CISO (US:CISO)2020-11-16 20:47Financial Performance - Total revenue for the nine months ended September 30, 2020, was $4,628,305, compared to $633,384 for the same period in 2019, representing a growth of approximately 630%[172] - Gross profit for the nine months ended September 30, 2020, was $1,683,008, compared to $310,759 for the same period in 2019, indicating a significant increase of about 442%[172] - Operating loss for the nine months ended September 30, 2020, was $(2,418,912), compared to $(989,476) for the same period in 2019, reflecting a worsening of approximately 144%[172] - Total revenue for the three months ended September 30, 2020, was $2,009,597, with significant contributions from TalaTek ($937,615) and Techville ($593,658)[194] - Total operating loss for the three months ended September 30, 2020, was $(1,030,383), reflecting increased operating expenses across all segments[194] Revenue Contributions - Cerberus revenue increased by $590,113, or 93%, due to an increase of approximately $382,000 in managed security services to a major customer[177] - TalaTek revenue increased by $2,514,693, or 100%, primarily due to an acquisition, with approximately $2,400,000 attributed to gap and risk assessment services for one major customer[178] - Techville revenue increased by $748,790, or 100%, following an acquisition, with contributions from managed services and consulting services totaling approximately $545,000[179] - Clear Skies revenue increased by $141,325, or 100%, as a result of an acquisition, with approximately $141,000 from gap and risk assessment services[180] - Cerberus reported a revenue increase of $55,747, or 20%, for the three months ended September 30, 2020, attributed to a shift towards managed services[197] - TalaTek's revenue surged by $937,614, or 100%, for the three months ended September 30, 2020, largely from gap and risk assessment services[198] - Techville's revenue increased by $593,658, or 100%, for the three months ended September 30, 2020, driven by its managed service offering Tech Connect Pro[199] - Clear Skies' revenue rose by $141,325, or 100%, for the three months ended September 30, 2020, primarily from gap and risk assessment offerings[200] Cost and Expenses - Total cost of revenue for the nine months ended September 30, 2020, was $2,945,297, up from $322,625 in 2019, marking an increase of 814%[182] - Cost of revenues for Cerberus increased by $499,417, or 155%, primarily due to payroll-related costs rising by $498,806 after reorganization[184] - Cost of revenues for TalaTek increased by $1,778,351, or 100%, mainly due to payroll and related services following its acquisition[185] - Total operating expenses for the nine months ended September 30, 2020, were $4,101,920, compared to $1,300,235 in 2019, reflecting a significant increase[188] - Stock-based compensation accounted for $1,062,000 of the total operating expenses for the nine months ended September 30, 2020[188] - Operating expenses for Cerberus increased by $1,282,716, or 99%, for the nine months ended September 30, 2020, compared to the same period in 2019[190] - TalaTek's operating expenses rose by $818,477, or 100%, for the nine months ended September 30, 2020, primarily due to the acquisition completed on October 1, 2019[191] - Techville's operating expenses increased by $572,240, or 100%, for the nine months ended September 30, 2020, following its acquisition on May 25, 2020[191] - Clear Skies' operating expenses grew by $128,252, or 100%, for the nine months ended September 30, 2020, due to the acquisition finalized on August 1, 2020[193] - Total operating expenses for the three months ended September 30, 2020, were $1,728,425, an increase from $661,485 in the same period of 2019[206] - Operating expenses for TalaTek increased by $257,894, or 100%, due to the acquisition completed on October 1, 2019[209] Strategic Initiatives - The company plans to continue making strategic acquisitions of small-to-medium-sized engineer-led cybersecurity service businesses to expand service scope and geographical coverage[161] - The company offers a range of cybersecurity services, including managed security services and consulting services, to cater to various organizational needs[161] - The company emphasizes a technology-agnostic approach, differentiating itself from competitors who are committed to specific technology solutions[162] - The company has a focus on attracting and retaining world-class cybersecurity talent to enhance its service offerings[172] - The company aims to achieve and sustain profitability through expansion and effective management of existing lines of business[172] - The company has faced challenges such as business interruptions from geopolitical actions and the need to navigate a complex cybersecurity regulatory environment[172] - The company has made several acquisitions, including GenResults, TalaTek, Techville, and Clear Skies, to enhance its capabilities and market presence[156][158][159][160] Cash Flow and Assets - Cash flows from operating activities for the nine months ended September 30, 2020, were $(1,157,976), compared to $31,571 in the same period of 2019[214] - Net cash provided by financing activities for the nine months ended September 30, 2020, was $1,443,158, primarily from common stock sales and loans[217] - Current assets as of September 30, 2020, were $3,541,729, an increase from $2,478,887 as of December 31, 2019[213] - Working capital surplus decreased to $1,568,634 as of September 30, 2020, from $1,900,200 as of December 31, 2019[213] Accounting Policies - Goodwill is tested for impairment at least annually, and it is considered impaired if the carrying value exceeds its fair value[224] - The Company recognizes revenue when control of services is transferred to the client, with most contracts having a duration of one year or less[227] - The Company received non-refundable upfront payments for the majority of its contracts, with average credit terms of thirty days[228] - Costs of revenue include compensation for billable employees, consumables, and other expenses directly related to service contracts[235] - The Company has adopted practical expedients under ASC 606, including not adjusting for significant financing components for contracts expected to be settled within one year[233] - The Company evaluates the carrying value of long-lived assets at least annually, recognizing impairment losses when anticipated cash flows are less than carrying value[226] - There are no off-balance sheet arrangements that materially affect the Company's financial condition[239] - The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less[229] - The volatility of stock-based compensation is based on historical volatilities of similar companies in the industry over the last two to five years[236]