root9B (RTNB) 10-Q 7 Jul 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Jun. 28, 2017
Document And Entity Information
Entity Registrant Name	root9B Holdings, 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		6,100,275
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
CURRENT ASSETS:
Cash and cash equivalents	$ 1,372,028	$ 1,445,028
Accounts receivable, net	1,097,800	1,664,808
Cost and estimated earnings in excess of billings	505,160	298,814
Assets held for sale	8,645,897	10,259,963
Prepaid expenses and other current assets	379,732	369,332
Total current assets	12,000,617	14,037,945
Property and Equipment - at cost less accumulated depreciation	2,260,257	2,417,456
OTHER ASSETS:
Goodwill	2,307,700	2,307,700
Intangible assets, net	38,635	49,372
Investment in cost-method investee	100,000	100,000
Deposits and other assets	134,003	130,554
Total other assets	2,580,338	2,587,626
TOTAL ASSETS	16,841,212	19,043,027
CURRENT LIABILITIES:
Notes Payable	0	1,600,000
Related Party Note Payable	745,000	500,000
Accounts payable	2,114,779	1,932,813
Billings in excess of costs and estimated earnings	602,760	676,232
Liabilities held for sale	3,009,998	3,713,919
Accrued expenses and other current liabilities	1,775,860	1,900,364
Total current liabilities	8,248,397	10,323,328
NONCURRENT LIABILITIES:
Long term debt, net of discount of $3,744,604 and $2,810,103, respectively	5,026,396	2,960,897
Notes payable	1,600,000	0
Derivative liability	929,341	1,692,053
Total noncurrent liabilities	7,555,737	4,652,950
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 30,000,000 shares authorized, 6,100,275 shares issued and outstanding	6,102	6,102
Additional paid-in capital	92,742,310	91,214,763
Deficit	(92,116,930)	(87,574,127)
Accumulated other comprehensive income	405,596	420,011
Total stockholders' equity	1,037,078	4,066,749
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 16,841,212	$ 19,043,027

CONSOLIDATED BALANCE SHEETS (U3

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Long term debt discount	$ 3,744,604	$ 2,810,103
STOCKHOLDERS' EQUITY:
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	6,100,275	6,100,275
Common stock, shares outstanding	6,100,275	6,100,275

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Net revenue	$ 2,654,284	$ 2,031,393
Operating expenses:
Direct cost of revenue	2,383,529	2,435,503
Selling, general and administrative	4,168,750	3,321,729
Depreciation and amortization	178,347	167,648
Total operating expenses	6,730,626	5,924,880
Loss from operations	(4,076,342)	(3,893,487)
Other (expense) income:
Derivative income	762,712	1,260,549
Interest expense, net	(441,745)	(76,136)
Other (expense) income	(15,887)	13,219
Total other (expense) income	305,080	1,197,632
Loss from continuing operations before taxes	(3,771,262)	(2,695,855)
Income tax expense	0	(51,905)
Loss from continuing operations	(3,771,262)	(2,747,760)
Loss from discontinued operations, net of taxes	(771,541)	(482,462)
Net loss	(4,542,803)	(3,230,222)
Preferred stock dividends	0	(6,857)
Net loss available to common stockholders	$ (4,542,803)	$ (3,237,079)
Basic loss per common share from:
Loss per share from continuing operations	$ (0.62)	$ (0.53)
Loss per share from discontinued operations	(0.13)	(0.09)
Net loss per share	(0.74)	(0.62)
Diluted loss per common share from:
Loss per share from continuing operations	(0.62)	(0.53)
Loss per share from discontinued operations	(0.13)	(0.09)
Net loss per share	$ (0.74)	$ (0.62)
Weighted average number of shares:
Basic	6,100,275	5,239,400
Diluted	6,100,275	5,239,400

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements Of Comprehensive Income Loss
Net Loss	$ (4,542,803)	$ (3,230,222)
Other comprehensive expense:
Foreign currency translation loss	(14,415)	(14,814)
Other comprehensive expense	(14,415)	(14,814)
Comprehensive loss	$ (4,557,218)	$ (3,245,036)

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net loss	$ (4,542,803)	$ (3,230,222)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	178,347	510,033
Amortization of debt discount	225,329	35,584
Increase in cash surrender value of officers' life insurance	0	(12,266)
Income from change in value of derivatives	(762,712)	(1,260,549)
Stock option compensation expense	367,717	358,409
Loss on sale of fixed assets	21,148	0
Loss on assets held for sale	164,823	0
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable	2,217,072	(3,034,674)
Decrease (increase) in marketable securities	0	(951)
Decrease (increase) in costs and estimated earnings in excess of billings	(206,346)	159,598
Decrease (increase) in prepaid expenses	51,124	61,307
Decrease (increase) in deposits and other assets	(6,042)	(19,549)
Increase (decrease) in accounts payable and accrued expenses	76,383	1,233,566
Increase (decrease) in factored receivables obligation	(709,312)	1,393,410
Increase (decrease) in billings in excess of costs and estimated earnings	(85,130)	(73,476)
Net cash used in operating activities	(3,010,402)	(3,879,780)
Cash flows from investing activities:
Purchases of property and equipment	(12,913)	(334,973)
Net cash used in investing activities	(12,913)	(334,973)
Cash flows from financing activities:
Warrants and Options Exercised	0	1,270,782
Common stock issuances	0	5,331,444
Convertible debt and related party note proceeds	3,245,000	0
Net cash provided by financing activities	3,245,000	6,602,226
Exchange loss on foreign currency	(14,415)	(14,814)
Net increase in cash	207,270	2,372,659
Cash - beginning of period, before discontinued operations	1,606,875	795,682
Cash - end of period, before discontinued operations	1,814,145	3,168,341
Less: Cash - end of period, discontinued operations	(442,117)	(279,877)
Cash - end of period, continuing operations	1,372,028	2,888,464
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for: Interest	161,408	14,290
Cash payments for: Income taxes	0	51,905
Summary of non-cash investing and financing activities:
Issuance of common stock for dividend payment on preferred stock	0	6,857
Fair Value of warrants issued to induce exercise of Series D warrants	0	84,525
Reclassification of Derivative warrant liability to equity	0	569,492
Debt modification adjustment due to Third Amendment to convertible promissory notes (debt discount) credited to additional paid-in capital	580,640	0
Fair value of warrants issued with 2017 Q1 convertible promissory notes (debt discount) credited to additional paid-in capital	500,815	0
Beneficial conversion feature with 2017 Q1 convertible promissory notes (debt discount) credited to additional paid-in capital	78,374	0
Fair Value of derivative features issued to Qualified Purchasers	$ 0	$ 599,228

1. Basis of Presentation and Ge

1. Basis of Presentation and General Information	3 Months Ended
	Mar. 31, 2017
Basis Of Presentation And General Information
Basis of Presentation and General Information	The accompanying unaudited interim consolidated financial statements of root9B Holdings, 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, 2016. 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 2016 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. Going Concern and Liquidity We had a net loss from continuing operations of $3,771,262 for the three months ended March 31, 2017 and $18,299,187 for the year ended December 31, 2016. Our working capital increased from $3,714,617 to $3,752,220 during the three months ended March 31, 2017, and $1,600,000 of our unsecured convertible promissory notes due on May 21, 2017 were extended to May 21, 2018. The Company has no existing lines of credit. During 2016, we incurred substantial costs in our efforts to grow the Cyber Solutions (“CS”) business segment. We hired additional personnel, engaged in strategic marketing and brand-building efforts, built-out the Adversary Pursuit Center (“APC”) and other new offices opened, incurred legal fees related to trademarks and patents, and engaged in extensive research and development projects to enhance the Orkos and HUNT software platforms. These investments in the Cyber Solutions segment were made in anticipation of revenue growth during 2017, of which, there can be no assurance. During the three months ended March 31, 2017, we incurred significant labor costs, software research and development, and advertising expenses as we continue to invest in and build out CS resources and expertise as we position this segment for future growth. We have not been able to secure enough CS contracts to support our continuing operations, and we anticipate requiring additional capital to grow our CS business segment, fund operating expenses, and make principal and interest payments on our promissory note obligations. During 2016 and early 2017, we took steps to mitigate these factors by: 1) Entering into various debt and equity financing arrangements described in our Annual Report on Form 10-K for 2016 and Notes 7 and 8 in this Form 10-Q. 2) Selling our Control Engineering, Inc., (“CEI”) subsidiary on December 31, 2016 and completing the sale of a substantial portion of our wholly-owned subsidiary IPSA International, Inc (“IPSA”) on April 30, 2017. See Note 4 “Discontinued Operations” and Note 13 “Subsequent Events” for further information. 3) Focusing 100% of our efforts on the growth of the Cyber Solutions contract pipeline. Despite the measures discussed above, our current levels of cash on hand, working capital and proceeds from the debt offerings in the first quarter of 2017 and the IPSA transaction has not been sufficient to alleviate our liquidity issues and, as a result, management has determined additional capital is required in order to sustain operations for one year beyond the issuance of these unaudited interim consolidated financial statements. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern for at least the next 12 months following the issuance of our financial statements and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. Revision of Previously-Issued Financial Statements During the quarter ended March 31, 2017, the Company revised its consolidated financial statements for 2016 to record an income tax benefit for discontinued operations related to an error identified in its income tax provision for the three months ended December 31, 2016. Additionally, the Company recorded a loss on assets held for sale for discontinued operations to arrive at the fair value of the net assets held for sale determined at December 31, 2016. As detailed below, the combined net effect of these adjustments were $0 and only affected discontinued operations. The Company assessed the effect of the above errors in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the errors were not material to any of the Company’s prior annual financial statements. The Company determined that the correction of the cumulative amounts of the errors would be material to the first quarter 2017 unaudited consolidated financial statements, and as such, the Company revised its previously-issued consolidated financial statements for 2016. All financial information contained in the accompanying notes to these unaudited interim consolidated financial statements has been revised to reflect the correction of these errors. The following table presents the effect of the aforementioned revision on the Company’s assets and liabilities classified as held for sale as reflected in the Consolidated Balance Sheets as of December 31, 2016: As of December 31, 2016 As Reported Revision As Revised Intangible assets $ 7,083,870 $ (696,429 ) $ 6,387,441 Total assets of the disposal group classified as held for sale $ 10,956,392 $ (696,429 ) $ 10,259,963 Accrued expenses and other current liabilities $ 2,225,342 $ (696,429 ) $ 1,528,913 Total liabilities of the disposal group classified as held for sale $ 4,410,348 $ (696,429 ) $ 3,713,919 Total net assets classified as held for sale $ 6,546,044 $ — $ 6,546,044 The following tables present the effect of the aforementioned revisions on the Company’s discontinued operations associated with CEI and IPSA as reflected in the Consolidated Statements of Operations for the year ended December 31, 2016: Year Ended December 31, 2016 As Reported Revision As Revised Goodwill impairment $ (7,215,181 ) $ (696,429 ) $ (7,911,610 ) Loss before income taxes (10,824,699 ) (696,429 ) (11,521,128 ) Income tax (expense) benefit (1,045,283 ) 696,429 (348,854 ) Loss from discontinued operations, net of taxes $ (11,869,982 ) $ — $ (11,869,982 ) In the fourth quarter of 2016, we determined that it would be appropriate to modify the presentation of certain descriptions within our Consolidated Statements of Operations to reflect our change in strategy to evolve into a pure-play cybersecurity company which provides cybersecurity and business advisory services. We believe the change does not represent an error in prior presentations; rather it is consistent with the change in our strategic focus. Periods presented herein are based on the revised presentation. The following table presents the effect of the aforementioned revisions on our Consolidated Statements of Operations as of March 31, 2016, and also reflects the presentation for discontinued operations of our IPSA and CEI subsidiaries. See Note 4 “Discontinued Operations.” March 31, 2016 As Previously Presented Adjustments As Revised Cost of revenues $ 2,765,518 $ (2,765,518 ) $ — Direct cost of revenues $ — $ 2,435,503 $ 2,435,503 Selling, general and administrative $ 2,991,714 $ 330,015 $ 3,321,729 Use of Estimates The preparation of the Company’s Consolidated unaudited 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.

2. Recent Accounting Pronouncem

2. Recent Accounting Pronouncements	3 Months Ended
	Mar. 31, 2017
Recent Accounting Pronouncements
Recent accounting pronouncements	In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases the lessee would recognize a straight-line lease expense. The standard is effective for annual periods beginning after December 15, 2018 using a modified retrospective approach. Early adoption is permitted. We are currently evaluating the impact that ASU 2016-02 may have on our consolidated financial statements and disclosures. In March 2016, the FASB issued ASU 2016-09, “Stock Compensation.” ASU 2016-09 identifies areas for simplification in accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The standard was effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2016-09 during the first quarter of 2017. As a result of the adoption of this standard, in the first quarter of 2017, we recognized deferred tax assets for the excess tax benefits that arose directly from tax deductions related to equity compensation greater than amounts recognized for financial reporting and also recognized an increase of an equal amount in the valuation allowance against those deferred tax assets. The adoption did not have any other material impacts on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash flows (Topic 230),” which changes how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-15 may have on its consolidated financial statements and has not elected early adoption as of the quarter ended March 31, 2017. In January 2017, the FASB issued ASU 2017-04, “Intangible-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the goodwill impairment test by eliminating the second step of the current two-step impairment test. ASU 2017-04 is effective for interim or annual goodwill impairment tests in fiscal years beginning after December 15, 2019 and is applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 may affect our financial statements to the extent that a goodwill impairment test results in impairment charges. Since January 1, 2017, 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.

3. Fair Value Measurements

3. Fair Value Measurements	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
Fair Value Measurements	Summarized information with respect to certain of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 is as follows: March 31, 2017 Fair Value Level 1 Level 2 Level 3 Derivative Liability: Series D common stock purchase warrants $ 94,169 $ — $ 94,169 $ — Qualified Purchaser common stock purchase warrants and anti-dilution provisions 835,172 — — 835,172 Total $ 929,341 $ — $ 94,169 $ 835,172 December 31, 2016 Fair Value Level 1 Level 2 Level 3 Derivative Liability: Series D common stock purchase warrants $ 471,134 $ — $ 471,134 $ — Qualified Purchaser common stock purchase warrants and anti-dilution provisions 1,220,919 — — 1,220,919 Total $ 1,692,053 $ — $ 471,134 $ 1,220,919 The table below provides a summary of the changes in fair value of derivative liabilities for the three months ended March 31, 2017 and 2016: Level 2 Inputs Level 3 Inputs Derivative liability - Series D Common Stock Purchase Warrants Total Fair Value Measurements Using Level 2 Inputs Qualified Purchasers from Q1 2016 PIPE Stock Warrants and Anti-dilution Provision Grand Total Fair Value Measurements Using Both Level 2 and Level 3 Inputs Balance December 31, 2016 $ 471,134 $ 471,134 $ 1,220,919 $ 1,692,053 Total unrealized (gains) or losses included in net income loss (376,965 ) (376,965 ) (385,747 ) (762,712 ) Initial fair value of derivative liability issuance — — — — Balance March 31, 2017 $ 94,169 $ 94,169 $ 835,172 $ 929,341 Level 2 Inputs Level 3 Inputs Derivative liability - Common Stock Purchase Warrants –Promissory Notes Derivative liability - Common Stock Purchase Warrants – Series D Preferred Stock Total Fair Value Measurements Using Level 2 Inputs Derivative liability - Common Stock Purchase Warrants – Series C Preferred Stock Qualified Purchasers from Q1 2016 PIPE Stock Warrants and Anti-dilution Provision Grand Total Fair Value Measurements Using Both Level 2 and Level 3 Inputs Balance December 31, 2015 $ 2,189 $ 2,904,849 $ 2,907,038 $ 633,046 $ — $ 3,540,084 Initial fair value of derivative liability issuance — — — — 599,228 599,228 Reclassification to equity — (429,570 ) (429,570 ) (139,922 ) — (569,492 ) Unrealized (gains) losses included in net loss 220 (767,645 ) (767,425 ) (493,124 ) — (1,260,549 ) Balance March 31, 2016 $ 2,409 $ 1,707,634 $ 1,710,043 $ — $ 599,228 $ 2,309,271 Series D Common Stock Purchase Warrants We use the Black-Scholes option valuation technique (Level 2 inputs) to value the warrants attached to certain promissory note issuances as this technique 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. The valuation using the Black-Scholes model does not differ materially from the valuation using a binomial valuation technique (such as a Monte Carlo Simulation - Level 3). Qualified Purchasers The Company determined that the warrants and anti-dilution provisions issued to the Qualified Purchasers as part of the Securities Purchase Agreement executed on March 10, 2016, should be recorded as derivative liabilities. However, due to the 9.9% ownership restrictions at both the execution date and at March 31, 2017, 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 probability of a capital raise triggering additional common share issuances to the Qualified Purchasers, were key inputs in the Monte Carlo simulation performed by an independent valuation firm in order to determine the fair value as of March 31, 2017 and December 31, 2016. The key quantitative assumptions related to the Securities Purchase Agreement, for the derivative features (warrants) issued to the Qualified Purchasers issued March 10, 2016 are as follows as of March 31, 2017 and December 31, 2016: March 31, December 31, 2017 2016 Expected Life (Years) 3.9 4.2 Risk Free Rate 1.60 % 1.60 % Volatility 72.87 % 75.30 % Probability of a Capital Raise 0%-95% 5%-95%

4. Discontinued Operations

4. Discontinued Operations	3 Months Ended
	Mar. 31, 2017
Discontinued Operations
Discontinued Operations	In 2016, we announced a strategic shift to evolve into a pure-play cybersecurity company. In August 2016, our Board of Directors approved the evaluation of the divestiture of IPSA and the remaining components of the Energy Solutions businesses. A plan to divest those business units was approved during 2016. Our Control Engineering, Inc. (“CEI”) subsidiary was sold on December 31, 2016 and we sold a portion of our IPSA subsidiary on April 30, 2017. See Note 13 “Subsequent Events” for further information. As of March 31, 2017, and December 31, 2016 the assets and liabilities of IPSA are classified as held for sale in the Consolidated Balance Sheets and reflect all adjustments considered necessary to represent fair market value less the costs of disposal. The operating results for CEI and IPSA are presented as discontinued operations in the Consolidated Statements of Operations. The following table represents the components of the results from discontinued operations associated with CEI and IPSA as reflected in the Consolidated Statements of Operations: Three Months Ended March 31, 2017 (Revised) 2016 Net revenue $ 2,114,541 $ 5,105,233 Direct cost of revenue 1,332,118 3,842,811 Selling, general and administrative 1,162,757 1,400,421 Depreciation and amortization — 342,384 Loss from operations (380,334 ) (480,383 ) Loss on assets held for sale (164,823 ) — Interest expense, net (19,572 ) (20,382 ) Other (expenses) income (269,314 ) 53,058 Loss before income taxes (834,043 ) (447,707 ) Income tax benefit (expense) 62,502 (34,755 ) Loss from discontinued operations, net of taxes $ (771,541 ) $ (482,462 ) Following is a summary of the assets and liabilities classified as held for sale as reflected in the Consolidated Balance Sheets in connection with the sale of CEI and IPSA as of: March 31, (Revised) December 31, 2017 2016 Carrying amounts of major classes of assets: Cash and cash equivalents $ 442,117 $ 161,847 Accounts receivable, net 1,192,999 2,818,948 Property and equipment, net 618,947 639,461 Goodwill and intangible assets 6,222,618 6,387,441 Other 169,216 252,266 Total assets of the disposal group classified as held for sale $ 8,645,897 $ 10,259,963 Carrying amounts of major classes of liabilities: Accounts payable $ 1,632,806 $ 1,354,194 Accrued expenses and other current liabilities 1,255,691 1,528,913 Factored receivables obligation 121,501 830,812 Total liabilities of the disposal group classified as held for sale $ 3,409,998 $ 3,713,919 Total net assets classified as held for sale $ 5,635,899 $ 6,546,044 The following table represents the components of the results from discontinued operations associated with the sale of CEI and IPSA as reflected in the Consolidated Statements of Cash Flows: Three Months Ended March 31, 2017 2016 Significant operating items: Depreciation and amortization $ — $ 342,384 Loss on assets held for sale $ 164,823 $ — Loss on disposal of property and equipment $ 21,148 $ — Changes in operating assets and liabilities $ 865,840 $ (425,352 ) Significant investing items: Capital expenditures $ — $ (168,117 )

5. Earnings Per Share and Equit

5. Earnings Per Share and Equity	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
Earnings Per Share and Equity	Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net 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 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 March 31, 2017 2016 Basic: Numerator –net (loss) attributable to common stockholders $ (4,542,803 ) $ (3,237,079 ) Denominator – weighted-average shares outstanding 6,100,275 5,239,400 Net loss per share – Basic $ (0.74 ) $ (0.62 ) Warrants The following table represents the warrant activity as of March 31, 2017 and the changes during each period: Weighted Average Warrants Shares Exercise Price Outstanding at December 31, 2015 1,724,517 $ 17.40 Issued 843,896 $ 15.64 Exercised (114,169 ) $ 14.85 Cancelled (118,973 ) $ 35.70 Outstanding at December 31, 2016 2,335,271 $ 15.90 Issued 198,092 $ 10.00 Exercised — $ — Cancelled (43,534 ) $ 14.08 Outstanding at March 31, 2017 2,489,829 $ 15.34 During the three months ended March 31, 2017, warrants were issued with Secured Convertible Promissory Notes pursuant to the Securities Purchase Agreement, and issued in conjunction with the Third Amendment to the Secured Convertible Promissory Notes. See Note 8 “Long Term Debt” for additional information Preferred Stock The Company has authorized shares of three classes of preferred stock of which no shares were issued or outstanding at March 31, 2017 and December 31, 2016. Further detail can be found in Note 13 “Stockholders Equity” under “Part II—Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2016.

6. Stock Options

6. Stock Options	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
Stock Options	The Company issued 11,867 stock options for services during the three months ended March 31, 2017 under the 2008 Stock Incentive Plan. The Company’s results for the three months ended March 31, 2017 and 2016, include stock based compensation expense of $367,717 and $ 358,409 The fair value of the 11,867 stock options granted during the three months ended March 31, 2017 were estimated using the Black Scholes option pricing model and using the following weighted-average assumptions: Exercise price $6.42 - $10.86 Risk free interest rate 2.05% - 2.20% Volatility 89.38% - 91.80% Expected term 5.5 years Dividend yield None The following table represents the activity under the stock incentive plan as of March 31, 2017 and the changes during each period: Weighted Average Options Shares Exercise Price Outstanding at December 31, 2015 690,672 $ 15.15 Issued 571,378 $ 13.08 Exercised (46,800 ) $ 9.60 Forfeitures (167,843 ) $ 14.56 Outstanding at December 31, 2016 1,047,407 $ 14.18 Issued 11,867 $ 7.03 Exercised — $ — Forfeitures (129,246 ) $ 18.33 Outstanding at March 31, 2017 930,028 $ 13.58

7. Notes Payable and Related Pa

7. Notes Payable and Related Party Notes Payable	3 Months Ended
	Mar. 31, 2017
Debt Disclosure [Abstract]
Notes Payable and Related Party Notes Payable	Between October 23, 2014 and December 31, 2016, we issued $1,800,000 of 10% Convertible Promissory Notes (the “Promissory Notes”) and warrants to purchase approximately 85,000 shares of our common stock (the “Warrants”) to accredited investors. The Promissory Notes had an initial term of 12 months, pay interest semi-annually at 10% per annum and can be voluntarily converted by the holder into shares of common stock at an exercise price of $16.80 per share. The Warrants have an exercise price of $16.50 - $16.80 per share and have an original term of five years. Initially the fair value of the warrants which qualified for equity classification, was recorded as a debt discount and credited to Additional Paid-In Capital. During the second quarter of 2015, $200,000 of the Promissory Notes were converted to common stock. In April 2016, we entered into a Note Extension Agreement and we 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 during the year ended December 31, 2016. On May 21, 2017, the Promissory Notes maturity date was extended from May 21, 2017 to May 21, 2018, see Note 13 “Subsequent Events” for additional information. As of March 31, 2017, the balance is classified as non-current due to the extension. The outstanding amount at March 31, 2017 and December 31, 2016 was $1,600,000. On August 22, 2016, our Chairman and CEO loaned the Company $500,000. We issued an unsecured, non-convertible promissory note in the principal amount of $500,000, bearing interest at 4% per annum payable on or before August 22, 2017. The Company used the proceeds to fund working capital requirements and for general corporate purposes. The outstanding amount at March 31, 2017 and December 31, 2016 was $500,000. On February 8, 2017, our Chairman loaned the Company an additional $245,000. We issued an unsecured, non-convertible, promissory note in the principal amount of $245,000, bearing interest at the rate of 4.0% per annum maturing on February 9, 2018. The Company used the proceeds to fund working capital requirements and for general corporate purposes.

8. Long Term Debt

8. Long Term Debt	3 Months Ended
	Mar. 31, 2017
Long-term Debt, Unclassified [Abstract]
Long Term Debt	In September 2016 the Company entered into an offering of Secured Convertible Promissory Notes (the “Notes”) with an aggregate principal amount of up to $10,000,000, along with warrants to purchase shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), representing fifty percent (50%) warrant coverage (the “Warrants”), to certain accredited investors (the “Investors”), in a private placement, pursuant to a securities purchase agreement (the “Agreement”) by and between the Company and each Investor. The term of each Note is three years after issuance (the “Maturity Date”). Each Note accrues interest at a rate of 10% per annum, payable on each March 31, June 30, September 30 and December 31, commencing December 31, 2016 until the earlier of (i) the entire principal amount being converted or (ii) the Maturity Date. The interest payments shall be made in either cash or, at the holder’s option, in shares of Common Stock (the “Interest Payment Shares”) at a per share price equal to 85% of the average daily volume weighted average price of the Common Stock during the five consecutive trading day period immediately prior to the interest payment date, but in no event less than $12 per share. Following the date which is six months after the date of issuance, at the election of the holder, all principal and interest due and owing under each Note is convertible into shares of Common Stock at a conversion price equal to $12 (the “Conversion Shares” and, together with the Warrant Shares and the Interest Payment Shares, the “Shares”). The conversion price is subject to adjustment for stock splits, stock dividends, combinations, or similar events. Pursuant to a security agreement entered into concurrently with the Investors, the Notes are secured by substantially all of the Company’s assets, subject to certain exceptions including the assets related to and held by IPSA. The Company may prepay any portion of the outstanding principal amount of any Note and any accrued and unpaid interest, with the prior written consent of the holder, by paying to the holder an amount (the “Prepayment Amount”) equal to (i) if the prepayment date is prior to the first anniversary of the date of issuance (the “Anniversary Date”), (1) the unpaid principal to be repaid plus (2) any accrued but unpaid interest plus (3) an amount equal to the interest which has not accrued as of the prepayment date but would accrue on the principal to be repaid during the period beginning on the prepayment date and ending on the Anniversary Date of the then-outstanding principal amount of that Note or (ii) if the prepayment date is after the Anniversary Date, (1) the unpaid principal to be repaid plus (2) any accrued but unpaid interest plus (3) an amount equal to one-half of the interest which has not accrued as of the prepayment date but would accrue on the principal to be repaid during the period beginning on the prepayment date and ending on the Maturity Date. Pursuant to the terms of both the Notes and the Warrants, a holder may not issue Shares if, after giving effect to the conversion of the Notes or exercise of the warrants, as applicable, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the outstanding shares of Common Stock. In addition, in the event the Company consummates a consolidation or merger with or into another entity or other reorganization event in which the Common Stock is converted or exchanged for securities, cash or other property, or the Company sells, assigns, transfers, conveys or otherwise disposes of all or substantially all of its assets or the Company (other than the sale, merger or asset sale of IPSA) or another entity acquires 50% or more of the outstanding Common Stock, then following such event, (i) at their election within 30 days of consummation of the transaction, the holders of the Notes will be entitled to receive the Prepayment Amount, and (ii) the holders of the Warrants will be entitled to receive upon exercise of such Warrants the same kind and amount of securities, cash or property which the holders would have received had they exercised the Warrants immediately prior to such transaction. Any successor to the Company or surviving entity shall assume the Company’s obligations under the Notes and the Warrants. With, or within 30 days after, the consummation of a such a consolidation or merger, the Company or any Successor Entity, at the Holder’s option shall purchase or exchange for cash or an equal amount of securities or property all or any portion of any related warrants from the Holder, by paying the Holder an amount equal to the Black Scholes Value of the remaining unexercised portion of such warrant on the date of such a consolidation or merger. On December 22, 2016, the Company entered into an amendment (the “First Amendment”) to the Agreement that provided the Noteholders with a one-time option to partially redeem up to 50% of the Outstanding Amount (as defined in the Agreement) if cash proceeds received by the Company in connection with the IPSA transaction exceed certain threshold levels. We do not expect such proceeds to exceed the threshold levels established. On January 24, 2017, the Company entered into an amendment (the “Second Amendment”) to the Agreement which extended the date by which the last closing under the Agreement must occur from December 31, 2016 until March 31, 2017. On March 24, 2017, the Company entered into an amendment (the “Third Amendment”) to the Agreement which amended each of Notes and Warrants held by the Noteholders and requires the Company to comply with new financial covenants, including that the Company maintain a positive Working Capital (as defined in the Agreement) as of each month end and average cash on hand at least equal to the largest payroll during the preceding 90 days (subject to certain adjustments), and requires the Company to provide regular financial reports to the Noteholders (Collectively the “Covenants”). The Third Amendment amends the definition of conversion price of the Notes from $12.00 per share to $10.00 per share and reduces the per share price floor for any interest payments made in shares of common stock from $12.00 per share to $10.00 per share, and amends the exercise price of the Warrants from $12.00 per share to $10.00 per share. On March 31, 2017, the Company closed the offering after issuing Notes with an aggregate principal amount of $8,771,000 (the “Note Proceeds”), along with Warrants to purchase approximately 438,550 shares of Common Stock. The Company determined that the Note Proceeds must be allocated between the Notes and Warrants, based on the relative fair value of the Warrants, with the intrinsic value of the beneficial conversion feature of the Notes along with the relative fair value of the Warrants, being recorded as a debt discount. The Company accounted for the Third Amendment as a modification of debt and treated the additional value of $580,640 related to the difference in value of the Warrants and conversion feature before and after the Third Amendment as additional debt discount that, along with the unamortized debt discount on the Notes, will be amortized over the remaining life of the debt using the effective interest rate method. The debt discount balance was $3,744,604 and $2,810,103 as of March 31, 2017 and December 31, 2016, respectively, which was recoded as a reduction in long term debt on the Company’s balance sheet. During the three months ended March 31, 2017, the Company recognized $225,329 in interest expense associated with this amortization. On May 1, 2017, the Covenants were waived through July 31, 2017. In June 2017, the Company reached an agreement with the Holders of the Agreement which requires the Holders consent to amend any terms of the Notes or Warrants issued pursuant to the Purchase Agreement to be, individually or in aggregate, more favorable than the existing terms.

9. Balance Sheet Information

9. Balance Sheet Information	3 Months Ended
	Mar. 31, 2017
Balance Sheet Information
Balance Sheet Information	Certain amounts included in the Company’s consolidated balance sheets as of March 31, 2017 and December 31, 2016 consist of the following: March 31, 2017 December 31, 2016 Receivables, net: Accounts receivable $ 1,104,648 $ 1,664,808 Less: Allowance for doubtful accounts (6,848 ) — $ 1,097,800 $ 1,664,808 Property and equipment, net: Office equipment $ 863,051 $ 854,530 Furniture and fixtures 2,108,104 2,106,214 Computer software 286,226 286,226 Leasehold improvements 29,183 29,183 Land 181,371 181,371 Construction in progress - at cost 42,092 42,092 Less: Accumulated depreciation (1,249,770 ) (1,082,160 ) $ 2,260,257 $ 2,417,456 Accrued expenses and other current liabilities: Accrued payroll $ 882,820 $ 949,516 Accrued vacation 406,625 192,485 Other accrued liabilities 486,415 758,363 $ 1,775,860 $ 1,900,364 During the three months ended March 31, 2017 and 2016 the property and equipment depreciation expense was $167,609 and $278,319, respectively.

10. Segment Information

10. Segment Information	3 Months Ended
	Mar. 31, 2017
Segment Reporting [Abstract]
Segment Information	We define our segments as those operations whose results the chief operating decision maker (“CODM)” regularly reviews to analyze performance and allocate resources. We operate in two business segments: The Cyber Solutions segment and the Business Advisory Solutions segment. The Cyber Solutions segment provides cybersecurity and advanced training services, operational support and consulting services. The Business Advisory Solutions segment provides advisory and consulting services in the following areas: risk, data, organizational change and cyber. We measure the results of our segments using each segment’s net revenue and operating income before corporate allocations. Cash, debt and financing matters are managed centrally and these segments operate as one from an accounting and overall executive management perspective. Our CODM does not review asset information and such information is not considered when analyzing performance or allocating resources. Although each segment has senior management in place and they are differentiated from a marketing and customer presentation perspective, cross-selling opportunities exist and continue to be pursued. Condensed summary segment information follows for the three months ended March 31, 2017 and 2016: Three months ended March 31, 2017 Cyber Solutions Business Advisory Solutions Total Revenue from Continuing Operations $ 1,860,530 $ 793,754 $ 2,654,284 Income (Loss) from Continuing Operations before Overhead (2,346,180 ) 61,447 (2,284,733 ) Allocated Corporate Overhead 1,255,835 535,774 1,791,609 Loss from Continuing Operations $ (3,602,015 ) $ (474,327 ) $ (4,076,342 ) Three months ended March 31, 2016 Cyber Solutions Business Advisory Solutions Total Revenue from Continuing Operations $ 680,820 $ 1,350,573 $ 2,031,393 Income (Loss) from Continuing Operations before Overhead (2,577,587 ) 120,106 (2,457,481 ) Allocated Corporate Overhead 481,276 954,730 1,436,006 Loss from Continuing Operations $ (3,058,863 ) $ (834,624 ) $ (3,893,487 ) For the quarter ended March 31, 2017, one customer accounted for 12.5% of total consolidated revenue. For the quarter ended March 31, 2016, no individual customer accounted for 10% or more of our total consolidated revenues.

11. Commitments and Contingenci

11. Commitments and Contingencies	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
Commitments and Contingencies	The Company and two senior executives of the Company are named as defendants (the “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. On September 21, 2016 the United States District Court for the District of Colorado dismissed, with prejudice, the class action suit. On October 21, 2016, Plaintiff filed a notice of appeal to the decision. On March 8, 2017, the parties completed their briefing on Plaintiff’s appeal to the Tenth Circuit. The Tenth Circuit has granted the parties’ request for oral argument but no date has been scheduled. We cannot predict the outcome of this appeal; however, the Company believes the appeal lacks merit. No liability has been recorded in the financial statements for this matter. We are obligated under various operating leases for office space and equipment. We had no other material contractual obligations. We have several employment contracts in place with key management which are in the normal course of business.

12. Related Party Transactions

12. Related Party Transactions	3 Months Ended
	Mar. 31, 2017
Related Party Transactions [Abstract]
Related Party Transactions	The Company hired a shareholder to perform investor relations services. The total expense related to this vendor was $10,000 for the three months ended March 31, 2017 and the ending payable balance was $29,000 as of March 31, 2017. During October 2016, our root9B LLC CEO became a board member of one of the Company’s vendors that provides sales and marketing services. The total expenses related to this vendor and reflected in the consolidated statements of operations for the three months ended March 31, 2017 and 2016 were $55,000 and $29,000, respectively. We had prepaid expenses of $132,000 at March 31, 2017, and a payable of $150,000 at December 31, 2016, respectively. As of March 31, 2017, our CEO is no longer a board member for this vendor company. Centurion Holdings, of which our Chairman is a majority owner, has a sublease agreement for a portion of its office in New York with IPSA. The sublease is at market rates and constitutes IPSA’s New York Office. The lease expired on December 31, 2016. The base rent for the sublease is approximately $204,000 per year and the ending accounts payable balance was $151,000 as of March 31, 2017. During the three months ended March 31, 2017 and 2016, we incurred $31,000 and $34,000, respectively, in public relations and marketing expenses from a public relations firm who is also shareholder. March 31, 2017 and December 31, 2016, respectively As of March 31, 2017, and December 31, 2016, we owed members of the Board of Directors, $192,000 and $171,000, respectively, in fees for various Board of Director, Audit Committee and Compensation Committee activities. In May 2017, $155,000 of the outstanding balance was paid. On February 8, 2017, our Chairman and CEO loaned the Company an additional $245,000. We issued an unsecured, non-convertible, promissory note in the principal amount of $245,000, bearing interest at the rate of 4.0% per annum maturing on February 9, 2018. The Company used the proceeds to fund working capital requirements and for general corporate purposes. On January 25, 2017, our Chairman and CEO purchased secured convertible notes in the principal amount of $250,000 and warrants to purchase 12,500 shares of common stock. Interest accrues at 10% per annum and is payable quarterly. See Note 7 “Notes Payable and Related Party Notes Payable” for additional information

13. Subsequent Events

13. Subsequent Events	3 Months Ended
	Mar. 31, 2017
Subsequent Events [Abstract]
Subsequent Events	On April 30, 2017, the Company sold (i) all of the shares of its Canadian subsidiary IPSA International, Inc. (“IPSA”), a wholly owned subsidiary of IPSA International Services, Inc., which is a wholly owned U.S. subsidiary of the Company, and (ii) assets related to the Company’s Hong Kong, London, and Miami offices (“Affiliate Offices”), pursuant to a Purchase Agreement, dated as of April 30, 2017 (“Purchase Agreement”) for $6,000,000. Although there can be no assurance in this regard, the Company is also eligible to receive up to $4,000,000 additional consideration under an earn out arrangement based upon certain performance targets over the next three years. The sales proceeds were reduced by a working capital adjustment (the “WCA”), as defined in the Purchase Agreement, of approximately $1.4 million, and $400,000 was deposited in escrow to secure potential unrecorded liabilities and representations of the Company and its affiliates. The WCA will be finalized within ninety days of the transactions’ close date. On May 21, 2017, we entered into convertible promissory note amendments (the “Note Amendments”) with existing holders (the “Holders”) of the Company’s unsecured convertible notes (the “Unsecured Notes”) issued in connection with the Securities Purchase Agreement, first dated as of October 23, 2014, by and among the Company and the Purchasers identified therein. The Note Amendments: 1. Extended the maturity date by one year from May 21, 2017 to May 21, 2018. 2. Increased the interest rate from 10% to 15% per annum. 3. Converted the existing semi-annual interest payments (paid in arrears) to non-refundable semi-annual prepaid interest payments. The first prepaid interest payment totaling $120,000 was paid on June 8, 2017. 4. Included a reduction in the price at which the Unsecured Notes may be voluntarily converted from $16.80 per share (as previously adjusted to reflect the Company’s one-for-fifteen reverse stock split on December 1, 2016) to $8.00 per share. 5. Included a reduction in the exercise price of the warrants from $16.80 per share (as previously adjusted to reflect the Company’s one-for-fifteen reverse stock split on December 1, 2016) to $8.00 per share. 6. Require repayment of the Unsecured Notes in the event the Company raises an aggregate of $16,000,000 or more in capital through the issuance of debt, equity, or a combination thereof. The Qualified Purchasers waived their anti-dilution protection for the unsecured Note Amendment. In exchange for waiving their anti-dilution provisions, they received a one year extension of their warrants. On May 25, 2017, Joseph Grano Jr., the Company's Chief Executive Officer stepped down as Chief Executive Officer and was replaced by Mr. Eric Hipkins. Mr. Grano continues as a director of the Company and serves as nonexecutive Chairman of the Board following his tenure as Chief Executive Officer. In connection with this new role the board of directors approved an annual consulting fee for $120,000. Additionally, he will receive $8,000 per month as reimbursement for office space used by the Company and administrative costs.

1. Basis of Presentation and 20

1. Basis of Presentation and General Information (Policies)	3 Months Ended
	Mar. 31, 2017
Basis Of Presentation And General Information Policies
Going Concern and Liquidity	We had a net loss from continuing operations of $3,771,262 for the three months ended March 31, 2017 and $18,299,187 for the year ended December 31, 2016. Our working capital increased from $3,714,617 to $3,752,220 during the three months ended March 31, 2017, and $1,600,000 of our unsecured convertible promissory notes due on May 21, 2017 were extended to May 21, 2018. The Company has no existing lines of credit. During 2016, we incurred substantial costs in our efforts to grow the Cyber Solutions (“CS”) business segment. We hired additional personnel, engaged in strategic marketing and brand-building efforts, built-out the Adversary Pursuit Center (“APC”) and other new offices opened, incurred legal fees related to trademarks and patents, and engaged in extensive research and development projects to enhance the Orkos and HUNT software platforms. These investments in the Cyber Solutions segment were made in anticipation of revenue growth during 2017, of which, there can be no assurance. During the three months ended March 31, 2017, we incurred significant labor costs, software research and development, and advertising expenses as we continue to invest in and build out CS resources and expertise as we position this segment for future growth. We have not been able to secure enough CS contracts to support our continuing operations, and we anticipate requiring additional capital to grow our CS business segment, fund operating expenses, and make principal and interest payments on our promissory note obligations. During 2016 and early 2017, we took steps to mitigate these factors by: 1) Entering into various debt and equity financing arrangements described in our Annual Report on Form 10-K for 2016 and Notes 7 and 8 in this Form 10-Q. 2) Selling our Control Engineering, Inc., (“CEI”) subsidiary on December 31, 2016 and completing the sale of a substantial portion of our wholly-owned subsidiary IPSA International, Inc (“IPSA”) on April 30, 2017. See Note 4 “Discontinued Operations” and Note 13 “Subsequent Events” for further information. 3) Focusing 100% of our efforts on the growth of the Cyber Solutions contract pipeline. Despite the measures discussed above, our current levels of cash on hand, working capital and proceeds from the debt offerings in the first quarter of 2017 and the IPSA transaction has not been sufficient to alleviate our liquidity issues and, as a result, management has determined additional capital is required in order to sustain operations for one year beyond the issuance of these unaudited interim consolidated financial statements. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern for at least the next 12 months following the issuance of our financial statements and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
Revision of Previously-Issued Financial Statements	During the quarter ended March 31, 2017, the Company revised its consolidated financial statements for 2016 to record an income tax benefit for discontinued operations related to an error identified in its income tax provision for the three months ended December 31, 2016. Additionally, the Company recorded a loss on assets held for sale for discontinued operations to arrive at the fair value of the net assets held for sale determined at December 31, 2016. Lastly, the Company’s estimated cost to sell its IPSA subsidiary estimated at $400,000 was reclassified as an accrued liability instead of as a reduction of goodwill. As detailed below, the combined net effect of these adjustments were $0 and only affected discontinued operations. The Company assessed the effect of the above errors in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the errors were not material to any of the Company’s prior annual financial statements. The Company determined that the correction of the cumulative amounts of the errors would be material to the first quarter 2017 unaudited consolidated financial statements, and as such, the Company revised its previously-issued consolidated financial statements for 2016. All financial information contained in the accompanying notes to these unaudited interim consolidated financial statements has been revised to reflect the correction of these errors. The following table presents the effect of the aforementioned revision on the Company’s assets and liabilities classified as held for sale as reflected in the Consolidated Balance Sheets as of December 31, 2016: As of December 31, 2016 As Reported Revision As Revised Intangible assets $ 7,083,870 $ (696,429 ) $ 6,387,441 Total assets of the disposal group classified as held for sale $ 10,956,392 $ (696,429 ) $ 10,259,963 Accrued expenses and other current liabilities $ 2,225,342 $ (696,429 ) $ 1,528,913 Total liabilities of the disposal group classified as held for sale $ 4,410,348 $ (696,429 ) $ 3,713,919 Total net assets classified as held for sale $ 6,546,044 $ — $ 6,546,044 The following tables present the effect of the aforementioned revisions on the Company’s discontinued operations associated with CEI and IPSA as reflected in the Consolidated Statements of Operations for the year ended December 31, 2016: Year Ended December 31, 2016 As Reported Revision As Revised Goodwill impairment $ (7,215,181 ) $ (696,429 ) $ (7,911,610 ) Loss before income taxes (10,824,699 ) (696,429 ) (11,521,128 ) Income tax (expense) benefit (1,045,283 ) 696,429 (348,854 ) Loss from discontinued operations, net of taxes $ (11,869,982 ) $ — $ (11,869,982 ) In the fourth quarter of 2016, we determined that it would be appropriate to modify the presentation of certain descriptions within our Consolidated Statements of Operations to reflect our change in strategy to evolve into a pure-play cybersecurity company which provides cybersecurity and business advisory services. We believe the change does not represent an error in prior presentations; rather it is consistent with the change in our strategic focus. Periods presented herein are based on the revised presentation. The following table presents the effect of the aforementioned revisions on our Consolidated Statements of Operations as of March 31, 2016, and also reflects the presentation for discontinued operations of our IPSA and CEI subsidiaries. See Note 4 “Discontinued Operations.” March 31, 2016 As Previously Presented Adjustments As Revised Cost of revenues $ 2,765,518 $ (2,765,518 ) $ — Direct cost of revenues $ — $ 2,435,503 $ 2,435,503 Selling, general and administrative $ 2,991,714 $ 330,015 $ 3,321,729
Use of Estimates	The preparation of the Company’s Consolidated unaudited 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.

1. Basis of Presentation and 21

1. Basis of Presentation and General Information (Tables)	3 Months Ended
	Mar. 31, 2017
Basis Of Presentation And General Information Tables
Revision of Previously-Issued Financial Statements	The following table presents the effect of the aforementioned revision on the Company’s assets and liabilities classified as held for sale as reflected in the Consolidated Balance Sheets as of December 31, 2016: As of December 31, 2016 As Reported Revision As Revised Intangible assets $ 7,083,870 $ (696,429 ) $ 6,387,441 Total assets of the disposal group classified as held for sale $ 10,956,392 $ (696,429 ) $ 10,259,963 Accrued expenses and other current liabilities $ 2,225,342 $ (696,429 ) $ 1,528,913 Total liabilities of the disposal group classified as held for sale $ 4,410,348 $ (696,429 ) $ 3,713,919 Total net assets classified as held for sale $ 6,546,044 $ — $ 6,546,044 The following tables present the effect of the aforementioned revisions on the Company’s discontinued operations associated with CEI and IPSA as reflected in the Consolidated Statements of Operations for the year ended December 31, 2016: Year Ended December 31, 2016 As Reported Revision As Revised Goodwill impairment $ (7,215,181 ) $ (696,429 ) $ (7,911,610 ) Loss before income taxes (10,824,699 ) (696,429 ) (11,521,128 ) Income tax (expense) benefit (1,045,283 ) 696,429 (348,854 ) Loss from discontinued operations, net of taxes $ (11,869,982 ) $ — $ (11,869,982 ) The following table presents the effect of the aforementioned revisions on our Consolidated Statements of Operations as of March 31, 2016, and also reflects the presentation for discontinued operations of our IPSA and CEI subsidiaries. See Note 4 “Discontinued Operations.” March 31, 2016 As Previously Presented Adjustments As Revised Cost of revenues $ 2,765,518 $ (2,765,518 ) $ — Direct cost of revenues $ — $ 2,435,503 $ 2,435,503 Selling, general and administrative $ 2,991,714 $ 330,015 $ 3,321,729

3. Fair Value Measurements (Tab

3. Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2017
Fair Value Measurements Tables
Financial assets and liabilities measured at fair value on a recurring basis	March 31, 2017 Fair Value Level 1 Level 2 Level 3 Derivative Liability: Series D common stock purchase warrants $ 94,169 $ — $ 94,169 $ — Qualified Purchaser common stock purchase warrants and anti-dilution provisions 835,172 — — 835,172 Total $ 929,341 $ — $ 94,169 $ 835,172 December 31, 2016 Fair Value Level 1 Level 2 Level 3 Derivative Liability: Series D common stock purchase warrants $ 471,134 $ — $ 471,134 $ — Qualified Purchaser common stock purchase warrants and anti-dilution provisions 1,220,919 — — 1,220,919 Total $ 1,692,053 $ — $ 471,134 $ 1,220,919
Change in the value of level 3 derivative liability	Level 2 Inputs Level 3 Inputs Derivative liability - Series D Common Stock Purchase Warrants Total Fair Value Measurements Using Level 2 Inputs Qualified Purchasers from Q1 2016 PIPE Stock Warrants and Anti-dilution Provision Grand Total Fair Value Measurements Using Both Level 2 and Level 3 Inputs Balance December 31, 2016 $ 471,134 $ 471,134 $ 1,220,919 $ 1,692,053 Total unrealized (gains) or losses included in net income loss (376,965 ) (376,965 ) (385,747 ) (762,712 ) Initial fair value of derivative liability issuance — — — — Balance March 31, 2017 $ 94,169 $ 94,169 $ 835,172 $ 929,341 Level 2 Inputs Level 3 Inputs Derivative liability - Common Stock Purchase Warrants –Promissory Notes Derivative liability - Common Stock Purchase Warrants – Series D Preferred Stock Total Fair Value Measurements Using Level 2 Inputs Derivative liability - Common Stock Purchase Warrants – Series C Preferred Stock Qualified Purchasers from Q1 2016 PIPE Stock Warrants and Anti-dilution Provision Grand Total Fair Value Measurements Using Both Level 2 and Level 3 Inputs Balance December 31, 2015 $ 2,189 $ 2,904,849 $ 2,907,038 $ 633,046 $ — $ 3,540,084 Initial fair value of derivative liability issuance — — — — 599,228 599,228 Reclassification to equity — (429,570 ) (429,570 ) (139,922 ) — (569,492 ) Unrealized (gains) losses included in net loss 220 (767,645 ) (767,425 ) (493,124 ) — (1,260,549 ) Balance March 31, 2016 $ 2,409 $ 1,707,634 $ 1,710,043 $ — $ 599,228 $ 2,309,271
Key assumptions for valuation of derivative liabilities	March 31, December 31, 2017 2016 Expected Life (Years) 3.9 4.2 Risk Free Rate 1.60 % 1.60 % Volatility 72.87 % 75.30 % Probability of a Capital Raise 0%-95% 5%-95%

4. Discontinued Operations (Tab

4. Discontinued Operations (Tables)	3 Months Ended
	Mar. 31, 2017
Discontinued Operations Tables
Discontinued operations	The following table represents the components of the results from discontinued operations associated with CEI and IPSA as reflected in the Consolidated Statements of Operations: Three Months Ended March 31, 2017 (Revised) 2016 Net revenue $ 2,114,541 $ 5,105,233 Direct cost of revenue 1,332,118 3,842,811 Selling, general and administrative 1,162,757 1,400,421 Depreciation and amortization — 342,384 Loss from operations (380,334 ) (480,383 ) Loss on assets held for sale (164,823 ) — Interest expense, net (19,572 ) (20,382 ) Other (expenses) income (269,314 ) 53,058 Loss before income taxes (834,043 ) (447,707 ) Income tax benefit (expense) 62,502 (34,755 ) Loss from discontinued operations, net of taxes $ (771,541 ) $ (482,462 ) Following is a summary of the assets and liabilities classified as held for sale as reflected in the Consolidated Balance Sheets in connection with the sale of CEI and IPSA as of: March 31, (Revised) December 31, 2017 2016 Carrying amounts of major classes of assets: Cash and cash equivalents $ 442,117 $ 161,847 Accounts receivable, net 1,192,999 2,818,948 Property and equipment, net 618,947 639,461 Goodwill and intangible assets 6,222,618 6,387,441 Other 169,216 252,266 Total assets of the disposal group classified as held for sale $ 8,645,897 $ 10,259,963 Carrying amounts of major classes of liabilities: Accounts payable $ 1,632,806 $ 1,354,194 Accrued expenses and other current liabilities 1,255,691 1,528,913 Factored receivables obligation 121,501 830,812 Total liabilities of the disposal group classified as held for sale $ 3,409,998 $ 3,713,919 Total net assets classified as held for sale $ 5,635,899 $ 6,546,044 The following table represents the components of the results from discontinued operations associated with the sale of CEI and IPSA as reflected in the Consolidated Statements of Cash Flows: Three Months Ended March 31, 2017 2016 Significant operating items: Depreciation and amortization $ — $ 342,384 Loss on assets held for sale $ 164,823 $ — Loss on disposal of property and equipment $ 21,148 $ — Changes in operating assets and liabilities $ 865,840 $ (425,352 ) Significant investing items: Capital expenditures $ — $ (168,117 )

5. Earnings Per Share and Equ24

5. Earnings Per Share and Equity (Tables)	3 Months Ended
	Mar. 31, 2017
Earnings Per Share And Equity Tables
Computation of net loss per share	Three Months Ended March 31, 2017 2016 Basic: Numerator –net (loss) attributable to common stockholders $ (4,542,803 ) $ (3,237,079 ) Denominator – weighted-average shares outstanding 6,100,275 5,239,400 Net loss per share – Basic $ (0.74 ) $ (0.62 )
Summary of warrant activity	Weighted Average Warrants Shares Exercise Price Outstanding at December 31, 2015 1,724,517 $ 17.40 Issued 843,896 $ 15.64 Exercised (114,169 ) $ 14.85 Cancelled (118,973 ) $ 35.70 Outstanding at December 31, 2016 2,335,271 $ 15.90 Issued 198,092 $ 10.00 Exercised — $ — Cancelled (43,534 ) $ 14.08 Outstanding at March 31, 2017 2,489,829 $ 15.34

6. Stock Options (Tables)

6. Stock Options (Tables)	3 Months Ended
	Mar. 31, 2017
Stock Options Tables
Share-Based Payment Award, Stock Options, Valuation Assumptions	Exercise price $6.42 - $10.86 Risk free interest rate 2.05% - 2.20% Volatility 89.38% - 91.80% Expected term 5.5 years Dividend yield None
Schedule of Stock Incentive Plan	Weighted Average Options Shares Exercise Price Outstanding at December 31, 2015 690,672 $ 15.15 Issued 571,378 $ 13.08 Exercised (46,800 ) $ 9.60 Forfeitures (167,843 ) $ 14.56 Outstanding at December 31, 2016 1,047,407 $ 14.18 Issued 11,867 $ 7.03 Exercised — $ — Forfeitures (129,246 ) $ 18.33 Outstanding at March 31, 2017 930,028 $ 13.58

9. Balance Sheet Information (T

9. Balance Sheet Information (Tables)	3 Months Ended
	Mar. 31, 2017
Balance Sheet Information Tables
Consolidated balance sheets information	March 31, 2017 December 31, 2016 Receivables, net: Accounts receivable $ 1,104,648 $ 1,664,808 Less: Allowance for doubtful accounts (6,848 ) — $ 1,097,800 $ 1,664,808 Property and equipment, net: Office equipment $ 863,051 $ 854,530 Furniture and fixtures 2,108,104 2,106,214 Computer software 286,226 286,226 Leasehold improvements 29,183 29,183 Land 181,371 181,371 Construction in progress - at cost 42,092 42,092 Less: Accumulated depreciation (1,249,770 ) (1,082,160 ) $ 2,260,257 $ 2,417,456 Accrued expenses and other current liabilities: Accrued payroll $ 882,820 $ 949,516 Accrued vacation 406,625 192,485 Other accrued liabilities 486,415 758,363 $ 1,775,860 $ 1,900,364

10. Segment Information (Tables

10. Segment Information (Tables)	3 Months Ended
	Mar. 31, 2017
Segment Information Tables
Summary of segment information	Three months ended March 31, 2017 Cyber Solutions Business Advisory Solutions Total Revenue from Continuing Operations $ 1,860,530 $ 793,754 $ 2,654,284 Income (Loss) from Continuing Operations before Overhead (2,346,180 ) 61,447 (2,284,733 ) Allocated Corporate Overhead 1,255,835 535,774 1,791,609 Loss from Continuing Operations $ (3,602,015 ) $ (474,327 ) $ (4,076,342 ) Three months ended March 31, 2016 Cyber Solutions Business Advisory Solutions Total Revenue from Continuing Operations $ 680,820 $ 1,350,573 $ 2,031,393 Income (Loss) from Continuing Operations before Overhead (2,577,587 ) 120,106 (2,457,481 ) Allocated Corporate Overhead 481,276 954,730 1,436,006 Loss from Continuing Operations $ (3,058,863 ) $ (834,624 ) $ (3,893,487 )

1. Basis of Presentation and 28

1. Basis of Presentation and General Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Intangible assets	$ 6,222,618		$ 6,387,441
Total assets of the disposal group classified as held for sale	8,645,897		10,259,963
Accrued expenses and other current liabilities	1,255,691		1,528,913
Total liabilities of the disposal group classified as held for sale	3,009,998		3,713,919
Total net assets classified as held for sale			6,546,044
Goodwill impairment			(7,911,610)
Loss before income taxes	(3,771,262)	$ (2,695,855)	(11,521,128)
Income tax (expense) benefit	0	51,905	(348,854)
Loss from discontinued operations, net of taxes	(771,541)	(482,462)	(11,869,982)
Cost of revenues		0
Direct cost of revenue		2,435,503
Selling, general and administrative	$ 4,168,750	3,321,729
As Reported
Intangible assets			7,083,870
Total assets of the disposal group classified as held for sale			10,956,392
Accrued expenses and other current liabilities			2,225,342
Total liabilities of the disposal group classified as held for sale			4,410,348
Total net assets classified as held for sale			6,546,044
Goodwill impairment			(7,215,181)
Loss before income taxes			(10,824,699)
Income tax (expense) benefit			(1,045,283)
Loss from discontinued operations, net of taxes			(11,869,982)
Cost of revenues		2,765,518
Direct cost of revenue		0
Selling, general and administrative		2,991,714
Revision
Intangible assets			(696,429)
Total assets of the disposal group classified as held for sale			(696,429)
Accrued expenses and other current liabilities			(696,429)
Total liabilities of the disposal group classified as held for sale			(696,429)
Total net assets classified as held for sale			0
Goodwill impairment			(696,429)
Loss before income taxes			(696,429)
Income tax (expense) benefit			696,429
Loss from discontinued operations, net of taxes			$ 0
Cost of revenues		(2,765,518)
Direct cost of revenue		2,435,503
Selling, general and administrative		$ 330,015

1. Basis of Presentation and 29

1. Basis of Presentation and General Information (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Basis Of Presentation And General Information Details Narrative
Loss from continuing operations	$ 3,771,262	$ 2,747,760	$ 18,299,187
Working capital	$ 3,752,220

3. Fair Value Measurements (Det

3. Fair Value Measurements (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Derivative Liability:
Series D common stock purchase warrants	$ 94,169	$ 471,134
Qualified Purchaser common stock purchase warrants and anti-dilution provisions	835,172	1,220,919
Total	929,341	1,692,053
Level 1
Derivative Liability:
Series D common stock purchase warrants	0	0
Qualified Purchaser common stock purchase warrants and anti-dilution provisions	0	0
Total	0	0
Level 2
Derivative Liability:
Series D common stock purchase warrants	94,169	471,134
Qualified Purchaser common stock purchase warrants and anti-dilution provisions	0	0
Total	94,169	471,134
Level 3
Derivative Liability:
Series D common stock purchase warrants	0	0
Qualified Purchaser common stock purchase warrants and anti-dilution provisions	835,172	1,220,919
Total	$ 835,172	$ 1,220,919

3. Fair Value Measurements (D31

3. Fair Value Measurements (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Beginning Balance	$ 1,692,053	$ 3,540,084
Initial fair value of derivative liability issuance	0	599,228
Reclassification to equity		(569,492)
Unrealized (gains) or losses included in net income/loss	(762,712)	(1,260,549)
Ending Balance	929,341	2,309,271
Level 2
Beginning Balance	471,134	2,907,038
Initial fair value of derivative liability issuance	0	0
Reclassification to equity		(429,570)
Unrealized (gains) or losses included in net income/loss	(376,965)	(767,425)
Ending Balance	94,169	1,710,043
Level 2 | Series D Preferred Stock
Beginning Balance	471,134	2,904,849
Initial fair value of derivative liability issuance	0	0
Reclassification to equity		(429,570)
Unrealized (gains) or losses included in net income/loss	(376,965)	(767,645)
Ending Balance	94,169	1,707,634
Level 2 | Promissory Notes
Beginning Balance		2,189
Initial fair value of derivative liability issuance		0
Reclassification to equity		0
Unrealized (gains) or losses included in net income/loss		220
Ending Balance		2,409
Level 3 | Quailified Purchasers
Beginning Balance	1,220,919	0
Initial fair value of derivative liability issuance	0	599,228
Reclassification to equity		0
Unrealized (gains) or losses included in net income/loss	(385,747)	0
Ending Balance	$ 835,172	599,228
Level 3 | Series C Preferred Stock
Beginning Balance		633,046
Initial fair value of derivative liability issuance		0
Reclassification to equity		(139,922)
Unrealized (gains) or losses included in net income/loss		(493,124)
Ending Balance		$ 0

3. Fair Value Measurements (D32

3. Fair Value Measurements (Details 2) - Derivative Liability	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Expected Life (Years)	3 years 10 months 24 days	4 years 2 months 12 days
Risk Free Rate	1.60%	1.60%
Volatility	72.87%	75.30%
Probability of a Capital Raise	0% - 95%	5% - 95%

4. Discontinued Operations (Det

4. Discontinued Operations (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Discontinued Operations Details
Net revenue	$ 2,114,541	$ 5,105,233
Direct costs of revenue	1,332,118	3,842,811
Selling, general and administrative	1,162,757	1,400,421
Depreciation and amortization	0	342,384
Loss from operations	(380,334)	(480,383)
Loss on assets held for sale	(164,823)	0
Interest expense net	(19,572)	(20,382)
Other (expenses) income	(269,314)	53,058
Loss before income taxes	(834,043)	(447,707)
Income tax expense (benefit)	62,502	(34,755)
Loss from discontinued operations, net of taxes	(771,541)	(482,462)
Carrying amounts of major classes of assets:
Cash and cash equivalents	442,117		$ 161,847
Accounts receivable, net	1,192,999		2,818,948
Property and equipment, net	618,947		639,461
Goodwill and intangible assets	6,222,618		6,387,441
Other	169,216		252,266
Total assets of the disposal group classified as held for sale	8,645,897		10,259,963
Carrying amounts of major classes of liabilities:
Accounts payable	1,632,806		1,354,194
Accrued expenses and other current liabilities	1,255,691		1,528,913
Factored receivables obligation	121,501		830,812
Total liabilities of the disposal group classified as held for sale	3,009,998		3,713,919
Total net assets classified as held for sale	5,635,899		$ 6,546,044
Significant operating items:
Depreciation and amortization	0	342,384
Loss on assets held for sale	164,823	0
Loss on disposal of property and equipment	21,148	0
Changes in operating assets and liabilities	865,840	(425,352)
Significant investing items:
Capital expenditures	$ 0	$ (168,117)

5. Earnings Per Share and Equ34

5. Earnings Per Share and Equity (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Basic:
Numerator - net (loss) available to common stockholders	$ (4,542,803)	$ (3,237,079)
Denominator - weighted-average shares outstanding	6,100,275	5,239,400
Net loss per share - Basic	$ (0.74)	$ (0.62)

5. Earnings Per Share and Equ35

5. Earnings Per Share and Equity (Details 1) - Warrant [Member] - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Warrants
Outstanding beginning balance	2,335,271	1,724,517
Issued	198,092	843,896
Exercised	0	(114,169)
Cancelled	(43,534)	(118,973)
Outstanding ending balance	2,489,829	2,335,271
Weighted Average Exercise Price
Outstanding beginning balance	$ 15.90	$ 17.40
Issued	10	15.64
Exercised	0	14.85
Cancelled	14.08	35.70
Outstanding ending balance	$ 15.34	$ 15.90

6. Stock Options (Details)

6. Stock Options (Details) - Stock Option	3 Months Ended
	Mar. 31, 2017USD ($)$ / shares
Expected term	5 years 6 months
Dividend yield | $	$ 0
Minimum [Member]
Exercise price	$ 6.42
Risk free interest rate	2.05%
Volatility	89.38%
Maximum [Member]
Exercise price	$ 10.86
Risk free interest rate	2.20%
Volatility	91.80%

6. Stock Options (Details 1)

6. Stock Options (Details 1) - Stock Options [Member] - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Options
Outstanding beginning balance	1,047,407	690,672
Issued	11,867	571,378
Exercised	0	(46,800)
Forfeitures	(129,246)	(167,843)
Outstanding ending balance	930,028	1,047,407
Weighted Average Exercise Price
Outstanding beginning balance	$ 14.18	$ 15.15
Issued	7.03	13.08
Exercised	0	9.60
Forfeitures	18.33	14.56
Outstanding ending balance	$ 13.58	$ 14.18

6. Stock Options (Details Narra

6. Stock Options (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Stock Options Details Narrative
Stock based compensation expense	$ 367,717	$ 358,409

8. Long Term Debt (Details Narr

8. Long Term Debt (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Long Term Debt Details Narrative
Long term debt discount	$ 3,744,604	$ 2,810,103
Interest expense	$ 225,329

9. Balance Sheet Information (D

9. Balance Sheet Information (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Receivables, net:
Accounts receivable	$ 1,104,648	$ 1,664,808
Less: Allowance for doubtful accounts	(6,848)	0
Accounts receivable, net	1,097,800	1,664,808
Property and equipment, net:
Office equipment	863,051	854,530
Furniture and fixtures	2,108,104	2,106,214
Computer software	286,226	286,226
Leasehold improvements	29,183	29,183
Land	181,371	181,371
Construction in progress - at cost	42,092	42,092
Less: Accumulated depreciation	(1,249,770)	(1,082,160)
Property and Equipment - at cost less accumulated depreciation	2,260,257	2,417,456
Accrued expenses and other current liabilities:
Accrued payroll	882,820	949,516
Accrued vacation	406,625	192,485
Other accrued liabilities	486,415	758,363
Accrued expenses and other current liabilities	$ 1,775,860	$ 1,900,364

9. Balance Sheet Information 41

9. Balance Sheet Information (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Balance Sheet Information Details Narrative
Property and equipment depreciation expense	$ 167,609	$ 278,319

10. Segment Information (Detail

10. Segment Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenue from Continuing Operations	$ 2,654,284	$ 2,031,393
Income (Loss) from Continuing Operations before Overhead	(2,284,733)	(2,457,481)
Allocated Corporate Overhead	1,791,609	1,436,006
Loss from Continuing Operations	(4,076,342)	(3,893,487)
Cyber Solutions
Revenue from Continuing Operations	1,860,530	680,820
Income (Loss) from Continuing Operations before Overhead	(2,346,180)	(2,577,587)
Allocated Corporate Overhead	1,255,835	481,276
Loss from Continuing Operations	(3,602,015)	(3,058,863)
Business Advisory Solutions
Revenue from Continuing Operations	793,754	1,350,573
Income (Loss) from Continuing Operations before Overhead	61,447	120,106
Allocated Corporate Overhead	535,774	954,730
Loss from Continuing Operations	$ (474,327)	$ (834,624)