root9B (RTNB) 10-Q 16 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 05, 2016
Document And Entity Information
Entity Registrant Name	root9B Technologies, Inc.
Entity Central Index Key	1,272,550
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		84,370,314
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash	$ 984,199	$ 795,682
Accounts receivable, net of reserve for doubtful accounts	7,859,715	3,010,161
Marketable securities	0	33,366
Cost and estimated earnings in excess of billings	334,461	357,625
Prepaid expenses and other current assets	404,794	758,240
Total current assets	9,583,169	4,955,074
Construction in Progress - at cost	217,622	108,095
Property and Equipment - at cost less accumulated depreciation	4,037,207	3,782,388
OTHER ASSETS:
Goodwill	15,676,246	15,676,246
Intangible assets - net	4,853,722	5,509,642
Investment in cost-method investee	100,000	100,000
Deferred income taxes	56,409	56,409
Cash surrender value of officers' life insurance	0	167,371
Deposits and other assets	226,120	233,579
Total other assets	20,912,497	21,743,247
TOTAL ASSETS	34,750,495	30,588,804
CURRENT LIABILITIES:
Notes payable	1,600,000	1,540,693
Factored receivables obligation	3,650,887	0
Current portion of long-term debt	1,500	1,500
Accounts payable	2,456,099	1,607,166
Billings in excess of costs and estimated earnings	122,913	217,336
Accrued expenses and other current liabilities	3,233,203	2,560,048
Total current liabilities	11,064,602	5,926,743
NONCURRENT LIABILITIES:
Long term debt - net of current portion	1,573	2,373
Derivative liability	2,746,616	3,540,084
Total noncurrent liabilities	2,748,189	3,542,457
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value, 4,985,000 authorized, no shares issued or outstanding at June 30, 2016 and December 31, 2015. Class B convertible preferred stock, no liquidation preference $.001 par value, 2,000,000 shares authorized, 0 and 0 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively. Class C convertible preferred stock, $.001 par value, 2,500,000 shares authorized, 2,380,952 shares issued and outstanding at June 30, 2016 and December 31, 2015.	0	0
Common stock, $.001 par value, 125,000,000 shares authorized, 84,290,314 and 76,990,639 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.	84,292	77,009
Additional paid-in capital	85,779,804	77,983,593
Accumulated deficit	(65,159,747)	(57,080,942)
Accumulated other comprehensive income	230,975	137,563
Total stockholders' equity	20,937,704	21,119,604
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	34,750,495	30,588,804
Class B convertible preferred stock
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value, 4,985,000 authorized, no shares issued or outstanding at June 30, 2016 and December 31, 2015. Class B convertible preferred stock, no liquidation preference $.001 par value, 2,000,000 shares authorized, 0 and 0 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively. Class C convertible preferred stock, $.001 par value, 2,500,000 shares authorized, 2,380,952 shares issued and outstanding at June 30, 2016 and December 31, 2015.	0	0
Series C Convertible Preferred Stock
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value, 4,985,000 authorized, no shares issued or outstanding at June 30, 2016 and December 31, 2015. Class B convertible preferred stock, no liquidation preference $.001 par value, 2,000,000 shares authorized, 0 and 0 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively. Class C convertible preferred stock, $.001 par value, 2,500,000 shares authorized, 2,380,952 shares issued and outstanding at June 30, 2016 and December 31, 2015.	$ 2,381	$ 2,381

CONSOLIDATED BALANCE SHEETS (U3

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
STOCKHOLDERS' EQUITY:
Preferred stock, par value (in dollars per share)	$ .001	$ .001
Preferred stock, shares authorized (in shares)	4,985,000	4,985,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	125,000,000	125,000,000
Common stock, shares issued (in shares)	84,290,314	76,990,639
Common stock, shares outstanding (in shares)	84,290,314	76,990,639
Class B convertible preferred stock
STOCKHOLDERS' EQUITY:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Series C Convertible Preferred Stock
STOCKHOLDERS' EQUITY:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	2,500,000	2,500,000
Preferred stock, shares issued (in shares)	2,380,952	2,380,952
Preferred stock, shares outstanding (in shares)	2,380,952	2,380,952

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
NET REVENUE	$ 10,199,986	$ 7,949,984	$ 17,336,612	$ 17,484,232
OPERATING EXPENSES:
Cost of revenues	8,700,345	6,080,676	15,337,999	13,397,844
Selling, general and administrative	4,808,190	4,554,313	9,170,559	8,570,848
Depreciation and amortization	548,250	390,147	1,058,283	676,030
Acquisition related costs	0	0	0	649,442
Total operating expenses	14,056,785	11,025,136	25,566,841	23,294,164
LOSS FROM OPERATIONS	(3,856,799)	(3,075,152)	(8,230,229)	(5,809,932)
OTHER INCOME (EXPENSE):
Derivative (expense) income	(437,345)	2,447,229	823,204	3,790,676
Loss on extinguishment of debt	(226,380)	0	(226,380)	0
Interest expense, net	(163,117)	(347,335)	(259,635)	(530,641)
Other income (expense)	(110,567)	55,890	(44,408)	89,236
Total other (expense) income	(937,409)	2,155,784	292,781	3,349,271
LOSS BEFORE INCOME TAXES	(4,794,208)	(919,368)	(7,937,448)	(2,460,661)
INCOME TAX BENEFIT (EXPENSE)	(46,273)	(222,967)	(133,255)	2,038,509
NET LOSS	(4,840,481)	(1,142,335)	(8,070,703)	(422,153)
PREFERRED STOCK DIVIDENDS	0	0	(6,857)	(406,372)
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS	$ (4,840,481)	$ (1,142,335)	$ (8,077,560)	$ (828,525)
Net loss per share:
Basic	$ (.06)	$ (.02)	$ (.10)	$ (.01)
Diluted	$ (0.06)	$ (0.02)	$ (0.10)	$ (0.01)
Weighted average number of shares:
Basic	83,862,270	72,549,771	81,226,641	66,512,488
Diluted	83,862,270	72,549,771	81,226,641	66,512,488

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements Of Comprehensive Income Loss
Net Loss	$ (4,840,481)	$ (1,142,335)	$ (8,070,703)	$ (422,153)
Other Comprehensive Gain/(Loss):
Foreign Currency Translation Gain/(Loss)	108,227	(40,106)	93,412	(39,990)
Other Comprehensive Gain/(Loss)	108,227	(40,106)	93,412	(39,990)
COMPREHENSIVE INCOME (LOSS)	$ (4,732,254)	$ (1,182,441)	$ (7,977,291)	$ (462,143)

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net Income (Loss)	$ (8,070,703)	$ (422,153)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	1,058,283	676,030
Amortization of debt discount	59,307	69,297
(Increase) in cash surrender value of officers' life insurance	(14,466)	(1,382)
(Income) from change in value of derivatives	(823,204)	(3,790,676)
Deferred income taxes	0	(2,255,419)
Stock option / warrant compensation expense	620,017	497,038
Loss on extinguishment of debt	226,380	0
Gain on sale of assets	0	(79,327)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(4,849,554)	2,922,596
Decrease in marketable securities	0	3,798
Decrease (increase) in costs and estimated earnings in excess of billings	23,164	(37,886)
Decrease (increase) in prepaid expenses	353,446	(299,668)
Increase (decrease) in deposits and other assets	7,459	(206,142)
Increase (decrease) in accounts payable and accrued expenses	1,522,982	(2,898,401)
Increase (decrease) in factored receivables obligation	3,650,887	(2,920,549)
Decrease in billings in excess of costs and estimated earnings	(94,423)	(413,180)
Net cash used in operating activities	(6,330,425)	(9,156,024)
Cash flows from investing activities:
Cash paid in acquisitions net of cash acquired	0	(1,368,825)
Proceeds on sale of assets	0	99,828
Proceeds from officer’s life insurance policy	181,837	0
Proceeds from sale of marketable securities	33,366	0
Purchases of property and equipment and construction in progress	(769,648)	(1,159,731)
Net cash used in investing activities	(554,445)	(2,428,728)
Cash flows from financing activities:
Warrants and Options Exercised	1,648,532	1,545,120
Common stock issuances	5,331,443	11,294,449
Net cash provided by financing activities	6,979,975	12,839,569
Effects of foreign exchange rate changes	93,412	(39,990)
Net increase in cash	188,517	1,214,827
Cash - beginning of period	795,682	765,099
Cash - end of period	984,199	1,979,926
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest	154,190	424,025
Income taxes	51,905	1,046,259
Summary of non-cash investing and financing activities:
Issuance of 10,000,000 shares of common stock in IPSA International, Inc. acquisition	0	13,300,000
Issuance of 214,287 shares of common stock for principal and interest on convertible notes	0	240,000
Issuance of common stock for dividend payment on preferred stock	6,857	406,372
Reclassification of Derivative warrant liability to equity	569,492	1,024,565
Fair Value of warrants issued to induce exercise of Series D warrants	84,525	0
Fair Value of derivative features issued to Qualified Purchasers	$ 599,228	$ 0

1. Basis of Presentation and Ge

1. Basis of Presentation and General Information	6 Months Ended
	Jun. 30, 2016
Basis Of Presentation And General Information
Basis of Presentation and General Information	The accompanying unaudited interim consolidated financial statements of root9B Technologies, Inc. (“root9B” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2015. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of consolidated financial position and the consolidated results of operations for the interim periods presented have been reflected herein. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal year 2015 as reported in the 10-K have been omitted. The consolidated results of operations for interim periods are not necessarily indicative of the results expected for future quarters or the full year. The preparation of the Company’s Consolidated Financial Statements, in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Recent accounting pronouncements: In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued a one-year deferral of the effective date of ASU 2014-09. ASU 2015-14 requires application of ASU 2014-09 for annual reporting periods beginning after December 15, 2017 and early adoption is permitted as of the original effective date (i.e. for annual reporting periods beginning after December 16, 2016). The Company has not yet determined the effect, if any, that the adoption of this standard will have on the Company’s financial position or results of operations. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Going Concern (“ASU 2014-15”). ASU 2014- 15 provides GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The standard will be effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. Upon adoption the Company will use the guidance in ASU 2014-15 to assess going concern uncertainty matters. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 is intended to improve financial reporting about leasing transactions. The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The standard will be effective for annual periods ending after December 15, 2018, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently in the process of evaluating the impact that ASU 2016-02 will have on its financial statements. Since January 1, 2016, there have been other new accounting pronouncements and updates to the Accounting Standards Codification. Each of these updates has been reviewed by Management who does not believe their adoption has had or will have a material impact on the Company’s financial position or operating results.

2. Summary of Significant Accou

2. Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2016
Summary Of Significant Accounting Policies
Summary of Significant Accounting Policies	The Company’s significant accounting policies are outlined in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2015.

3. Fair Value Measurements

3. Fair Value Measurements	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Fair Value Measurements	We measure the fair value of financial assets and liabilities in accordance with GAAP, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities. Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable. Level 3 – inputs that are unobservable (for example the probability of a capital raise in a “binomial” model used for derivative liability valuation). Derivative Instruments : We do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, we have entered into certain financial instruments and contracts, such as debt financing arrangements and the issuance of common and preferred stock with detachable common stock warrants features that are either i) not afforded equity classification, ii) embody risks not clearly and closely related to host contracts, or iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value. Certain of our derivative instruments are detachable (or “free-standing”) common stock purchase warrants issued in conjunction with debt or common and preferred stock. We estimate fair values of these derivatives utilizing Level 2 inputs for all warrants issued, other than those associated with Series C Preferred Stock and derivative features issued to qualified investors as part of the Q1 2016 capital raise. Other than the Series C Preferred Stock warrants and the derivative features issued to Qualified Purchasers, we use the Black-Scholes option valuation technique as it embodies all of the requisite assumptions (including trading volatility, remaining term to maturity, market price, strike price, and risk free rates) necessary to fair value these instruments, for they do not contain material “down round protection” (otherwise referred to as “anti-dilution” and full ratchet provisions). For the warrants directly related to the Series C Preferred Stock and the derivative features issued to Qualified Purchasers, the warrant contracts do contain “Down Round Protections” and the “Black-Scholes” option valuation technique does not, in its valuation calculation, give effect for the additional value inherently attributable to the “Down Round Protection” mechanisms in its contractual arrangement. Valuation models and techniques have been developed and are widely accepted that take into account the additional value inherent in “Down Round Protection.” These techniques include “Modified Binomial”, “Monte Carlo Simulation” and the “Lattice Model.” The “core” assumptions and inputs to the “Binomial” model are the same as for “Black-Scholes”, such as trading volatility, remaining term to maturity, market price, strike price, and risk free rates; all Level 2 inputs. However, a key input to the “Binomial” model (in our case, the “Monte Carlo Simulation”, for which we engage an independent valuation firm to perform) is the probability of a future capital raise which would trigger the Down Round Protection feature. By definition, this input assumption does not meet the requirements for Level 1 or Level 2 outlined above; therefore, the entire fair value calculation for the Series C Common Stock Warrants and the derivative features issued to Qualified Purchasers are deemed to be Level 3. This input to the Monte Carlo Simulation model, was developed with significant input from management based on its knowledge of the business, current financial position and the strategic business plan with its best efforts. As of December 31, 2015, the Company has determined that the Black-Scholes model valuation for the Series C warrants was not materially different than the Binomial model due to the remaining period before warrant expiration being less than 3 months and the current market price of the Company’s stock being in excess of the down round trigger price of $0.77. As a result, the valuation of the Series C warrants as of December 31, 2015 was performed using the Black-Scholes model to approximate the Binomial model valuation. The 714,285 Series C warrants that were unexercised as of the March 3, 2016 expiration date had $0 value as of June 30, 2016. The Company determined that the derivative features issued to the Qualified Purchasers as part of the Securities Purchase Agreement executed on March 10, 2016, which included 5,073,863 warrants (See Note 8), should be recorded as derivative liabilities. However, due to the 9.9% ownership restrictions at both the execution date and at June 30, 2016, the warrants to the Qualified Purchasers were not exercisable. Management has also determined that the likelihood of the Qualified Purchasers ownership percentage being reduced below the 9.9% maximum ownership is highly improbable during the term of the warrants. These factors, along with the anti-dilution protection were key inputs in the Monte Carlo simulation performed by an independent valuation firm. Also, as of June 30, 2016, the Non-Qualified Purchasers that were part of the same Securities Purchase Agreement dated March 10, 2016, which included 1,926,137 warrants, met the criteria of being indexed to the Company’s common stock and have been classified in stockholder’s equity. Estimating fair values of these derivative financial instruments requires the use of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are volatile and sensitive to changes in our trading market price, the trading market price of various peer companies and other key assumptions such as the probability of a capital raise for the Monte Carlo Simulation described above. Since derivative financial instruments are initially and subsequently carried at fair value, our operating results will reflect this sensitivity of internal and external factors. The key quantitative assumptions related to the Series C Common Stock Warrants, issued March 3, 2011 that expired on March 3, 2016, were as follows: December 31, 2015 Expected Life (Years) 0.2 Risk Free Rate 0.15% Volatility 38.06% Probability of a Capital Raise 100% The key quantitative assumptions related to the Securities Purchase Agreement, for the derivative features issued to the Qualified Purchasers issued March 10, 2016 are as follows: June 30, 2016 Expected Life (Years) 1.7 – 4.7 Risk Free Rate 0.82% Volatility 65.45% Probability of a Capital Raise 5% - 95% Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Financial assets and liabilities measured at fair value on a recurring basis (for the Company, only derivative liabilities related to common stock purchase warrants, issued directly in conjunction with debt and common and preferred stock are summarized below and disclosed on the balance sheet under Derivative liability: June 30, 2016 Fair Value Level 1 Level 2 Level 3 Derivative Liability – Common Stock Purchase Warrants: Promissory Notes $1,482 $1,482 Series D Preferred Stock 1,674,689 1,674,689 Series C Preferred Stock - - Qualified Purchaser derivative features $1,070,445 $1,070,445 Total $2,746,616 $1,676,171 $1,070,445 December 31, 2015 Fair Value Level 1 Level 2 Level 3 Derivative Liability – Common Stock Purchase Warrants: Promissory Notes $ 2,189 $ 2,189 Series D Preferred Stock 2,904,849 2,904,849 Series C Preferred Stock 633,046 633,046 Total $ 3,540,084 $2,907,038 $633,046 The Series C Preferred Stock change in Level 3 value from $633,046 as of December 31, 2015 to $0 as of June 30, 2016 consisted of a $493,124 decrease in value, with the balance of $139,922 reclassified to shareholder equity upon the exercise of the warrants. The Qualified Purchaser Level 3 derivative features were valued at $1,070,445 as of June 30, 2016, an increase of $471,217 from the $599,228 valuation as of March 31, 2016.

4. Acquisitions

4. Acquisitions	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Acquisitions	IPSA International, Inc. On February 6, 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IPSA International, Inc. (“IPSA”). On February 9, 2015, the Company and IPSA consummated and closed the Merger, which was accounted for as a business acquisition. Pursuant to the terms of the Merger Agreement, upon the closing of the Merger, the Corporation issued 10,000,000 shares of the Company’s common stock, valued at $13,300,000 to the stockholders of IPSA (the “Stock Consideration”), as well as paid $2,500,000 in cash to such stockholders. In conjunction with the closing of the Merger, the Company entered into a registration rights agreement with the stockholders of IPSA whereby the Company agreed to provide piggyback registration rights to the holders of the Stock Consideration. The Company also entered into an employment agreement with Dan Wachtler, the CEO of IPSA. The Company incurred acquisition related costs of $649,442 and these were included in operating expenses for the six months ended June 30, 2015. IPSA specializes in Anti-Money Laundering (“AML”) operational, investigative and remedial services, AML risk advisory and consulting services, conducting high-end investigations with expertise in services ranging from complex financial crime and intellectual property issues to conducting anti-bribery investigations or due diligence on a potential partner or customer. Additionally, IPSA provides investigative services related to passport issuances by foreign countries. IPSA has offices in the U.S., Canada, U.K., U.A.E. and Hong Kong and a talent base that is focused on assisting clients in making better-informed decisions to protect their investments and assets. The following table presents the final purchase price allocation: Consideration $ 15,800,000 Assets Acquired: Current Assets $ 11,798,564 Property and Equipment, net 29,180 Other long term assets 712,353 Intangible assets 6,580,464 Goodwill 11,324,069 Total assets acquired 30,444,565 Liabilities Assumed: Accounts Payable 1,546,117 Factored Receivables Obligation 6,488,748 Accrued Expenses 1,990,857 Dividends Payable 1,100,000 Deferred Income Tax – non current 3,287,524 Derivative – contingent value right 231,384 Total liabilities assumed 14,644,565 Net Assets Acquired $ 15,800,000 The acquired intangibles include customer relationships valued at $3,056,856 being amortized over 5 years, trademarks valued at $2,548,364 being amortized over 15 years and a non-compete agreement valued at $975,244 being amortized over 2 years. As a part of the purchase price allocation, the Company recorded net deferred tax assets, which were recorded on IPSA’s books at the time of acquisition, of approximately $556,000. In connection with the purchase price allocation, the Company recorded a deferred tax liability of approximately $2,842,000, with a corresponding increase to goodwill, for the tax effect of the acquired identifiable intangible assets from IPSA. This liability was recorded as there will be no future tax deductions related to the acquired intangibles but they will be amortized as described above for financial reporting purposes. Prior to the acquisition, the Company had determined that it was more likely than not that some portion or all of its deferred tax assets would not be realized and therefore had recorded a valuation allowance for the full amount of its deferred tax assets (which were $7,543,910 at December 31, 2014). Upon the acquisition, the Company evaluated the likelihood that the acquired deferred tax assets and liabilities would be realized, and as a result of that evaluation, recorded an increase to the valuation allowance of approximately $474,000 related to the acquired deferred tax assets and recorded a reduction in the valuation allowance of approximately $2,842,000 related to the deferred tax liability associated with the acquired identifiable intangible assets. The net amount of these two adjustments to the Company’s valuation allowance against its net deferred tax assets was approximately $2,368,000 and is included in the income tax benefit on the Company’s consolidated statement of operations for the six months ended June 30, 2015.

5. Receivables sold with recour

5. Receivables sold with recourse	6 Months Ended
	Jun. 30, 2016
Receivables Sold With Recourse
Receivables sold with recourse	The Company’s IPSA subsidiary sells certain of its accounts receivable with full recourse to Advance Payroll Funding Ltd. (“Advance”). Advance retains portions of the proceeds from the receivable sales as reserves, which are released to the Company as the receivables are collected. Proceeds from sales of such receivables, net of amounts held in reserves, during the period from January 1, 2016 to June 30, 2016, totaled $5,044,297. The outstanding balance of full recourse receivables at June 30, 2016 was $4,540,436 and this amount is included in Accounts receivable on the consolidated balance sheet. The outstanding factored receivable obligations as of June 30, 2016 was $3,650,887. The outstanding balance of full course receivables and factored receivable obligations as of December 31, 2015 was $0. In the event of default, the Company is required to repurchase the entire balance of the full recourse receivables and is subject to fees. There are no limits on the amount of accounts receivable factoring available to the Company under the factoring agreement. The agreement with Advance automatically renewed for a two year period on January 10, 2016, with additional 24 month renewal intervals thereafter. The Company may only terminate the agreement as of the end of the next maturing term, or may provide at least sixty days written notice for an early termination of the agreement. In the event of early termination, the Company would be subject to an early termination fee calculated as the average monthly base fees earned by Advance for the three months having the highest total base fees throughout the previous twelve months, multiplied by the number of months (or portions thereof) between the early termination date and the end of the current term.

6. Pro-Forma Financial Informat

6. Pro-Forma Financial Information (unaudited)	6 Months Ended
	Jun. 30, 2016
Business Acquisition, Pro Forma Information [Abstract]
Pro-Forma Financial Information (unaudited)	The following unaudited pro-forma data summarizes the consolidated results of operations for the six months ended June 30, 2015 as if the purchase of IPSA International, Inc. had been completed on January 1, 2015. The pro-forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2015. Six Months Ended June 30, 2015 Net revenues $ 22,516,379 Operating (loss) (5,388,560) Net loss per share – basic and fully diluted $ (0.08)

7. Net Income (Loss) Per Share

7. Net Income (Loss) Per Share	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Net Income (Loss) Per Share	Basic net income or loss per common share is computed by dividing net income or loss for the period by the weighted-average number of common shares outstanding during the period. Diluted net income or loss per share is computed by dividing net income or loss available to common stockholders for the period by the weighted-average number of common and common equivalent shares, such as stock options, warrants and convertible securities outstanding during the period. Such common equivalent shares have not been included in the Company’s computation of net income (loss) per share when their effect would have been anti-dilutive based on the strike price as compared to the average trading price or due to the Company’s net losses attributable to common stockholders. Three Months Ended June 30, Three Months Ended June 30, 2016 2015 Basic: Numerator –net (loss) available to common stockholders $ (4,840,481) $ (1,142,335) Denominator – weighted-average shares outstanding 83,862,270 72,549,771 Net (loss) per share – Basic $ (0.06) $ (0.02) Six Months Ended June 30, Six Months Ended June 30, 2016 2015 Basic: Numerator –net income (loss) available to common stockholders $ (8,077,560) $ (828,525) Denominator – weighted-average shares outstanding 81,226,641 66,512,488 Net income (loss) per share – Basic $ (0.10) $ (0.01)

8. Stockholders' Equity

8. Stockholders' Equity	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Stockholders' Equity	Common Stock: Generally, the Company issues common stock in connection with acquisitions, as a part of equity financing transactions, as dividends on preferred stock, upon conversion of preferred shares to common stock and upon the exercise of stock options or warrants. There were no shares of common stock or warrants issued for equity financing during the three months ended June 30, 2016. During the six months ended June 30, 2016, the Company issued common stock and common stock warrants as a part of the following four equity financing transactions: On January 26, 2016, the Company entered into securities purchase agreements with a group of accredited investors, pursuant to which the Company was to issue 227,273 shares of common stock at a purchase price of $1.10 per share. In addition, the Company issued warrants to purchase up to 56,818 shares of the Corporation’s common stock in the aggregate, at an exercise price of $1.50 per share (the “Warrants”). The Warrants have a term of five years and may be exercised at any time from or after the date of issuance and contain customary, structural anti-dilution protection (i.e., stock splits, dividends, etc). Upon closing of this equity financing, the Company received proceeds of $250,000. On February 24, 2016, the Company received proceeds of $1,256,782 in connection with the Company's offer to amend and exercise warrants. In connection with the offering, warrant holders elected to exercise a total of 1,142,529 of their $1.125 warrants at a reduced exercise price of $1.10 per share. The Company issued new warrants to the participants to purchase 285,654 shares of common stock with a term of five (5) years and have an exercise price per share equal to $1.50. The Company incurred fees of $105,407 relative to this transaction. On March 3, 2016 the Company agreed to replace the 480,784 $1.50 warrants from the November 5, 2015, December 23, 2015 and January 26, 2016 financings with 1,923,137 five year warrants at $1.10 per share. These 1,923,137 warrants are subject to the Company’s customary, structural anti-dilution protections (i.e. stock splits, dividends, etc). On March 10, 2016, the Company entered into securities purchase agreements with accredited investors, advisory clients of Wellington Management Company, LLP In the event, prior to March 10, 2021, the Company issues “Additional Stock” (as defined in the Qualified Purchasers Securities Purchase Agreement) for per share consideration that is less than the Exercise Price of the Qualified Purchaser warrants, then the Exercise Price of each Warrant shall be reduced concurrently with such issue, to match the per share price of the dilutive issuance. Additional Stock as defined in the Securities Purchase Agreement excludes common stock issued for exercises of stock options and warrants, conversions of promissory notes, and certain other adjustments as defined in the agreement. Additionally, in the event, prior to March 10, 2018, the Company issues “Additional Stock” for a per share consideration of less than $1.10 resulting in a “Dilutive Issuance” as defined in the Securities Purchase Agreement, the Company shall issue shares to the Qualified Purchasers, for no additional consideration, based on a formula defined in the Securities Purchase Agreement. Furthermore, in the event, prior to March 10, 2018, the Company issues “Additional Stock” (as defined in the Qualified Purchasers Warrant Agreement) the number of warrant shares shall be increased by the number of shares necessary to ensure that the “Ownership Percentage” immediately following the issuance of any such shares shall remain equal to the Ownership Percentage immediately prior to such issuance. Ownership Percentage is calculated as the 5,073,863 warrant shares issued to Qualified Investors divided by 141,538,754 fully diluted shares agreed upon at the issuance date. Additional stock per the Warrant Agreement excludes all of the same items described above and also excludes shares issued for a strategic investment between $10 million and $25 million. There was no activity during the three months ended June 30, 2016 to cause the above referenced dilutive or derivative features to be initiated. Qualified Purchasers cannot exercise their warrants unless their beneficial ownership of outstanding common stock falls below 9.9%. As of the March 10, 2016 issuance date and June 30, 2016, the Qualified Purchasers beneficially owned approximately 14% of the Company’s common stock, thus, the warrants are not exercisable. If the Qualified Purchasers ownership of outstanding common stock falls below 9.9%, they are permitted to exercise warrants only to the extent that their beneficial ownership reaches 9.9%. Aside from legal fees, the Company incurred $397,699 in fees, plus the issuance of 202,955 $1.10 five year warrants, with an exercise price of $1.10 and in connection with this financing transaction and this amount is not reflected in the proceeds above. The table below summarizes the common stock and warrant activity referenced: Common Shares Warrants January 26, 2016 Securities Purchase Agreement 227,273 56,818 February 24, 2016 Warrant Exercises 1,142,529 (1,142,529) February 24, 2016 Warrant Issue 285,654 March 3, 2016 Warrants Replaced (480,784) March 3, 2016 Warrant Re-Issue 1,923,137 March 10, 2016 Stock Purchase Agreement 5,076,863 5,076,863 Warrants Issued for Services 202,955 Totals 6,446,665 5,922,114 7% Series B Convertible Preferred Stock: During 2010, the Company issued 1,200,000 shares of 7% Series B Convertible Preferred Stock (“Series B Preferred Stock”), along with 1,058,940 detachable warrants. The holders of shares of Series B Preferred Stock are entitled to receive a 7 percent annual dividend until the shares are converted to common stock. The warrants, immediately exercisable, are for a term of five years, and entitle the holder to purchase shares of common stock at an exercise price of $ 0.77 per share. During the three months ended March 31, 2015, 880,000 shares of Series B Preferred Stock were converted into 880,000 shares of common stock. As of June 30, 2016 and December 31, 2015, no shares of the Series B Preferred Stock remained outstanding. The Class B preferred stock accrued 7 percent per annum dividends. The dividends began accruing April 30, 2010, and were cumulative. Dividends were payable annually in arrears. At December 31, 2015, $6,857 of dividends had accrued on these shares. However, they are unrecorded on the Company’s books until declared. On February 26, 2016, the Company declared the dividends on its Series B preferred stock accrued as of December 31, 2015, and the Company paid the dividends in 4,969 shares of Company common stock during the three months ended March 31, 2016. There were no accrued dividends payable as of June 30, 2016. Series C Convertible Preferred Stock: During 2011, the Company issued 2,380,952 shares of Series C Convertible Preferred Stock; $.001 par value per share (“Series C Preferred Stock”), along with 8,217,141 warrants. Each share was priced at $2.10 and, when issued, included 3 warrants at an exercise price of $0.77 which expire in 5 years. The Series C Preferred Stock (a) is convertible into three shares of common stock, subject to certain adjustments, (b) pays 7 percent dividends per annum, payable annually in cash or shares of common stock, at the Company’s option, and (c) is automatically converted into common stock should the price of the Company’s common stock exceed $2.50 for 30 consecutive trading days. The warrants issued in connection with the Series C Preferred Stock contain full-ratchet anti-dilution provisions that require them to be recorded as a derivative instrument. On August 11, 2015, the Company executed an Exchange Agreement with the holders of the Series C Preferred Stock Warrants, replacing the original $0.77 warrants, with $1.20 warrants, which are not eligible for exercise until after February 11, 2017 and have an expiration date of August 11, 2018. Additionally, the Company did not provide full-ratchet anti-dilution provisions. As of June 30, 2016 and December 31, 2015, 2,380,952 shares of the Series C Preferred Stock remain outstanding. On February 9, 2016, the Company entered into a letter agreement (the “Agreement”) with Miriam Blech and River Charitable Remainder Unitrust f/b/o Isaac Blech, who together control all of the Company’s Class C Preferred Stock. Pursuant to the Agreement, the parties agreed to postpone payment of the annual dividend on the Company’s Class C Preferred Stock until five (5) business days following the day on which the Company holds an annual or special meeting of its stockholders where the stockholders approve a proposal to increase the authorized capital stock of the Company. Associated with the March 10, 2016 financing, Mr. Isaac Blech and his affiliates agreed that the Company does not have to reserve shares of common stock for the conversion of their Series C Preferred Stock and underlying warrants until five (5) business days following the day on which the Company holds an annual or special meeting of its stockholders where the stockholders approve a proposal to increase the authorized capital stock of the Company. In addition, Mr. Blech and his affiliates agreed not to convert the Series C Preferred Stock or exercise the underlying warrants into shares of the Company’s common stock, until such time as the Company’s stockholders approve a proposal to increase the authorized capital stock of the Company. Stock Options: The Company issued 35,000 stock options during the three months ended June 30, 2016 and 260,000 stock options during the three months ended June 30, 2015 under the 2008 Stock Incentive Plan. The Company’s results for the three months ended June 30, 2016 and 2015, include stock option based compensation expense of $201,433 and $161,867, respectively. These amounts are included within selling, general and administrative expenses on the Consolidated Statements of Operations. There were no tax benefits recognized with respect to that stock based compensation during the three months ended June 30, 2016 or 2015. The fair value of the 35,000 stock options granted during the three months ended June 30, 2016 were estimated using the Black Scholes option pricing model and using the following weighted-average assumptions: Exercise price $1.05 Risk free interest rate 2.39% Volatility 58.89% Expected term 5.5 Years Dividend yield None As of June 30, 2016 the Company has issued employees 2,114,000 contingent vesting options. The vesting of these options is contingent on shareholder approval of an increase in the amount of authorized shares of common stock. In the event that the shareholders do not approve the increase in authorized shares by December 7, 2016 the options will be cancelled. The Company has determined that due to the contingent vesting of these options, they are not included in the Company’s outstanding stock options at June 30, 2016. The following table represents the activity under the stock incentive plan as of June 30, 2016 and the changes during each period: Options Shares Weighted Average Exercise Price Outstanding at December 31, 2014 11,309,864 $0.81 Issued 3,140,000 $1.37 Exercised (3,053,397) $0.66 Forfeitures (1,036,383) $1.07 Outstanding at December 31, 2015 10,360,084 $1.01 Issued 352,874 $1.31 Exercised (622,000) $0.63 Forfeitures (215,600) $1.11 Outstanding at June 30, 2016 9,875,358 $1.02 Warrants: On June 10, 2016 the Company exchanged 250,000 previously issued warrants for services provided by Board Members of the Company. These original warrants had 5 year terms maturing on June 10, 2016, had exercise prices of $1.05 per warrant and qualified for equity treatment. The replacement warrants also qualified for equity treatment and have 3 year terms with a strike price of $1.50 per warrant. The incremental fair value of the replacement warrants totaling $60,175 was recorded as stock compensation expense for the three months ended June 30, 2016. During the three months ended June 30, 2016, the Company issued 480,000 extension warrants to the holders of the Promissory Notes originally scheduled to expire May 21, 2016 (extended to May 21, 2017). Management determined that this transaction constituted a debt extinguishment under ASC 470 and the $226,380 fair value of the warrants was recorded as a loss on extinguishment in the accompanying consolidated statement of operations for the three months ended June 30, 2016. No warrants to purchase common stock were exercised during the three months ended June 30, 2016. The following table represents the warrant activity as of June 30, 2016 and the changes during each period: Warrants Shares Weighted Average Exercise Outstanding at December 31, 2014 18,753,060 $1.06 Issued 15,848,643 $1.09 Exercised (1,546,308) $0.76 Cancelled (7,187,642) $0.80 Outstanding at December 31, 2015 25,867,753 $1.16 Issued 8,218,609 $1.13 Exercised (1,712,529) $0.99 Cancelled (1,684,595) $2.46 Outstanding at June 30, 2016 30,689,238 $1.09

9. Notes Payable

9. Notes Payable	6 Months Ended
	Jun. 30, 2016
Debt Disclosure [Abstract]
Notes Payable	In April 2016, the Company entered into Note Extension Agreement with existing note holders who held Promissory Notes for $1,600,000 scheduled to mature on May 21, 2016, whereby the note holders agreed to extend the maturity date of the Promissory notes to May 21, 2017. As consideration for the extension the note holders received 480,000 five year warrants with an exercise price of $1.10 per share. (See Note 8 – Warrants)

10. Segment Information

10. Segment Information	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
Segment Information	The Company operates in three business segments: the Cyber Solutions segment, the IPSA / Business Advisory Solutions segment and the Energy Solutions segment. The Cyber Solutions segment provides cyber security and advanced technology training services, operational support and consulting services. The IPSA / Business Advisory Solutions (IPSA/BAS) segment, which includes IPSA as of February 9, 2015, provides anti-money laundering operational, advisory and consulting services, investigative due diligence services and advisory services in the following areas: risk, data, organizational change and cyber. The Energy Solutions segment works with customers to assess, design and install processes and automation to address energy regulation, strategy, cost, and usage initiatives. The performance of the business is evaluated at the segment level. Cash, debt and financing matters are managed centrally. These segments operate as one from an accounting and overall executive management perspective, though each segment has senior management in place; however, they are differentiated from a marketing and customer presentation perspective, though cross-selling opportunities exist and continue to be pursued. Condensed summary segment information follows for the three and six months ended June 30, 2016 and 2015. Three Months Ended June 30, 2016 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions Total Revenue $ 1,121,267 $ 431,724 $ 8,646,995 $ 10,199,986 Income (loss) from Operations before Overhead $ (2,297,953) $ (66,893) $ (111,440) $(2,476,286) Allocated Corporate Overhead 130,243 51,305 1,198,965 1,380,513 Loss from Operations $ (2,428,196) $ (118,198) $ (1,310,405) $ (3,856,799) Three Months Ended June 30, 2015 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions Total Revenue $ 682,689 $ 551,709 $ 6,751,586 $ 7,949,984 Income (loss) from Operations before Overhead $ (1,136,433) $ (61,787) $ (162,495) $ (1,360,715) Allocated Corporate Overhead 140,203 126,654 1,447,580 1,714,437 Loss from Operations $ (1,276,636) $ (188,441) $ (1,610,075) $(3,075,152) Six Months Ended June 30, 2016 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions Total Revenue $ 1,802,087 $ 636,716 $ 14,897,809 $ 17,336,612 Income (loss) from Operations before Overhead $ (4,873,541) $ (301,900) $ (243,370) $ (5,418,811) Allocated Corporate Overhead 266,748 92,406 2,452,264 2,811,418 Loss from Operations $ (5,140,289) $ (394,306) $ (2,695,634) $ (8,230,299) Assets $ 5,306,901 $ 1,670,991 $ 27,772,603 $ 34,750,495 Six Months Ended June 30, 2015 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions * Total Revenue $ 1,111,277 $ 1,074,639 $ 15,298,316 $ 17,484,232 Income (loss) from Operations before Overhead $ (2,139,402) $ (341,805) $ 874,168 $ (1,607,039) Allocated Corporate Overhead 919,658 278,980 3,004,256 4,202,894 Loss from Operations $ (3,059,060) $ (620,785) $ (2,130,087) $(5,809,932) Assets $ 4,407,940 $ 2,461,851 $ 32,357,460 $ 39,227,251 · IPSA revenues and expenses were consolidated effective as of February 9, 2015; therefore, the results of operations for 2015 reflect the results as of the February 9, 2015 acquisition date.

11. Commitments and Contingenci

11. Commitments and Contingencies	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Commitments and Contingencies	Platte River Insurance Company (“Platte River”) instituted an action on April 8, 2015, in the United States District Court for the District of Massachusetts in which Platte River claims that the Company signed as a co-indemnitor in support of surety bonds issued by Platte River on behalf of Prime Solutions for the benefit of Honeywell pursuant to Prime Solutions, Inc.’s (“Prime”) solar project located in Worcester Massachusetts (the “Prime Contract”). The Company filed its answer to the complaint, denying the allegations of Platte River. On February 1, 2016 the Company received a demand letter from Platte River for immediate payment of an $868,617 claim under the terms of the co-indemnity agreement. The Company continued to deny the allegations and did not agree to the demand. The Company’s maximum liability exposure under the bond was $1,412,544, if Prime failed to meet its contracted obligations. In October 2014, the Company determined it probable that Prime did fail to meet its contracted obligations under the Prime Contract, and therefore, the potential existed that the Company would have to meet outstanding Prime Contract obligations. On April 11, 2016, the Company settled this litigation with an agreement to pay $650,000, an amount that was initially accrued as a Selling, General and Administrative expense on the Consolidated Statement of Operations during 2014 and was still accrued for as of March 31, 2016. Per the settlement agreement the Company paid $325,000 on April 19, 2016. The original settlement agreement was modified and the remaining $325,000 was paid in two installments, $162,500 on July 15, 2016 and $162,500 on August 1, 2016. As of June 30, 2016 $325,000 remained in accrued expenses and other current liabilities. The Company and two senior executives of the Company are named as defendants in a class action proceeding filed on June 23, 2015, in the U.S. District Court for the Central District of California. On September 24, 2015, the U.S. District Court for the Central District of California granted a motion to transfer the lawsuit to the United States District Court for the District of Colorado. On October 14, 2015, the Court appointed David Hampton as Lead Plaintiff and approved Hampton’s selection of the law firm Levi & Korsinsky LLP as Lead Counsel. Plaintiff filed an Amended Complaint on January 4, 2016. The Amended Complaint alleges violations of the federal securities laws on behalf of a class of persons who purchased shares of the Company’s common stock between October 17, 2014 and June 15, 2015. In general, the Amended Complaint alleges that false or misleading statements were made or that there was a failure to make appropriate disclosures concerning the Company’ s cyber security business and products. On February 18, 2016, the Company filed a motion to dismiss Plaintiff’s Amended Complaint. Plaintiff filed an opposition to the motion to dismiss and the Company replied on May 4, 2016. On August 3, 2016, the U.S. Magistrate Judge issued a recommendation that the Court grant Plaintiff’s motion to strike certain exhibits from Defendants’ motion to dismiss, and on August 4, 2016, the U.S. Magistrate Judge issued a recommendation that the Court grant in part and deny in part Defendants’ motion to dismiss the Amended Complaint. Unless the parties agree otherwise, the parties have 14 days from the issuance of the recommendations within which to object to the recommendations. We cannot predict the outcome of this lawsuit; however, the Company believes the claims lack merit and intends to defend against the lawsuit vigorously. No l

12. Related Party Transactions

12. Related Party Transactions	6 Months Ended
	Jun. 30, 2016
Related Party Transactions [Abstract]
Related Party Transactions	Centurion Holdings, of which Mr. Grano, the Company’s Chairman and CEO, and a majority shareholder, has a sublease agreement for a portion of its office in New York with IPSA. The lease is at market rates of $21,609 per month and constitutes IPSA’s New York Office. The lease expires Aug 2018.

13. Liquidity and Capital Resou

13. Liquidity and Capital Resources	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Liquidity and Capital Resources	As of June 30, 2016, we had cash and cash equivalents of $984,199, compared to $795,682 at December 31, 2015, an increase of $188,517. The increase is primarily attributable to the proceeds from the equity financing transactions and warrant and stock option exercises during the first six months of 2016 which totaled approximately $7,000,000, offset by the net cash used in operations and investing of approximately $6,800,000. Our objective from a liquidity perspective is to use operating cash flows to fund day to day operations. In both the first six months of 2016 and 2015 we did not achieve this objective, as cash flow from operations in the first six months of 2016 and 2015 has been the net use of $6.3 million and $9.2 million, respectively. Our high use of cash has been predominantly caused by competitive pricing pressures decreasing gross margins for the IPSA/BAS business segments, costs associated with the 2015 IPSA acquisition and integration, costs for the ramp up of root9B, our cyber security subsidiary, the cyber solutions employee base and capital costs associated with the build out of the Adversarial Pursuit Center and other expansion related costs. New IPSA and Cyber Solutions client engagements in the first six months of 2016, while increasing revenues for the three months ended June 30, 2016 versus 2015, have not scaled to the revenue and gross margin levels that the Company expected in providing sufficient resources to significantly improve the Company’s liquidity position. Continued investments in the Cyber Solutions business segment and the reduced revenue and gross margin forecasts have resulted in the Company’s need to raise additional capital. The Company continues to pursue available options for obtaining additional financing. However, no assurances can be given that the Company will be successful in obtaining the necessary financing. Without additional funding, the issues of not generating material revenue increases and having negative operating cash flows, among other issues, raise substantial doubt about our ability to continue as a “going concern.”

14. Goodwill and Intangibles Im

14. Goodwill and Intangibles Impairment	6 Months Ended
	Jun. 30, 2016
Goodwill And Intangibles Impairment
Goodwill and Intangibles Impairment	The Company completes an annual impairment analysis each year by applying both Step 1 and Step 2 tests, as applicable, according to FASB ASC 350. The annual impairment testing date has been October 1 st th Due to the limited time period from recent commencement of our impairment analysis to the date of this filing, and the complexities involved in estimating the fair value of certain assets and liabilities, the Company has not finalized its impairment analysis as of August 16, 2016. The Company will complete a formal impairment analysis in accordance with ASC 350, Intangibles - Goodwill and Other, during the third quarter of 2016 and, if required, recognize any impairment charge at that time. The extent of any impairment charge, if needed, can not be determined as of August 16, 2016.

15. Subsequent Events

15. Subsequent Events	6 Months Ended
	Jun. 30, 2016
Subsequent Events [Abstract]
Subsequent Events	On July 15, 2016 the Company allowed three departing members of the Board of Directors to exchange a total of 325,000 fully vested options in the Company’s common stock, for 325,000 $1.50 three year warrants.

3. Fair Value Measurements (Tab

3. Fair Value Measurements (Tables)	6 Months Ended
	Jun. 30, 2016
Fair Value Measurements Tables
Assumptions related to the Series C Common Stock Warrants	December 31, 2015 Expected Life (Years) 0.2 Risk Free Rate 0.15% Volatility 38.06% Probability of a Capital Raise 100%
Key assumptions for valuation of derivative liabilities	June 30, 2016 Expected Life (Years) 1.7 – 4.7 Risk Free Rate 0.82% Volatility 65.45% Probability of a Capital Raise 5% - 95%
Financial assets and liabilities measured at fair value on a recurring basis	June 30, 2016 Fair Value Level 1 Level 2 Level 3 Derivative Liability – Common Stock Purchase Warrants: Promissory Notes $1,482 $1,482 Series D Preferred Stock 1,674,689 1,674,689 Series C Preferred Stock - - Qualified Purchaser derivative features $1,070,445 $1,070,445 Total $2,746,616 $1,676,171 $1,070,445 December 31, 2015 Fair Value Level 1 Level 2 Level 3 Derivative Liability – Common Stock Purchase Warrants: Promissory Notes $ 2,189 $ 2,189 Series D Preferred Stock 2,904,849 2,904,849 Series C Preferred Stock 633,046 633,046 Total $ 3,540,084 $2,907,038 $633,046

4. Acquisitions (Tables)

4. Acquisitions (Tables)	6 Months Ended
	Jun. 30, 2016
Acquisitions Tables
Purchase Price Allocation	Consideration $ 15,800,000 Assets Acquired: Current Assets $ 11,798,564 Property and Equipment, net 29,180 Other long term assets 712,353 Intangible assets 6,580,464 Goodwill 11,324,069 Total assets acquired 30,444,565 Liabilities Assumed: Accounts Payable 1,546,117 Factored Receivables Obligation 6,488,748 Accrued Expenses 1,990,857 Dividends Payable 1,100,000 Deferred Income Tax – non current 3,287,524 Derivative – contingent value right 231,384 Total liabilities assumed 14,644,565 Net Assets Acquired $ 15,800,000

6. Pro-Forma Financial Inform24

6. Pro-Forma Financial Information (unaudited) (Tables)	6 Months Ended
	Jun. 30, 2016
Business Acquisition, Pro Forma Information [Abstract]
Unaudited pro-forma data	Six Months Ended June 30, 2015 Net revenues $ 22,516,379 Operating (loss) (5,388,560) Net loss per share – basic and fully diluted $ (0.08)

7. Net Income (Loss) Per Share

7. Net Income (Loss) Per Share (Tables)	6 Months Ended
	Jun. 30, 2016
Net Income Loss Per Share Tables
Computation of net income (loss) per share	Three Months Ended June 30, Three Months Ended June 30, 2016 2015 Basic: Numerator –net (loss) available to common stockholders $ (4,840,481) $ (1,142,335) Denominator – weighted-average shares outstanding 83,862,270 72,549,771 Net (loss) per share – Basic $ (0.06) $ (0.02) Six Months Ended June 30, Six Months Ended June 30, 2016 2015 Basic: Numerator –net income (loss) available to common stockholders $ (8,077,560) $ (828,525) Denominator – weighted-average shares outstanding 81,226,641 66,512,488 Net income (loss) per share – Basic $ (0.10) $ (0.01)

8. Stockholders' Equity (Tables

8. Stockholders' Equity (Tables)	6 Months Ended
	Jun. 30, 2016
Stockholders Equity Tables
Summary of the common stock and warrant activity	Common Shares Warrants January 26, 2016 Securities Purchase Agreement 227,273 56,818 February 24, 2016 Warrant Exercises 1,142,529 (1,142,529) February 24, 2016 Warrant Issue 285,654 March 3, 2016 Warrants Replaced (480,784) March 3, 2016 Warrant Re-Issue 1,923,137 March 10, 2016 Stock Purchase Agreement 5,076,863 5,076,863 Warrants Issued for Services 202,955 Totals 6,446,665 5,922,114
Share-Based Payment Award, Stock Options, Valuation Assumptions	Exercise price $1.05 Risk free interest rate 2.39% Volatility 58.89% Expected term 5.5 Years Dividend yield None
Schedule of Stock Incentive Plan	Options Shares Weighted Average Exercise Price Outstanding at December 31, 2014 11,309,864 $0.81 Issued 3,140,000 $1.37 Exercised (3,053,397) $0.66 Forfeitures (1,036,383) $1.07 Outstanding at December 31, 2015 10,360,084 $1.01 Issued 352,874 $1.31 Exercised (622,000) $0.63 Forfeitures (215,600) $1.11 Outstanding at June 30, 2016 9,875,358 $1.02
Schedule of Warrants Activity under incentive plan	Warrants Shares Weighted Average Exercise Outstanding at December 31, 2014 18,753,060 $1.06 Issued 15,848,643 $1.09 Exercised (1,546,308) $0.76 Cancelled (7,187,642) $0.80 Outstanding at December 31, 2015 25,867,753 $1.16 Issued 8,218,609 $1.13 Exercised (1,712,529) $0.99 Cancelled (1,684,595) $2.46 Outstanding at June 30, 2016 30,689,238 $1.09

10. Segment Information (Tables

10. Segment Information (Tables)	6 Months Ended
	Jun. 30, 2016
Segment Information Tables
Summary of segment information	Three Months Ended June 30, 2016 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions Total Revenue $ 1,121,267 $ 431,724 $ 8,646,995 $ 10,199,986 Income (loss) from Operations before Overhead $ (2,297,953) $ (66,893) $ (111,440) $(2,476,286) Allocated Corporate Overhead 130,243 51,305 1,198,965 1,380,513 Loss from Operations $ (2,428,196) $ (118,198) $ (1,310,405) $ (3,856,799) Three Months Ended June 30, 2015 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions Total Revenue $ 682,689 $ 551,709 $ 6,751,586 $ 7,949,984 Income (loss) from Operations before Overhead $ (1,136,433) $ (61,787) $ (162,495) $ (1,360,715) Allocated Corporate Overhead 140,203 126,654 1,447,580 1,714,437 Loss from Operations $ (1,276,636) $ (188,441) $ (1,610,075) $(3,075,152) Six Months Ended June 30, 2016 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions Total Revenue $ 1,802,087 $ 636,716 $ 14,897,809 $ 17,336,612 Income (loss) from Operations before Overhead $ (4,873,541) $ (301,900) $ (243,370) $ (5,418,811) Allocated Corporate Overhead 266,748 92,406 2,452,264 2,811,418 Loss from Operations $ (5,140,289) $ (394,306) $ (2,695,634) $ (8,230,299) Assets $ 5,306,901 $ 1,670,991 $ 27,772,603 $ 34,750,495 Six Months Ended June 30, 2015 Cyber Solutions Energy Solutions IPSA / Business Advisory Solutions * Total Revenue $ 1,111,277 $ 1,074,639 $ 15,298,316 $ 17,484,232 Income (loss) from Operations before Overhead $ (2,139,402) $ (341,805) $ 874,168 $ (1,607,039) Allocated Corporate Overhead 919,658 278,980 3,004,256 4,202,894 Loss from Operations $ (3,059,060) $ (620,785) $ (2,130,087) $(5,809,932) Assets $ 4,407,940 $ 2,461,851 $ 32,357,460 $ 39,227,251

3. Fair Value Measurements (Det

3. Fair Value Measurements (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Series C Common Stock Warrants
Expected Life (Years)		2 months 12 days
Risk Free Rate		0.15%
Volatility		38.06%
Probability of a Capital Raise		100%
Derivative Liability
Risk Free Rate	0.82%
Volatility	65.45%
Derivative Liability | Minimum [Member]
Expected Life (Years)	1 year 8 months 12 days
Probability of a Capital Raise	.05
Derivative Liability | Maximum [Member]
Expected Life (Years)	4 years 8 months 12 days
Probability of a Capital Raise	.95

3. Fair Value Measurements (D29

3. Fair Value Measurements (Details 1) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Derivative Liability - Common Stock Purchase Warrants:
Promissory Notes	$ 1,482	$ 2,189
Series D Preferred Stock	1,674,689	2,904,849
Series C Preferred Stock	0	633,046
Qualified Purchaser derivative features	1,070,445
Total	2,746,616	3,540,084
Level 1
Derivative Liability - Common Stock Purchase Warrants:
Promissory Notes	0	0
Series D Preferred Stock	0	0
Series C Preferred Stock	0	0
Qualified Purchaser derivative features	0
Total	0	0
Level 2
Derivative Liability - Common Stock Purchase Warrants:
Promissory Notes	1,482	2,189
Series D Preferred Stock	1,674,689	2,904,849
Series C Preferred Stock	0	0
Qualified Purchaser derivative features	0
Total	1,676,171	2,907,038
Level 3
Derivative Liability - Common Stock Purchase Warrants:
Promissory Notes	0	0
Series D Preferred Stock	0	0
Series C Preferred Stock	0	633,046
Qualified Purchaser derivative features	1,070,445
Total	$ 1,070,445	$ 633,046

4. Acquisitions (Details)

4. Acquisitions (Details) - Root9B, LLC [Member]	Jun. 30, 2016USD ($)
Consideration	$ 15,800,000
Assets acquired:
Current assets	11,798,564
Property and equipment, net	29,180
Other long term assets	712,353
Intangible assets	6,580,464
Goodwill	11,324,069
Total assets acquired	30,444,565
Liabilities Assumed:
Accounts payable	1,546,117
Factored Receivables Obligation	6,488,748
Accrued Expenses	1,990,857
Dividends Payable	1,100,000
Deferred Income Tax - non current	3,287,524
Derivative - contingent value right	231,384
Total liabilities assumed	14,644,565
Net assets acquired	$ 15,800,000

5. Receivables sold with reco31

5. Receivables sold with recourse (Details Narrative) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Receivables Sold With Recourse
Full recourse receivables	$ 4,540,436	$ 0
Factored receivables obligation	$ 3,650,887	$ 0

6. Pro-Forma Financial Inform32

6. Pro-Forma Financial Information (unaudited) (Details)	6 Months Ended
	Jun. 30, 2015USD ($)$ / shares
Pro-Forma Financial Information (unaudited):
Net revenues	$ 22,516,379
Operating (loss)	$ (5,388,560)
Net loss per share - basic and fully diluted | $ / shares	$ (.08)

7. Net Income (Loss) Per Shar33

7. Net Income (Loss) Per Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Basic:
Numerator - net income (loss) available to common stockholders	$ (4,840,481)	$ (1,142,335)	$ (8,077,560)	$ (828,525)
Denominator - weighted-average shares outstanding	83,862,270	72,549,771	81,226,641	66,512,488
Net income (loss) per share - Basic and diluted	$ (.06)	$ (.02)	$ (.10)	$ (.01)

8. Stockholders' Equity (Detail

8. Stockholders' Equity (Details)	6 Months Ended
	Jun. 30, 2016shares
Common Shares
Securities Purchase Agreement	227,273
Warrant Exercises	1,142,529
Warrant Issue	0
Warrants Replaced	0
Warrant Re-Issue	0
Stock Purchase Agreement	5,076,863
Warrants Issued for Services	0
Totals	6,446,665
Warrant
Securities Purchase Agreement	56,818
Warrant Exercises	(1,142,529)
Warrant Issue	285,654
Warrants Replaced	(480,784)
Warrant Re-Issue	1,923,137
Stock Purchase Agreement	5,076,863
Warrants Issued for Services	202,955
Totals	5,922,114

8. Stockholders' Equity (Deta35

8. Stockholders' Equity (Details 1) - Stock Option	3 Months Ended
	Jun. 30, 2016USD ($)$ / shares
Exercise price | $ / shares	$ 1.05
Risk free interest rate	2.39%
Volatility	58.89%
Expected term	5 years 6 months
Dividend yield | $	$ 0

8. Stockholders' Equity - Stock

8. Stockholders' Equity - Stock Options (Details 2) - Stock Options [Member] - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Options
Outstanding beginning balance	10,360,084	11,309,864
Issued	352,874	3,140,000
Exercised	(622,000)	(3,053,397)
Forfeitures	(215,600)	(1,036,383)
Outstanding ending balance	9,875,358	10,360,084
Weighted Average Exercise Price
Outstanding beginning balance	$ 1.01	$ .81
Issued	1.31	1.37
Exercised	.63	.66
Forfeitures	1.11	1.07
Outstanding ending balance	$ 1.02	$ 1.01

8. Stockholders' Equity - Warra

8. Stockholders' Equity - Warrants (Details 3) - Warrant [Member] - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Warrants
Outstanding beginning balance	25,867,753	18,753,060
Issued	8,218,609	15,848,643
Exercised	(1,712,529)	(1,546,308)
Cancelled	(1,684,595)	(7,187,642)
Outstanding ending balance	30,689,238	25,867,753
Weighted Average Exercise Price
Outstanding beginning balance	$ 1.16	$ 1.06
Issued	1.13	1.09
Exercised	.99	.76
Cancelled	2.46	.80
Outstanding ending balance	$ 1.09	$ 1.16

8. Stockholders' Equity (Deta38

8. Stockholders' Equity (Details Narrative) - USD ($)	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
7% Series B Convertible Preferred Stock
Preferred Stock, Shares Outstanding	0		0
Stock Options and Warrants
Warrants issued to purchase shares of common stock in exchange for service	250,000
Compensation expense	$ 60,175
Warrants exercised	0
Proceeds from warrants exercised	$ 0
2008 Stock Incentive Plan
Stock Options and Warrants
Stock options issued	35,000	260,000
Compensation expense	$ 201,433	$ 161,867
Series B Convertible Preferred Stock
7% Series B Convertible Preferred Stock
Preferred Stock, Shares Outstanding	0		0
Series C Convertible Preferred Stock
7% Series B Convertible Preferred Stock
Preferred Stock, Shares Outstanding	2,380,952		2,380,952

10. Segment Information (Detail

10. Segment Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue
Revenue	$ 10,199,986	$ 7,949,984	$ 17,336,612	$ 17,484,232
Income (loss) from Operations before Overhead	(2,476,286)	(1,360,715)	(5,418,811)	(1,607,039)
Allocated Corporate Overhead	1,380,513	1,714,437	2,811,418	4,202,894
Loss from Operations	(3,856,799)	(3,075,152)	(8,230,229)	(5,809,932)
Assets			34,750,495	39,227,251
Cyber Solutions
Revenue
Revenue	1,121,267	682,689	1,802,087	1,111,277
Income (loss) from Operations before Overhead	(2,297,953)	(1,136,433)	(4,873,541)	(2,139,402)
Allocated Corporate Overhead	130,243	140,203	266,748	919,658
Loss from Operations	(2,428,196)	(1,276,636)	(5,140,289)	(3,059,060)
Assets			5,306,901	4,407,940
Energy Solutions [Member]
Revenue
Revenue	431,724	551,709	636,716	1,074,639
Income (loss) from Operations before Overhead	(66,893)	(61,787)	(301,900)	(341,805)
Allocated Corporate Overhead	51,305	126,654	92,406	278,980
Loss from Operations	(118,198)	(188,441)	(394,306)	(620,785)
Assets			1,670,991	2,461,851
IPSA Business Advisory Solutions [Member]
Revenue
Revenue	8,646,995	6,751,586	14,897,809	15,298,316
Income (loss) from Operations before Overhead	(111,440)	(162,495)	(243,370)	874,168
Allocated Corporate Overhead	1,198,965	1,447,580	2,452,264	3,004,256
Loss from Operations	$ (1,310,405)	$ (1,610,075)	(2,695,634)	(2,130,087)
Assets			$ 27,772,603	$ 32,357,460