lender a $44,000 origination fee. The Loan bears interest at a rate of 53.44% per annum and is payable in 52 weekly installments of $53,731, commencing on November 16, 2023. We may prepay the Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Loan, or $594,000. If the Loan is prepaid in full prior to the 90-day anniversary of the date of the Loan Agreement, the total interest is reduced as follows: (i) if the Loan is repaid within 30 days, the total amount of interest due will be $464,000, (ii) if the Loan is repaid within 60 days, the total amount of interest due will be $508,000, and (iii) if the Loan is repaid within 90 days, the total amount of interest due will be $552,000.

~~None.~~Pursuant to the Loan Agreement, we granted the Lender a security interest in all if its assets and the assets of our US subsidiaries (the “Collateral”). Upon the occurrence of an event of default, the Lender may, among other things, accelerate the Loan and declare all obligations immediate due and payable or take possession of the Collateral.

The Loan Agreement contains customary representations and warranties, indemnification provisions in favor of Lender, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict the our ability to, among other things, merge or consolidate.

The proceeds from the Loan were used to repay in full the amount owed under Cash Advance Agreement with Cedar Advance, LLC that we entered into in March 2023.

The Shares have not been registered under the Securities Act and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder.

During the quarter ended September 30, 2023, no director or officer of our company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, defined in Item 408 of Regulation S-K).

Item 6. Exhibits

Incorporated by Reference
Exhibit
Number
Exhibit Description Form Exhibit Filing Date
3.1 Amended and Restated Certificate of Incorporation of the Registrant 10-Q 3.1 8/15/2022
10.3# 2019 Equity Incentive Plan, as amended 10-Q 10.3 8/15/2022
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)

Exhibit		Incorporated by Reference
Number	Exhibit Description	Form	Exhibit	Filing Date

3.1	Second Amended and Restated By-Laws of the Registrant	8-K	3.1	10/10/2023
10.1#	2023 Equity Incentive Plan	S-8	10.2	10/31/2023
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.

#Management contracts and compensatory plans and arrangements.

3429

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~~

CISO GLOBAL, INC.

By:	/s/ David G. Jemmett
	David G. Jemmett
	Chief Executive Officer
	(Principal Executive Officer)
Date:	November ~~14, 2022~~13, 2023


By:	/s/ Debra L. Smith
	Debra L. Smith
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
Date:	November ~~14, 2022~~13, 2023

3530


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

Intangible assets acquired:
Tradename - trademarks		1,744,200
Intellectual property		1,137,000
Non-competes		124,900
Total intangible assets		3,006,100

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		1,899,227

Goodwill (a)	$	38,980,153


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

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

Net assets acquired		62,354

Goodwill (a)	$	3,567,646

Balance December 31, 2021	$	16,792,535
Acquisition of goodwill		59,430,213
Foreign currency translation adjustment		(2,127,968	)
Ending balance, September 30, 2022⁽¹⁾	$	74,094,780


2022 (remainder of)	$	667,397
2023		2,341,057
2024		1,623,017
2025		1,434,081
2026		1,334,585
Thereafter		250,013
Finite-lived intangible assets, net	$	7,650,150

	September 30, 2023		December 31, 2022
Accounts payable	$	8,631,762	$	5,267,492
Accrued payroll and bonuses		1,883,593		1,274,919
Accrued expenses		2,251,244		1,296,382
Accrued commissions		93,449		305,768
Accrued interest		301,246		165,776
Total accounts payable and accrued expenses	$	13,161,294	$	8,310,337

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation of the Registrant	10-Q	3.1	8/15/2022
10.3#	2019 Equity Incentive Plan, as amended	10-Q	10.3	8/15/2022
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)