UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended ~~September 30, 2021~~March 31, 2022

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

For the Transition Period from _________ to _________

Commission file number: ~~000-56059~~001-41227

CERBERUS CYBER SENTINEL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

83-4210278

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

6900 E. Camelback Road, Suite 240, Scottsdale, AZ		85251
(Address of Principal Executive Offices)		(Zip Code)

(480) 389-3444

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value	~~Trading symbol(s)~~CISO	~~Name of exchange on which registered~~
~~None~~	~~N/A~~The Nasdaq	~~N/A~~ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 12, 2021,~~May 16, 2022, there were ~~117,789,789~~124,704,567 shares of the registrant’s common stock outstanding.

CERBERUS CYBER SENTINEL CORPORATION

FORM 10-Q

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION		34

ITEM 1.	Financial Statements	34

	Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 (unaudited) and December 31, 2020	34

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	45

	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	56

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	67

	Notes to Condensed Consolidated Financial Statements (unaudited)	78

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2328

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3633

ITEM 4.	Controls and Procedures	3633

PART II. OTHER INFORMATION		3734

ITEM 1.	Legal Proceedings	3734

ITEM 1A.	Risk Factors	3734

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3735

ITEM 3.	Defaults Upon Senior Securities	3735

ITEM 4.	Mine Safety Disclosures	3735

ITEM 5.	Other Information	3735

ITEM 6.	Exhibits	3835

SIGNATURES		3936

FORWARD-LOOKING STATEMENTS

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

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

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

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

	●	our ability to achieve and sustain profitability of our existing lines of business and through our wholly owned subsidiaries;
	●	our ability to raise sufficient capital to continue to acquire cybersecurity companies;
	●	our ability to attract and retain cybersecurity talent;
	●	our ability to identify potential acquisition targets within predetermined parameters;
	●	our ability to successfully execute acquisitions, integrate the acquired businesses, and create synergies as a global cybersecurity consolidator;
	●	our ability to attract and retain key technology or management personnel and to expand our management team;
	●	the accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and needs for additional financing;
	●	our ability to attract and retain clients;
	●	our ability to generate revenue and gross profit; and
	●	our ability to navigate through the increasingly complex cybersecurity regulatory environment.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2022, any of which may cause our or our industry’s actual results, levels of activity, or performance or achievements to be materially different from any future results, levels of activity, or performance or achievements expressed or implied in our forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Except as required by law, we undertake no obligation to update any forward-looking statements after the date of this report to conform these statements to actual results.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated Balance Sheets

								1			2
	September 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
		(Unaudited)					(Unaudited)
ASSETS

Current Assets:
Cash and cash equivalents	$	2,729,579		$	5,197,030		$	3,862,907		$	2,725,035
Accounts receivable, net of allowances for doubtful accounts of $76,200 and $40,000, respectively		2,268,833			1,006,834
Accounts receivable, net of allowances for doubtful accounts of $91,707 and $77,811, respectively								5,945,709			4,840,802
Notes receivable, related party								1,161,718			1,090,903
Inventory								735,887			189,596
Prepaid expenses and other current assets		485,617			142,144			2,165,525			960,965
Contract asset								218,153			-
Total Current Assets		5,484,029			6,346,008			14,089,899			9,807,301

Property and equipment, net of accumulated depreciation of $30,310 and $14,473, respectively		89,401			80,630
Property and equipment, net of accumulated depreciation of $256,540 and $102,466, respectively								3,442,937			2,394,424
Right of use asset, net		268,096			13,426			406,770			277,578
Intangible assets, net of accumulated amortization of $226,964 and $116,468, respectively		2,359,402			2,105,432
Intangible assets, net of accumulated amortization of $628,245 and $323,331, respectively								6,397,492			6,540,269
Goodwill		20,695,024			4,101,369			59,274,429			16,792,535
Other assets								18,681			-

Total Assets	$	28,895,952		$	12,646,865		$	83,630,208		$	35,812,107

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	1,494,159		$	809,804		$	6,221,551		$	2,709,066
Stock payable		79,950			46,000
Deferred revenue								1,952,543			52,824
Settlement liability								-			470,000
Lease liability, current portion		166,709			8,989			211,752			196,472
Loans payable, current portion		115,981			9,405			212,262			213,199
Line of credit		-			3,000			369,829			-
Convertible note payable, net of debt discount, related party		2,981,401			2,926,609			1,500,000			1,500,000
Note payable, related party		-			59,787			419,472			-
Total Current Liabilities		4,838,200			3,863,594			10,887,409			5,141,561

Long-term Liabilities:
Loans payable, net of current portion		443,373			1,037,115			5,279,424			5,284,301
Lease liability, net of current portion		107,899			4,693			202,918			88,040

Total Liabilities		5,389,472			4,905,402			16,369,751			10,513,902

Commitments and Contingencies		-			-			-			-

Stockholders’ Equity:
Common stock, $.00001 par value; 250,000,000 shares authorized; 120,529,649 and 116,104,971 shares issued and outstanding on September 30, 2021 and December 31, 2020, respectively		1,205			1,161
Common stock, $.00001 par value; 250,000,000 shares authorized; 135,458,071 and 125,852,971 shares issued and outstanding on March 31, 2022 and December 31, 2021, respectively								1,354			1,258
Additional paid-in capital		34,518,667			12,607,074			118,311,695			69,309,369
Accumulated translation adjustment								902,441			-
Accumulated deficit		(11,013,392	)		(4,866,772	)		(51,955,033	)		(44,012,422	)
Total Stockholders’ Equity		23,506,480			7,741,463			67,260,457			25,298,205

Total Liabilities and Stockholders’ Equity	$	28,895,952		$	12,646,865		$	83,630,208		$	35,812,107

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

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

														March 31, 2022			March 31, 2021
	For the Three Months Ended						For the Nine Months Ended						Three Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020			March 31, 2022			March 31, 2021

Revenue:
Security managed services	$	3,099,753		$	1,683,733		$	6,979,146		$	3,612,489		$	8,052,225		$	1,871,817
Professional services		645,255			325,865			2,275,437			1,015,816			1,277,185			687,961
Total revenue		3,745,008			2,009,598			9,254,583			4,628,305			9,329,410			2,559,778

Cost of revenue:
Security managed services		650,955			423,784			1,326,788			726,614			2,602,924			193,667
Professional services		234,326			18,962			350,388			82,992			110,337			117,794
Cost of payroll		2,093,072			868,810			5,052,684			2,135,691			4,445,850			1,427,702
Stock based compensation														2,121,583			100,925
Total cost of revenue		2,978,353			1,311,556			6,729,860			2,945,297			9,280,693			1,840,088
Total gross profit		766,655			698,042			2,524,723			1,683,008			48,717			719,690

Operating expenses:
Professional fees		293,408			284,511			695,023			685,821			623,061			157,354
Advertising and marketing		254,026			30,488			471,721			104,058			155,341			45,227
Selling, general and administrative		2,085,720			1,020,765			5,241,095			2,235,041			4,616,374			1,487,641
Stock based compensation		1,251,635			392,661			2,981,523			1,062,000			2,565,510			737,837
Loss on write-off of account receivable		40,264			-			55,528			15,000
Total operating expenses		3,925,053			1,728,425			9,444,890			4,101,920			7,960,286			2,428,059

Loss from operations		(3,158,398	)		(1,030,383	)		(6,920,167	)		(2,418,912	)		(7,911,569	)		(1,708,369	)

Other income (expense):
Other income		169			751			2,553			10,751
Other income (expense)														12,543			205
Interest expense, net		(75,470	)		(5,567	)		(209,806	)		(12,285	)		(43,585	)		(68,695	)
PPP loan forgiveness		980,800			-			980,800			-

Total other income (expense)		905,499			(4,816	)		773,547			(1,534	)		(31,042	)		(68,490	)

Net loss	$	(2,252,899	)	$	(1,035,199	)	$	(6,146,620	)	$	(2,420,446	)		(7,942,611	)		(1,776,859	)
Foreign currency translation adjustment														902,441			-

Net loss per common share - basic	$	(0.02	)	$	(0.01	)	$	(0.05	)	$	(0.02	)
Net loss per common share - diluted	$	(0.02	)	$	(0.01	)	$	(0.05	)	$	(0.02	)
Comprehensive loss													$	(7,040,170	)	$	(1,776,859	)

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

Weighted average shares outstanding - basic		118,856,026			113,174,336			117,801,672			110,305,671			133,983,960			116,418,173
Weighted average shares outstanding - diluted		118,856,026			113,174,336			117,801,672			110,305,671

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

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

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

(Unaudited)

Additional
Common Stock Paid-in Accumulated Treasury
Shares Amount Capital Deficit Stock Total

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

Stock based compensation - stock options - - 838,762 - - 838,762
Stock issued for cash 1,625,000 16 3,249,984 - - 3,250,000
Stock based compensation - shares
Stock based compensation - shares, shares
Stock issued for VelocIT acquisition
Stock issued for VelocIT acquisition, shares
Return of treasury stock to authorized capital
Net loss - - - (1,776,859 ) - (1,776,859 )
Balance as of March 31, 2021 117,729,971 1,177 16,695,820 (6,643,631 ) - 10,053,366

Stock based compensation - stock options - - 891,126 - - 891,126
Net loss - - - (2,116,862 ) - (2,116,862 )
Balance as of June 30, 2021 117,729,971 1,177 17,586,946 (8,760,493 ) - 8,827,630

Stock based compensation - stock options - - 1,251,635 - - 1,251,635
Stock based compensation - shares 232,900 2 279,443 - - 279,445
Stock issued for VelocIT acquisition 2,566,778 26 15,400,643 - - 15,400,669
Net loss - - - (2,252,899 ) - (2,252,899 )
Balance as of September 30, 2021 120,529,649 $ 1,205 $ 34,518,667 $ (11,013,392 ) $ - $ 23,506,480

Balance at January 1, 2020 107,912,500 $ 1,139 $ 7,770,902 $ (1,453,510 ) $ (2,400,000 ) $ 3,918,531

Stock based compensation - stock options - - 325,429 - - 325,429
Stock issued for cash 350,000 4 139,996 - - 140,000
Return of treasury stock to authorized capital - (60 ) (2,399,940 ) - 2,400,000 -
Net loss - - - (839,144 ) - (839,144 )
Balance as of March 31, 2020 108,262,500 1,083 5,836,387 (2,292,654 ) - 3,544,816

Stock based compensation - stock options - - 343,910 - - 343,910
Stock issued for Technologyville acquisition 3,392,271 34 1,356,874 - - 1,356,908
Net loss - - - (546,103 ) - (546,103 )
Balance as of June 30, 2020 111,654,771 1,117 7,537,171 (2,838,757 ) - 4,699,531

Stock based compensation - stock options - - 392,661 - - 392,661
Common shares issued for cash 325,000 3 649,997 - - 650,000
Stock issued for Clear Skies acquisition 2,330,000 23 931,977 - - 932,000
Net loss - - - (1,035,199 ) - (1,035,199 )
Balance as of September 30, 2020 114,309,771 $ 1,143 $ 9,511,806 $ (3,873,956 ) $ - $ 5,638,993


							Accumulated
					Additional		Other
	Common Stock				Paid-in		Comprehensive		Retained
	Shares		Amount		Capital		Income		Earnings			Total

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

Stock based compensation - stock options		-		-		4,687,093		-		-			4,687,093
Stock based compensation - common stock		39,000		-		79,949		-		-			79,949
Exercise of options		100,000		1		37,999		-		-			38,000
Stock issued for cash in public offering		2,060,000		21		9,470,979		-		-			9,471,000
Stock issued for True Digital acquisition		7,406,100		74		34,726,306		-		-			34,726,380
Foreign currency translation		-		-		-		902,441		-			902,441
Net loss		-		-		-		-		(7,942,611	)		(7,942,611	)
Balance as of March 31, 2022		135,458,071	$	1,354	$	118,311,695	$	902,441	$	(51,955,033	)	$	67,260,457

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

Stock based compensation - stock options		-		-		838,762		-		-			838,762
Stock issued for cash		1,625,000		16		3,249,984		-		-			3,250,000
Net loss		-		-		-		-		(1,776,859	)		(1,776,859	)
Balance as of March 31, 2021		117,729,971	$	1,177	$	16,695,820	$	902,441	$	(6,643,631	)	$	10,053,366

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

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

(Unaudited)

								1			1
	September 30, 2021			September 30, 2020			March 31, 2022			March 31, 2021
Cash flows from operating activities:
Net loss	$	(6,146,620	)	$	(2,420,446	)	$	(7,942,611	)	$	(1,776,859	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation - stock options		2,981,523			1,062,000			4,687,093			838,762
Loss on write-off of accounts receivable		55,528			15,000
Issuance of common stock for services		313,395			34,000			79,949			2,000
Depreciation and amortization		131,403			55,365			458,988			57,515
Right of use amortization		75,842			3,729			45,387			13,257
Amortization of debt discount		54,792			-
Forgiveness of PPP Loan		(980,800	)
Settlement liability								(470,000	)		-
Gain on termination of operating lease								(22,289	)		-
Changes in operating assets and liabilities:
Accounts receivable, net		(355,946	)		(191,958	)		397,548			(176,484	)
Other current assets		(305,532	)		(77,083	)
Inventory								(522,342	)		-
Contract assets								(86,811	)		-
Prepaids and other current assets								(865,483	)		(13,426	)
Accounts payable and accrued expenses		(66,311	)		364,961			1,149,469			(62,166	)
Lease liability		(69,586	)		(3,544	)		(16,156	)		(12,772	)
Deferred revenue								91,463			-

Net cash used in operating activities		(4,312,312	)		(1,157,976	)		(3,015,795	)		(1,130,173	)

Cash flows from investing activities:

Cash acquired in acquisitions		662,176			254,180
Purchases of property and equipment								(103,858	)		-
Cash paid in acquisitions, net								(4,917,768	)		-

Net cash provided by investing activities		662,176			254,180
Net cash used in investing activities								(5,021,626	)		-

Cash flows from financing activities:
Proceeds from sale of common stock		3,250,000			790,000			9,471,000			3,250,000
Proceeds from PPP loans		-			709,600
Proceeds from stock option exercise								38,000			-
Proceeds from line of credit		221,346			60,000			86,585			221,346
Payment on line of credit		(224,346	)		(93,705	)		-			(190,988	)
Payment on loans payable		(2,004,528	)		(2,737	)		(458,719	)		(20,606	)
Payment on notes payable, related party		(59,787	)		-			(125,861	)		-
Distributions to member		-			(20,000	)

Net cash provided by financing activities		1,182,685			1,443,158			9,011,005			3,259,752

Net increase (decrease) in cash and cash equivalents		(2,467,451	)		539,362
Effect of exchange rates on cash and cash equivalents								164,288			-

Net increase in cash and cash equivalents								1,137,872			2,129,579

Cash and cash equivalents - beginning of the period		5,197,030			1,876,645			2,725,035			5,197,030

Cash and cash equivalents - end of the period	$	2,729,579		$	2,416,007		$	3,862,907		$	7,326,609

Supplemental cash flow information:
Cash paid for:
Interest	$	91,490		$	169		$	36,069		$	34,163
Income taxes	$	-		$	5,882		$	-		$	-
Non-cash investing and financing activities:
Right of use asset and lease liability recorded	$	330,512		$	19,393
Forgiveness of PPP Loan	$	980,800		$	-
Common shares issued in Technologyville acquisition	$	-		$	1,356,908
Common shares issued in Clear Skies acquisition	$	-		$	932,000
Right of use asset and lease liability recorded upon adoption of ASC 842							$	-		$	175,759
Common stock issued in True Digital acquisition							$	34,726,380		$	-

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

CERBERUS CYBER SENTINEL CORPORATION and subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to Cerberus Cyber Sentinel Corporation, a Delaware corporation (“Cerberus”), and its wholly owned subsidiaries, including GenResults, LLC, an Arizona limited liability company (“GenResults”), TalaTek, LLC, a Virginia limited liability company (“TalaTek”), Technologyville, Inc., an Illinois corporation (“Techville”), Clear Skies Security, LLC, a Georgia limited liability company (“Clear Skies”), Alpine Security, LLC, an Illinois limited liability company (“Alpine”), Catapult Acquisition Corporation, a New Jersey corporation (“VelocIT”), Southford Equities, Inc., a British Virgin Islands company (“Arkavia”), True Digital Security, Inc., a Delaware corporation (“True Digital”), RED74 LLC, a New Jersey limited liability company (“RED74”), Atlantic Technology Systems, Inc., a New Jersey corporation (“ATS”), Atlantic Technology Enterprises, Inc., a New Jersey corporation (“ATE” and together with ATS, “Atlantic”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.

NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS

Nature of the Business

We are a cybersecurity and compliance company comprised of highly trained and seasoned security professionals who work with clients to enhance or create a better cyber posture in their organization. Cybersecurity, also known as computer security or information technology security, is the protection of computer systems and networks from information disclosure, theft of or damage to their hardware, software, or electronic data, as well as from the disruption or misdirection of the services they provide. The cybersecurity industry has a supply and demand issue wherein there is more demand for cybersecurity services than there are expert and seasoned compliance and cybersecurity professionals available in the market. We seek to identify, attract, and retain highly skilled cyber and compliance teams and bring them together to provide holistic cyber services. We accomplish this through acquisitions, direct hiring, and incentivizing employees with stock options to help retain them. On an ongoing basis, we seek to identify cyber talent that is culturally aligned and that offers operating leverage through both existing customer revenue and relationships. We have invested in enterprise solutions and executive talent to integrate our different organizations into an ecosystem that works together to provide complete and holistic cybersecurity through cross pollination of solutions. The ecosystem is intended to provide additional revenue opportunities and drive overall recurring revenue.

We provide a full range of cybersecurity consulting and related services, encompassing all three pillars of compliance, cybersecurity, and culture. Our services include secured managed services, compliance services, security operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, certified forensics, technical assessments, and cybersecurity training. We believe that culture is the foundation of every successful cybersecurity and compliance program. To deliver that outcome, we developed our unique offering of MCCP+ (“Managed Compliance & Cybersecurity Provider + Culture”), which is the only holistic solution that provides all three of these pillars under one roof from a dedicated team of subject matter experts. In contrast to the majority of cybersecurity firms that are focused on a specific technology or service, we seek to differentiate ourselves by remaining technology agnostic, focusing on accumulating highly sought-after topic experts. We continually seek to identify and acquire cybersecurity talent to expand our service scope and geographical coverage to provide the best possible service for our clients. We believe that bringing together a world-class team of technological experts with multi-faceted expertise in the critical aspects of cybersecurity is key to providing technology agnostic solutions to our clients in a business environment that has suffered from a chronic lack of highly skilled professionals, thereby setting us apart from competitors and in-house security teams. Our goal is to create a culture of security and to help quantify, define, and capture a return on investment from information technology and cybersecurity spending. Our brand rallies around the battle cry: “Cybersecurity is a Culture, not a Product.”

Corporate and Acquisition History

~~Cerberus Cyber Sentinel Corporation (“Cerberus Sentinel,” “Cerberus,” or the “Company”) was~~We were formed on March 5, 2019 as a Delaware corporation. ~~The Company’s~~Our principal offices are located at 6900 E.East Camelback Road, Suite 240, Scottsdale, ~~AZ 85258.~~Arizona 85251.

~~Effective~~On April 1, 2019, we acquired GenResults. GenResults was established on June 22, 2015. Prior to our acquisition of GenResults, GenResults was wholly owned by an entity affiliated with David G. Jemmett, our Chief Executive Officer and a director of our company. Due to the companies being under common control, we accounted for the acquisition as a reorganization.

On April 12, 2019, we consummated a transaction whereby VCAB Six Corporation, a Texas corporation, (“VCAB”) merged with and into us (the “VCAB Merger”). At the time of the VCAB Merger, VCAB was subject to a bankruptcy proceeding and had minimal assets, no equity owners, and no liabilities, except for approximately 1,500 holders of Class 5 Allowed General Unsecured Claims and a holder of allowed administrative expenses (collectively the “Claim Holders”). Pursuant to the terms of the VCAB Merger, and in accordance with the bankruptcy plan, we issued an aggregate of 2,000,000 shares of our common stock (the “Plan Shares”) to the Claim Holders as full settlement and satisfaction of their respective claims. As provided in the bankruptcy plan, the Plan Shares were issued pursuant to Section 1145 of the United States Bankruptcy Code. As a result of the VCAB Merger, the separate corporate existence of VCAB was terminated. We entered into the VCAB Merger to increase our stockholder base to, among other things, assist us in satisfying the listing standards of a national securities exchange.

On October 1, 2019, we entered into an agreement and plan of merger with TalaTek (the “TalaTek Merger”) pursuant to which TalaTek became our wholly owned subsidiary. Under the TalaTek Merger, all issued and outstanding units representing membership interests in TalaTek were converted into an aggregate of 6,200,000 shares of our common stock.

On October 2, 2019, we filed a registration statement on Form 10-12G with the SEC to effect registration of our common stock, par value $0.00001 per share, under the Exchange Act. The registration statement became effective on December 1, 2019.

On May 25, 2020, ~~the Company~~we entered into a ~~Stock Purchase Agreement~~stock purchase agreement with ~~Technologyville, Inc., an Illinois corporation (“Techville”),~~Techville and its sole shareholder, pursuant to which ~~Techville became a wholly owned subsidiary~~we acquired all of the ~~Company (the “Techville Acquisition”). Under the terms of the Techville Acquisition, all~~ issued and outstanding common stock of ~~Techville was exchanged for an aggregate of~~ ~~3,392,271~~ ~~shares of the Company’s common stock.~~Techville.

~~Effective~~On August 1, 2020, ~~the Company~~we entered into a ~~Stock Purchase Agreement~~stock purchase agreement with Clear Skies ~~Security, LLC, a Georgia limited liability company (“Clear Skies”),~~ and its equity holders, pursuant to which ~~Clear Skies became a wholly owned subsidiary~~we acquired all of the ~~Company (the “Clear Skies Acquisition”). Under the terms of the Clear Skies Acquisition, all~~ issued and outstanding equity securities inof Clear ~~Skies were exchanged for an aggregate of~~ ~~2,330,000~~ ~~shares of the Company’s common stock.~~Skies.

~~Effective~~On December 16, 2020, ~~the Company~~we entered into an ~~Agreement~~agreement and ~~Plan~~plan of ~~Merger~~merger with Alpine ~~Security, LLC, an Illinois limited liability company (“Alpine”),~~ and its sole member, pursuant to which Alpine became aour wholly owned ~~subsidiary of the Company (the “Alpine Acquisition”). Under the terms of the Alpine Acquisition, all issued and outstanding membership units in Alpine were exchanged for an aggregate of~~ ~~900,000~~ ~~shares of the Company’s common stock.~~subsidiary.

~~Effective August 12,~~On October 1, 2021, ~~the Company~~we entered into ~~an Agreement~~a stock purchase agreement with ATS, ATE, James Montagne as the sole shareholder of ATS, and ~~Plan~~James Montagne and Miriam Montagne, as the sole shareholders of ~~Merger~~ATE.

On October 8, 2021, we entered into a merger agreement with ~~Catapult Acquisition Corporation,~~RED74 and Ticato Holdings, Inc., a New Jersey corporation (“~~VelocIT”~~Ticato”), and ~~its equity holders,~~Tim Coleman, as sole shareholder of Ticato. Tim Coleman and Ticato were the sole shareholders of RED74.

On July 26, 2021, we entered into an agreement and plan of merger with VelocIT, pursuant to which VelocIT became a wholly owned subsidiary of ~~the Company (the “Catapult Acquisition”). Under the terms~~our company.

On December 1, 2021, we entered into a stock purchase agreement with Arkavia and all of the ~~Catapult Acquisition,~~owners of Arkavia, pursuant to which we acquired all of the issued and outstanding equity ~~secruities in VelocIT were exchanged for an aggregate~~securities of ~~2,566,778~~ ~~shares of the Company’s common stock.~~Arkavia.

~~Nature~~On January 5, 2022, we entered into a stock purchase agreement (the “True Digital Stock Purchase Agreement”) with certain stockholders of True Digital and an agreement and plan of merger (the “True Digital Merger Agreement”) with True Digital and certain of its other stockholders. On January 19, 2022, the ~~Business~~transactions contemplated by the True Digital Stock Purchase Agreement and the True Digital Merger Agreement were consummated, with True Digital becoming a wholly owned subsidiary of our company.

~~Cerberus Sentinel is~~On January 18, 2022, we completed a ~~security services company comprised~~$10,300,000 underwritten public offering of ~~security professionals who work with clients throughout the United States~~shares of our common stock, pursuant to create a continuously aware security culture. We do not sell cybersecurity products. We position the Company as a trusted cybersecurity advisor and are committed to delivering tailored security solutions to organizationswhich an aggregate of ~~different sizes and across all geographies and industries to fit their budgetary needs and limit their cyber threat exposure.~~2,060,000

~~We currently provide a multitude~~ shares of cybersecurity services including managed security service, cybersecurity consulting, technology consulting, compliance auditing, vulnerability assessment, penetration testing, security remediation, Security Operations Center (“SOC”) set-up and consulting and cybersecurity training. We differentiate ourselves from our competitors by staying technology agnostic. We believe that many cybersecurity service providers in the market today are committed to a specific technology solution which limits their service scope and ability to quickly respond to any emerging cybersecurity challenges.common stock were issued (see Note 9). In addition, as we ~~continue~~granted the underwriter warrants to ~~serve~~purchase an aggregate of 144,200 shares of our ~~clients within~~common stock (see Note 10). We intend to use the net proceeds from the offering to fund acquisitions, sales, marketing, and general corporate purposes. In connection with the public offering, our existing capacities, we plan to continue making strategic acquisitions of small-to-medium-sized engineer-led cybersecurity service firms to continue to expand our service scope and geographical coverage. We believe that having a world-class technology team with multi-faceted expertise is key to providing technology agnostic solutions to our clients and maximizing their returncommon stock was listed on ~~investment from information technology (“IT”) and cybersecurity spending.~~The Nasdaq Stock Market LLC.

Liquidity

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that ~~the Company~~we will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At ~~September 30, 2021, the Company~~March 31, 2022, we had an accumulated deficit of $~~11,013,392~~ 51,955,033 and working capital surplus of ~~approximately~~ $3,202,490~~646,000~~. For the ~~nine~~three months ended ~~September 30, 2021, the Company~~March 31, 2022, we had a loss from operations of ~~approximately~~ $~~6,920,167~~7,911,569 and negative cash flows from operations of approximately $~~4,312,312~~3,015,795. Although ~~the Company is~~we are showing positive ~~revenues and~~revenue, gross profit ~~trends, the Company expects~~is trending negatively primarily due to increased stock compensation related to sales activity, we expect to incur further losses through the end of ~~2021.~~2022.

To date, ~~the Company has been funding~~we have funded operations primarily through the sale of equity in private placements and ~~revenues~~revenue generated by ~~the Company’s~~our services. During the ~~nine~~three months ended ~~September 30, 2021, the Company~~March 31, 2022, we received $~~3,250,000~~9,471,000 in net proceeds from ~~private placements of the Company’s common stock.~~our public offering.

~~Based~~Although we expect that we will need to raise additional capital for future acquisitions, based on ~~its~~our current cash resources and commitments, ~~the Company believes it~~we believe we will be able to maintain ~~its~~our current planned development and corresponding level of expenditure for at least ~~twelve~~12 months from the date of the issuance of these unaudited condensed consolidated financial statements, although no assurance can be given that itwe will not need additional funds prior to such time.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial ~~information~~statements as of ~~September 30, 2021,~~March 31, 2022, and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ has been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of our management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for such periods. Operating results for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission ~~or the SEC.~~(the “SEC”). These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended December 31, ~~2020,~~2021, included in ~~the Company’s~~our Annual Report on Form 10-K filed with the SEC on ~~March 31, 2021.~~April 15, 2022.

Consolidation

The unaudited condensed consolidated financial statements include the accounts of ~~the Company~~our company and ~~its~~our wholly owned ~~subsidiaries, GenResults, LLC (“GenResults”), TalaTek, Inc. (“TalaTek”), Techville, Clear Skies, Alpine, and VelocIT.~~subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to the financial statements for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, to conform to the financial statements presentation for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. These reclassifications had no effect on net loss or cash flows as previously reported.

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of ~~revenues~~revenue and expenses during the reporting period. Actual results could materially differ from those estimates.

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

Revenue

~~The Company’s revenues are~~

Our revenue is derived from two major types of services to clients: ~~Managed Services~~security managed services and ~~Consulting Services.~~professional services. With respect to ~~Managed Services, the Company provides~~security managed services, we provide culture education and enablement, tools and technology provisioning, data and privacy monitoring, regulations and compliance monitoring, remote infrastructure administration, and cybersecurity services including, but not limited to, antivirus and patch management. With respect to ~~Consulting Services, the Company provides~~professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.

~~Practical Expedients~~

As part of Accounting Standards Codification (“ASC”) 606, the Company has adopted several practical expedients including the following: (i) the Company has determined that it need not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised service to the customer and when the customer pays for that service will be one year or less and (ii) the Company recognizes any incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

Disaggregated ~~Revenues~~Revenue

Revenue ~~consists~~consisted of the following by service offering for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

SCHEDULE OF DISAGGREGATION OF REVENUES

Security Managed Services Professional Services Total
Primary Sector Markets
Public $ 3,179,047 $ 44,579 $ 3,223,626
Private 3,607,146 2,178,545 5,785,691
Not-for-Profit 192,953 52,313 245,266
$ 6,979,146 $ 2,275,437 $ 9,254,583

Major Service Lines
Compliance $ 3,336,795 $ - $ 3,336,795
Secured Managed Services 3,134,269 - 3,134,269
SOC Managed Services 352,535 - 352,535
vCISO 155,547 - 155,547
Technical Assessments - 1,844,496 1,844,496
Forensics & I/R - 265,567 265,567
Training - 149,529 149,529
Other CyberSecurity Services - 15,845 15,845
$ 6,979,146 $ 2,275,437 $ 9,254,583

	Security Managed Services		Professional Services		Total
Primary Sector Markets
Public	$	1,118,844	$	136,272	$	1,255,116
Private		6,746,088		1,110,530		7,856,618
Not-for-profit		187,293		30,383		217,676
Revenue	$	8,052,225	$	1,277,185	$	9,329,410

Major Service Lines
Compliance	$	1,612,167	$	-	$	1,612,167
Secured managed services		5,790,764		-		5,790,764
SOC managed services		629,561		-		629,561
vCISO		19,733		-		19,733
Technical assessments		-		908,232		908,232
Incident reporting and forensics		-		158,447		158,447
Training		-		2,550		2,550
Other cybersecurity services		-		207,956		207,956
Revenue	$	8,052,225	$	1,277,185	$	9,329,410

Major Geographic Location
U.S.	$	7,183,987	$	1,222,243	$	8,406,230
Chile		868,238		54,942		923,180
Revenue	$	8,052,225	$	1,277,185	$	9,329,410

Revenue ~~consists~~consisted of the following by service offering for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:

	Security Managed Services		Professional Services		Total		Security Managed Services		Professional Services		Total
Primary Sector Markets
Public	$	2,498,371	$	5,068	$	2,503,439	$	971,834	$	6,000	$	977,834
Private		1,024,744		1,001,748		2,026,492		848,463		681,961		1,530,424
Not-for-Profit		89,374		9,000		98,374
	$	3,612,489	$	1,015,816	$	4,628,305
Not-for-profit								51,520		-		51,520
Revenue							$	1,871,817	$	687,961	$	2,559,778

Major Service Lines
Compliance	$	2,519,958	$	-	$	2,519,958	$	1,066,628	$	-	$	1,066,628
Secured Managed Services		752,371		-		752,371
SOC Managed Services		301,760		-		301,760
Secured managed services								567,594		-		567,594
SOC managed services								206,035		-		206,035
vCISO		38,400		-		38,400		31,560		-		31,560
Technical Assessments		-		190,825		190,825
Forensics & I/R		-		554,069		554,069
Technical assessments								-		561,297		561,297
Incident reporting and forensics								-		85,350		85,350
Training		-		58,625		58,625		-		40,725		40,725
Other CyberSecurity Services		-		212,297		212,297
Other cybersecurity services								-		589		589
Revenue							$	1,871,817	$	687,961	$	2,559,778
	$	3,612,489	$	1,015,816	$	4,628,305
Major Geographic Location
U.S.							$	1,871,817	$	687,961	$	2,559,778
Chile								-		-		-
Revenue							$	1,871,817	$	687,961	$	2,559,778

Cash and Cash Equivalents

~~The Company considers~~We consider all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Accounts Receivable

Accounts receivable are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts. ~~The Company~~We periodically ~~assesses its~~assess our accounts and other receivables for collectability on a specific identification basis. ~~The Company provides~~We provide for allowances for doubtful receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. ~~The Company writes~~We write off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020, the Company’s~~2021, our allowance for doubtful accounts was $~~76,200~~ 91,707and $~~40,000~~77,811, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally between three and five years. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. ~~Computer equipment costs for the Company are capitalized, as incurred, and depreciated on a straight-line basis over three years. TalaTek capitalizes all equipment costs over $5,000~~ ~~and depreciates these costs on a straight-line basis over three years.~~

Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts, and the resulting gain or loss, if any, is reflected in results of operations.

Inventory

Inventory consists of software licenses and computer equipment for sale to customers. Inventory is measured using the first-in, first-out (“FIFO”) method and stated at lower of cost or net realizable value as of March 31, 2022 and December 31, 2021. The value of inventories is reduced for excess and obsolete inventories. We monitor inventory to identify events that would require impairment due to obsolete inventory and adjusts the value of inventory when required. We recorded 0 inventory impairment losses for the three months ended March 31, 2022 and 2021.

Impairment of Long-Lived Assets

~~The Company reviews~~We review long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. During the three ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~the Company~~we did not record a loss on impairment.

Intangible Assets

~~The Company records its~~We record our intangible assets at ~~cost~~fair value in accordance with ASC 350, Intangibles – Goodwill and Other. Finite-lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated.

Goodwill

Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit level ~~(See~~(see Note 6).

Advertising and Marketing Costs

~~The Company expenses~~We expense advertising and marketing costs as they are incurred. Advertising and marketing expenses were $~~254,026~~155,341 and $~~30,488~~45,227 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and are recorded in operating expenses on the unaudited condensed consolidated statements of operations. Advertising and marketing expenses were $471,721~~ ~~and $104,058~~ ~~for the nine months ended September 30, 2021 and 2020,~~ respectively, and are recorded in operating expenses on the unaudited condensed consolidated statements of operations.

Fair Value Measurements

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

Level 1:	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:	Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Level 3:	Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques.

Net Loss per Common Share

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. All vested outstanding options are considered potentially outstanding common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, the options and shares issuable upon conversion thereof have been excluded from ~~the Company’s~~our computation of net loss per common share for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

The following tables summarize the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to ~~the Company’s~~our net loss position even though the exercise price could be less than the average market price of the common shares:

SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE CALCULATION

September 30, 2021 September 30, 2020
Stock Options 27,680,040 21,435,700
Convertible Debt 1,500,000 -
Total 29,180,040 21,435,700

	March 31, 2022		March 31, 2021
Stock options		34,820,131		25,404,533
Convertible debt		300,000		1,500,000
Total		35,120,131		26,904,533

Stock-Based ~~Stock-based~~ Compensation

~~The Company applies~~We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the statements of operations.

For stock options issued to employees and members of ~~the~~our board of directors for their services, ~~the Company estimates~~we estimate the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates, and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, ~~the Company recognizes~~we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised. Due to ~~the Company’s~~our limited history and lack of public trading volume for ~~its~~our common stock, ~~the Company~~we used the average of historical share prices of similar companies within ~~its~~our industry to calculate volatility for use in the Black-Scholes option pricing model.

Pursuant to Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, ~~the Company accounts~~we account for stock options issued to non-employees for their services in accordance with ASC 718. ~~The Company uses~~We use valuation methods and assumptions to value stock options that are in line with the process for valuing employee stock options noted above.

Leases

Leases in which ~~the Company is~~we are the lessee are comprised of corporate offices and property and equipment. All of the leases are classified as operating leases. ~~The Company leases~~We lease multiple office spaces with a remaining weighted average term of ~~1.17~~2.21 years. ~~The Company leases~~We lease a vehicle with a remaining term of ~~0.67~~0.25 years.

In accordance with ASC 842, Leases, ~~the Company~~we recognized a right-of-use (“ROU”) asset and corresponding lease liability on ~~its~~our unaudited condensed consolidated balance sheet for long-term office leases and a vehicle operating lease agreement. See Note 12 – Leases for further discussion, including the impact on ~~the Company’s~~our unaudited condensed consolidated financial statements and related disclosures.

Deferred Revenue

Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the services provided to our customers or annual licenses and is recognized as services are performed or ratably over the life of the lease. We generally invoice customers in advance or in milestone-based installments. Deferred revenue of approximately $54,000 was recognized for the three months ended March 31, 2022 that was included in the deferred revenue balance as of December 31, 2021. As of March 31, 2022, deferred revenue related to such customer payments was $1,952,543, all of which is expected to be recognized during the succeeding twelve-month period and is therefore presented as current.

Deferred revenue consisted of the following:

SCHEDULE OF DEFERRED REVENUE

	March 31, 2022		December 31, 2021
Security managed services	$	1,724,543	$	52,824
Professional services		228,000		-
Total deferred revenue	$	1,952,543	$	52,824

Foreign Currency

Arkavia, uses the local currency as their functional currency. Assets and liabilities for Arkavia have been translated into U.S. dollars at the exchange rates prevailing at the end of the period and results of operations at the average exchange rates for the period. Unrealized exchange gains and losses arising from the translation of the financial statements of our non-U.S. functional currency operations are accumulated in the cumulative foreign currency translation adjustments account in the unaudited condensed consolidated statements of operations and comprehensive loss.

Accumulated Other Comprehensive Gain

Foreign currency translation adjustments of $902,441 represent the difference between net loss and comprehensive gain for the three months ended March 31, 2022.

Income Taxes

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

~~The Company utilizes~~We utilize ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. ~~The Company accounts~~We account for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, the Company’s~~2021, our net deferred tax asset has been fully reserved.

For uncertain tax positions that meet a “more likely than not” threshold, ~~the Company recognizes~~we recognize the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. ~~The Company’s~~Our practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations when a determination is made that such expense is likely.

Recently Issued Accounting Standards

In March 2021, the FASB issued ASU No. 2021-03, Intangibles – Goodwill and Other (Topic 350). ASU 2021-03 requires an entity to identify and evaluate goodwill impairment triggering events when they occur to determine whether it is more likely than not that the fair value of a reporting unit (or entity, if the entity has elected the accounting alternative for amortizing goodwill and chosen that option) is less than its carrying amount. If an entity determines that it is more likely than not that the goodwill is impaired. It must test goodwill for impairment using the triggering event date as the measurement date. An entity is required to disclose the amount assigned to goodwill in total and by major business combination, or by reorganization event resulting in fresh-start reporting. Also, the entity must disclose the weighted average amortization period in total and the amortization period by major business combination, or by reorganization event resulting in fresh-start reporting. ASU 2021-03 was effective for the Company on January 1, 2021 and did not have a significant impact on our unaudited condensed consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the Emerging Issues Task Force). The ASU requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. Under the ASU, an issuer determines the accounting for the modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt, or for other reasons. The ASU is applied prospectively and is effective for ~~the Company~~us for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. We adopted the standard on January 1, 2022 and management noted that there is no material impact to the unaudited condensed consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers. The ~~Company~~new guidance requires contract assets and contract liabilities acquired in business combinations to be recognized in accordance with ASC Topic 606 as if the acquirer had originated the contracts. The ASU is applied prospectively and is effective for us for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that adopting this standard will have on the unaudited condensed consolidated financial statements.

All newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to ~~the Company.~~us.

NOTE 3 – ACQUISITIONS

~~Catapult Acquisition Corporation~~

On ~~August 12, 2021,~~January 5, 2022, we entered into True Digital Stock Purchase Agreement with certain stockholders of True Digital and the ~~Company effected an Amended~~True Digital Merger Agreement with True Digital and ~~Restated~~certain of its other stockholders. On January 19, 2022, the transactions contemplated by the True Digital Stock Purchase Agreement and ~~Plan of Merger (the “Merger Agreement”) with Catapult Acquisition Merger Sub, LLC (“Merger Sub”), Catapult Acquisition Corporation (d/b/a VelocIT) (“VelocIT”),~~ the ~~shareholders of VelocIT and Derek Hahn, in his capacity as the shareholder representative. Pursuant to the~~True Digital Merger Agreement ~~the Merger Sub merged~~were consummated, with ~~and into VelocIT, with VelocIT surviving the Merger as~~True Digital becoming a ~~wholly-owned~~wholly owned subsidiary of ~~the Company~~our company (the ~~“VelocIT~~“True Digital Acquisition”). ~~At the effective time of the VelocIT Acquisition, VelocIT’s~~True Digital’s outstanding common stock was exchanged for ~~2,566,778~~ ~~shares of~~ the ~~Company’s common stock.~~

~~Immediately following the VelocIT Acquisition, the Company had~~ ~~120,296,749~~ ~~shares of common stock issued and outstanding. The pre-acquisition stockholders of the Company retained~~right to receive an aggregate of $~~117,729,971~~6,153,000 in cash and 8,229,000 shares ~~representing approximately~~of our common stock, subject to a ~~98%~~10% ~~ownership~~holdback. In the event that no claim is made by a Cerberus Indemnitee (as defined in the Merger Agreement) within one year from closing, then we shall pay the entire amount of the ~~post-acquisition company. Therefore, upon consummation~~10% holdback to the shareholders of ~~the VelocIT Acquisition, there was no change in control.~~True Digital.

The Company accounted for this transaction in accordance with the acquisition method of accounting for business combinations. Assets and liabilities of the acquired business were included in the consolidated balance sheet as of September 30, 2021, based on the respective estimated fair value on the date of acquisition as determined in a purchase price allocation using available information and making assumptions management believed are reasonable.

~~Per ASC 805,~~ ~~Business Combinations~~, the measurement period is the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination. The measurement period shall not exceed one year from the acquisition date. The Company has identified the acquisition date as ~~August 12, 2021~~. Subsequent to the issuance of these financial statements, ~~the Company expects~~we expect to obtain a third-party valuation on the fair value of the assets acquired, including identifiable intangible assets, and the liabilities assumed for use in the purchase price allocation.

~~During the period subsequent to the effective date of the acquisition, VelocIT recorded revenue of $985,146~~ ~~and a net loss of $1,695,276~~ ~~for the period from August 12, 2021 to September 30, 2021.~~

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

SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES

		August 12,2021
Consideration paid	$	15,400,668		$	40,879,380

Tangible assets acquired:
Cash		662,176			485,232
Accounts receivable		961,581			1,404,386
Prepaid expenses		37,941
Contract assets					131,342
Prepaid expenses and other current assets					196,825
Property and equipment		24,608			906,006
Capitalizable expenses		5,091
Other assets					17,505
Total tangible assets		1,691,397			3,141,296

Intangible assets acquired:
Intellectual property		134,445
Total intangible assets		134,445

Assumed liabilities:
Accounts payable		528,571			419,100
Accrued expenses		222,095			812,091
Deferred revenue					1,796,330
Line of credit					283,244
Loans payable		1,071,313			156,783
SBA loan payoff		1,426,850
Loans payable - shareholder					543,581
Other liabilities					17,012
Total assumed liabilities		3,248,829			4,028,141

Net liabilities assumed		(1,422,987	)		(886,845	)

Goodwill (a.)(b.)	$	16,823,655
Goodwill (^a)				$	41,766,225

a.(a)

Goodwill is the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. In accordance with applicable accounting standards, goodwill is not amortized but instead is tested for impairment at least annually or more frequently if certain indicators are present. Goodwill and intangibles are not deductible for tax purposes.

Goodwill represents expected synergies from the merger of operations and intangible assets that do not qualify for separate recognition. Cerberus and VelocIT are both cybersecurity service providers. The acquisition of VelocIT provided Cerberus potential sales synergies resulting from Cerberus’ access to VelocIT’s current client-base to offer additional services. These items will be assigned a fair value upon the completion of the third-party valuation and are not expected to change significantly.

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets ~~consist~~consisted of:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Prepaid expenses	$	398,712	$	128,398	$	1,182,061	$	453,498
Prepaid taxes						688,100		231,014
Prepaid insurance		56,125		13,746		51,130		46,751
Other current assets		30,780		-
Deferred interest						244,234		229,702
Total prepaid expenses and other current assets	$	485,617	$	142,144	$	2,165,525	$	960,965

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment ~~consists~~consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Computer equipment	$	15,735		$	15,735		$	687,086		$	495,235
Building								1,047,020			1,047,020
Leasehold improvements								177,853			109,626
Vehicle		63,052			63,052			63,052			63,052
Furniture and fixtures		30,832			6,224			45,835			33,358
Software		10,092			10,092			1,678,631			748,599
Property and equipment, gross		119,711			95,103
Property and equipment gross								3,699,477			2,496,890
Less: accumulated depreciation		(30,310	)		(14,473	)		(256,540	)		(102,466	)
Property and equipment, net	$	89,401		$	80,630		$	3,442,937		$	2,394,424

Total depreciation expense was $~~6,989~~154,074 and $~~5,361~~4,424 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. Total depreciation expense was $15,837~~ ~~and $8,668~~ ~~for the nine months ended September 30, 2021 and 2020,~~ respectively.

NOTE 6 – INTANGIBLE ASSETS AND GOODWILL

The following table summarizes the changes in goodwill during the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

SCHEDULE OF CHANGES IN GOODWILL

Balance December 31, 2020 $ 4,101,369
Acquisition of goodwill 16,823,655
Impairment -
Reclassification based on valuation report⁽¹⁾
(230,000
)
Ending balance, September 30, 2021⁽²⁾ $ 20,695,024

Balance December 31, 2021	$	16,792,535
Acquisition of goodwill		41,766,225
Foreign currency translation adjustment		715,669
Ending balance, March 31, 2022⁽¹⁾	$	59,274,429

⁽¹⁾

~~Subsequent to September 30, 2021, the Company obtained a third-party valuation for the December 16, 2020, acquisition~~As of ~~Alpine. As such, the purchase price allocation disclosed in the Company’s Annual Report in Form 10-K for December 31, 2020, filed on~~ March 31, ~~2021, changed and, therefore, goodwill changed.~~

⁽²⁾

~~As of September 30, 2021, the Company~~2022, we had not obtained a third-party valuation for the ~~August 12, 2021,~~January 19, 2022 acquisition of ~~VelocIT.~~True Digital. As such, the purchase price allocation disclosed in this Quarterly Report for ~~September 30, 2021,~~True Digital may change, and, therefore, goodwill from the acquisition may change.

The following table summarizes the identifiable intangible assets as of ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020:~~2021:

SUMMARY OF IDENTIFIABLE INTANGIBLE ASSETS

	Useful life	September 30, 2021			December 31, 2020			Useful life	March 31, 2022			December 31, 2021
Tradenames – trademarks ⁽¹⁾	Indefinite	$	1,211,800		$	1,094,500		Indefinite	$	1,211,800		$	1,211,800
Customer base ⁽¹⁾	15 years		384,000			370,000
Non-compete agreements ⁽¹⁾	5 years		242,100			236,400
Intellectual property/technology ⁽¹⁾	10 years		748,466			521,000
Tradenames - trademarks								5 years		1,849,449			1,798,300
Customer base								5 - 10 years		1,712,242			1,650,000
Non-compete agreements								2 - 5 years		695,238			675,500
Intellectual property/technology								5 - 10 years		1,557,008			1,528,000
Identifiable intangible assets			2,586,366			2,221,900				7,025,737			6,863,600
Less accumulated amortization			(226,964	)		(116,468	)			(628,245	)		(323,331	)
Total		$	2,359,402		$	2,105,432			$	6,397,492		$	6,540,269

⁽¹⁾	~~These intangible assets were acquired in the acquisitions of TalaTek, Techville, Clear Skies, Alpine and VelocIT.~~

The weighted average remaining useful life of identifiable amortizable intangible assets remaining is ~~8.24~~3.88 years.

Amortization of identifiable intangible assets for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020,~~ was $~~40,506~~304,914 and $~~15,648~~34,994~~, respectively. Amortization of identifiable intangible assets for the nine months ended September 30, 2021 and 2020, was $110,495~~ ~~and $46,944~~, respectively.

The below table summarizes the future amortization expense for the remainder of 2021 and the next four years thereafter:

SCHEDULE OF FUTURE AMORTIZATION EXPENSE

2		2021
Remainder of 2021	$	51,709
2022		153,554

2022 (excluding the three months ended March 31, 2022)			$	879,235
2023		125,086		1,166,080
2024		127,939		940,215
2025		100,444		909,440
2026				865,360
Thereafter		588,869		425,362
Future Amortization Expense	$	1,147,602	$	5,185,692

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses ~~consist~~consisted of the following amounts:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Accounts payable	$	788,268	$	328,368	$	2,975,474	$	1,700,260
Accrued payroll		408,602		39,670		453,147		482,588
Accrued expenses		265,532		417,832		2,032,540		513,718
Accrued commissions		26,678		-		729,397		-
Accrued interest – related party		5,079		23,934		30,993		12,500
Total accounts payable and accrued expenses	$	1,494,159	$	809,804	$	6,221,551	$	2,709,066

~~NOTE~~Note 8 - RELATED PARTY TRANSACTIONS

Convertible Note Payable, Consulting, and Stock Payable – Related Party

On ~~December 31, 2018, GenResults~~November 1, 2021, we entered into ~~an unsecured note payable~~a two-year consulting agreement with ~~Jemmett Enterprises, LLC,~~Smile on Fridays LLP (“Smile”) pursuant to which Smile will represent us as the ~~Company’s majority stockholder that is controlled by~~Chief Marketing Officer. Upon execution of the ~~Company’s Chief Executive Officer, in~~agreement, we were to issue a total of 432,000 shares of our common stock. The shares shall be deemed vested and earned to 25% upon the ~~original principal amount~~execution of $~~200,000. The note has a maturity date~~the agreement and 25% at the beginning of ~~June 15, 2021, and bears interest at~~ 6% ~~per annum. There was no remaining balance at September 30, 2021, The outstanding principal balance~~each subsequent six-month period. As of ~~this loan was $9,787~~ ~~at December~~March 31, ~~2020. At September 30, 2021, and December 31, 2020, the Company has recorded accrued interest~~2022, 108,000 shares of $~~5,079~~ ~~and $23,934, respectively, with respect to this note payable. The Company has recorded interest expense related to this note of $186~~ ~~and $3,669~~ ~~during the three months ended September 30, 2021 and 2020, respectively, and $4,595~~ ~~and $9,358~~ ~~during the nine months ended September 30, 2021 and 2020, respectively.~~

~~Convertible Note Payable, Accounts Receivable and Revenue – Related Party~~our stock have been issued.

On ~~December 23, 2020,~~January 1, 2021, we entered into a two-year consulting agreement with Smile, pursuant to which Smile will provide marketing and public relations services to us. Upon execution of the ~~Company~~agreement, we were to issue a total of 312,000 shares of our common stock. As of March 31, 2022, 156,000 shares of our common stock have been issued.

On October 27, 2021, we issued to ~~a related party~~Neil Stinchcombe, the sole owner of Smile, a convertible note in the principal amount of $~~3,000,000~~1,500,000 bearing an interest atrate of 6%5% per annum payable at maturity with aan original maturity date of ~~December 31, 2021 and~~January 27, 2022, with a conversion price of ~~$2.00~~ $5.00 per share. Pursuant to the note, the maturity date, at our election, was extended to April 22, 2022. On March 10, 2022, we entered into an amendment to the note pursuant to which the maturity date was extended to October 27, 2022. The outstanding principal ~~balance~~ of this ~~loan~~note was $~~3,000,000~~1,500,000 ~~at September 30, 2021,~~on March 31, 2022 and December 31, ~~2020, respectively. See~~ 2021. During the three months ended March 31, 2022, we recorded $18,493 in accrued interest.

Note ~~12 for additional details.~~Receivable – Related Party

~~At September 30, 2021, the Company had $48,270~~ ~~in outstanding accounts receivable from~~Arkavia provided cash infusions to a related ~~party. In addition, during~~party to fund an intended wholly owned subsidiary, Arkavia Peru, for start-up and operational costs. As of March 31, 2022, the ~~nine months ended September 30, 2021,~~subsidiary has yet to be incorporated and as such, Arkavia has recorded the ~~Company generated~~amount as a receivable. The amount outstanding at March 31, 2022 is $~~305,127~~1,161,718 ~~in revenues from the related party.~~ and is considered short-term and non-interest bearing.

Note 9 -– STOCKHOLDERS’ EQUITY

~~Equity Transactions During the Period~~

~~During the nine months ended September 30, 2021, the Company issued an aggregate of~~ ~~1,625,000~~ ~~shares of common stock with a fair value of $2.00~~ ~~per share, respectively, to investors for cash proceeds of $3,250,000~~.

~~On August 12, 2021, the Company issued an aggregate of~~ ~~2,566,778~~ ~~shares of common stock with a fair value of $6.00~~ ~~per share, to VelocIT pursuant to the Acquisition (See Note 3).~~

~~On August 16, 2021, the Company issued an aggregate of~~ ~~232,900~~ ~~shares of common stock with a fair value of $2.05~~ ~~per share to a consultant for services rendered (See Note 10).~~

~~Stock Payable~~

On January 16, 2020, the Company entered into a consulting agreement, with Eskenzi PR Limited (“Eskenzi”). As per the agreement, Eskenzi will provide various marketing and public relations services to the Company. The initial term of the agreement was for twelve months and automatically renews for an additional twelve months unless either the Company or Eskenzi provides at least three months advance written notice of termination. On January 16, 2021, the consulting agreement was automatically renewed per the terms of the agreement.

~~Upon execution of the consulting agreement the Company was to issue~~ ~~120,000~~ ~~shares of the Company’s restricted common stock, valued at $48,000~~ ~~to Eskenzi. Upon the renewal of the consulting agreement the Company was to issue~~ ~~312,000~~ ~~shares of the Company’s restricted stock, valued at $639,600, for a two-year period. On August 16, 2021, the Company issued~~ ~~232,900~~ ~~shares of vested common stock under the consulting agreement. As of September 30, 2021,~~ ~~39,000~~ ~~of vested shares have yet to be issued. As such, the Company recorded a stock payable in the amount of $79,950~~ ~~and $46,000~~ ~~representing the fair value of services performed through the nine months and year ended September 30, 2021 and December 31, 2020, respectively.~~

~~See Note 10 for disclosure of additional equity related transactions.~~

~~Note 10 –~~ ~~StocK-BASED COMPENSATION~~

2019 Equity Incentive Plan

~~The Board~~Our board of ~~Directors and stockholders of the Company~~directors approved ~~the Company’s~~our 2019 Equity Incentive Plan (the “2019 Plan”) on June 6, ~~2019.~~2019, and our stockholders holding a majority of the outstanding shares of our common stock approved and adopted the 2019 Plan. The maximum number of shares of ~~the Company’s~~our common stock that may be issued under the ~~Company’s~~ 2019 Plan is 25,000,000 shares. The 2019 Plan has a term of ten years from the date it was adopted. Shares issued under the 2019 Plan shall be made available from (i) authorized but unissued shares of common stock, (ii) common stock held in our treasury, ~~of the Company,~~ or (iii) previously issued shares of common stock reacquired by ~~the Company,~~us, including shares purchased on the open market.

Warrant and Option Valuation

We computed the fair value of options granted using the Black-Scholes option pricing model. The expected terms for options issued to non-employees is the contractual life and the expected term used for options issued to employees and directors is the estimated period of time that options granted are expected to be outstanding. We utilize the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. We utilize an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within our industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

Options

~~The Company~~We granted options for the purchase of ~~3,236,340~~6,025,815 shares of common stock during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

~~The Company~~We granted options for the purchase of ~~4,390,700~~900,000 shares of common stock during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2022.

In applying the Black-Scholes option pricing model to stock options granted, ~~the Company~~we used the following assumptions:

SCHEDULE OF ~~BLACK-SCHOLES~~ STOCK OPTIONS ~~GRANTED~~ASSUMPTIONS

	For the Nine Months Ended		For the Nine Months Ended		For the Three Months Ended			For the Three Months Ended
	September 30, 2021		September 30, 2020		March 31, 2022			March 31, 2021
Risk free interest rate		0.42% - 0.86%		0.22% - 0.33%		0.63% - 2.46%			0.42% - 0.48%
Contractual term (years)		5.00		5.00		10.00			5.00
Expected volatility		73.43% - 83.28%		73.61% - 73.93%		65	%		74	%
Expected dividends						0.00	%		0.00	%

The ~~total weighted average grant date fair value of options issued and vested during the nine months ended September 30, 2021, was $1,554,909~~ ~~and $267,818, respectively. The weighted average grant date fair value of non-vested options was $15,713,025~~ ~~at September 30, 2021.~~

~~The total weighted average grant date fair value of options issued during the nine months ended September 30, 2020, was $157,384. The weighted average non-vested grant date fair value of non-vested options was $1,871,528~~ ~~at September 30, 2020.~~

~~Compensation-based~~following table summarize stock option ~~activity for qualified and unqualified stock options is summarized as follows:~~activity:

SCHEDULE OF STOCK ~~OPTION~~OPTIONS ACTIVITY

				Weighted					Weighted
				Average					Average
	Shares			Exercise Price		Shares			Exercise Price
Outstanding at January 1, 2021		24,573,700		$	0.86
Outstanding at January 1, 2022							31,372,148		$	1.84
Granted		3,236,340			2.40		6,025,815			3.95
Exercised		-			-		(100,000	)		0.38
Expired or cancelled		(130,000	)		0.54		(2,477,832	)		1.84
Outstanding at September 30, 2021		27,680,040		$	1.04
Outstanding at March 31, 2022							34,820,131		$	2.21

The following table summarizes information about options to purchase shares of ~~the Company’s~~our common stock outstanding and exercisable at ~~September 30, 2021:~~March 31, 2022:

SUMMARY OF ~~OPTIONS TO PURCHASE SHARES OF COMMON~~ STOCK OUTSTANDING AND EXERCISABLE

				Weighted-		Weighted-							Weighted-		Weighted-
				Average		Average							Average		Average
		Outstanding		Remaining Life		Exercise		Number			Outstanding		Remaining Life		Exercise		Number
Exercise Prices	Exercise Prices	Options		In Years		Price		Exercisable		Exercise Prices	Options		In Years		Price		Exercisable

$	0.38		3,000,000		2.87	$	0.38		3,000,000	0.38		2,733,333		2.37	$	0.38		2,733,333
	0.40		3,600,000		2.81		0.40		3,000,000	0.40		3,600,000		2.31		0.40		3,600,000
	0.50		12,026,000		3.36		0.50		8,081,238	0.50		8,732,388		3.12		0.50		8,412,538
	2.00		6,277,700		4.14		2.00		108,333	1.40		1,417,251		5.39		1.40		1,372,395
	2.05		1,857,000		4.28		2.05		-	2.00		5,045,200		4.83		2.00		2,251,750
	3.05		170,000		4.83		3.05		-	2.05		1,421,703		3.92		2.05		342,396
	3.60		155,000		4.83		3.60		-	2.25		1,100,000		9.78		2.25		-
	4.00		499,340		4.83		4.00		-	3.05		170,000		4.33		3.05		-
										3.20		22,000		9.93		3.20		-
										3.46		12,000		9.94		3.46		-
										3.60		155,000		4.33		3.60		-
										4.00		624,340		4.30		4.00		-
										4.12		12,000		9.93		4.12		-
										4.21		18,000		9.97		4.21		-
										4.82		1,062,827		9.96		4.82		-
										5.00		8,599,088		9.60		5.00		52,958
$	6.75		95,000		4.82		6.75		-	6.75		95,000		4.33		5.00		-
			27,680,040		3.52	$	1.03		14,189,571			34,820,131		5.42	$	2.21		18,765,371

The compensation expense attributed to the issuance of the options is recognized ratably over the vesting period.

Options granted under the 2019 Plan are exercisable for a specified period, generally five to ten years from the grant date, and generally vest over three to four years from the grant date.

Total compensation expense related to the options was $~~1,251,635~~4,687,093 and $~~392,661~~838,762 for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, we attributed $2,121,583 and ~~2020, respectively. Total~~$2,565,510 of compensation expense related to the options ~~was~~to cost of payroll and selling, general, and administrative expenses, respectively. During the three months ended March 31, 2021, we attributed $~~2,981,523~~100,925 and $~~1,062,000~~737,837 ~~for~~of compensation expense related to the ~~nine months ended September 30, 2021~~options to cost of payroll and ~~2020,~~selling, general, and administrative expenses, respectively. As of ~~September 30, 2021,~~March 31, 2022, there was future compensation expense of $~~12,863,247~~46,517,161 with a weighted average recognition period of ~~2.58~~ 2.20years related to the options.

The aggregate intrinsic value totaled $~~129,067,956~~105,004,192 and $~~75,702,225~~85,717,281, for total outstanding and exercisable options, respectively, and was based on ~~the Company’s~~our estimated fair value of the common stock of $~~5.80~~5.32 as of ~~September 30, 2021,~~March 31, 2022, which is the aggregate fair value of the common stock that would have been received by the option holders had all option holders exercised their options as of that date, net of the aggregate exercise price.

Warrant Activity Summary

~~Options Pending~~

In applying the Black-Scholes option pricing model to warrants granted or issued, we used the following assumptions:

AsSCHEDULE OF STOCK WARRANTS ASSUMPTIONS

	For the Three Months Ended
	March 31, 2022
Risk free interest rate		1.47% - 1.62	%
Contractual term (years)		4.00 – 5.00
Expected volatility		84	%
Expected dividends		0.00	%

A summary of ~~September 30, 2021,~~ the ~~Company has approximately~~ warrant activity during the three months ended March 31, 2022 is presented below:

~~3,400,000~~SCHEDULE OF STOCK WARRANT ACTIVITY ~~options~~

			Weighted
			Average
	Shares		Exercise Price
Outstanding at January 1, 2022		-	$	-
Granted		144,200		5.00
Exercised		-		-
Expired or cancelled		-		-
Outstanding at March 31, 2022		144,200	$	5.00

The following table summarizes information about warrants to ~~be awarded to employees upon their acceptance~~purchase shares of ~~employment.~~ our common stock outstanding and exercisable at March 31, 2022:

SUMMARY OF STOCK OUTSTANDING AND EXERCISABLE

				Weighted-		Weighted-
				Average		Average
		Outstanding		Remaining Life		Exercise		Number
Exercise Prices		Options		In Years		Price		Exercisable

$	5.00		144,200		4.76	$	5.00		144,200
			144,200		4.76	$	5.00		144,200

The ~~majority of these employees work~~aggregate intrinsic value totaled $46,144, for ~~VelocIT. The options will be granted with an exercise price equal to the trading price~~total outstanding and exercisable warrants and was based on the ~~date~~estimated fair value of ~~grant, and will be valued utilizing a Black-Scholes valuation. The expense will be amortized over~~our common stock of $5.32 as of March 31, 2022, which is the ~~term~~aggregate fair value of the ~~options vesting period, although~~common stock that would have been received by the ~~amount~~warrant holders had all warrant holders exercised their warrants as of that date, net of the ~~expense has yet to be determined.~~aggregate exercise price.

NOTE 1110 – COMMITMENTS AND CONTINGENCIES

Maxim Settlement Agreement

On October 27, 2020, we entered into an advisory agreement (the “Advisory Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which the parties agreed to certain compensation obligations in the form of our common stock, cash and future rights. Certain disputes arose between the parties regarding the duties and obligations pursuant to the Advisory Agreement, resulting in the parties agreeing to enter into a settlement and release agreement on January 13, 2022. As a result, the Company recorded a settlement liability at December 31, 2021 of $470,000 and issued 400,000 shares of the Company’s common stock to Maxim, with a fair value of $5.00 per share, pursuant to the settlement. During the three months ended March 31, 2022, the Company paid $470,000 in cash.

Legal Claims

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

NOTE 1211 – LOANS PAYABLE AND LINES OF CREDIT

Lines of Credit

TalaTek, Inc.

On July 29, 2019, TalaTek entered into a secured line of credit with SunTrust Bank (“SunTrust”) for $500,000. The line of credit bears interest at LIBOR plus 2.25%. The line of credit is an open-end revolving line of credit and may be terminated at any time by SunTrust without notice to TalaTek. At ~~September 30,~~March 31, 2022 and December 31, 2021, ~~the line of credit remained open and~~ no amounts were drawn on the line of credit.

~~Technologyville, Inc.~~True Digital

On ~~August 24, 2017, Techville~~September 9, 2021, True Digital entered into a secured ~~revolving~~ line of credit with ~~Wintrust~~Blue Sky Bank (“~~Wintrust”~~Blue Sky”) for ~~a maximum amount of~~ $~~75,000~~500,000. The line of credit bears interest at ~~1.99%~~3.25% ~~for the first twelve (12) months, then Prime plus~~ 2%~~, with a floor rate of~~ 6% ~~and a maturity date of~~ ~~August 24, 2021~~.per annum. The line of credit ~~was collateralized by all~~has an ending term of ~~Techville’s assets. During the nine months ended September 30, 2021, Techville drew $221,346~~ ~~against the line of credit and made payments of $224,346~~August 9, 2022. At ~~September 30, 2021, and December~~March 31, ~~2020, there~~2022, the outstanding balance was $-369,829 ~~and $3,000~~ ~~outstanding, respectively, and has expired.~~.

Loans Payable

Technologyville, Inc.

On April 29, 2019, Techville entered into a note payable with VCI Account Services, that subsequently was assigned to U.S. Bancorp, in the original principal amount of $59,905. The note has a maturity date of May 12, 2025and bears an interest atrate of 5.77%per annum. During the ~~nine~~three months ended ~~September 30, 2021, the Company~~March 31, 2022, we made cash payments of $~~8,580~~5,532~~, of which $~~. ~~8,054~~ ~~and $526~~ ~~was attributed to principal and interest, respectively.~~ The loan is collateralized by a vehicle. At ~~September 30, 2021, $37,826~~ ~~was outstanding.~~

~~On June 22, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Techville entered into a note payable with a financial institution for $179,600~~ ~~bearing interest at~~ 1% ~~per annum and a maturity date of~~ ~~June 22, 2025. Pursuant to the note, principal and interest payments were deferred for ten months. Techville applied for loan forgiveness on a timely basis, and at September 30, 2021, the total amount due of $179,600~~ ~~had been forgiven.~~

~~GenResults, LLC~~

~~On December~~March 31, 2018, GenResults entered into an unsecured note payable with Jemmett Enterprises, LLC, the Company’s majority stockholder that is controlled by the Company’s Chief Executive Officer, in the original principal amount of $~~200,000. The note had a maturity date of~~ ~~June 15, 2021, and bore interest at~~ 6% ~~per annum. There was no remaining balance at September 30, 2021, The outstanding principal balance of this loan was $9,787~~ ~~at December 31, 2020. At September 30, 2021,~~2022 and December 31, ~~2020, the Company has recorded accrued interest of~~2021, $~~5,079~~27,122 and $~~23,934~~32,474 ~~, respectively, with respect to this note payable. The Company has recorded interest expense related to this note of $186~~ ~~and $3,669~~ ~~during the three months ended September 30, 2021 and 2020, respectively, and $4,595~~ ~~and $9,358~~ ~~during the nine months ended September 30, 2021 and 2020,~~was outstanding, respectively.

~~Cerberus Cyber Sentinel Corporation~~

~~On April 17, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Cerberus entered into a note payable with a financial institution for $530,000~~ ~~bearing interest at~~ 1% ~~per annum and a maturity date of~~ ~~April 17, 2022. Pursuant to the note, principal and interest payments were deferred for six months. The Company applied for loan forgiveness on a timely basis, and at September 30, 2021, the total amount due of $530,000~~ ~~had been forgiven.~~

~~Clear Skies Security LLC~~

~~On May 8, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Clear Skies entered into a loan payable with a financial institution for $134,200~~ ~~bearing interest at~~ 1% ~~per annum and a maturity date of~~ ~~May 8, 2022. Pursuant to the loan, principal and interest payments were deferred for six months. Clear Skies applied for loan forgiveness on a timely basis, and at September 30, 2021, the total amount due of $134,200~~ ~~had been forgiven.~~

~~Alpine Security, LLC~~

~~On April 18, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, Alpine entered into a loan payable with a financial institution for $137,000~~ ~~bearing interest at~~ 1% ~~per annum and a maturity date of~~ ~~April 8, 2022. Pursuant to the loan, principal and interest payments were deferred for six months. Alpine applied for loan forgiveness on a timely basis, and at September 30, 2021, the total amount due of $137,000~~ ~~had been forgiven.~~

Catapult Acquisition Corp.

On July 9, 2016, Catapult ~~Acquistion~~Acquisition Corp. entered into several seller notes payable with shareholders of VelocIT. The total borrowing amount was $600,000and each loan bears interest at 5%per annum with a maturity date of July 31, 2023. Pursuant to the terms of the loans, principal and interest payments were deferred for two years on three of the loans, making up $150,000of the $600,000 total amount borrowed. During the three months ended March 31, 2022, we made cash payments totaling $80,956, of which $75,652 and $5,304 was attributable to principal and interest, respectively. The amount outstanding as of ~~September 30,~~March 31, 2022 and December 31, 2021 was $~~559,354~~370,587 and $446,239, respectively.

Arkavia

At March 31, 2022 and December 31, 2021, notes payable consist of the following amounts:

SCHEDULE OF NOTES PAYABLE

	March 31, 2022			December 31, 2021
Total notes payable		4,697,586			5,018,788
4.22% Note payable, due March 30, 2026	$	557,582		$	607,915
4.22% Note payable, due March 30, 2026		400,981			437,178
4.81% Note payable, due April 10, 2028		141,804			148,665
4.81% Note payable, due April 10, 2028		160,530			168,308
4.20% Note payable, due June 3, 2024		29,230			33,418
4.20% Note payable, due March 6, 2026		939,066			998,759
3.48% Note payable, due May 15, 2023		109,774			129,692
4.88% Note payable, due August 8, 2024		149,538			179,591
3.50% Note payable, due May 26, 2021		-			5,817
3.50% Note payable, due December 1, 2023		45,936			58,805
4.69% Note payable, due April 15, 2024		136,172			206,993
6.48% Note payable, due February 17, 2022		196,206			191,792
3.50% Note payable, due April 15, 2024		136,172			182,088
7.14% Note payable, due December 3, 2029		540,933			557,445
7.14% Note payable, due December 3, 2029		95,981			99,574
7.14% Note payable, due December 3, 2029		924,168			869,179
7.14% Note payable, due December 3, 2029		133,513			143,569
Total notes payable		4,697,586			5,018,788
Less current portion		(196,206	)		(213,199	)
Long term notes payable	$	4,501,380		$	4,805,589

At various times during the three months ended March 31, 2022, Arkavia paid an aggregate of $337,680 in cash towards outstanding principal.

True Digital

On April 26, 2018, True Digital entered into a loan agreement with a shareholder for the principal amount of $250,000. The note had a maturity date of April 25, 2022 and bore an interest rate of 6% per annum. During the period of January 19, 2022 through March 31, 2022, True Digital made aggregate cash payments of $97,731. The loan was repaid prior the March 31, 2022.

On April 13, 2020, True Digital entered into a promissory note with a financial institution for the principal amount of $1,271,000. The note has a maturity date of April 13, 2022, bore an interest rate of 1% per annum and called for seventeen monthly payments of principal and interest of $71,171 beginning on November 13, 2020. At March 31, 2022, the amount outstanding was $74,427. Subsequent to March 31, 2022, the note was paid in full.

On February 10, 2020, True Digital entered into a promissory note with a shareholder for the principal amount of $113,975. The note has a maturity date of February 10, 2027 and bears an interest rate 6% per annum. During the period of January 19, 2022 through March 31, 2022, True Digital made aggregate cash payments of $2,693. At March 31, 2022, the amount outstanding was $92,834.

On February 2, 2021, True Digital entered into a promissory note with a shareholder for the principal amount of $510,000. The note has a maturity date of May 2, 2024 and bears an interest rate of 4% per annum. During the period of January 19, 2022 through March 31, 2022, True Digital made aggregate cash payments of $23,685. At March 31, 2022, the amount outstanding was $326,639.

Convertible Note Payable

On ~~December 23, 2020, the Company~~October 27, 2021, we issued to ~~a related party lender~~Neil Stinchcombe, the sole owner of Smile, a convertible note ~~payable~~ in the principal amount of $~~3,000,000~~1,500,000 ~~. The convertible note bears interest at~~ 6% ~~per annum, with~~bearing an ~~effective~~ interest rate ~~due to the if converted value of the note,~~ of ~~8.5%~~5% per annum payable at maturity with a maturity date of ~~December 31, 2021. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the holder, at~~January 27, 2022, with a conversion price of $~~2.00~~5.00 per share. ~~At December 31, 2020, the if converted value of~~On March 10, 2022, we entered into an amendment to the note atpursuant to which the ~~market price of $~~maturity date was extended to ~~2.05~~ ~~per share, would be $3,075,000~~October 27, 2022. The ~~issuance of the note resulted in a discount from the beneficial conversion feature totaling $75,000. Total straight-line amortization~~outstanding principal of this ~~discount totaled~~note was $~~56,501~~1,500,000 at March 31, 2022. At March 31, 2022 and December 31, 2021, we recorded accrued interest of $30,993 and $12,500 with respect to this note. We recorded interest expense of $18,493 during the ~~nine~~three months ended ~~September 30, 2021, and has a remaining amortization period of~~ ~~0.25~~ ~~years. Total interest expense on the note was $46,000~~ ~~and $135,000~~ ~~for the three and nine months ended September 30, 2021.~~March 31, 2022.

Future minimum payments under the above line of credit and notes payable ~~for~~following the ~~remainder of 2021 and thereafter and the amount of loans payable, net of current portion,~~three months ended March 31, 2022, are as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENTS ~~UNDER NOTES PAYABLE~~FOR LONG TERM DEBT

Sep. 30, 2021
2021 $ 3,000,000
2022 559,354
Total future minimum payments 3,559,354
Less: discount (18,599 )
Loans payable 3,540,755
Less: current (3,097,382 )
Loans payable, noncurrent $ 443,373

		March 31, 2022
2022 (excluding the three months ended March 31, 2022)	$	3,465,848
2023		1,069,214
2024		1,207,280
2025		752,419
2026		278,215
Thereafter		1,008,011
Total future minimum payments		7,780,987
Less: current		(2,501,563	)
Long term debt, noncurrent	$	5,279,424

NOTE 1312 – LEASES

All of ~~the Company’s~~our leases are classified as operating leases. With the adoption of Topic 842, operating lease agreements are required to be recognized on the condensed consolidated balance sheet as ROU assets and corresponding lease liabilities.

On January ~~1, 2021, February 1, 2021, and August 12, 2021, the Company~~19, 2022, we recognized additional ROU assets and lease liabilities of $~~37,932~~226,942~~, $137,826and~~ ~~154,767, respectively. The Company~~. We elected to not recognize ROU assets and lease liabilities arising from office leases with initial terms of twelve months or less (deemed immaterial) on the unaudited condensed consolidated balance sheets.

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

When measuring lease liabilities for leases that were classified as operating leases, ~~the Company~~we discounted lease payments using ~~its~~our estimated incremental borrowing rate at January 1, ~~2021.~~2022. The weighted average incremental borrowing rate applied was6%. As of ~~September 30, 2021, the Company’s~~March 31, 2022, our leases had a remaining weighted average term of ~~1.15~~2.21 years.

~~The following table presents net lease cost and other supplemental lease information:~~Operating leases are included in the unaudited condensed consolidated balance sheets as follows:

SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION

Nine Months Ended September 30, 2021
Lease cost
Operating lease cost (cost resulting from lease payments) $ 80,251
Short term lease cost 29,329
Net lease cost $ 109,580

Operating lease – operating cash flows (fixed payments) $ 80,251
Operating lease – operating cash flows (liability reduction) $ 72,639
Non-current leases – right of use assets $ 268,096
Current liabilities – operating lease liabilities $ 166,709
Non-current liabilities – operating lease liabilities $ 107,899

	Classification	March 31, 2022		December 31, 2021
Lease assets
Operating lease cost ROU assets	Assets	$	406,770	$	277,578
Total lease assets		$	406,770	$	277,578

Lease liabilities
Operating lease liabilities, current	Current liabilities	$	211,752	$	196,472
Operating lease liabilities, non-current	Liabilities		202,918		88,040
Total lease liabilities		$	414,670	$	284,512

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

SCHEDULE OF LEASE COST

	2022		2021
	Three Months Ended March 31,
	2022		2021
Leases costs
Operating lease costs	$	158,041	$	14,194
Total lease costs	$	158,041	$	14,194

Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, are as follows:

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

		Sep. 30, 2021		March 31, 2022
Fiscal Year	Operating Leases			Operating Leases
2021 (excluding the nine months ended September 30, 2021)	$	44,638
2022		178,273
				(Unaudited)
2022 (excluding the three months ended March 31, 2022)				$	189,657
2023		66,738			144,866
2024					57,605
2025					54,389
Total future minimum lease payments		289,649			446,517
Amount representing interest		(15,041	)		(31,846	)
Present value of net future minimum lease payments	$	274,608		$	414,670

NOTE 13 – GEOGRAPHIC INFORMATION

Revenue by geography is based on the customer’s billing address for the three months ended March 31, 2022 was as follows:

SCHEDULE OF REVENUE BY GEOGRAPHY IS BASED ON CUSTOMERS BILLING ADDRESS

	Secured Managed Services		Professional Services		Total
Major Geographic Location
U.S.	$	7,183,987	$	1,222,243	$	8,406,230
Chile		868,238		54,942		923,180
Revenue	$	8,052,225	$	1,277,185	$	9,329,410

Revenue by geography is based on the customer’s billing address for the three months ended March 31, 2021, was as follows:

	Secured Managed Services		Professional Services		Total

U.S.	$	1,871,817	$	687,961	$	2,559,778
Chile		-		-		-
Revenue	$	1,871,817	$	687,961	$	2,559,778

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

Property and equipment, net by geography was as follows:

SCHEDULE OF PROPERTY AND EQUIPMENT, NET BY GEOGRAPHIC AREAS

	March 31, 2022		December 31, 2021

U.S.	$	1,064,519	$	95,069
Chile		2,378,418		2,299,355
Property and equipment net	$	3,442,937	$	2,394,424

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

NOTE 14 – CONCENTRATION OF CREDIT RISK

Cash Deposits

Financial instruments that potentially subject ~~the Company~~us to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, the Company~~2021, we had approximately $~~1,788,000~~1,894,000 and $~~4,252,000~~1,119,000, respectively, in excess of the FDIC insured limit.

~~SCHEDULES OF CONCENTRATION OF RISK, BY RISK FACTOR~~Revenue

~~Revenues~~

No clients accounted for more than 10% of revenue for the three months ended March 31, 2022.

One client accounted for ~~26%~~32% of revenue for the ~~nine~~three months ended ~~September 30,~~March 31, 2021.

~~Two clients accounted for~~ ~~68%~~ ~~of revenue for the nine months ended September 30, 2020, as set forth below:~~

~~Client A~~			52	%
~~Client B~~			16	%

Accounts Receivable

~~Two~~No clients accounted for more than ~~27%~~10% of ~~the~~ accounts receivable as of ~~September 30, 2021, as set forth below:~~March 31, 2022.

~~Client A~~			15	%
~~Client B~~			12	%

~~Two clients~~One client accounted for ~~56%~~20% of ~~the~~ accounts receivable as of ~~September 30, 2020, as set forth below:~~March 31, 2021.

~~Client A~~			29	%
~~Client B~~			27	%

~~Accounts Payable~~

~~Two vendors accounted for~~ ~~21%~~ ~~of the accounts payable as of September 30, 2021, as set forth below:~~

~~Vendor A~~			11	%
~~Vendor B~~			10	%

~~Two vendors accounted for~~ ~~40%~~ ~~of the accounts payable as of September 30, 2020, as set forth below.~~

~~Vendor A~~			26	%
~~Vendor B~~			14	%

NOTE 15 – SUBSEQUENT EVENTS

In accordance with ASC 855, ~~Atlantic Technology Systems, Inc. Acquisition~~Subsequent Events

~~On October 1, 2021,~~, which establishes general standards general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company ~~entered into a Stock Purchase Agreement (the “Agreement”) by~~has evaluated all events and ~~among~~transactions that occurred after March 31, 2022 through the date the unaudited condensed consolidated financial statements are available for issuance. During this period the Company Atlantic Technology Systems, Inc. (“ATS”) and Atlantic Technology Enterprises, Inc. (“ATE”) (collectively, “Atlantic”) and James Montagne, the sole shareholder of ATS, and James Montagne and Miriam Montagne as the sole shareholders of ATE (the “Shareholder”). Pursuant to the Agreement, the Company purchased from the Shareholder all of the outstanding shares of Atlantic, with ATE and ATS becoming wholly-owned subsidiaries of the Company. The aggregate purchase price for the Atlantic shares was ~~200,000~~ ~~shares of the Company’s common stock, par value $0.00001, and $75,000~~ ~~in cash. Furthermore, the Shareholder shall receive an additional~~ ~~100,000~~ ~~shares of the Company’s common stock based upon Atlantic achieving certain revenue and earnings thresholds and an additional $150,000~~ ~~in cash upon the Company listing to a national exchange.~~

~~Convertible Note Issuance~~

~~On October 27, 2021, the Company issued a 5% Unsecured Convertible Note (the “Note”) to Neil Stinchcombe (the “Lender”), in consideration of the Lender lending the Company $1,500,000~~ (the “Principal Amount”) to provide funding for the Company’s prospective acquisitions and other general corporate purposes. The Principal Amount, together with accrued and unpaid interest, is due on ~~January 27, 2022~~ (the “Maturity Date”), with no prepayment option. Interest is calculated at 6% per annum (based on a 360-day year) and is payable monthly. The Maturity Date may be extended at the Company’s election to April 27, 2022.did not have any material reportable subsequent events.

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

~~Note Regarding Forward-Looking Statements~~

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements and related notes.

~~This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance.~~Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue”Unless otherwise indicated or the ~~negative of these terms or other comparable terminology.~~ These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2021, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:

●	~~our ability to achieve and sustain profitability of the existing lines of business through expansion;~~
●	~~our ability to raise sufficient capital to acquire world-class engineer-owned cybersecurity companies;~~
●	~~our ability to attract and retain world-class cybersecurity talent;~~
●	~~our ability to identify potential acquisition targets within predetermined parameters;~~
●	~~our ability to successfully execute acquisitions, integrate the acquired businesses and create synergies as a nationwide cybersecurity consolidator;~~
●	~~our ability to attract and retain key technology or management personnel and to expand our management team;~~
●	~~the accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and needs for additional financing;~~
●	~~business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as the outbreak of COVID-19 or any of its variants);~~
●	~~our ability to attract and retain clients; and~~
●	~~our ability to navigate through the increasingly complex cybersecurity regulatory environment.~~

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in the future operating results over time, except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

~~As used in this Quarterly Report on Form 10-Q and unless~~context requires otherwise, ~~indicated,~~ the terms ~~“Company,”~~ “we,” “us,” “our,” and ~~“our”~~“our company” refer to Cerberus Cyber Sentinel Corporation, a Delaware corporation (“Cerberus”), and its wholly owned subsidiaries, including GenResults, LLC, an Arizona limited liability company (“GenResults”), TalaTek, LLC, a Virginia limited liability company (“TalaTek”), Technologyville, Inc., an Illinois corporation (“Techville”), Clear Skies Security, LLC, a Georgia limited liability company (“Clear Skies”), Alpine Security, LLC, an Illinois limited liability company (“Alpine”) ~~and~~, Catapult Acquisition Corporation, a New Jersey corporation (“~~VelocIT)~~VelocIT”), Southford Equities, Inc., a British Virgin Islands company (“Arkavia”), True Digital Security, Inc., a Delaware corporation (“True Digital”), RED74 LLC, a New Jersey limited liability company (“RED74”), Atlantic Technology Systems, Inc., a New Jersey ~~corporation.~~corporation (“ATS”), and Atlantic Technology Enterprises, Inc., a New Jersey corporation (“ATE” and together with ATS, “Atlantic”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.

~~Corporate History~~

Cerberus Cyber Sentinel Corporation (“Cerberus Sentinel”) was formed on March 5, 2019 as a Delaware corporation. Our principal offices are located at 6900 E. Camelback Road, Suite 240, Scottsdale, AZ 85251.

Effective May 25, 2020, we entered into a Stock Purchase Agreement with Techville and its sole shareholder, pursuant to which Techville became a wholly owned subsidiary of the Company (the “Techville Acquisition”). Under the terms of the Techville Acquisition, all issued and outstanding common stock of Techville was exchanged for an aggregate of 3,392,271 shares of our common stock.

Effective August 1, 2020, we entered into a Stock Purchase Agreement with Clear Skies and its equity holders, pursuant to which Clear Skies became a wholly owned subsidiary of the Company (the “Clear Skies Acquisition”). Under the terms of the Clear Skies Acquisition, all issued and outstanding equity securities in Clear Skies were exchanged for an aggregate of 2,330,000 shares of our common stock.

On December 16, 2020, we entered into an Agreement and Plan of Merger pursuant to which Alpine became a wholly owned subsidiary of the Company. All units representing membership interests of Alpine issued and outstanding were converted into 900,000 shares of our common stock.

On July 26, 2021, and effective August 12, 2021, we entered into an Amended and Restated Agreement and Plan of Merger pursuant to which VelocIT became a wholly-owned subsidiary of the Company. All issued and outstanding shares of common stock of VelocIT were converted into the right to receive an aggregate of up to 2,566,778 shares of common stock of the Company, subject to a holdback of 256,678 shares of Company stock.

Our Business

~~The cyber security industry has a supply and demand issue; there is more demand for cyber security services than expert and seasoned compliance and cybersecurity professionals available in the market.~~ We are a cybersecurity and compliance company comprised of highly trained and seasoned security professionals who work with clients to enhance or create a better cyber posture in their organization. Cybersecurity, also known as computer security or information technology security, is the protection of computer systems and networks from information disclosure, theft of or damage to their hardware, software, or electronic data, as well as from the disruption or misdirection of the services they provide. The cybersecurity industry has a supply and demand issue wherein there is more demand for cybersecurity services than there are expert and seasoned compliance and cybersecurity professionals available in the market. We seek to identify, attract, and retain highly skilled cyber and compliance teams and bring them together to provide holistic cyber services. ~~This is accomplished~~We accomplish this through acquisitions, direct hiring, and incentivizing employees with stock options to help retain them. On an ongoing basis, we seek to identify cyber talent that is culturally aligned and that offers operating leverage through both existing customer revenue and relationships. We have invested in enterprise solutions and executive talent to integrate our different organizations into an ecosystem that works together to provide complete and holistic cybersecurity through cross pollination of solutions. The ecosystem is intended to provide additional revenue opportunities and drive overall recurring revenue.

We emphasize to clients the critical nature of having their work force create a continuously aware security culture. Once engaged, we strive to become the trusted advisors for customers’ cybersecurity and compliance needs by providing tailored security solutions based upon their organizational needs. We do not focus on the selling of cybersecurity products; we are product agnostic so that we can provide solutions that fit customers’ security needs, financial realities, and future strategy. Our approach is to evaluate clients’ organizations holistically, identify compliance requirements, and help secure the infrastructure while helping to create a culture of security.

We provide a full range of cybersecurity consulting and related services, encompassing all three pillars of compliance, cybersecurity, and culture. Our services include secured managed services, compliance services, security operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, certified forensics, technical assessments, and culture, including Secured Managed Services, Compliance Services, SOC Services, Virtual CISO (vCISO) Services, Incident Response, Certified Forensics, Technical Assessments, and Cybersecurity Training.cybersecurity training. We believe that culture is the foundation of every successful cybersecurity and compliance program. To deliver that outcome, we developed our unique offering of MCCP+ (“Managed Compliance & Cybersecurity Provider + Culture”), which is the only holistic solution that provides all three of these pillars under one roof from a dedicated team of subject matter experts. In contrast to the majority of cybersecurity firms that are focused on a specific technology or service, we seek to differentiate ourselves by remaining technology agnostic, focusing on accumulating ~~highly-sought after~~highly sought-after topic experts. We continually seek to identify and acquire ~~cyber security~~cybersecurity talent to expand our service scope and geographical coverage to provide the best possible service for our clients. We believe that bringing together a world-class team of technological experts with multi-faceted expertise in the critical aspects of cybersecurity is key to providing technology agnostic solutions to our clients in a business environment that has suffered from a chronic lack of ~~highly-skilled~~highly skilled professionals, thereby setting us apart from competitors and in-house security teams. Our goal is to create a culture of security and to help quantify, define, and capture a return on investment ~~(ROI)~~ from information technology and cybersecurity spending. Our brand rallies around the battle cry: “Cybersecurity is a Culture, not a Product.”

Offering this set of cybersecurity services allows us to capture more revenue with greater efficiency, facilitating greater profitability and stronger customer retention. The benefit to our customers is that they receive an efficient engagement from a single provider that covers a wide range of their needs. This means their challenges are addressed more thoroughly and problems are resolved more rapidly when compared to working with multiple vendors. This leads to the best possible outcome which enables them to commit to usFirst Quarter Fiscal 2022 Highlights

Our operating results for the ~~long term.~~three months ended March 31, 2022 included the following:

We believe that our business model is differentiated from other companies in the industry in that our employees are not consultants; they’re dedicated partners available on a recurring monthly contract. Due to the numerous challenges in hiring experienced cybersecurity and compliance professionals, we believe that assimilating our team of industry and subject matter experts into our clients’ teams is the ideal solution.

	●	Total revenue increased by $6.8 million to $8.1 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.
	●	Total gross profit decreased by $670,000 to $49,000 for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.
	●	We acquired TrueDigital, which is now wholly owned subsidiaries of our company.

We are technology agnostic. Whereas, most cybersecurity firms are locked into working with a single technology, we seek to differentiate ourselves by remaining technology agnostic. This approach enables us to work with any business, no matter what systems or tools they use. For our customers the benefit is equally valuable; they’re able to choose the best tools and technology for their business needs without affecting their relationship with us.

We believe that building a world-class technology team with industry-specific and subject-matter expertise is the key to providing cutting-edge solutions to our clients. We aim to continue to identify and acquire cybersecurity talent to expand our scope of services and geographical footprint to fortify our capability to deliver excellence to our customers. Furthermore, our commitment is that we will stay a step ahead of threat actors and regulatory obligations to keep our customers safe and compliant.

~~Our Service Offering~~Significant Developments During First Quarter Fiscal 2022

~~We currently offer two major types of services to clients including Security Managed Services~~Nasdaq Listing and ~~Professional Services.~~

~~Security Managed Services~~Public Offering

~~Our Security Managed Services deliver an end-to-end solution to cybersecurity and compliance needs. We begin with~~On January 19, 2022, we completed a ~~gap analysis~~public offering of our ~~customers’ existing cybersecurity~~common stock. Pursuant to the public offering, we issued and ~~compliance practices. Next, we perform penetration testing, vulnerability scanning,~~sold 2,060,000 shares of common stock at a public offering price of $5.00 per share and ~~a best practices assessment. This culminates with a deliverable report outlining failures~~granted to the underwriter warrants for the purchase of 144,200 shares of common stock at an exercise price of $5.00 per share. We received net proceeds of approximately $9,471,000 from the public offering, after deducting underwriting discounts and ~~risks~~commissions of $721,000 and includes a remediation roadmap organized based on highest-value opportunities and critical necessities. This prioritized approach utilizes the maxi-min strategy to optimize our customers’ budget; something that comes from decadesestimated offering costs of experiential wisdom. Using this roadmap, our team performs remediation and change implementation throughout a customer’s business. This is followed by our culture program that delivers cybersecurity and compliance awareness training, risk reporting, and periodic knowledge verification. We cover every area of our customers’ businesses and engage with every member of their team. This is our end-to-end holistic approach that we believe leaves no stone unturned to ensure our customers are truly safe, secure, and compliant.$108,000.

~~We offer multiple services in~~On January 14, 2022, we were approved to list our common stock on The Nasdaq Stock Market LLC under the ~~Security Managed Services portfolio including the following:~~

● Compliance: Our compliance practice ensures the customers are implementing the right controls, properly prioritizing risks, and investing in the appropriate remediation, so our customers can achieve compliance, adhere to industry standards and guidelines, and manage continuous monitoring over time. We provide the combination of integrated processes and systems, experienced staff, and innovative technology to help our customers meet those goals. Our seasoned experts possess the stringent industry certifications and accreditations that prove they understand security compliance regulations, frameworks, and controls. Our deep knowledge of these rigorous and unique requirements means we can offer a thorough, timely assessment that will identify residual risk within the customer’s information system. We then propose mitigation strategies to manage the customer’s risk effectively. As an authorized FedRAMP vendor ourselves, we bring an insider’s perspective to the process in the following standards:

○ FedRAMP - The Federal Risk and Authorization Management Program (FedRAMP) provides standardization to cloud security for Cloud Service Providers (CSP). FedRAMP recognition is required to sell cloud services to the US Federal and many state and local governments ~~https://www.fedramp.gov/~~

○ FISMA 2014 - codifies the Department of Homeland Security’s role in administering the implementation of information security policies for federal Executive Branch civilian agencies, overseeing agencies’ compliance with those policies, and assisting OMB in developing those policies. ~~https://www.cisa.gov/federal-information-security-modernization-act~~

○ ISO 17021, ISO 27001 is an International Standard that provides Certification Bodies (CB) with a set of requirements that will enable them to ensure that their management system certification process is carried out in a competent, consistent and impartial manner. ~~https://www.iso.org/~~

○ HIPAA - Technology for Economic and Clinical Health Act of 2009 (“HITECH”) – These are laws regulated by the Department of Health and Human Services (“HHS”) to secure the privacy and confidentiality of protected health information (“PHI”) (~~https://www.hhs.gov/hipaa/index.html~~)

○ ~~PCI - This is a standard administered by the Payment Card Industry Security Standards Council (https://www.pcisecuritystandards.org/pci_security/~~)

○ Cyber Security Framework (CSF) Consist of five core functions: Identify, Protect, Detect, Respond, and Recover. NIST defines the framework core on its official website as a set of cybersecurity activities, desired outcomes, and applicable informative references common across critical infrastructure sectors. ~~https://www.nist.gov/cyberframework~~

○ NIST - The National Institute of Standards and Technology (“NIST”) – This is formally known as a National Bureau of Standards, which is a federal agency that promotes and maintains measurement standards while encouraging and assisting industry and science to develop and use these standards. ~~https://www.nist.gov/~~

○ 800-171/CMMC - CMMC is intended to serve as a verification mechanism to ensure that DIB companies implement appropriate cybersecurity practices and processes to protect Federal Contract Information (FCI) and Controlled Unclassified Information (CUI) within their unclassified networks. ~~https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final~~

○ GDPR - The General Data Protection Regulation is one of the most wide-ranging pieces of legislation passed by the EU in recent memory. It was introduced to standardize data protection law across the single market and give people in a growing digital economy greater control over how their personal information is used. https://gdpr.eu/compliance/

○ Service Organization 2 (“SOC 2”) – This is an auditing procedure that focuses on a business’ non-financial reporting controls related to security, availability, processing, integrity, confidentiality, and privacy of a system; https://www.aicpa.org/

○ HITRUST CSF – This is a comprehensive security framework (“CSF”) developed by the Health Information Trust Alliance (“HITRUST”) in collaboration with healthcare, technology and information security leaders, to create access, store and exchange sensitive and/or regulated data; https://hitrustalliance.net/

● Secured Managed Services: Cybersecurity companies who may excel at pointing out vulnerabilities or configuration issues, we have experts with the capability to resolve fix them. Our team has extensive experience in remediating security issues in a holistic fashion, to quickly effect change at organization scale. We know our customers’ teams are busy enough as is, so we offload the burden of addressing the dozens or hundreds of remediation items that may come from a security review, penetration test, or incident response project. Our remediation services resolve vulnerabilities that may expose risk to, or have caused, unwanted conditions or outcomes. Examples of issues that Cerberus Sentinel remediate include writing new or more effective policies, rearchitecting computer networks to minimize attack surface, implementing high security password requirements and multi-factor authentication, applying missing security patches that expose an organization to security attack, or correcting misconfigurations that can lead to unauthorized access such as a user being granted overly broad permissions. Our remediation services provide customers with a mature methodology for the heavy lifting needed to ensure that implementing solutions to minimize security risk are done safely, efficiently, and correctly the first time.

● SOC Managed Services: We offer SOC-as-a-service, which is a subscription-based service that manages and monitors client’s’ logs, devices, clouds, network, and assets for possible cyber threats. This lets our service provide the clients with the knowledge and skills necessary to combat cybersecurity threats.

● vCISO Service: Corporations are in need of cybersecurity services but many do not have the capital resources or knowledge base to hire a Chief Information Security Officer (“CISO”). We offer this service to companies on an ongoing managed service basis as a resource to augment their management team. vCISO includes road mapping the future state for the client and providing our knowledgeable expertise to help them achieve their security needs.

~~Professional Services~~

Our advisory services include a wide array of tailored solutions for organizations of all sizes. Our in-depth and uniquely acquired industry expertise allows us to act as a trusted advisor of our clients to help them lower their risk profile, minimize cost impact to organizations and meet regulatory compliance demands. We specialize in:

● ~~Incident Response and Forensics: This is where we focus on identification, investigation, and remediation of cyberattacks.~~

● Technical Assessments: We specialize in advanced cyber security assessments that highlight the skills and experience of our team’s top-tier talent. Our customers benefit from our routine identification of issues based on our emphasis on real-world manual testing techniques and custom exploit development to uncover new avenues of attack. We believe that our approach to penetration testing services strikes the perfect equilibrium between cost, time and results. Our team of highly skilled testers utilize the same tools and techniques a malicious cybercriminal would use to try to gain unauthorized access to highly-guarded corporate systems and data to evaluate technical controls and quantify business risks in a meaningful way. This level of analysis provides business leaders the knowledge required to not only understand the impact a successful attack might have on their business operations, but also can validate the effectiveness of existing security controls and justify additional security related investment.

Training: This targets the root cause for 75% of cyber breach events by starting with a culture of security-first forward thinking. Our security awareness training can prevent a catastrophic cyberattack before it even occurs by equipping users with the tools and techniques required to spot a potential cyberattack in the early stages.

● ~~Other Cybersecurity Services:~~

○ Cybersecurity Road Mapping: Bringing the culture of cybersecurity to client’s leadership team and penetrating throughout the organization is a critical first step of building any successful cybersecurity system. Through our consulting service, we dive into both the cultural and technical aspects of cybersecurity within the organization, providing meaningful recommendations to improve cybersecurity posture immediately. We help our clients build effective policies and best practices, design or enhance a cybersecurity system and train the executive management team to foster a top-down culture of cybersecurity in order to facilitate diligent implementation of cybersecurity awareness.

○ Gap and Risk Assessment: Threat actors probe and exploit the weakest points in an organization, it doesn’t matter if a business has done 100 things right when one mistake can be catastrophic. Cerberus Sentinel combines decades of security expertise and in-depth knowledge of how cyberattackers operate to deliver a thorough security risk gap analysis that identifies real world threats and issues guidance for protection. We first familiarize ourselves with the customer’s environment, business model, operations, and business drivers to best determine a customer’s cybersecurity posture in an ever evolving threat landscape. We then use our advanced threat intelligence, data breach experience, and analytics to accurately assess the customers unique cybersecurity risk based on their “as is” state. We then operate with a holistic mindset, considering every link in the cybersecurity chain from people, processes, and technology, to determine their ideal “to be” state, aligned with their business goals, compliance requirements, and risk tolerance. Finally, we collaboratively devise and develop a strategic cybersecurity plan that takes into account critical priorities to effectively reduce cybersecurity risk by closing the gap between their “as is” and “to be” states. This comprehensive awareness of internal systems and policies provides our customers with a clear understanding of their overall risk as well as the strategies and tools they need to protect their most valuable assets: their data and brand reputation.

~~Significant Development During the Quarter~~symbol “CISO.”

Acquisition of ~~VelocIT~~True Digital

On ~~June 30, 2021,~~January 5, 2022, we entered into a stock purchase agreement (the “True Digital Stock Purchase Agreement”) with certain stockholders of True Digital and an agreement and plan of merger (the “True Digital Merger Agreement”) with True Digital and certain of its other stockholders. On January 19, 2022, the transactions contemplated by the True Digital Stock Purchase Agreement and ~~Plan of Merger (the “Merger Agreement”) by and among~~ the Company, Catapult Acquisition Merger Sub, LLC (“Merger Sub”), Catapult Acquisition Corporation (“Catapult”), the shareholders of Catapult Acquisition Corporation (the “Catapult Shareholders”) and Darek Hahn, in his capacity as the shareholder representative (the “Shareholder Representative”). Pursuant to theTrue Digital Merger Agreement ~~Catapult agreed to merge~~were consummated, with ~~and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as~~True Digital becoming a ~~wholly-owned~~wholly owned subsidiary of ~~the Company. The Merger was to become effective as soon as practicable following completion of certain conditions to closing in the Merger Agreement (the “Effective Time”).~~

On July 26, 2021, the Company, Merger Sub, Catapult, the Catapult Shareholders and the Shareholder Representative entered into an Amended and Restated Agreement and Plan of Merger (the “Amended and Restated Merger Agreement”) to provide, among other things, that Merger Sub would mergeour company. In connection with ~~and into Catapult, with Catapult surviving the Merger as a wholly-owned subsidiary~~consummation of the ~~Company. All issued~~transactions, we paid aggregate consideration of $6,153,000 in cash and ~~outstanding~~8,229,000 shares of our common stock, ~~of Catapult immediately prior to the Effective Time were converted into the right to receive an aggregate of up to 2,566,778 shares of common stock, par value $0.00001, of the Company,~~ subject to a holdback of ~~256,678~~822,900 shares of ~~Cerberus Stock. The Effective Time was August 12, 2021.~~our common stock and $615,300 of cash.

~~Catapult, which operates under~~

True Digital is a managed cybersecurity and compliance provider dedicated to the ~~brand name~~advancement of ~~VelocIT, offers enterprise solutions~~security in an increasingly connected world. Through integrated services and deep visibility, True Digital helps organizations manage risk and compliance. From its own U.S.-based security operations center and network operations center, True Digital manages client networks and endpoints, including cybersecurity monitoring and cyber incident response. Additionally, True Digital enables both regulated and unregulated companies to redefine their security operations and establishes a holistic viewpoint of their IT, cybersecurity, and compliance operations through a suite of products and services to small and medium sized businesses. Such suite of products and services include IT leadership, vector alerts, active directory management, server management, email management, antivirus services, LAN services, wireless management, firewall management, virtualization management, WAN services, SAN services, endpoint back-up, endpoint encryption and business continuity support. VelocIT is based in Cranbury, New Jersey.TrueSpeed, its proprietary IT-security compliance operational intelligence platform.

Results of Operations

Comparison of the Three Months Ended ~~September 30, 2021~~March 31, 2022 to the Three Months Ended ~~September 30, 2020~~March 31, 2021

Our financial results for the three months ended ~~September 30, 2021~~March 31, 2022 are summarized as follows in comparison to the three months ended ~~September 30, 2020:~~March 31, 2021:

	Three Months Ended September 30,									Three Months Ended March 31,
	2021			2020			Variance			2022			2021			Variance
Revenue:
Security Managed Services	$	3,099,753		$	1,683,733		$	1,416,020
Professional Services		645,255			325,865			319,390
Security managed services										$	8,052,225		$	1,871,817		$	6,180,408
Professional services											1,227,185			687,961			589,224
Total revenue		3,745,008			2,009,598			1,735,410			9,329,410			2,559,778			6,769,632

Cost of revenue:
Security Managed Services		650,955			423,784			227,171
Professional Services		234,326			18,962			215,364
Security managed services											2,602,924			193,667			2,409,257
Professional services											110,337			117,794			(7,457	)
Cost of payroll		2,093,072			868,810			1,224,262			4,445,850			1,427,702			3,018,148
Stock based compensation											2,121,583			100,925			2,020,658
Total cost of revenue		2,978,353			1,311,556			1,666,797			9,280,693			1,840,088			7,440,605
Total gross profit		766,655			698,042			68,613			48,717			719,690			(670,973	)
Operating expenses:
Professional fees		293,408			284,511			8,897			623,061			157,354			465,707
Advertising and marketing		254,026			30,488			223,538			155,341			45,227			110,114
Selling, general and administrative		2,085,720			1,020,765			1,064,955
Stock based compensation		1,251,635			392,661			858,974
Loss on write-off of account receivable		40,264			-			40,264
Selling, general, and administrative											4,616,374			1,487,641			3,128,733
Stock-based compensation											2,565,510			737,837			1,827,673
Total operating expenses		3,925,053			1,728,425			2,196,628			7,960,286			2,428,059			5,532,227

Loss from operations		(3,158,398	)		(1,030,383	)		(2,128,015	)		(7,911,569	)		(1,708,369	)		(6,203,200	)
Other income (expense):
Other income		169			751			(582	)		12,543			205			12,338
Interest expense, net		(75,470	)		(5,567	)		(69,903	)		(43,585	)		(68,695	)		25,110
PPP loan forgiveness		980,800			-			980,800
Total other income (expense)		905,499			(4,816)			899,935			(31,042	)		(68,490	)		37,448
Net loss	$	(2,252,899	)	$	(1,035,199	)	$	(1,217,700	)		(7,942,611	)		(1,776,859	)		(6,165,752	)
Foreign currency translation adjustment											902,441			-			902,441
Comprehensive net loss										$	(7,040,170	)	$	(1,776,859	)	$	(5,263,311	)

~~Revenues~~Revenue

Security managed services ~~revenues~~revenue increased by ~~$1,416,020,~~$6,180,408, or ~~84%~~330%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, due mainly to to revenues of $985,146 for VelocIT for the 3 months ended September 30, 2021. We did not recognize any revenue attributable to VelocIT during the 3 months ended September 30, 2020 because the acquisition consummated on August 12^,~~2021. The additional~~an increase in ~~revenues were a result of additional~~ customers from the Arkavia and ~~usage increases within~~True Digital acquisitions, as well as expanded services to existing customers.

Professional services ~~revenues~~revenue increased by ~~$319,390,~~$589,224, or ~~98%~~86%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, due to ~~revenues~~an increased demand for Clear Skies and Alpine of $695,069 for the 3 months ended September 30, 2021. The acquisitions of Clear Skies and Alpine were consummated on August 1, 2020 and December 16, 2020, respectively. Revenues for Clear Skies was approximately $141,000 for the 3 months ended September 30, 2020. technical assessments.

Expenses

Cost of ~~Revenues~~Revenue

Security managed services cost of ~~revenues~~revenue increased by ~~$227,171,~~$2,409,257, or ~~54%~~1,244%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, and was primarily the result of ~~as a result of~~higher direct software and hardware costs to support the ~~VelocIT acquisition on August 12, 2020.~~increased customer demand.

~~Profesional~~Professional services cost of ~~revenues increased~~revenue decreased by ~~$215,364,~~$7,457, or ~~1,136%~~6%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, due to ~~cost of revenues for Clear Skies and Alpine. The acquisitions of Clear Skies and Alpine were consummated on August 1, 2020 and December 16, 2020, respectively.~~our ability to utilize internal expert professionals to deliver our services.

Cost of payroll cost of ~~revenues~~revenue increased by ~~$1,224,262,~~$3,018,148, or ~~141%~~211%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, as a result of ~~the cost of headcount for the VelocIT, Clear Skies,~~increased staff resulting from acquisitions and ~~Alpine acquisitions as well as an increase in employees resulting in an increase in salaries in other lines of business due to an increase in demand for our services.~~

higher stock compensation expense.

~~Operating Expenses~~

~~Professional fees remained relatively consistent during the three months ended September 30, 2021 as compared to three months ended September 30, 2020.~~

~~Advertising and marketing~~Stock-based compensation expenses increased by ~~$223,538,~~$2,020,658, or ~~733%~~2,002%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the three months ended ~~September 30, 2020, as a result of increased public relations and marketing prograams.~~

~~Selling, general and administrative expenses increased by $1,064,955, or 104%, for the three months ended September 30,~~March 31, 2021, as compared to the three months ended September 30, 2020, primarily as a result of an increase in payroll due to the Company being able to recognize Alpine’s payroll as well as a portion of VelocIT’s payroll, which both were not recognizeable during the three months ended September 30, 2020, due to the acquisition dates of December 1, 2020 and August 12, 2021, respectively.

~~Stock based compensation expenses increased by $858,974, or 219%, for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020,~~ due to an increase in stock options awarded during the three months ended ~~September 30, 2021.~~

March 31, 2022.

~~Loss on write-off of accounts receivable remained relatively consistent during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.~~

~~Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020~~

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

Nine Months Ended September 30,
2021 2020 Variance
Revenue:
Security Managed Services $ 6,979,146 $ 3,612,489 $ 3,366,657
Professional Services 2,275,437 1,015,816 1,259,621
Total revenue 9,254,583 4,628,305 4,626,278

Cost of revenue:
Security Managed Services 1,326,788 726,614 600,174
Professional Services 350,388 82,992 267,396
Cost of payroll 5,052,684 2,135,691 2,916,993
Total cost of revenue 6,729,860 2,945,297 3,784,563
Total gross profit 2,524,723 1,683,008 841,715
Operating expenses:
Professional fees 695,023 685,821 9,202
Advertising and marketing 471,721 104,058 367,663
Selling, general and administrative 5,241,095 2,235,041 3,006,054
Stock based compensation 2,981,523 1,062,000 1,919,523
Loss on write-off of account receivable 55,528 15,000 40,528
Total operating expenses
9,444,890
4,101,920 5,342,970

Loss from operations
(6,920,167
) (2,418,912 ) (4,501,255 )
Other income (expense):
Other income 2,553 10,751 (8,218 )
Interest expense, net (209,806 ) (12,285 ) (197,521 )
PPP loan forgiveness
980,800
- 980,800
Total other income (expense)
773,547
(1,534 ) 775,081
Net loss $ (6,146,620 ) $ (2,420,446 ) $ (3,726,174 )
30
~~Revenues~~
Security managed services revenues increased by $3,366,657, or 93%, for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, due to the acquisitions of VelocIT and Technologyville consummated on August 12, 2021 and May 25, 2020, respectively. Approximately $2,400,000 was a result of these acquisitions. The balance is a result of increase in usage and various new client contracts that were entered into subsequent to September 30, 2020.
Professional services revenues increased by $1,259,621, or 124%, for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, due to the acquisitions of Clear Skies and Alpine consummated on August 1, 2020 and December 16, 2020, respectively.
~~Expenses~~
~~Cost of Revenues~~
Secuity managed services cost of revenues increased by $600,174, or 83%, for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, and was primarily due to the acquisitions of VelocIT and Technologyville consummated on August 12, 2021 and May 25, 2020, respectively.
Professional services cost of revenues increased by $267,396, or 322%, for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, due to the acquisitions of Clear Skies and Alpine consummated on August 1, 2020 and December 16, 2020, respectively.
Cost of payroll increased by $2,916,993, or 137%, for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, due to as a result of the cost of headcount for the VelocIT, Clear Skies, and Alpine acquisitions as well as an increase in employees resulting in an increase in salaries in other lines of business due to an increase in demand for our services.
Operating Expenses

Professional fees ~~remained relatively consistent during~~increased by $465,707, or 296%, for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~the nine~~three months ended ~~September 30, 2020.~~March 31, 2021 as a result of higher accounting and audit fees due for our financial reporting and periodic SEC filings, legal fees, and fees for listing to Nasdaq.

Advertising and marketing expenses increased by ~~$367,663,~~$110,114, or ~~353%~~243%, for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as a result of ~~additional spend on public relations.~~marketing campaign initiatives.

Selling, general, and administrative expenses increased by ~~$3,006,054,~~$3,128,733, or ~~135%~~210%, for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020, as a result of~~March 31, 2021, primarily as a result of an increase in payroll due to the Company being able to recognize a full nine months of Clear Skies’ and Alpine’s payroll as well as a portion of VelocIT’s payroll, which were not recognizeable during the nine months ended September 30, 2020, due to the acquisition dates of August 1, 2020, December 1, 2020 and August 12, 2021, respectively.increased employee costs.

Stock based compensation expenses increased by ~~$1,919,523,~~$1,827,673, or ~~181%~~248%, for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as ~~compred~~compared to the ~~nine~~three months ended ~~September 30, 2020, as a result of~~March 31, 2021, due to an increase in stock options awarded during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At March 31, 2022, we had an accumulated deficit of $51,955,033 and working capital surplus of $3,202,490. For the three months ended March 31, 2022, we had a loss from operations of $7,911,569 and negative cash flows from operations of $3,015,795. Although we are showing positive revenue, gross profit is trending negatively primarily due to increased stock compensation related to sales activity, we expect to incur further losses through the end of 2022.
To date we have funded operations primarily through the sale of equity in private placements and revenue generated by our services. During the three months ended March 31, 2022, we received $9,471,000 from our public offering of our common stock.
We believe that our existing cash and cash equivalents and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months as well as our longer-term expected future cash requirements and obligations.

~~Loss~~Our future capital requirements, both near-term and long-term, will depend on ~~write-off~~many factors, in addition to our recurring operating expenses, include our growth rate, the continued expansion of ~~accounts receivable remained relatively consistent during~~sales and marketing activities, the ~~nine months ended September 30, 2021 as compared~~introduction of new and enhanced products and service offerings, and the costs of any future acquisitions in complementary businesses and technologies. To the extent existing cash and cash equivalents are not sufficient to fund future activities, we may seek to raise additional funds through equity, equity-linked or debt financings. Any additional equity financing may be dilutive to our existing stockholders. We may enter into agreements or letters of intent with respect to potential investments in, or acquisitions of, complementary businesses, services or technologies, which could also require us to seek additional equity financing, incur indebtedness or use cash resources. In the ~~nine months ended September 30, 2020.~~event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

Working Capital Surplus

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

As of
September 30, December 31,
2021 2020
Current assets $ 5,484,029 $ 6,346,008
Current liabilities 4,838,200 3,863,594
Working capital surplus $ 645,829 $ 2,482,414
31
As of
March 31, December 31,
2022 2021
Current assets $ 14,089,899 $ 10,345,679
Current liabilities 10,887,409 5,141,561
Working capital surplus $ 3,202,490 $ 5,204,118

The ~~decrease~~increase in current assets is primarily due to ~~a decrease~~an increase in cash and cash equivalents, ~~of $2,467,451, offset by an increase in~~ accounts receivable, and prepaid expenses and other current assets of ~~$1,261,999.~~$1,137,872, $1,104,907, and $1,204,560, respectively. The increase in current liabilities is primarily due to the increase in accounts payable and accrued expense, and ~~the current portion~~deferred revenue of ~~lease liabilities of $684,355~~$3,512,486 and ~~$157,720,~~$1,899,719, respectively.

Cash Flows

Our cash flows for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, in comparison to our cash flows for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, can be summarized as follows:

Nine months ended September 30, Three months ended March 31,
2021 2020 2022 2021
Net cash used in operating activities $ (4,312,312 ) $ (1,157,976 ) $ (3,015,795 ) $ (1,130,173 )
Net cash provided by investing activities 662,176 254,180
Net cash used in investing activities (5,021,626 ) -
Net cash provided by financing activities 1,182,685 1,443,158 9,011,005 3,259,579
Increase (decrease) in cash $ (2,467,451 ) $ 539,362
Effect of exchange rates on cash and cash equivalents 164,288 -
Increase in cash $ 1,137,872 $ 2,129,579
31
Operating Activities

Net cash used in operating activities was ~~$4,313,312~~$3,015,795 for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and was primarily due to cash used to fund a net loss of ~~$7,124,149,~~$7,942,611, adjusted for non-cash expenses in the aggregate of ~~$2,631,683~~$5,398,770 and additional cash outlaid by changes in the levels of operating assets and liabilities, primarily as a result of an increase in accounts receivable and other current assets. Net cash used in operating activities was ~~$1,157,976~~$1,130,173 for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and was primarily due to cash used to fund a net loss of ~~$2,420,446,~~$1,776,859, adjusted for non-cash expenses in the aggregate of ~~$1,170,094,~~$911,534, partially offset by cash generated by changes in the levels of operating assets and liabilities, primarily as a result of an increase in accounts payable.

Investing Activities

Net cash ~~provided by~~used in investing activities of ~~$662,176~~$5,021,626 for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was primarily due to cash ~~acquired~~paid in the ~~VelocIT~~True Digital acquisition. ~~Net~~There was no cash ~~provided by~~used in investing activities ~~of $254,180~~ for the ~~nine~~three months ended ~~September 30, 2020, was due to cash acquired in the Techville and Clear Skies Acquisitions.~~March 31, 2021.

Financing Activities

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$1,182,685,~~$9,250,657, which was primarily due to cash received from the sale of ~~the Company’s~~our common stock in our public offering of ~~$3,250,000 and offset by the payment of loans of approximately $2,000,000.~~$9,471,000. Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$1,443,158~~$3,259,579 and was primarily due to cash received from the sale of ~~the Company’s~~our common stock of ~~$790,000 and proceeds from PPP loans of $709,600.~~
~~Liquidity~~
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At September 30, 2021, the Company had an accumulated deficit of approximately $11,013,000 and working capital surplus of approximately $646,000. For the nine months ended September 30, 2021, the Company had a loss from operations of approximately $6,920,000 and negative cash flows from operations of approximately $4,312,000. Although the Company is showing positive revenues and gross profit trends, the Company expects to incur further losses through the end of 2021.
32
To date the Company has been funding operations primarily through the sale of equity in private placements and revenues generated by the Company’s services. During the nine months ended June 30, 2021, the Company received $3,250,000 from private placements of the Company’s common stock.
Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development and corresponding level of expenditure for at least twelve months from the date of the issuance of these unaudited condensed consolidated financial statements, although no assurance can be given that it will not need additional funds prior to such time.$3,250,000.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, ~~revenues~~revenue or operating results during the periods presented.

~~Significant~~ Critical Accounting Policies and Estimates

Our ~~significant~~critical accounting policies are more fully described in the notes to our condensed consolidated financial statements included herein for the quarter and ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on ~~March 31, 2021.~~
~~Fair Value Measurement~~
The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in the valuation of an asset or liability. It establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below:
~~Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;~~
~~Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or~~
~~Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).~~
~~Business Combination~~
The Company allocates the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Direct transaction costs associated with the business combination are expensed as incurred. The allocation of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. The Company includes the results of operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.April 15, 2022.

33
32

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.
~~Goodwill~~
Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.
~~Impairment of Long-lived Assets~~
We will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.
~~Revenue Recognition~~
The Company’s agreements with its clients are primarily service contracts that range in duration from a few months to one year. The Company recognizes revenue when control of these services is transferred to the client for an amount, referred to as the transaction price, which reflects the consideration to which the Company is expected to be entitled in exchange for those goods or services.
~~A contract with a client exists only when:~~
● ~~the parties to the contract have approved it and are committed to perform their respective obligations;~~
● ~~the Company can identify each party’s rights regarding the distinct services to be transferred (“performance obligations”);~~
● ~~the Company can determine the transaction price for the services to be transferred; and~~
● the contract has commercial substance, and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the client.
For the majority of its contracts, the Company receives non-refundable upfront payments. The Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between the time of transfer of the promised goods or services to the client and the time the client pays for these goods or services to be generally one year or less. The Company’s credit terms to clients generally average thirty days, although in some cases payments are required in 15 days.
~~The Company does not disclose the value of unsatisfied performance obligations for contracts with original expected duration of one year or less.~~
34
~~Disaggregation of Revenue~~
~~Revenue consists of the following by service offering for the nine months ended September 30, 2021:~~

Security Managed
Services

Professional
Services
Total
Primary Sector Markets
Public $ 3,179,047 $ 44,579 $ 3,223,626
Private 3,607,146 2,178,545 5,785,691
Not-for-Profit 192,953 52,313 245,266
$ 6,979,146 $ 2,275,437 $ 9,254,583

Major Service Lines
Compliance $ 3,336,795 $ - $ 3,336,795
Secured Managed Services 3,134,269 - 3,134,269
SOC Managed Services 352,535 - 352,535
vCISO 155,547 - 155,547
Technical Assessments - 1,844,496 1,844,496
Forensics & I/R - 265,567 265,567
Training - 149,529 149,529
Other CyberSecurity Services - 15,845 15,845
$ 6,979,146 $ 2,275,437 $ 9,254,583
~~Revenue consists of the following by service offering for the nine months ended September 30, 2020:~~

Security Managed
Services

Professional
Services
Total
Primary Sector Markets
Public $ 2,498,371 $ 5,068 $ 2,503,439
Private 1,024,744 1,001,748 2,026,492
Not-for-Profit 89,374 9,000 98,374
$ 3,612,489 $ 1,015,816 $ 4,628,305

Major Service Lines
Compliance $ 2,519,958 $ - $ 2,519,958
Secured Managed Services 752,371 - 752,371
SOC Managed Services 301,760 - 301,760
vCISO 38,400 - 38,400
Technical Assessments - 190,825 190,825
Forensics & I/R - 554,069 554,069
Training - 58,625 58,625
Other CyberSecurity Services - 212,297 212,297
$ 3,612,489 $ 1,015,816 $ 4,628,305
~~Practical Expedients~~
As part of ASC 606, the Company has adopted several practical expedients including the following: (i) the Company has determined that it need not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised service to the customer and when the customer pays for that service will be one year or less and (ii) the Company recognizes any incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
~~Reimbursed Expenses~~
The Company includes reimbursed expenses in revenues and costs of revenue as the Company is primarily responsible for fulfilling the promise to provide the specified service, including the integration of the related services into a combined output to the client, which are inseparable from the integrated service. These costs include such items as consumables, transportation and travel expenses, over which the Company has discretion in establishing prices.
35
~~Costs of Revenue~~
Costs of revenue include (i) compensation and benefits for billable employees and consultants directly involved with delivering services offerings and engagements; (ii) consumables used for the services; and (iii) other expenses directly related to service contracts such as professional services, meals and travel expenses.
~~Volatility in Stock-Based Compensation~~
The volatility is based on historical volatilities of companies in comparable stages as well as the historical volatility of companies in the industry and, by statistical analysis of the daily share-pricing model. The volatility of stock-based compensation at any point in time is based on historical volatility of similar companies in the industry for the last two to five years.
New and Recently Adopted Accounting Pronouncements

Any new and recently adopted accounting pronouncements are more fully described in Note 2 to our unaudited condensed consolidated financial statements herein for the quarter ended ~~September 30, 2021.~~March 31, 2022.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Not Applicable. As~~
Because we are a smaller reporting company, we are not required to provide the information ~~required~~called for by this Item.
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”))~~Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our ~~principal executive officer~~Chief Executive Officer and ~~our principal financial officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

36
Our management, with the participation of our ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer~~Chief Financial Officer concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective ~~due~~ to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures as of March 31, 2022.
33
Our management’s evaluation was based on the following material ~~weakness(es)~~weaknesses in our internal control over financial reporting ~~disclosed~~which existed as of December 31, 2021, and which continue to exist, as discussed in our ~~annual report~~Annual Report on Form ~~10-K for~~10-K:
● Lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner; and
● Lack of documentation on policies and procedures that are critical to the accomplishment of financial reporting objectives.
A material weakness is a control deficiency or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the ~~fiscal year ended December 31, 2020.~~annual or interim financial statements will not be prevented or detected on a timely basis. As a company with limited accounting resources, a significant amount of management’s time and attention has been and will be diverted from our business to ensure compliance with these regulatory requirements.
Management’s Plan to Remediate the Material Weaknesses
Our management plans to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:
● Identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and
● Develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures.

Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and ~~as funds allow.~~in accordance with financial and budgetary considerations.

Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2021, our additional finance and accounting staff that we hired in the first quarter of this year continued to positively impact our segregation of duties. In addition, during the nine months ended September 30, 2021, we established an audit committee.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~June 30, 2021,~~March 31, 2022, other than those noted above, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not ~~involved in~~a party to any ~~litigation that we believe could have a~~ material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.legal proceedings.

Item 1A. Risk Factors

~~An investment in our common stock involves a number of very significant risks. You should carefully consider~~
We have disclosed under the ~~risk factors included in the~~heading “Risk Factors” ~~section of~~in our Annual Report on Form 10-K for the year ended December 31, ~~2020, as~~2021, filed with the SEC on ~~March 31, 2021, in addition to other information contained in those reports and in this quarterly report in evaluating the Company and its~~April 15, 2022, risk factors that materially affect our business, ~~before purchasing shares of our common stock. The Company’s business, operating results and~~ financial condition, ~~could be adversely affected due to any~~or results of ~~those risks.~~operations. There have been no material changes from the risk factors previously disclosed.
34

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

During the three months ended ~~September 30, 2021,~~March 31, 2022, there were no sales of equity securities during the period covered by this report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.
37
Item 6. Exhibits

Incorporated by Reference
Exhibit
Number
Exhibit Description Form Exhibit Filing Date
2.1 Stock Purchase Agreement among the Registrant and certain shareholders of True Digital Security Inc. dated January 5, 2022 8-K 10.1 01/06/2022
2.2** Agreement and Plan of Merger among the Registrant and certain shareholders of True Digital Security Inc. dated January 5, 2022 8-K 10.2 01/06/2022
4.1 Form of Underwriter Warrant S-1 4.3 12/14/2021
10.1 Form of Lockup Agreement S-1/A 10.14 01/07/2022
31.1* Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2* Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
32.1 Section 1350 Certification of Principal Executive Officer
32.2 Section 1350 Certification of Principal Financial Officer
101.INS* Inline XBRL Instance Document
101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Exhibit Incorporated by Reference
Number
Exhibit Description Form Exhibit Filing Date
3.1 Certificate of Incorporation of Cerberus Cyber Sentinel Corporation filed March 5, 2019 10-12G 3.1 10/2/2019
3.2 Certificate of Amendment of Certificate of Incorporation of Cerberus Cyber Sentinel Corporation filed April 17, 2019 10-12G 3.2 10/2/2019
3.3 Certificate of Amendment of Certificate of Incorporation of the Registrant effective September 26, 2019 10-12G 3.3 10/2/2019
3.4 By-laws of the Registrant 10-12G 3.4 10/2/2019
4.1 Form of Common Stock Certificate of the Registrant 10-K 4.1 3/30/20
4.2 Description of Securities Registered under Section 12 of the Exchange Act 10-K 4.2 3/30/20
31.1* Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2* Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer and Principal Accounting Officer
32.1** Section 1350 Certification of Principal Executive Officer
32.2** Section 1350 Certification of Principal Financial Officer and Principal Accounting Officer
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
*Filed herewith.
**~~In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.~~
Certain exhibits, annexes, and/or s~~# Management contracts and compensatory plans and arrangements required to be filed as exhibits~~chedules have been omitted from this filing pursuant to Item ~~15(b)~~601(b)(2) of ~~this report~~Regulation S-K. We agree to furnish supplementally a copy of any omitted exhibit, annex, or schedule to the Securities and Exchange Commission upon request.
38
35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CERBERUS CYBER SENTINEL CORPORATION

By: /s/ David G. Jemmett
David G. Jemmett
Chief Executive Officer
(Principal Executive Officer)
Date: ~~November 12, 2021~~May 16, 2022
By: /s/ Debra L. Smith
Debra L. Smith
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Date: May 16, 2022

~~By:~~ ~~/s/ Deb Smith~~
~~Deb Smith~~
~~Chief Financial Officer~~
~~(Principal Financial Officer)~~
~~Date: November 12, 2021~~ 36
39

Balance December 31, 2020	$	4,101,369
Acquisition of goodwill		16,823,655
Impairment		-
Reclassification based on valuation report⁽¹⁾		(230,000	)
Ending balance, September 30, 2021⁽²⁾	$	20,695,024

	Nine Months Ended September 30, 2021
Lease cost
Operating lease cost (cost resulting from lease payments)	$	80,251
Short term lease cost		29,329
Net lease cost	$	109,580

Operating lease – operating cash flows (fixed payments)	$	80,251
Operating lease – operating cash flows (liability reduction)	$	72,639
Non-current leases – right of use assets	$	268,096
Current liabilities – operating lease liabilities	$	166,709
Non-current liabilities – operating lease liabilities	$	107,899

	Nine Months Ended September 30,
	2021			2020			Variance
Revenue:
Security Managed Services	$	6,979,146		$	3,612,489		$	3,366,657
Professional Services		2,275,437			1,015,816			1,259,621
Total revenue		9,254,583			4,628,305			4,626,278

Cost of revenue:
Security Managed Services		1,326,788			726,614			600,174
Professional Services		350,388			82,992			267,396
Cost of payroll		5,052,684			2,135,691			2,916,993
Total cost of revenue		6,729,860			2,945,297			3,784,563
Total gross profit		2,524,723			1,683,008			841,715
Operating expenses:
Professional fees		695,023			685,821			9,202
Advertising and marketing		471,721			104,058			367,663
Selling, general and administrative		5,241,095			2,235,041			3,006,054
Stock based compensation		2,981,523			1,062,000			1,919,523
Loss on write-off of account receivable		55,528			15,000			40,528
Total operating expenses		9,444,890			4,101,920			5,342,970

Loss from operations		(6,920,167	)		(2,418,912	)		(4,501,255	)
Other income (expense):
Other income		2,553			10,751			(8,218	)
Interest expense, net		(209,806	)		(12,285	)		(197,521	)
PPP loan forgiveness		980,800			-			980,800
Total other income (expense)		773,547			(1,534	)		775,081
Net loss	$	(6,146,620	)	$	(2,420,446	)	$	(3,726,174	)

	As of
	September 30,		December 31,
	2021		2020
Current assets	$	5,484,029	$	6,346,008
Current liabilities		4,838,200		3,863,594
Working capital surplus	$	645,829	$	2,482,414

	●	~~the parties to the contract have approved it and are committed to perform their respective obligations;~~
	●	~~the Company can identify each party’s rights regarding the distinct services to be transferred (“performance obligations”);~~
	●	~~the Company can determine the transaction price for the services to be transferred; and~~
	●	the contract has commercial substance, and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the client.

●	Lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner; and

●	Lack of documentation on policies and procedures that are critical to the accomplishment of financial reporting objectives.

●	Identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and

●	Develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures.

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date
2.1	Stock Purchase Agreement among the Registrant and certain shareholders of True Digital Security Inc. dated January 5, 2022	8-K	10.1	01/06/2022
2.2**	Agreement and Plan of Merger among the Registrant and certain shareholders of True Digital Security Inc. dated January 5, 2022	8-K	10.2	01/06/2022
4.1	Form of Underwriter Warrant	S-1	4.3	12/14/2021
10.1	Form of Lockup Agreement	S-1/A	10.14	01/07/2022
31.1*	Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2*	Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
32.1	Section 1350 Certification of Principal Executive Officer
32.2	Section 1350 Certification of Principal Financial Officer
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Exhibit		Incorporated by Reference
Number	Exhibit Description	Form	Exhibit	Filing Date
3.1	Certificate of Incorporation of Cerberus Cyber Sentinel Corporation filed March 5, 2019	10-12G	3.1	10/2/2019
3.2	Certificate of Amendment of Certificate of Incorporation of Cerberus Cyber Sentinel Corporation filed April 17, 2019	10-12G	3.2	10/2/2019
3.3	Certificate of Amendment of Certificate of Incorporation of the Registrant effective September 26, 2019	10-12G	3.3	10/2/2019
3.4	By-laws of the Registrant	10-12G	3.4	10/2/2019
4.1	Form of Common Stock Certificate of the Registrant	10-K	4.1	3/30/20
4.2	Description of Securities Registered under Section 12 of the Exchange Act	10-K	4.2	3/30/20
31.1*	Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2*	Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer and Principal Accounting Officer
32.1**	Section 1350 Certification of Principal Executive Officer
32.2**	Section 1350 Certification of Principal Financial Officer and Principal Accounting Officer
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

By:	/s/ David G. Jemmett
	David G. Jemmett
	Chief Executive Officer
	(Principal Executive Officer)
	Date: ~~November 12, 2021~~May 16, 2022

By:	/s/ Debra L. Smith
	Debra L. Smith
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
	Date: May 16, 2022

~~By:~~	~~/s/ Deb Smith~~
	~~Deb Smith~~
	~~Chief Financial Officer~~
	~~(Principal Financial Officer)~~
	~~Date: November 12, 2021~~	36