8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 31, 2020

CERBERUS CYBER SENTINEL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	000-56059	83-4210278
(State or other jurisdiction	(Commission File	(IRS Employer
of incorporation	Number)	Identification No.)

7333 E. Doubletree Ranch Road, Suite D270, Scottsdale, Arizona 85258

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (480) 389-3444

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b -2 of this chapter).

Emerging growth company [X]

If an emerging growth company, indicate by checkmark 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. [  ]

EXPLANATORY NOTE

Pursuant to the Share Purchase Agreement (the “Agreement”) dated as of July 31, 2020 by and among Cerberus Cyber Sentinel Corporation, a Delaware corporation (the “Company”), and Clear Skies Security LLC, a Georgia limited liability company (“Clear Skies”), and all of its members, all of Clear Skies’ outstanding equity securities were exchanged for the issuance of 2,330,000 share of common stock, par value $0.00001, of the Company.

This Amendment No. 1 on Form 8-K/A includes the financial statements and pro forma financial information required by Item 9.01.

2

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired

In accordance with Item 9.01(a), Clear Skies’ audited financial statements for the fiscal years ended December 31, 2019 and 2018 are filed herewith as Exhibit 99.1.

In accordance with Item 9.01(a), Clear Skies’ unaudited condensed financial statements for the six months ended June 30, 2020 and 2019 are filed herewith as Exhibit 99.2.

(b) Pro Forma Financial Information

In accordance with Item 9.01(b), the Company’s pro forma unaudited combined balance sheets and statements of operations at and for the six months ended June 30, 2020 and the pro forma unaudited combined statements of operations for the fiscal year ended December 31, 2019 are filed herewith as Exhibit 99.3.

(c) Exhibits

Exhibit Number	Exhibit Description
23.1*	Consent of Independent Public Accounting Firm
99.1*	Financial Statements of Clear Skies Security LLC for the years ended December 31, 2019 and 2018
99.2*	Unaudited Condensed Financial Statements of Clear Skies Security LLC for the six months ended June 30, 2020 and 2019
99.3*	Pro forma unaudited condensed combined financial statements for the six months ended June 30, 2020 and the year ended December 31, 2019

* Filed herewith

3

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 hereunto duly authorized.

CERBERUS CYBER SENTINEL CORPORATION
By:	/s/ David G. Jemmett
David G. Jemmett
Chief Executive Officer (Principal Executive and Principal Accounting Officer)
October 15, 2020

4

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated October 15, 2020, with respect to the financial statements of Clear Skies Security, LLC for the years ended December 31, 2019 and 2018, included in this Form 8-K/A of Cerberus Cyber Sentinel Corporation. We consent to the incorporation by reference of said report in the General Form for Registration of Cerberus Cyber Sentinel Corporation on Form 10 (File No. 000-56059).

/s/ Semple, Marchal & Cooper, LLP

Phoenix, Arizona

October 15, 2020

EX-99.1

Exhibit 99.1

CLEAR SKIES SECURITY, LLC

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2019 AND 2018

TABLE OF CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 2019 and 2018	F-3
Statements of Operations For the Years Ended December 31, 2019 and 2018	F-4
Statements of Changes in Members’ Equity For the Years Ended December 31, 2019 and 2018	F-5
Statements of Cash Flows For the Years Ended December 31, 2019 and 2018	F-6
Notes to Financial Statements For the Years Ended December 31, 2019 and 2018	F-7 to F-12

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Members of

Clear Skies Security LLC

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Clear Skies Security LLC (the “Company”) as of December 31, 2019 and 2018, the related statements of operations, changes in members’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations, changes in members’ equity, and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Semple, Marchal & Cooper, LLP

Certified Public Accountants

We have served as the Company’s auditor since 2020.

Phoenix, Arizona

October 15, 2020

F-2

CLEAR SKIES SECURITY, INC.

BALANCE SHEETS

	December 31,		December 31,
	2019		2018
ASSETS
Current Assets:
Cash and cash equivalents	$	68,254	$	69,164
Accounts receivable		176,395		449,377
Total Current Assets		244,649		518,541
Total Assets	$	244,649	$	518,541
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities:
Accounts payable	$	12,251	$	17,950
Total Current Liabilities		12,251		17,950
Total Liabilities		12,251		17,950
Commitments and Contingencies
Members’ equity		232,398		500,591
Total Liabilities and Members’ Equity	$	244,649	$	518,541

The accompanying notes are an integral part of these financial statements.

F-3

CLEAR SKIES SECURITY, LLC

STATEMENTS OF OPERATIONS

	Years Ended
	December 31, 2019			December 31, 2018
Revenue:
Penetration testing	$	723,749		$	838,412
Application assessments		130,585			151,273
Other professional services		252,316			292,290
Total revenue		1,106,650			1,281,975
Cost of revenue		698,202			828,920
Gross profit		408,448			453,055
Operating expenses:
Salaries and benefits		487,715			439,456
Selling, general and administrative		167,773			174,552
Total operating expenses		655,488			614,008
Loss from operations		(247,040	)		(160,953	)
Other income:
Interest income		147			158
Total other income		147			158
Net loss	$	(246,893	)	$	(160,795	)

The accompanying notes are an integral part of these financial statements.

F-4

CLEAR SKIES SECURITY, LLC

STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

	Members’
	Equity			Total
Balance at January 1, 2018	$	661,386		$	661,386
Net loss		(160,795	)		(160,795	)
Balance as of December 31, 2018	$	500,591		$	500,591
Balance at January 1, 2019	$	500,591		$	500,591
Distributions to members		(21,300	)		(21,300	)
Net loss		(246,893	)		(246,893	)
Balance as of December 31, 2019	$	232,398		$	232,398

The accompanying notes are an integral part of these financial statements.

F-5

CLEAR SKIES SECURITY, LLC

STATEMENTS OF CASH FLOWS

	Years Ended
	December 31, 2019			December 31, 2018
Cash flows from operating activities:
Net Loss	$	(246,893	)	$	(160,795	)
Changes in operating assets and liabilities:
Accounts receivable		272,982			265,757
Accounts payable		(5,699	)		(45,466	)
Net cash provided by operating activities		20,390			59,496
Cash flows from financing activities:
Distributions to members		(21,300	)		-
Net cash used in financing activities		(21,300	)		-
Net increase (decrease) in cash and cash equivalents		(910	)		59,496
Cash and cash equivalents - beginning of period		69,164			9,668
Cash and cash equivalents - end of period	$	68,254		$	69,164
Supplemental cash flow information:
Cash paid for:
Interest	$	-		$	-

The accompanying notes are an integral part of these financial statements.

F-6

CLEAR SKIES SECURITY, LLC

NOTES TO FINANCIAL STATEMENTS

Note 1 – organization and business operations

Corporate History

Clear Skies Security, LLC (“Clear Skies” or the “Company”) was formed on October 8, 2008 as a Georgia limited liability company. The Company’s principal offices are located at 12460 Crabapple Road, Suite 202-253, Alpharetta, Georgia 30004.

Business Overview

The Company is a security consulting company that specializes in finding potential security flaws in networks and applications before they can be used for malicious purposes. The Company’s goal is to ensure its intelligence secures its customers’ intelligence. The Company offers tailored consulting services with various supplemental services such as penetration testing, application testing, and internal security assessments.

NOTE 2 – LIQUIDITY

The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2019, the Company had a members’ equity surplus and working capital surplus each of $232,399. For the year ended December 31, 2019, the Company had a loss from operations of $247,040 and positive cash flows from operating activities of $20,389. Although the Company is showing consistent revenues and gross profit trends, the Company expects to incur further losses through the end of 2020.

To date the Company has been funding operations through revenues generated by the Company’s services. On May 8, 2020, the Company entered into a loan payable under the U.S. Small Business Administration’s Paycheck Protection Program with a financial institution for $132,400.

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 expenditures for at least twelve months from the date of the issuance of these financial statements, although no assurance can be given that it will not need additional funds prior to such time.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent liabilities at the date of the financial statements. The Company bases its estimates and assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, which may cause the Company’s future results to be affected.

F-7

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the financial statements. Significant estimates include the allowance for doubtful accounts.

Revenue

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted beginning on January 1, 2018, utilizing the modified retrospective method. The approach was applied to contracts that were in process as of January 1, 2018. The adoption of ASC Topic 606 did not have an impact on the Company’s reported revenue or contracts in process at January 1, 2018. The reported results for the years ended December 31, 2019 and 2018 reflect the application of ASC Topic 606.

The Company evaluates the criteria outlined in ASC Topic 606, Principal Agent Considerations, in determining whether it is appropriate to record gross amount of product and services sales and related costs or the net amount earned as revenue. Generally, when the Company is primarily obligated in a transaction, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded at the gross amount. If the Company is not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, the Company generally records the net amounts as revenue earned. The Company has determined that it acts as the principal in its revenue transactions with customers.

The Company’s revenues are derived from consulting service offerings. With respect to consulting services, the Company provides penetration testing, application testing, and internal security assessments.

Revenue Streams

The Company has three revenue streams, penetration testing, application assessments, and other professional services. The Company derives its revenues from penetration testing from examining a customer’s entire information technology (“IT”) environment for vulnerabilities, at all levels of the infrastructure to include the network, operating systems, and common application services. The Company derives its revenues from application assessments from rapid security assessments of a customer’s applications vulnerabilities before they go live, or utilizing reoccurring testing to ensure the applications remain secure. The Company derives its revenues from other professional services from utilizing technical testing with best-practices reviews of infrastructure and configurations to provide a comprehensive view of the current state of the customer’s security controls on the network, code review and social engineering.

Performance Obligations

The transaction price of the Company’s contracts is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company has determined the performance obligations for the following services:

● Penetration Testing: Management has determined that services provided for penetration testing services contain a single performance obligation. The Company bills the client and recognizes revenue at the point of delivery of the assessment report.

● Application Assessments: Management has determined that services provided for application assessment services contain a single performance obligation. The Company bills the client and recognizes revenue at the point of delivery of the assessment report.

● Other Professional Services: Management has determined that services provided for other professional services contain a single performance obligation. The Company bills the client and recognizes revenue at the point of delivery of the assessment report.

F-8

Practical Expedients

As part of ASC Topic 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 consists of the following by service offering for the fiscal year ended December 31, 2019:

Penetration Testing		Application Assessments		Other Professional Services		Total
$	723,749	$	130,585	$	252,316	$	1,106,650

Revenue consists of the following by service offering for the fiscal year ended December 31, 2018:

Penetration Testing		Application Assessments		Other Professional Services		Total
$	838,412	$	151,273	$	292,290	$	1,281,975

Contract Modifications

There were no contract modifications during the years ended December 31, 2019 and 2018. Contract modifications are not routine in the performance of the Company’s contracts.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities 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 periodically assesses its accounts and other receivables for collectability on a specific identification basis. The Company provides 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 off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of December 31, 2019 and 2018, the Company did not record an allowance for doubtful accounts.

Advertising and Marketing Costs

The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $9,032 and $811 for the years ended December 31, 2019 and 2018, respectively, and are recorded in selling, general and administrative expenses on the statements of operations.

F-9

Fair Value Measurements

As defined in ASC 820, Fair Value Measurement, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

Level 1:	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:	Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3:	Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, and accounts payable approximate their fair values using Level 3 inputs, based on the short-term maturity of these instruments.

Income Taxes

The Company is treated as a partnership for income tax purposes. Accordingly it is not subject to U.S. federal, state and local income taxes since all income, gains and losses are passed through to its members. Therefore, no provision, liability, or benefit for income taxes has been included in these financial statements. Additionally, since the Company is treated as a partnership for U.S. tax purposes, the 2017 U.S. tax reform, which was enacted on December 22, 2017, has no impact on the Company or the financial statements. The Company is generally subject to tax audits for its federal and state tax returns for tax years since 2016.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard is effective for the Company’s interim and annual periods beginning January 1, 2022. Management does not believe that adoption of ASU 2016 - 02 will have a material impact on the Company’s financial statements and related disclosures.

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

F-10

Note 4 – MEMBERS’ Equity

During the years ended December 31, 2019 and 2018, the Company distributed capital of $21,299 and $0, respectively.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

Office and Rental Property Leases

The Company does not lease office space.

Legal Claims

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

NOTE 6 – RELATED PARTY TRANSACTIONS

Consulting Services with MacKenzie Consulting

The Company employed MacKenzie Consulting, Inc., a Georgia corporation, of which Brad MacKenzie, Chief Executive Officer to the Company, is the sole shareholder, to provide bookkeeping services to the Company. In consideration for these services, the Company paid to MacKenzie Consulting $20,000 during the year ended December 31, 2019.

NOTE 7 – CONCENTRATION OF CREDIT RISK

Cash Deposits

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2019 and 2018, the Company had no amounts in excess of the FDIC insured limit.

Revenues

One client accounted for 14% of revenue for the year ended December 31, 2019.

Two clients accounted for 22% of revenue for the year ended December 31, 2018, as set forth below:

Client A	12	%
Client B	10	%

Accounts Receivable

Five clients accounted for 71% of the accounts receivable as of December 31, 2019, as set forth below:

Client A	17	%
Client B	16	%
Client C	14	%
Client D	14	%
Client E	10	%

F-11

Four clients accounted for 54% of the accounts receivable as of December 31, 2018, as set forth below:

Client A	18	%
Client B	15	%
Client C	11	%
Client D	10	%

Accounts Payable

One vendor accounted for 82% of the accounts payable as of December 31, 2019.

Two vendors accounted for 100% of the accounts payable for the year ended December 31, 2018, as set forth below:

Vendor A	56	%
Vendor B	44	%

NOTE 8 – SUBSEQUENT EVENTS

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the world. The Company is monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, in addition to the impact on its employees. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations and liquidity is uncertain as of the date of this report. While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the impact could not be determined. Management does not believe COVID-19 had a material impact on the Company’s revenues, when compared to prior years, through the date of filing of these financial statements.

On May 8, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, the Company entered into a loan payable with a financial institution for $134,200 at an interest rate of 1% per annum and a maturity date of May 8, 2022. Pursuant to the loan, principal and interest payments are deferred for six months. The Company may apply for loan forgiveness at any time during the 24-week period beginning on May 5, 2020. If the Company does not apply for loan forgiveness the Company will be required to make monthly payments of $5,650 starting on December 8, 2020. All remaining principal and interest is due and payable at the maturity date. At any time during the term of the loan, the loan holder may call all remaining amounts owed in full.

On July 31, 2020, the Company and its equity holders entered into a share purchase agreement with Cerberus Cyber Sentinel Corporation (“Cerberus”), a Delaware corporation. A a result of the transaction, the Company became a wholly-owned subsidiary of Cerberus.

F-12

EX-99.2

Exhibit 99.2

CLEAR SKIES SECURITY LLC

FINANCIAL STATEMENTS FOR SIX MONTHS ENDED JUNE 30, 2020 AND 2019

TABLE OF CONTENTS

	Page
FINANCIAL STATEMENTS:
Condensed Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	F-2
Condensed Statements of Operations for the Six Months Ended June 30, 2020 and 2019 (unaudited)	F-3
Condensed Statements of Changes in Members’ Equity for the Six Months Ended June 30, 2020 and 2019 (unaudited)	F-4
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (unaudited)	F-5
Notes to Condensed Financial Statements (unaudited)	F-6 to F-10

CLEAR SKIES SECURITY LLC

CONDENSED Balance Sheets

	June 30,		December 31,
	2020		2019
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	184,827	$	68,254
Accounts receivable		115,000		176,395
Total Current Assets		299,827		244,649
Total Assets	$	299,827	$	244,649
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities:
Accounts payable	$	13,191	$	12,250
Loan payable		134,200		-
Total Current Liabilities		147,391		12,250
Total Liabilities		147,391		12,250
Commitments and Contingencies
Members’ equity		152,436		232,399
Total Liabilities and Members’ Equity	$	299,827	$	244,649

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

F-2

CLEAR SKIES SECURITY LLC

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For The Six Months Ended
	June 30, 2020			June 30, 2019
Revenue:
Penetration testing	$	294,349		$	280,255
Application assessments		53,109			50,566
Other professional services		102,617			97,704
Total revenue		450,075			428,525
Cost of revenue		318,415			387,722
Gross profit		131,660			40,803
Operating expenses:
Salaries and benefits		177,284			134,683
Selling, general and administrative		34,370			48,523
Total operating expenses		211,654			183,206
Loss from operations		(79,994	)		(142,403	)
Other income:
Interest income		31			83
Total other income		31			83
Net loss	$	(79,963	)	$	(142,320	)

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

F-3

CLEAR SKIES SECURITY LLC

CONDENSED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2020 and 2019

(Unaudited)

	Members’
	Equity			Total
Balance at January 1, 2019	$	500,591		$	500,591
Distributions to members		(21,300	)		(21,300	)
Net loss		(142,320	)		(142,320	)
Balance as of June 30, 2019	$	336,971		$	336,971
Balance at January 1, 2020	$	232,399		$	232,399
Net loss		(79,963	)		(79,963	)
Balance as of June 30, 2020	$	152,436		$	152,436

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

F-4

CLEAR SKIES SECURITY LLC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	June 30, 2020			June 30, 2019
Cash flows from operating activities:
Net Loss	$	(79,963	)	$	(142,320	)
Changes in operating assets and liabilities:
Accounts receivable		61,395			282,502
Accounts payable		941			(243	)
Net cash provided by (used in) operating activities		(17,627	)		139,939
Cash flows from financing activities:
Distributions to members		-			(21,300	)
Proceeds from PPP loans		134,200			-
Net cash provided by (used in) financing activities		134,200			(21,300	)
Net increase in cash and cash equivalents		116,573			118,639
Cash and cash equivalents - beginning of period		68,254			69,164
Cash and cash equivalents - end of period	$	184,827		$	187,803
Supplemental cash flow information:
Cash paid for:
Interest	$	-		$	-

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

F-5

CLEAR SKIES SECURITY LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS

Corporate History

Clear Skies Security, LLC (“Clear Skies” or the “Company”) was formed on October 8, 2008 as a Georgia limited liability company. The Company’s principal offices are located at 12460 Crabapple Road, Suite 202-253, Alpharetta, Georgia 30004.

Business Overview

The Company is a security consulting company that specializes in finding potential security flaws in networks and applications before they can be used for malicious purposes. The Company’s goal is to ensure its intelligence secures its customer’s intelligence. The Company offers tailored consulting services with various supplemental services such as penetration testing, application testing, and internal security assessments.

Liquidity

The accompanying unaudited condensed financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At June 30, 2020, the Company had a members’ equity surplus and working capital surplus each of $152,436. For the six months ended June 30, 2020, the Company had a loss from operations of $79,994 and negative cash flows from operating activities of $17,627. Although the Company is showing consistent revenues and gross profit trends, the Company expects to incur further losses through the end of 2020

To date the Company has been funding operations through revenues generated by the Company’s services. During the six months ended June 30, 2020, the Company received $134,200 from the U.S. Small Business Administration’s Paycheck Protection Program with a financial institution.

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.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial information as of and for the six months ended June 30, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information include 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 six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited condensed financial statements and related notes should be read in conjunction with our audited financial statements for the years ended December 31, 2019 and 2018 included in the Company’s Annual Report filed as Exhibit 99.1 to this Current Report on Form 8-K/A.

F-6

Use of Estimates

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

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the accompanying unaudited condensed financial statements. Significant estimates include the allowance for doubtful accounts and the potential offset of the loan payable forgiveness.

Revenue

The Company has three revenue streams, penetration testing, application assessments, and other professional services. The Company derives its revenues from penetration testing from examining a customer’s entire information technology (“IT”) IT environment for vulnerabilities, at all levels of the infrastructure to include the network, operating systems, and common application services. The Company derives its revenues from application assessments from rapid security assessments of a customer’s application’s vulnerabilities before they go live, or utilizing reoccurring testing to ensure the applications remain secure. The Company derives its revenues from other professional services from utilizing technical testing with best-practices reviews of infrastructure and configurations to provide a comprehensive view of the current state of the customer’s security controls on the network, code review and social engineering.

Practical Expedients

As part of ASC Topic 606, Revenue from Contracts with Customers, 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 consists of the following by service offering for the six months ended June 30, 2020:

Penetration Testing		Application Assessments		Other Professional Services		Total
$	294,349	$	53,109	$	102,617	$	450,075

Revenue consists of the following by service offering for the six months ended June 30, 2019:

Penetration Testing		Application Assessments		Other Professional Services		Total
$	280,255	$	50,566	$	97,704	$	428,525

Contract Modifications

There were no contract modifications during the six months ended June 30, 2020. Contract modifications are not routine in the performance of the Company’s contracts.

F-7

Cash and Cash Equivalents

The Company considers 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 periodically assesses its accounts and other receivables for collectability on a specific identification basis. The Company provides 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 off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of June 30, 2020 and December 31, 2019, the Company did not record an allowance for doubtful accounts.

Advertising and Marketing Costs

The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $480 and $1,997 for the six months ended June 30, 2020 and 2019, respectively, and are recorded in selling, general and administrative expenses on the unaudited condensed 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). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

Level 1:	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:	Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3:	Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, accounts payable and loan payable approximate their fair values using Level 3 inputs, based on the short-term maturity of these instruments.

F-8

Income Taxes

The Company is treated as a partnership for income tax purposes. Accordingly it is not subject to U.S. federal, state and local income taxes since all income, gains and losses are passed through to its members. Therefore, no provision, liability, or benefit for income taxes has been included in these financial statements. Additionally, since the Company is treated as a partnership for U.S. tax purposes, the 2017 U.S. tax reform, which was enacted on December 22, 2017, has no impact on the Company or the financial statements. The Company is generally subject to tax audits for its federal and state tax returns for tax years since 2016.

Recently Issued Accounting Standards

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

NOTE 3 – LOAN PAYABLE

On May 8, 2020, under the U.S. Small Business Administration’s Paycheck Protection Program, the Company entered into a loan payable with a financial institution for $134,200 at an interest rate of 1% per annum and a maturity date of May 8, 2022. Pursuant to the loan, principal and interest payments are deferred for six months. The Company may apply for loan forgiveness at any time during the 24-week period beginning on May 5, 2020. If the Company does not apply for loan forgiveness the Company will be required to make monthly payments of $5,650 starting on December 8, 2020. All remaining principal and interest is due and payable at the maturity date. At any time during the term of the loan, the loan holder may call all remaining amounts owed in full. At June 30, 2020, $134,200 was shown as an outstanding liability.

Note 4 - MEMBERS’ Equity

During the six months ended June 30, 2020, the Company made no distributions to its members.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

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

NOTE 6 – CONCENTRATION OF CREDIT RISK

Cash Deposits

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of June 30, 2020 and December 31, 2019, the Company had no amounts in excess of the FDIC insured limit.

Revenues

Three clients accounted for 35% of revenue for the six months ended June 30, 2020, as set forth below:

Client A	13	%
Client B	12	%
Client C	10	%

Two clients accounted for 25% of revenue for the six months ended June 30, 2019.

F-9

Client A	15	%
Client B	10	%

Accounts Receivable

Three clients accounted for 80% of the accounts receivable as of June 30, 2020, as set forth below:

Client A	46	%
Client B	20	%
Client C	14	%

Four clients accounted for 63% of the accounts receivable as of June 30, 2019, as set forth below:

Client A	24	%
Client B	14	%
Client C	13	%
Client D	12	%

Accounts Payable

Two vendors accounted for 84% of the accounts payable as of June 30, 2020, as set forth below:

Vendor A	51	%
Vendor B	33	%

Four vendors accounted for 93% of the accounts payable as of June 30, 2019, as set forth below:

Vendor A	56	%
Vendor B	15	%
Vendor C	12	%
Vendor D	10	%

NOTE 7 – SUBSEQUENT EVENTS

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the World. The Company is monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, in addition to the impact on its employees. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations and liquidity is uncertain as of the date of this report. While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the impact could not be determined. Management does not believe COVID-19 had a material impact on the Company’s revenues, when compared to prior years, through the date of filing of these unaudited condensed financial statements.

On July 31, 2020, the Company and its equity holders entered into a share purchase agreement with Cerberus Cyber Sentinel Corporation (“Cerberus”), a Delaware corporation. As a result of the transaction, the Company became a wholly owned subsidiary of Cerberus.

F-10

EX-99.3

Exhibit 99.3

CERBERUS CYBER SENTINEL CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2020 and the unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2020 and the year ended December 31, 2019 are based on the historical consolidated financial statements of Cerberus Cyber Sentinel Corporation, a Delaware corporation (“Cerberus”, “CCSC” or the “Company”) and Clear Skies Security LLC, a Georgia limited liability company (“Clear Skies”) after giving retroactive effect to the Company’s acquisition of Clear Skies effective July 31, 2020 (the “Acquisition”), and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2020 is presented as if the Acquisition had occurred on June 30, 2020, and is derived from the unaudited condensed consolidated balance sheet of the Company at June 30, 2020 and the unaudited condensed balance sheet of Clear Skies at June 30, 2020 and gives effect to certain pro forma adjustments. The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2020 is presented as if the Acquisition had occurred on January 1, 2020 and gives effect to certain pro forma adjustments and are derived from the unaudited condensed consolidated statement of operations of the Company for the six months ended June 30, 2020 and the unaudited condensed consolidated statement of operations of Clear Skies for the six months ended June 30, 2020; the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2019 are derived from the audited historical statement of operations of the Company for the year ended December 31, 2019 and the audited historical statement of operations of Clear Skies for the year ended December 31, 2019 and are presented as if the Acquisition occurred on January 1, 2019 and give effect to certain pro forma adjustments.

The unaudited pro forma condensed consolidated financial information is based on the assumptions set forth in the notes to such information. These adjustments are provisional and subject to further adjustment as additional information becomes available, additional analyses are performed, and as warranted by changes in current conditions and future expectations. The unaudited pro forma adjustments made in preparation of the unaudited pro forma information are based upon available information and assumptions that the Company considers to be reasonable and have been made solely for purposes of developing such unaudited pro forma condensed consolidated financial information for illustrative purposes in compliance with the disclosure requirements of the Securities and Exchange Commission (“SEC”).

The unaudited pro forma adjustments have been made solely for informational purposes. The actual results reported by the Company in periods following the Acquisition may differ significantly from that reflected in these unaudited pro forma condensed consolidated financial statements. As a result, the unaudited pro forma condensed consolidated information is not intended to represent and does not purport to be indicative of what the Company’s financial condition or results of operations would have been had the Acquisition been completed on the applicable dates of the unaudited pro forma condensed consolidated financial statements. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial condition and results of operations of the Company.

The unaudited pro forma condensed consolidated financial statements, including the notes thereto, should be read in conjunction with:

● the accompanying notes to the unaudited pro forma condensed consolidated financial statements;

● the audited consolidated financial statements of the Company for the year ended December 31, 2019 and the related notes thereto, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2020;

● the unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2020 and 2019 and the related notes thereto, included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 17, 2020;

● the audited financial statements of Clear Skies for the year ended December 31, 2019 and the related notes thereto, filed as Exhibit 99.1 to this Current Report on Form 8-K/A; and

● the unaudited condensed financial statements of Clear Skies for the six months ended June 30, 2020 and 2019 and the related notes thereto, filed as Exhibit 99.2 to this Current Report on Form 8-K/A.

The purchase price allocation takes into account the information management believes is reasonable. Nevertheless, the Company has one year from the Closing Date to make a final determination of purchase price accounting allocations; and, accordingly, adjustments may be made to the foregoing allocations for the Acquisition.

CERBERUS CYBER SENTINEL CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2020

	Historical					Pro Forma			Pro Forma
	CCSC			Clear Skies		Adjustments			Combined
ASSETS
Current Assets:
Cash and cash equivalents	$	2,043,469		$	184,827	$	-		$	2,228,296
Accounts receivable, net		806,532			115,000		-			921,532
Prepaid expenses and other current assets		247,021			-		-			247,021
Total Current Assets		3,097,022			299,827		-			3,396,849
Property and equipment, net		66,460			-		-			66,460
Right of use asset		17,901			-		-			17,901
Intangible assets, net		1,053,556			-		-			1,053,556
Goodwill		2,278,939			-		779,565	(1),(2)		3,058,504
Total Assets	$	6,513,878		$	299,827	$	779,565		$	7,593,270
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	811,632		$	13,191	$	-		$	824,823
Line of credit		27,000			-		-			27,000
Stock payable		22,000			-		-			22,000
Deferred revenue		66,434			-		-			66,434
Lease liability		4,304			-		-			4,304
Loans payable		718,650			134,200					852,850
Note payable - related party		109,787			-		-			109,787
Total Current Liabilities		1,759,807			147,391		-			1,907,198
Long-term Liabilities:
Loan payable, net of current portion		40,858			-		-			40,858
Lease liability, net of current portion		13,682			-		-			13,682
Total Liabilities		1,814,347			147,391		-			1,961,738
Commitments and Contingencies
Stockholders’ Equity:
Common stock, $.00001 par value; 250,000,000 shares authorized; 111,654,771 shares issued and outstanding		1,117			-		23	(1)		1,140
Additional paid-in capital		7,537,171			-		931,978	(1)		8,469,149
Members’ equity		-			152,436		(152,436	)(2)		-
Retained earnings (Accumulated deficit )		(2,838,757	)		-		-			(2,838,757	)
Total Stockholders’ Equity		4,699,531			152,436		779,565			5,631,532
Total Liabilities and Stockholders’ Equity	$	6,513,878		$	299,827	$	779,565		$	7,593,270

See the unaudited notes to the Pro Forma Condensed Consolidated Financial Statements

CERBERUS CYBER SENTINEL COPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019

	Historical						Pro Forma			Pro Forma
	CCSC			Clear Skies			Adjustments			Combined
Revenues, net	$	1,907,930		$	1,106,650		$	-		$	3,014,580
Cost of revenues		936,172			698,202			-			1,634,374
Total gross profit		971,758			408,448			-			1,380,206
Operating expenses:
Professional fees		622,336			11,995			-			634,331
Selling, general and administrative		768,286			643,493			-			1,411,779
Stock based compensation		823,651			-			-			823,651
Loss on impairment of intangible assets		100,000			-			-			100,000
Total operating expenses		2,314,273			655,488			-			2,969,761
Loss from operations		(1,342,515	)		(247,040	)		-			(1,589,555	)
Other income (expense):
Interest income (expense), net		(11,853	)		147			-			(11,706	)
Total other income (expense)		(11,853	)		147			-			(11,706	)
Loss before provision for income taxes		(1,354,368	)		(246,893	)		-			(1,601,261	)
Provision for income taxes		-			-			-	(3)		-
Net loss	$	(1,354,368	)	$	(246,893	)	$	-		$	(1,601,261	)
Net loss per common share - basic	$	(0.01	)							$	(0.02	)
Net loss per common share - diluted	$	(0.01	)							$	(0.02	)
Weighted average shares outstanding - basic		93,080,426									95,410,426
Weighted average shares outstanding - diluted		93,080,426									95,410,426

See the unaudited notes to the Pro Forma Condensed Consolidated Financial Statements

CERBERUS CYBER SENTINEL COPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2020

	Historical						Pro Forma			Pro Forma
	CCSC			Clear Skies			Adjustments			Combined
Revenues, net	$	2,618,708		$	450,075		$	-		$	3,068,783
Cost of revenues		1,633,742			318,415			-			1,952,157
Total gross profit		984,966			131,660			-			1,116,626
Operating expenses:
Professional fees		401,310			7,196			-			408,506
Salaries and benefits		808,671			177,284						985,955
Selling, general and administrative		494,175			27,174			-			521,349
Stock based compensation		669,339			-			-			669,339
Total operating expenses		2,373,495			211,654			-			2,585,149
Loss from operations		(1,388,529	)		(79,994	)		-			(1,468,523	)
Other income (expense):
Interest income (expense), net		(6,718	)		31			-			(6,687	)
Other income		10,000			-			-			10,000
Total other expense		3,282			31			-			3,313
Loss before provision for income taxes		(1,385,247	)		(79,963	)		-			(1,465,210	)
Provision for income taxes		-			-			-	(3)		-
Net loss	$	(1,385,247	)	$	(79,963	)	$	-		$	(1,465,210	)
Net loss per common share - basic	$	(0.01	)							$	(0.01	)
Net loss per common share - diluted	$	(0.01	)							$	(0.01	)
Weighted average shares outstanding - basic		108,847,565									111,177,565
Weighted average shares outstanding - diluted		108,847,565									111,177,565

See the unaudited notes to the Pro Forma Condensed Consolidated Financial Statements

CERBERUS CYBER SENTINEL CORPORATION AND SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed CONSOLIDATED Financial Statements

NOTE 1 - ACQUISITION OF CLEAR SKIES

On July 31, 2020, the Company entered into and effected a Share Purchase Agreement (the “SPA”) with Clear Skies, and its equity holders. Pursuant to the terms of the SPA, Clear Skies became a wholly owned subsidiary of the Company. Pursuant to the SPA, at the effective time of the Acquisition, Clear Skies’ outstanding equity was exchanged for 2,330,000 shares of the Company’s common stock.

Immediately following the Acquisition, the Company had 113,984,771 shares of common stock issued and outstanding. The pre-acquisition stockholders of the Company retained an aggregate of 111,654,771 shares, representing approximately 98% ownership of the post-acquisition company. Therefore, upon consummation of the Acquisition, there was no change in control.

The Company accounted for this transaction in accordance with the acquisition method of accounting for business combinations. Assets and liabilities of the acquired business will be included in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2020, based on the retrospective estimated fair value on the date of Acquisition as determined in a purchase price allocation using available information and making assumptions management believes are reasonable.

Per ASC Topic 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 July 31, 2020. Subsequent to the issuance of these financial statements, the Company expects to obtain a third-party valuation on the fair value of the assets acquired and the liabilities assumed for use in the purchase price allocation.

The following table shows the preliminary allocation of the purchase price paid by the Company to the acquired identifiable assets, liabilities assumed and goodwill as of July 31, 2020, to be presented in the Company’s unaudited condensed consolidated financial statements for the nine months ended September 30, 2020:

Consideration paid	$	932,000
Tangible assets acquired:
Cash		189,143
Accounts receivable		189,150
Total tangible assets	$	378,293
Assumed liabilities:
Accounts payable		21,340
Loan payable		134,200
Total assumed liabilities	$	155,540
Net assets acquired	$	222,753
Goodwill (a.) (b.)	$	709,247

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.

b. Goodwill represents expected synergies from the merger of operations and intangible assets that do not qualify for separate recognition. Cerberus and Clear Skies are both cybersecurity service providers. The acquisition of Clear Skies provides Cerberus potential sales synergies resulting from Cerberus’ access to Clear Skies’ current client-base to offer additional services. Goodwill also represents Clear Skies’ customer list as well as Mr. McKenzie’s two-year non-compete agreement to which the Company was unable to assign a fair value at this time. These items will be assigned a fair value upon the completion of the third-party valuation, and will be amortizable, which will affect the pro forma loss from operations and loss per share.

The above purchase price allocation is not reflected in the unaudited pro forma condensed consolidated balance sheet at June 30, 2020 (See Note 4).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited pro forma condensed consolidated financial statements have been compiled in a manner consistent with the accounting policies adopted by the Company. The accounting policies of Clear Skies were not deemed to be materially different to those adopted by the Company. See the Company’s audited financial statements as of December 31, 2019 and 2018.

NOTE 3 - ACQUISITION-RELATED COSTS

In conjunction with the Acquisition, the Company incurred acquisition-related charges, related primarily to investment banking, legal, accounting and other professional services which are expensed as incurred.

NOTE 4 - PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed consolidated financial statements are based upon the historical financial statements of the Company and Clear Skies and certain adjustments, which the Company believes are reasonable to give effect to the Acquisition. These adjustments are based upon currently available information and certain assumptions, and therefore the actual impacts will likely differ from the pro forma adjustments. The unaudited pro forma condensed consolidated balance sheet at June 30, 2020 reflects the assets, liabilities and equity positions of the Company and Clear Skies as of June 30, 2020. This differs from the fair value of the assets and liabilities acquired by the Company on July 31, 2020 as discussed above in Note 1. However, the Company believes that the preliminary determination of the fair value of goodwill and other related assumptions utilized in preparing the unaudited pro forma condensed consolidated financial statements provide a reasonable basis for presenting the pro forma effects of the Acquisition.

The adjustments made in preparing the unaudited pro forma condensed consolidated financial statements are as follows:

⁽¹⁾ Reflects the fair value of the 2,330,000 shares of common stock issued to the members of Clear Skies in the Acquisition, at $0.40 per share.

⁽²⁾ Reflects the estimated amount of goodwill purchased as part of the Acquisition and the elimination of Clear Skies’ members’ equity.

⁽³⁾ No adjustment was made for pro forma taxes on Clear Skies, which has historically been a pass-through entity, given the losses generated by CCSC and Clear Skies.