Form 10-12G CERBERUS CYBER SENTINEL

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

 

Form 10

 

General Form for Registration of Securities

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934

 

CERBERUS CYBER SENTINEL CORPORATION 
(Exact name of registrant as specified in its charter)

 

Delaware		83-4210278
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
7333 E. Doubletree, Suite D270
Scottsdale, Arizona		85258
(Address of principal executive offices)		(Zip Code)

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

Send all correspondence to:

 

Cerberus Cyber Sentinel Corporation

7333 E. Doubletree, Suite D270

Scottsdale, Arizona 85258

Attn: David G. Jemmett, CEO

Telephone: (480) 389-3444
 

Copies to:

 

Gray Reed & McGraw LLP

1601 Elm Street, Suite 4600

Dallas, Texas 75201

Attn: David R. Earhart

Telephone: (469) 320-6041

 

Securities to be registered under Section 12(b) of the Act: None

 

Securities to be registered under Section 12(g) of the Act: Common Stock, par value $0.00001

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller 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. ☐

 

TABLE OF CONTENTS

 

		Page
Forward Looking Statements		1
Item 1.	Business	2
Item 1A.	Risk Factors	9
Item 2.	Financial Information	19
Item 3.	Properties	25
Item 4.	Security Ownership of Certain Beneficial Owners and Management	25
Item 5.	Directors and Executive Officers	26
Item 6.	Executive Compensation	28
Item 7.	Certain Relationships and Related Transactions, and Director Independence	28
Item 8.	Legal Proceedings	30
Item 9.	Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters	30
Item 10.	Recent Sales of Unregistered Securities	32
Item 11.	Description of Registrant’s Securities to be Registered	32
Item 12.	Indemnification of Directors and Officers	33
Item 13.	Financial Statements and Supplementary Data	34
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34
Item 15.	Financial Statements and Exhibits	34
Exhibits		35
Signatures		36

 

We are filing this General Form for Registration of Securities on Form 10 to register our common stock, par value $0.00001 per share (the “Common Stock”), pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless otherwise noted, references in this registration statement to “Cerberus,” the “Company,” or pronouns such as, “we,” “our” or “us,” refer to Cerberus Cyber Sentinel Corporation. Once this registration statement is deemed effective, we will be subject to the requirements of Regulation 13A under the Exchange Act, which will require us to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act.

 

FORWARD LOOKING STATEMENTS

 

There are statements in this registration statement that are not historical facts. These “forward-looking statements” can be identified by use of terminology suggesting a belief in future performance and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these risks, you should read this entire registration statement carefully. Although management believes that the assumptions underlying the forward-looking statements included in this registration statement are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward-looking statements. The assumptions used for purposes of the forward-looking statements represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In the light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this registration statement will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. We do not undertake any obligation to update or revise any forward-looking statements.

Item 1.  Business.

The Company

 

Cerberus Cyber Sentinel Corporation was formed on March 5, 2019 as a Delaware corporation. Our principal offices are located at 7333 E. Doubletree, Suite D270, Scottsdale, Arizona 85258.

 

Effective as of April 1, 2019, we acquired GenResults, LLC, an Arizona limited liability company (“GenResults”). GenResults was established in 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 the Company.

 

We are a provider of high-quality cybersecurity services which differs from incumbent industry leaders. Many providers in the market today are committed to a specific technology solution, limited in their scope of services, or are unable to consistently provide exceptional service. By identifying, acquiring, and integrating small, world-class security consulting firms, we intend to create a one-of-a-kind security team that is platform-agnostic, broad in-service capability and absolutely committed to the belief that true security starts with a cultural shift. We have a four-step business model:

 

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Identify and acquire high-quality businesses that are culturally aligned with us;

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Grow revenue nationally, leveraging a diversified cybersecurity business and comprehensive engineering talent;

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Establish and then leverage a nationwide footprint and brand to compete for large enterprise clients; and

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Be the recognized thought-leader for an aligned cybersecurity culture.

Overview

 

We present analytical and thoughtful cybersecurity solutions to our clients to assist in safeguarding their own as well as their customers’ data, financial information, intellectual property and business reputation. We focus on acquiring recognized engineering talent and utilizing the latest technology to provide state-of-the-art solutions to protect the most demanding businesses and governments against continuing and emerging cybersecurity threats. Our services are technology agnostic.

 

Our clients engage us to provide periodic advisory services and/or on-going upgrades of software, replacement and upgrades of hardware, adjustments to systems to address new threats, updates of governance and procedures, security and network operations as a service, and education and training of employees.

 

Sales of cybersecurity services are characterized by long sales cycles, normally between four and 12 months. A key success factor for us will be our ability to retain and extend our existing relationships (and those of any businesses that we might acquire in the future) to other parts of our clients’ operations.

 

Cybersecurity Consulting

 

We are a cybersecurity services business driven by relationships, outcomes and a 100% security focus. We believe that accepting incentives to sell security products would create a product-centric focus which could easily impact judgment and conflict outcomes. We are truly committed to understanding each client’s business, infrastructure and threat landscape to assess, enhance and optimize its security posture. Our goal is to allow clients to focus more on their core business knowing that their security needs have been addressed properly utilizing a company-wide culture that places security and threat awareness in the mind of each and every employee.

The Company’s comprehensive analysis of the client’s security needs is captured within five core service components:

 

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Gap analysis of company practices,

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Business training, policies and procedures,

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CISO as a Service (“CaaS”),

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Managed Security Services, and

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Security Operations Center (“SOC”).

By acquiring businesses with different aspects of cybersecurity from gap analysis, auditing, risk assessments, road mapping for security, backup/recovery and consulting services, SOC, we expect to be able to address the cybersecurity demands of enterprise customers. Gap analysis is the initial phase of any security audit, creating a holistic view of the client’s environment and documenting its risk profile. From this activity, a report is created which records the risk of the organization, but also provides alternatives to remediate any issues the report has identified. The outcome of this activity is expected to enable us to become a trusted asset into the core of the client’s business and thus being entrenched in the very foundation of their company, becoming integrated as a security expert. This type of work is classified as non-recurring revenue and may be converted into a more comprehensive plan with monthly recurring revenue. Almost every opportunity will have some form of gap analysis to gain an understanding on how best to assist the client going forward; however, the main thrust of it will be to drive recurring revenue.

 

Our second focus area is comprised of business process, training, and procedures. Following a gap analysis, most clients struggle to create, train and enforce policies and procedures because of lack of staff and expertise. We are focused on “Security is a Culture, Not a Product,” where any business starts to transform into a focused security organization. Without proper policies and procedures that allow the business to grow and thrive, it is impossible to change the culture. In most engagements, the framework will be defined by a compliance requirement. However, these types of engagements should never be a “one and done” opportunity since training and reinforcement have to be done over time in any organization. Our initial revenue stream will be non-recurring. However, the goal will be to incorporate these activities into a recurring revenue opportunity as an upfront exercise over the first few months of any client engagement.

 

While some businesses can function with a small number of resources to ensure compliance is in place, many will require more security services and direction at the executive level. This is the target for our CaaS offering. This offering will allow enterprises that need to outsource their entire security department but require interaction with the executive teams and communication with their clients as well. Designed as a shared group of resources or, if desired, a dedicated resource, many enterprises will leverage small teams of security professionals provided by us. These services will be offered primarily as a remote service offering with optional onsite capabilities for an upcharge in service fees. The CaaS team provides services ranging from filling out security questionnaires on behalf of the customer to creating culture changing plans for an enterprise client. The revenue from these services will be entirely recurring. We expect that a large part of the overall revenue will come from its On-Demand service offering.

 

Managed security services represent tactical capabilities that drive security compliance and culture, often driven by a gap analysis report finding. These services focus on providing robust industry standard methodologies and technologies to ensure continuous compliance for customers on a recurring basis. Teams are set up much like the CaaS service to assist in creating secure and compliant environments for enterprise clients. This service is not to be confused with a SOC as this service will be more of a trusted advisor role to design, architect, and manage security solutions on behalf of the customer. The revenue model for this service is longer-term contracts with monthly recurring revenue along with an onboarding fee. The onboarding fee would cover a gap analysis and could also include policy and procedure work.

 

SOC services provide complete monitoring of a client’s network and server infrastructure to track any potential threats that put the client at risk. The SOC can thus respond on behalf of the client and in turn protect it against identified threats. This service is a core component of monthly recurring revenue that is built from a long-term relationship with the client. Since most organizations cannot provide this service internally, outsourcing this capability to augment their business is more cost-effective for the company than bringing it in-house, while at the same time leveraging our expertise that would be difficult to find elsewhere.

 

To complete our portfolio of services, we will provide auditing services for several compliance frameworks on an as-needed basis. The audit services for compliance at this time will focus on SOC2, PCI DSS, HIPAA, HITRUST, and NIST standards and may integrate several others over time. Our executives not only have operational experience with these frameworks but also have been auditing environments for many years. The revenue created by this activity will be mainly non-recurring in nature; however, it will be used to create follow on revenue to drive monthly recurring services such as SOC and Managed Security Services. While this service offering is not in the primary five listed above, it is an ancillary service that will drive a smaller percentage of revenue and is worth mentioning in this document.

 

In summary, while numerous providers offer components of an IT security data solution, we will offer complete managed security services ranging from executive education, Gap analysis and remediation, auditing, forensics, penetration testing, managed security service, risk assessments, remediation services, and SOC-based services, with no dependence or requirement for a particular technology or platform. In the data-intensive business/institutional market, the Company will offer one-stop shopping for a client’s technology security needs.

 

The cybersecurity industry is faced with several regulatory compliance requirements with associated deadlines. Companies will need to continue to seek new ways to improve operational performance and satisfy compliance requirements. Optimizing use of cybersecurity consultants will be the key to successfully attaining these goals.

 

Our services can help executive teams, human resources departments, organizational risk management and infrastructure groupings to ensure improved resource utilization and help maximize performance. Our clients engage us to:

 

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Help executives understand cyber security;

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Help organize and optimize resources to reduce costs;

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Provide options for an efficient and scalable infrastructure with security measures;

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Develop the correct security road mapping to meet client-specific goals;

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Target areas of resource gaps for security; and

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Produce policies for compliance needs of the clients

Our professionals work with clients to help assure complete and easily communicated processes and procedures are in place. We seek to achieve:

 

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Reduction in duplication of effort;

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Adherence to defined standards;

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Enhancement of information flow throughout a system;

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Infrastructure Security:

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Preventive measures for Security threats;

•

Training for executives through company culture for awareness;

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Adaptability, flexibility and agility required for a changing environment; and

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Effective management policies and practices.

Cyber Security and Compliance Consulting

 

Due to ever-increasing and sophisticated hacking threats, organizations cannot simply comply, they must expand their security requirements to address such advanced threats with advanced tools. Companies are faced with internal, national and international threats from sophisticated cyber technology experts. The critical objective is to protect confidential data and improve risk-mitigation plans for protecting confidential data at rest as well as in transition. Organizations are faced with critical and strategic decisions about how to address and eliminate potential vulnerabilities, reduce risk, and minimize exposure to yet undeveloped security threats. We help our clients optimize their security and compliance needs while seeking to lower their risk profiles and minimize costs, while meeting regulatory requirements.

 

Vulnerability Assessments

 

We provide a comprehensive portfolio of solutions and services for organizations of all sizes. We help our valued clients protect and secure their infrastructure, networks, data and users against today’s advancing cyber threats and attacks. We work to ensure a customer’s data is protected and that clients are meeting the compliance and privacy rules, regulations and requirements in areas such as HIPAA, HITECH, HITRUST, PCI DSS, Cyber Security Framework, and others.

 

Security Risk Gap Analysis

 

We provide a comprehensive review and evaluation of the current state of a client’s security for its compliance, policies and procedures, infrastructure, network, data and users as well as its operational processes, procedures and gaps in coverage. We do a thorough vulnerability assessment to identify potential areas of security risk, and then provide recommendations for improvement.

 

Utilizing the latest in technology, linked with our security expertise, we provide manual and automated configuration reviews on the existing confidential data infrastructure and network devices. We identify any systems and devices with missing software patches, insecure configuration settings, and authentication vulnerabilities. We review potential internet exposures within web applications such as input validation, service and application configuration, and authentication vulnerabilities.

 

Advanced Threat Intelligence and Analytics

 

We help guard our clients against the threat of damaging and potentially costly confidential data security breaches that are occurring on a more frequent basis. The products we use for Threat Intelligence and Analytic solutions alert our clients to potential risks so that our team can assist them in mitigating those risks.

 

We help guard the perimeter as well as the internal data systems, applications, and data storage environments from advanced and persistent threats. We monitor our clients’ systems to identify unauthorized access attempts, user activity, and detect potential cyber security threats and attacks that might otherwise go undetected.

Penetration Testing

 

We offer application and network level penetration testing performed through industry tools and verified by certified security experts. This process reduces the number of false positives in the findings. We provide continuous and periodic (monthly, quarterly, annual) scans based on customer’s regulatory requirements.

 

External Penetration testing (Network Layer)

 

We conduct network scans for customers at a predefined interval based on a customer’s prior approval. Once appropriate IP addresses are captured, the system will be set up to perform scans upon verification that the same internet IP addresses are used.

 

We will further attempt to exploit any vulnerability found by the network scan to eliminate any false positives. This will be performed after any known vulnerabilities are identified and mitigated.

 

External Penetration testing (Application Layer)

 

We assess the application for known application vulnerabilities. Assessment techniques include:

 

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Parameter Tampering – Query strings, POST parameters, and hidden fields are modified to gain unauthorized access to data or functionality.

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Cookie Poisoning – Data sent in cookies is modified to test application response to receiving unexpected cookie values.

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Session hijacking – We attempt to take over a session established by another user to assume the privileges of that user.

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User privilege escalation – We attempt to gain unauthorized access to administrator or other users’ privileges.

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Credential manipulation – We modify identification and authorization credentials in an attempt to gain unauthorized access to other users’ privileges.

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Forceful Browsing – Misconfigured web servers will send any file to a user if the user knows the file name and the file is not protected. Therefore, a hacker may exploit this security hole, and “jump” directly to pages.

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Backdoors and Debug Options – Many applications contain code left by developers for debugging purposes. Debugging code typically runs with a higher level of access, making it a target for potential exploitation. Application developers may leave backdoors in their code. These backdoors, if discovered, could potentially allow an intruder to gain an additional level of access.

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Configuration Subversion – Misconfiguring web servers and application servers is a common occurrence. The most common misconfiguration is one that permits directory browsing. Hackers can utilize this feature to browse the application’s directories (such as CGI-bin/) by just typing in the directory name.

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Input validation bypass – Client-side validation routines and bounds-checking are removed to ensure controls are implemented on the server.

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SQL injection – Specially crafted SQL commands are submitted in input fields to validate input type controls.

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Cross-site scripting – Active content is submitted to the application to cause a user’s web browser to execute unauthorized code. This test is meant to validate user input type controls.

 

Compliance Auditing

 

We provide several services that help organizations comply with local, state, federal and international regulations and associated reporting, including:

 

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Review of policies, procedures, and implementation guidelines for any risk exposure against the regulations;

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Security assessment to identify gaps in the current security posture of the environment;

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Log management and threat management identification of internal and external risks that face the enterprise;

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Vulnerability assessment scanning of the physical and application environment to validate and lighten security posture;

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Data loss prevention to identify critical data’s location and assist in preventing its outflow;

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Network access control safeguards the customer’s perimeter and enhances end point security; and

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Managed security services to reduce time and cost of monitoring and testing.

 

We also provide auditing services in the following areas:

 

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AICPA Service Organization Control Reports;

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PCI Security Standards Council;

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HIPAA & Hitech Compliance;

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NIST;

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SOC2; and

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Security Framework

 

Backlog

 

As of May 22, 2019, we do not have any backlog.

 

Employees

 

As of May 22, 2019, we do not have any employees. Our officers and certain independent contractors provide services to the Company.

 

Implications of Being an Emerging Growth Company

 

We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, or “JOBS Act.” An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies, and we have elected to comply with these reduced reporting and other burdens. These provisions include:

 

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A requirement to have only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

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Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002; and

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Reduced disclosure about the emerging growth company’s executive compensation arrangements and an exemption from various stockholder voting requirements with respect to executive compensation arrangements.

We could remain an emerging growth company until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1,070,000,000, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under a registration statement under the Securities Act of 1933, (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. The foregoing amounts are subject to adjustment for inflation.

 

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act and Section 13(a) of the Exchange Act for complying with new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to take advantage of the extended transition period for complying with the revised accounting standards. As a result, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Merger of VCAB Six Corporation into Cerberus

 

On April 15, 2019, we consummated a transaction whereby VCAB Six Corporation, a Texas corporation (“VCAB”), merged with and into us. At the time of the 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, “Claim Holders”). Pursuant to the terms of the 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 merger, the separate corporate existence of VCAB was terminated. We entered into the merger in order to increase our stockholder base in order to, among other things, assist us in satisfying the listing standards of a national securities exchange.

Item 1A. Risk Factors.

 

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information contained herein before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

 

Risks Related to Our Business and Industry

 

We have a limited operating history and there can be no assurance that we can attain or maintain profitability.

 

We were formed in March 2019. Our wholly owned subsidiary, GenResults was formed in 2015, and was profitable prior to becoming our wholly owned subsidiary. However, given the competitive and evolving nature of the industry in which we operate, we may be unable to attain, sustain and increase profitability. Our failure to do so would adversely affect our business, including our ability to raise additional funds that may be required to maintain and/or enhance operations.

 

We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, curtail or cease our efforts.

 

We expect to spend substantial amounts on the expansion of our business, including potential acquisitions of other complementary businesses, as well as hiring additional officers and employees. We expect that we will require additional funds in the near future to support our continued activities, as well as the costs of marketing and additional costs that we will incur as a public company. We have based this estimate, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect.

 

Until such time, if ever, as we can generate a sufficient amount of revenue and achieve profitability, we expect to seek to finance future cash needs through equity or debt financings and strategic arrangements. We currently have no other commitments or agreements relating to any of these types of transactions and we cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital, we might have to delay, curtail or eliminate our efforts to expand through hiring additional personnel and through acquisitions of strategic businesses.

 

The nature of our business involves significant risks and uncertainties that may not be covered by insurance or indemnification.

 

We provide services in circumstances where insurance or indemnification may not be available. We may not be able to maintain insurance to protect against all operational risks and uncertainties that we confront. Substantial claims resulting from liability arising from our services in excess of any indemnity or insurance coverage (or for which indemnity or insurance coverage is not available or is not obtained) could harm our financial condition, cash flows and operating results. Any claim, even if fully covered or insured, could negatively affect our reputation among our customers and the public, and make it more difficult for us to compete effectively.

 

We rely heavily on the expertise of our executive officers. If we no longer had the services of these officers, our business may suffer.

 

Our success is dependent upon our Chief Executive Officer, David G. Jemmett; our President, William Santos; and our Chief Technology Officer, Jason Ford. We believe that these officers are essential to our ability to continue to grow our business. If their services were no longer available to us for any reason, our growth strategy would be hindered, which could limit our ability to increase revenue and maintain profitability.

 

We do not maintain key man life insurance on any of our officers.

 

We operate in an industry that is experiencing a shortage of qualified engineers. If we are unable to recruit and retain key management, technical and sales personnel, our business would be negatively affected.

 

To execute our growth strategy, we must continue to attract and retain highly skilled employees. Competition for these employees is intense, especially for cyber-security engineers, as there is a global shortage of engineers who can provide the technical and strategic skills required for us to deliver high levels of services to our clients and potential clients. We may not be successful in attracting and retaining qualified employees. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies with which we compete for these highly skilled employees have greater resources than we have. In addition, in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the stock options, restricted stock grants or other stock-based compensation they are to receive in connection with their employment. Declines in the value of our stock could adversely affect our ability to attract or retain key employees and result in increased employee compensation expenses. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed.

 

Our growth plans include growth through acquisition of businesses that provide similar services. If we are not able to identify and consummate acquisitions of complementary businesses, our ability to grow would be negatively impacted.

 

We intend to enter into acquisitions, mergers, and business combinations, and may from time to time consider other potential strategic transactions, including joint ventures. Any of these transactions could be material to our business, financial condition, results of operations or prospects. The process of integrating any acquired business may create unforeseen operating difficulties and expenditures and is itself risky. Consequently, stockholders must assume the risk that (i) such expansion may ultimately involve expenditures of funds beyond our available resources and (ii) management of such expanded operations may divert management’s attention and resources away from its existing operations, all of which factors may have a material adverse effect on our present and prospective business activities. Future acquisitions or mergers may require us to issue additional equity securities, spend our cash, incur debt, assume liabilities, amortize expenses related to intangible assets or write-off goodwill, any of which could adversely affect our business, financial condition, results of operations or prospects.

 

We intend to fund acquisitions, mergers and business combinations, in whole or in part, through the issuance of our common stock. If the price of our common stock declines, or experiences unusual volatility, our strategy to fund acquisitions, mergers and business combinations could be negatively impacted.

 

Further, we may incur substantial expenses in connection with reviewing potential acquisitions, including accounting, legal and other expenses relating to our due diligence review. If a potential acquisition is not consummated, we may not be able to recoup any of these expenses, which could be material.

 

We may pursue additional strategic transactions in the future, which could be difficult to implement, disrupt our business or change our business profile significantly.

 

We intend to consider additional potential strategic transactions, which could involve acquisitions of businesses or assets, joint ventures or investments in businesses or technologies that expand, complement or otherwise relate to our business. We may also consider, from time to time, opportunities to engage in joint ventures or other business collaborations with third parties. Should our relationships fail to materialize into significant agreements or should we fail to work efficiently with these companies, we may lose sales and marketing opportunities and our business, results of operations and financial condition could be adversely affected.

 

These activities, if successful, create risks such as, among others: (i) the need to integrate and manage the businesses acquired with our own business; (ii) additional demands on our resources, systems, procedures and controls; (iii) disruption of our ongoing business; and (iv) diversion of management’s attention from other business concerns. Moreover, these transactions could involve: (a) substantial investment of funds or financings by issuance of debt or equity securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition or disposition of lines of businesses. Also, such activities could result in one-time charges and expenses and have the potential to either dilute the interests of our existing stockholders or result in the issuance of, or assumption of debt.  Such acquisitions, investments, joint ventures or other business collaborations may involve significant commitments of financial and other resources. Any such activities may not be successful in generating revenue, income or other returns, and any resources we committed to such activities will not be available to us for other purposes. Moreover, if we are unable to access the capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure. Our inability to take advantage of growth opportunities or address risks associated with acquisitions or investments in businesses may negatively affect our operating results.

 

Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially reduce our earnings. Future acquisitions or joint ventures may not result in their anticipated benefits and we may not be able to properly integrate acquired technologies or businesses with our existing operations or successfully combine personnel and cultures. Failure to do so could deprive us of the intended benefits of those acquisitions.

 

If our efforts to increase our client base are unsuccessful, we may not earn enough revenue to become profitable.

 

While we believe we can further develop our existing client base, and expand our client base through acquisitions, cross-selling and up-selling, and marketing and promotion, our inability to further develop our client base would have a material adverse effect on us. We will need to heavily invest in marketing resources for the successful implementation of our marketing plan. Our marketing plan includes attendance at trade shows, making private demonstrations, advertising, promotional materials and advertising campaigns in print and/or broadcast media.  In the event we are not successful in obtaining orders for our services from existing and new clients, we will face significant obstacles in expanding our business. We cannot give any assurance that our marketing efforts will be successful.  If they are not, revenue may not be sufficient to cover our fixed costs and we may not become profitable.

 

If we incur additional debt, we will be subject to restrictive covenants and debt service obligations that could negatively impact our operations.

 

If we incur additional indebtedness, a portion of our cash flow will have to be dedicated to the payment of principal and interest on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair our operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of our stockholders. A judgment creditor would have the right to foreclose on any of our assets resulting in a material adverse effect on our business, operating results or financial condition.

 

We face a significant risk of failure because we cannot accurately forecast our future revenues and operating results.  

 

Our operating results may fluctuate significantly from period to period as a result of a variety of factors, including purchasing patterns of our clients, competitive pricing, debt service and principal reduction payments, and general economic conditions. There is no assurance that we will be successful in marketing our services. Consequently, our revenues may vary by quarter, and our operating results may experience fluctuations.

 

The nature of the markets in which we expect to compete makes it difficult to accurately forecast our revenues and operating results.  Furthermore, we expect our revenues and operating results to fluctuate in the future due to a number of factors, including the following:

 

•

the timing of sales of our services;

•

unexpected delays in introducing new services; and

•

increased expenses, whether related to sales and marketing or administration.

 

Our revenues and operating results will be impacted by such events, which we are not able to predict or control.

 

Our future results may be affected by various legal and regulatory proceedings and legal compliance risks, including those involving intellectual property, environmental, governmental regulations, the US Foreign Corrupt Practices Act and other anti-bribery, anti-corruption, or other matters.

 

The outcome of these legal proceedings may differ from our expectations because the outcomes of litigation, including regulatory matters, are often difficult to reliably predict. Various factors or developments can lead us to change current estimates of liabilities and related insurance requirements where applicable, or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on our results of operations or cash flows in any particular period.

 

Breaches of network or information technology security could have an adverse effect on our business.

 

Cyber-attacks or other breaches of network or IT security may cause equipment failures or disrupt the systems and operations of us and our clients. We and our clients may be subject to attempts to breach the security of applicable networks and IT infrastructure through cyber-attack, malware, computer viruses and other means of unauthorized access. The potential liabilities associated with these events could exceed the insurance coverage we or our clients maintain, if any. An inability to operate as a result of such events, even for a limited period of time, may result in significant expenses or loss of market share to other competitors in the market we serve. In addition, a failure to protect our, or our client’s, enterprises, networks, privacy of customer and employee confidential data against breaches of network or IT security could result in damage to our reputation. To date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted in a material adverse effect on our business, operating results and financial condition.

 

We are subject to security threats to our own IT infrastructure, which can also affect our customers. A party who is able to compromise the security measures on our networks or the security of our infrastructure could misappropriate our proprietary information or the personal information of our customers, cause interruptions or malfunctions in our operations or our customers’ operations or damage our computers or systems and those of our customers. As security is a primary competitive factor in our industry, such a compromise could be particularly harmful to our brand and reputation. We may be required to expend significant resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not be able to implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures. Any breaches that may occur could expose us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, harm to our reputation and increases in our security costs, which may not be fully insured or indemnified by other means. Additionally, breaches of our, or our customers’, systems could similarly result in a loss of confidence in our services or damage to our brand and reputation. Occurrence of any of these events could have a material adverse effect on our business, financial condition, operating results or prospects.

 

Because our services are aimed at protecting customers from, and limiting the impact of, critical business interruptions and losses related to cyber-attacks, if our customer’s experience losses related to cyber-attacks that result in lost profits or other indirect or consequential damages to our customers, are customer may expose us to lawsuits. Our customer agreements for services typically contain provisions limiting our liability. However, we cannot assure you that a court would enforce any contractual limitations on our liability. The outcome of any such lawsuit would depend on the specific facts of the case and any legal and policy considerations that we may not be able to mitigate. In such cases, we could be liable for substantial damage awards that may exceed our liability insurance coverage by unknown but significant amounts, which could materially impair our financial condition.

 

If we fail to meet our service level obligations under our service level agreements, we may be subject to certain penalties and could lose clients.

 

We have service level agreements with many of our managed services clients under which we guarantee specified levels of service availability. These arrangements require us to estimate the level of service we will provide. If we fail to meet our service level obligations under these agreements, we may be subject to penalties, which could result in higher than expected costs, and we may lose clients, which could lead to decreased revenue and decreased gross and operating margins. If we fail to meet our service level obligations under these agreements, our reputation may suffer as a result.

 

The preparation of our financial statements involves use of estimates, judgments and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate.

 

Financial statements prepared in accordance with accounting principles generally accepted in the United States require the use of estimates, judgments, and assumptions that affect the reported amounts. Different estimates, judgments, and assumptions reasonably could be used that would have a material effect on the financial statements, and changes in these estimates, judgments, and assumptions are likely to occur from period to period in the future. These estimates, judgments, and assumptions are inherently uncertain, and, if they prove to be wrong, then we face the risk that charges to income will be required.

 

We indemnify our officers and directors against liability to us and our security holders, and such indemnification could increase our operating costs.

 

Our certificate of formation and bylaws allow us to indemnify our officers and directors against claims associated with carrying out the duties of their offices. Our bylaws also allow us to reimburse them for the costs of certain legal defenses. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our officers, directors or control persons, the SEC has advised that such indemnification is against public policy and is therefore unenforceable.

 

Our industry is highly competitive, and there is no assurance that we will compete successfully.

 

Our current and potential competitors vary by size, service offerings and geographic region. Competitors include technology companies, consulting companies, telecommunication companies, technology resellers, hardware and software companies, and others. Many of our competitors have entrenched relationships in particular industries, or have gained a reputation for expertise in a specific segment of the cyber market, including services, software and hardware. The primary competitive factors in our market are: security, reliability and functionality, customer service and technical expertise, reputation and brand recognition, financial strength, breadth of products and services offered, price, and scalability. Many of our current and potential competitors have substantially greater financial, technical and marketing resources; more diversified product and service offerings; larger customer bases; longer operating histories; greater brand recognition; and more established relationships in the industry than we do. As a result, some of these competitors may be able to:

 

	•	adapt more rapidly to new or emerging technologies and changes in customer requirements;
	•	develop superior products or services, thereby gain greater market acceptance and expand their product and service offerings more efficiently or rapidly;
	•	bundle products and services that we may not offer or in a manner that provides our competitors with a price advantage;
	•	take advantage of acquisitions and other opportunities more readily;
	•	maintain a lower cost basis;
	•	adopt more aggressive pricing policies and devote greater resources to the promotion, marketing and sales of their products and services; and
	•	devote greater resources to the research and development of their products and services.

 

Many of these companies have significantly greater financial, technical, marketing and other resources than we do and may be better positioned to acquire, offer and service complementary products and technologies. These companies and alliances resulting from possible combinations may create more compelling product and service offerings, be able to offer greater pricing flexibility than we can or engage in business practices that make it more difficult for us to compete effectively, including on the basis of sales and marketing programs (such as providing greater incentives to our channel partners to sell a competitor’s product), technology or product functionality. Competition could result in, among other things, a substantial loss of customers, reduction in revenues or increase in expenses, which could materially adversely affect our business, financial condition, results of operations or prospects.

 

Our business is dependent upon the protection of our proprietary rights and trade secrets.

 

We rely on trade secrets to protect intellectual property, proprietary technology and processes, which we have or may develop in the future. There can be no assurances that secrecy obligations will be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. We may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.

 

We may become subject to disputes, including litigation, that could negatively impact our business and our profitability and financial condition.

 

We may become subject to disputes with third parties from time to time. Any such dispute could result in litigation between us and the other parties. Whether or not any dispute actually proceeds to litigation, we may be required to devote significant management time and attention and financial resources to its resolution (through litigation, settlement or otherwise), which would detract from our management’s ability to focus on our business. Any such resolution could involve the payment of damages or expenses by us, which may be significant. In addition, any such resolution could involve our agreement with terms that restrict the operation of our business.

 

Domestic economic trends and financial market conditions may adversely affect our operating performance.

 

Our financial success may be sensitive to adverse changes in general economic conditions in the United States, such as recession, inflation, unemployment, and interest rates. Such changing conditions could reduce demand in the marketplace for our services. We have no control over these changes.

 

Risks Associated with our Common Stock

 

Our directors and executive officers beneficially own a substantial majority of our outstanding capital stock and will have the ability to control our affairs.

 

Our directors and executive officers, beneficially owns approximately 88% of our issued and outstanding capital stock. By virtue of these holdings, they effectively control, the election of the members of our board of directors, our management and our affairs, and may prevent us from consummating corporate transactions such as mergers, consolidations or the sale of all or substantially all of our assets that may be favorable from our standpoint or that of our other stockholders.

 

We do not know whether an active, liquid and orderly trading market will develop for our common stock.

 

There has been no public market for our common stock. An active trading market for our shares may never develop or be sustained. The lack of an active or liquid market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.

 

The market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance.

 

Our stock price may experience substantial volatility as a result of a number of factors, including, among others:

 

•

sales or potential sales of substantial amounts of our common stock;

•

announcements about us or about our competitors or new product introductions;

•

the loss or unanticipated underperformance of our global distribution channels;

•

litigation and other developments relating to our patents or other proprietary rights or those of our competitors;

•

conditions in the cybersecurity and IT services industries;

•

governmental regulation and legislation;

•

variations in our anticipated or actual operating results;

•

changes in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations;

•

foreign currency values and fluctuations; and

•

overall political and economic conditions.

 

Many of these factors are beyond our control. The stock markets have historically experienced substantial price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our common stock, regardless of our actual operating performance.

 

Future sales of shares of our common stock by existing stockholders could depress the market price of our common stock.

 

We have an aggregate of 102,000,000 outstanding shares of common stock. The Plan Shares issued in connection with the merger with VCAB are freely tradeable. The remainder of the outstanding shares may be sold, subject to certain volume limitations, pursuant to Rule 144 or other available exemptions. Also, in the future, we may issue additional securities in connection with investments and acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding stock. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

 

We do not intend to pay cash dividends.  As a result, for the foreseeable future, capital appreciation, if any, will be your sole source of gain.

 

We currently intend to retain future earnings, if any, to fund the development and growth of our business.  In addition, the terms of future debt agreements may preclude us from paying dividends.  As a result, capital appreciation, if any, of our common stock is anticipated to be your sole source of gain for the foreseeable future.

 

Provisions in our certificate of incorporation, our by-laws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

 

Provisions of our amended and restated certificate of formation, our amended and restated bylaws and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors.

 

The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Our board of directors is expressly authorized to make, alter or repeal our by-laws by majority vote, while such action by stockholders would require a super majority vote; and establish advance notice requirements for nominations for elections to our board of directors or proposing matters that can be acted upon by stockholders at stockholder meetings.

 

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

 

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

 

The Financial Industry Regulatory Authority, Inc. (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in the shares, resulting in fewer broker-dealers may be willing to make a market in our shares, potentially reducing a stockholder’s ability to resell shares of our common stock.

 

We are eligible to be treated as an “emerging growth company,” as defined in the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in this registration statement and our periodic reports and proxy statements and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier.

 

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to take advantage of the extended transition period for complying with the revised accounting standards. As a result, our financial statements may not be comparable to companies that comply with effective dates generally applicable to public companies.

 

Investors may find our common stock less attractive because we may rely on these exemptions, reduced reporting requirements and extended transition periods. If investors find our common stock less attractive as a result of any of the foregoing, there may be a less active trading market for our common stock and our stock price may be more volatile or may decrease.

 

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our share price and trading volume could decline.

 

The trading market for our shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. Moreover, if analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our share price could decline.

Item 2.  Financial Information.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

The following discussion and analysis should be read in conjunction with our financial statements and the related notes. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Forward-Looking Statements and Business sections in this registration statement. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Overview

 

GenResults, LLC (the “Company” or “GenResults”) was formed on June 22, 2015 as an Arizona limited liability company. Following our acquisition of GenResults effective as of April 1, 2019, GenResults is our wholly owned subsidiary. To date, all services to our clients have been provided through GenResults.

 

We provide cybersecurity consulting and are committed to delivering innovative technology security solutions that solve human challenges. Our team delivers full lifecycle security solutions from project inception and planning, through deployment to ongoing support and maintenance focusing on compliance and security.

 

As of, and for the years ended, December 31, 2018 and 2017, and the three months ended March 31, 2019 and 2018, the financial statements of GenResults are presented herein as the financial statements of the Company.

 

Financial Overview

 

Revenue

 

Our ability to increase revenues will depend on our ability to increase services we provide to existing and new clients.

 

Reorganization Expenses

 

In April 2019, we acquired all of the equity interests of GenResults in consideration of the issuance by us of 1,000,000 shares of our common stock to an affiliate of David G. Jemmett, our Chief Executive Officer. We did not incur material legal, accounting or other expenses in connection with this transaction.

 

On April 15, 2019, we incurred reorganization expenses in connection with our merger with VCAB, and related transactions, as described under “Business – Merger of VCAB Six Corporation into Cerberus Cyber Sentinel Corporation.” Reorganization expenses primarily consisted of the fair value of the Plan Shares issued in connection with those transactions, as well as legal expenses incurred in connection therewith. All reorganization expenses in connection with those transactions have been incurred, and no additional expenses with respect thereto are anticipated.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative (“SG&A”) expenses consist primarily of professional fees for legal, finance and accounting services. We anticipate that our SG&A expenses will increase in future periods to support increases in our research and development activities and as a result of increased headcount, expanded infrastructure, increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and increased insurance premiums, among other factors.

 

Critical Accounting Policies and Recent Accounting Pronouncements

 

Critical Accounting Policies

 

We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, some of which require management to make subjective or complex judgments. These judgments involve making estimates and assumptions about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. The methods, estimates, interpretations and judgements we use in applying our most critical accounting policies can have a significant impact on the results that we report in our financial statements.

 

The following discussion provides supplemental information regarding the significant estimates, judgments and assumptions made in implementing the Company’s critical accounting policies.

 

Basis of Presentation and Use of Estimates

 

The discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts receivable, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For any given individual estimate or assumption we make, it is possible that other people applying reasonable judgment to the same facts and circumstances could develop different estimates. Actual results may differ from these estimates under different assumptions or conditions. The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.  For a discussion of our significant accounting policies, refer to Note 2 – “Summary of Significant Accounting Policies” in the Notes to our Financial Statements for the years ended December 31, 2018 and 2017, included in this registration statement in Item 15.

 

Allowance for Doubtful Accounts Receivable

 

Our accounts receivable consist primarily of amounts due from customers for the performance of services, and we record the amount net of an allowance for doubtful accounts. To record our accounts receivable at the net realizable value, we assess their collectability, which requires a considerable amount of judgment. We perform a detailed analysis of the aging of our receivables, the credit worthiness of our customers, our historical bad debts, and other adjustments. If economic, industry, or customer specific business trends worsen, we increase the allowance for uncollectible accounts by recording additional expense in the period in which we become aware of the new conditions.

 

Income Taxes

 

Prior to our acquisition of GenResults, GenResults was treated as a disregarded entity for federal and state tax purposes. Accordingly, GenResults was not subject to federal or state income taxes. The income of GenResults was included in the tax return of its sole member. Therefore, no provision, liability or benefit for income taxes has been included in the financial statements of GenResults. Additionally, because GenResults was a disregarded entity for federal tax purposes, tax reform legislation that was enacted in December 2017 had no impact on GenResults or the financial statements. The Company is generally subject to tax audits for its federal and state tax returns for tax years since the Company’s inception.

 

We anticipate using significant judgment in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against net deferred tax assets. In preparing our financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax liability together with assessing temporary differences resulting from differing treatment of items, such as depreciation and amortization of property. These differences result in deferred tax assets and liabilities. We will then assess the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, we establish a valuation allowance. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we will consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we will begin with historical results and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and will be consistent with the plans and estimates we are using to manage the underlying business. To the extent we establish or change a valuation allowance in a period, we will include an adjustment within the tax provision of our statements of operations.

 

Deferred tax assets will reflect current statutory income tax rates in effect for the period in which the deferred tax assets are expected to be realized. As changes in tax laws or statutory tax rates are enacted, deferred tax assets and liabilities will be adjusted through the provision of income taxes.

 

We anticipate the calculation of our tax liabilities to involve dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our operations. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We expect to (1) record unrecognized tax benefits as liabilities in accordance with ASC 740 and (2) adjust these liabilities when our judgment changes as a result of the valuation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

 

Revenue Recognition

 

As of the beginning of 2018, GenResults adopted the new revenue recognition accounting guidance by applying the modified retrospective transition approach to all contracts. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The adoption of the guidance did not have a material impact on the amount or timing of revenue recognized.

We earn revenues by providing cybersecurity consulting and managed security services to our clients. Contracts for consulting services have various terms based on the scope, deliverables and complexities of the engagement, which require management to make judgements and estimates in recognizing revenue.

Revenue from the sale of services is recognized when services are rendered to clients and amounts are earned, and there is no condition or uncertainty implying a reversal thereof.

Recently Adopted Accounting Pronouncements

 

Between May 2014 and December 2016, the FASB issued several Accounting Standards Updates (“ASU”) on Revenue from Contracts with Customers (Topic 606). These updates superseded nearly all previous revenue recognition guidance under GAAP. The core principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. A five-step process has been defined to achieve this core principle, and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standards are effective for annual periods beginning after December 15, 2017 using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standards in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which includes additional footnote disclosures). The Company adopted these standards effective on January 1, 2018, and management concluded the adoption of this standard did not result in any financial statement impacts or changes to revenue recognition policies or processes as revenue is primarily derived from arrangements in which the transfer of control coincides with the fulfillment of performance obligations.

 

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

 

Results of Operations

 

Years Ended December 31, 2018 and 2017

 

Revenues and Costs of Revenues

 

We generated revenues of $641,606 and $601,963, respectively, and incurred costs of revenues of $114,668 and $145,921, respectively, for the years ended December 31, 2018 and 2017, respectively. As a result, we generated gross profit of $526,938 and $456,042, respectively, for the years ended December 31, 2018 and 2017.

 

Selling, General and Administrative Expenses

 

We incurred total SG&A expenses of $203,814 during 2018 and $99,425 during 2017. Advertising expenses were $23,322 and $2,235 for the years ended December 31, 2018 and 2017, respectively. Other SG&A expenses increased during the year ended December 31, 2018 primarily related to increases in Legal and other Professional Services and Facility expenses, partially offset by a decrease in commission expenses.

 

Net Income

 

We incurred net income of $323,124 and $356,617 for the years ended December 31, 2018 and 2017, respectively, because of the factors discussed above.  It is anticipated that future operating expenses will increase as the Company complies with its periodic reporting requirements. Such expenses would also increase if the Company were to effect a business combination, although there can be no assurance that the Company will be successful in effecting a business combination.

 

Three Months Ended March 31, 2019 and 2018

 

Revenues and Costs of Revenues

 

We generated revenues of $197,814 and $96,569, respectively, and incurred costs of revenues of $43,663 and $65,162, respectively, for the three months ended March 31, 2019 and 2018, respectively. As a result, we generated gross profit of $154,151 and $31,407, respectively, for the three months ended March 31, 2019 and 2018.

 

Selling, General and Administrative Expenses

 

We incurred total SG&A expenses of $51,994 during the three months ended March 31, 2019 and $46,675 during the three months ended March 31, 2018. Advertising expenses were $2,505 and $2,822 for the three months ended March 31, 2019 and 2018, respectively. Other SG&A expenses increased during the three months ended March 31, 2019 primarily related to increases in Legal and other Professional Services and Business Development expenses, partially offset by a decrease in commission expenses.

 

Net Income (Loss)

 

We incurred net income (loss) of $99,142 and $(15,268) for the three months ended March 31, 2019 and 2018, respectively, because of the factors discussed above.  It is anticipated that future operating expenses will increase as the Company complies with its periodic reporting requirements. Such expenses would also increase if the Company were to effect a business combination, although there can be no assurance that the Company will be successful in effecting a business combination.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

As of December 31, 2018 and March 31, 2019, we had total current assets of $256,006 and $287,308, respectively. We have financed our operations through March 31, 2019 primarily through capital contributions and cash from operations.

 

Cash Flows

 

The following table sets forth the primary sources and uses of cash for the periods set forth below.

 

		Year ended December 31, 2018				Year ended December 31, 2017				Quarter Ended March 31, 2019				Quarter Ended March 31, 2018
Cash provided by operating activities		$	243,772			$	280,067			$	287,364			$	20,072
Cash used for financing activities			(204,831	)			(244,895	)			(82,776	)			(45,200	)
Increase (decrease) in cash and cash equivalents		$	38,941			$	35,172			$	204, 588			$	(25,128	)

 

Operating activities. Our cash provided by operating activities resulted primarily from our net income (loss), as adjusted for changes in operating assets and liabilities. For the year ended December 31, 2018 and the three months ended March 31, 2019, changes in operating assets and liabilities consisted primarily of a decrease in accounts receivable and accrued expenses.

 

Financing activities. Cash used by financing activities consisted of net distributions to our equity holder.

 

Funding Requirements

 

We expect to continue to incur significant expenses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

We expect that we will require approximately $2,000,000 in additional capital to fund operations and future commercialization efforts during the next twelve (12) month period. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with our services, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with successfully commercializing such products. Our future capital requirements will depend on many factors, including:

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and strategic alliances. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies and future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, and should cash flows from our current profitable operations be insufficient to support our planned growth, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to commercialize products that we would otherwise prefer to develop and market ourselves.

 

Quantitative and Qualitative Disclosures About Market Risk

 

We have not utilized any derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. We do not have any borrowings and, consequently, we are not affected by changes in market interest rates. We do not currently have any sales or own assets and operate facilities in countries outside the United States and, consequently, we are not impacted by foreign currency fluctuations or exchange rate changes.  Overall, at this time, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Item 3.  Properties.

We currently do not own any real properties. We utilize office facilities for our principal executive offices at 7333 E. Doubletree, Suite D270, Scottsdale, Arizona 85258. We believe suitable replacement facilities would be available to us if our arrangements for our facilities were to terminate.

 

Item 4.  Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth the ownership of our common stock by our officers and directors, and other beneficial owners of 5% or more of our outstanding common stock, as of May 22, 2019. There are not any pending arrangements that may cause a change in control. The information presented below has been presented in accordance with the rules of the SEC and is not necessarily indicative of ownership for any other purpose.

  

A person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner.

 

Name and Address		Amount and Nature of  Beneficial Ownership				Percentage of Class
David G. Jemmett			70,000,000				68.6%
Stephen Scott			20,000,000				19.6%
Ret. General Robert Oaks			—				—
Scott Holbrook			—				—
Andrew McCain			—				—
William Santos			—				—
Jason Ford			—				—
All Executive Officers and Directors as a group (7 persons)			90,000,000				88.2%
Other 5% or greater holder: Alan L. Kierman			10,000,000				9.8%

 

The address for each person named in the table above is c/o the Company.

 

This table is based upon information derived from our stock records. We believe that each of the stockholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned.

 

Item 5.  Directors and Executive Officers.

Directors and Executive Officers

 

The following table sets forth the names of the directors and executive officers of the Company as of May 22, 2019:

Name		Age				Title
David G. Jemmett			52			CEO and Director
Stephen Scott			51			Director
Ret. General Robert Oaks			83			Director
R. Scott Holbrook			71			Director
Andrew McCain			57			Director
William Santos			53			President
Jason Ford			44			Chief Technology Officer

 

The following sets forth biographical information and the qualifications and skills of directors and executive officers:

 

David G. Jemmett – Chief Executive Officer & Director

 

Mr. Jemmett has been CEO and a director of the Company since its formation. He also founded GenResults in 2015, now a wholly owned subsidiary of the Company. Mr. Jemmett has served as an executive at several companies, including as founder, CEO and CTO of ClearDATA Networks, COO of NantCloud, and CEO of GoodNet. He has been a guest speaker on CBS, CNN, MSNBC and CSPAN, and has spoken before the US Senate Subcommittee on Telecommunications and Internet Security regarding internet technologies in 1998.

 

Stephen Scott – Director

 

Mr. Scott is a founder of the Company, and has been a Partner with Advisor ID (formerly BRI Partners), a financial services technology firm, since 2014. Prior to founding Advisor ID, Mr. Scott was at Van Eck Global, from 2009 to 2014, where he served as the Co-Head of the Alternatives Committee and as portfolio manager. Mr. Scott has founded and managed several investment partnerships focused on both private and public investment strategies since 1995.

 

Ret. General Robert C. Oaks – Director

 

Ret. General Oaks is a retired U.S. Air Force general who served as commander in chief of the U.S Air Forces in Europe, and commander, Allied Air Forces Central Europe, with headquarters at Ramstein Air Base, Germany. He retired as a four-star General and Commander and Chief of U.S. Air Forces Europe and NATO Central Europe in 1994 after serving 34 years. Following his retirement, Oaks was employed at U.S. Airways as Senior Vice President. In 2000, Oaks resigned from this position when he was called to serve the LDS Church, where he served until 2009, when he was released as a general authority. He earned a Bachelor of Science degree in Military Science from the US Air Force Academy and a Master’s degree in Business Administration from Ohio State University prior to graduating from the Naval War College. Ret. General Oaks currently serves as the official Liaison for the Church of Jesus Christ to the US Armed Forces.

 

R. Scott Holbrook – Director

 

Mr. Holbrook is a healthcare technology veteran, having served as the Executive Vice President of Medicity from 2002 to 2013. In 1998 Mr. Holbrook founded KLAS, and remains a Board Member thereof. He has served in executive positions at IHC, GTE, Sunquest Information Systems, Integrated Medical Networks, and is a founder of Park City Solutions. Since 2013 Mr. Holbrook has been a Principal at Mountain Summit Advisors, and a Strategic Advisor to Health Catalyst. Mr. Holbrook is a HIMSS Fellow. Mr. Holbrook holds a Master of Science from Utah State University, and a Bachelor of Science from Brigham Young University.

 

Andrew McCain – Director

 

Mr. McCain is the President and Chief Operating Officer for Hensley Beverage Company. Mr. McCain received his Bachelor of Arts in Mathematics, 1984, and an MBA, 1986, both from Vanderbilt University. He is a Board Member of the Arizona Super Bowl Host Committee; the Arizona 2016 College Football Championship Local Organizing Committee; Chairman of Hensley Employee Foundation; Patrons Committee member of United Methodist Outreach Ministries’ New Day Centers. He is past Chairman of the Board of the Fiesta Bowl; past Chairman, Anheuser-Busch National Wholesaler Advisory Panel; past Chairman of the Greater Phoenix Chamber of Commerce.

 

William Santos – President

Mr. Santos has spent over 30 years in technology sales, service delivery, and executive leadership.  After a 10-year career with IBM Mr. Santos successfully launched and sold Atlantec Group, his first professional services firm.   He started the professional services business unit at Software House International, growing it to over $30 million in revenue over a 5-year period.  After SHI, Mr. Santos joined HOSTING in 2010 to build the professional services organization before shifting roles and leading the acquisition of several professional service organizations including Ntirety (a database services firm) and Stelligent (an AWS DevOps organization) from 2013-2018.  Most recently, Mr. Santos led the sale of Stelligent to Mphasis at 2.5x the price purchased less than 24 months prior, where he has been President/CEO of Mphasis Stelligent from 2018 - present.  Mr. Santos has degrees in computer science and engineering from the Massachusetts Institute of Technology.  

 

Jason Ford – Chief Technology Officer

 

Mr. Ford has over 25 years of experience in advanced technology, infrastructure development and security. Mr. Ford worked in the public sector including for the Chief Scientist of the Federal Bureau of Investigations developing innovative network and system technologies, and then with the Department of the Treasury, creating an online platform for purchasing savings bonds. After leaving the public sector, Mr. Ford co-founded BlackMesh in Ashburn, VA in 2003, and served as Chief Technology Officer. In 2017 BlackMesh was acquired by Contegix, where he continued to serve as Chief Technology Officer and Chief Information Security Officer until March 2019.

Involvement in Legal Proceedings

 

No officer or director has been involved in the last ten years in any of the following:

 

·

Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

·

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

·

Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

·

Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Committees of the Board

 

The Board has not established any standing committees.

 

Board Leadership Structure and Risk Oversight

The Board, in conjunction with the Company’s officers, is responsible for considering, identifying and managing material risks to the Company. The Board plays a critical role in evaluating and managing internal controls, financial risk exposure and monitoring the activities of the Company’s independent registered public accounting firm. The entire Board also receives updates at each Board meeting regarding any material risks from the Company’s management.

 

Item 6.  Executive Compensation

 

The Company was formed in 2019. Therefore, the Company did not pay any compensation to any director or executive officer for any prior period. Our wholly owned subsidiary, GenResults, also did not pay any compensation to any executive officer for the years ended December 31, 2018 and 2017.

Material Terms of Employment

 

We have no employment agreements with any of our executive officers. Through March 31, 2019, our executive officers have not been paid for their services.

 

Item 7.  Certain Relationships and Related Transactions, and Director Independence.

Review, Approval or Ratification of Transactions with Related Persons

Our Board reviews and approves certain transactions between us and our executive officers and directors and greater than 5% beneficial owners of our common stock, and each of their immediate family members. Transactions subject to the review and approval of the Board include transactions between us and the related person in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which such person has or will have a direct or indirect material interest. To identify any related party transactions, each year, we submit and require our directors and officers to complete director and officer questionnaires identifying any transactions with us in which the executive officer or director or their family members has an interest.  In addition, the Board determines, on an annual basis, which members of the Board meet the definition of independent director as defined in the rules of The Nasdaq Stock Market and reviews and discusses any relationships with a director that would potentially interfere with his or her exercise of independent judgment in carrying out the responsibilities of a director. In approving or rejecting any such transaction, the Board considers the relevant facts and circumstances available to it, including but not limited to the risks, costs, benefits to our company, the terms of the transaction, the availability of other sources for comparable services or products and, if applicable, the impact on a director’s independence. Our Board approves only those transactions that it determines in good faith, are in, or are not inconsistent with, our best interests.

On December 31, 2018, GenResults issued an unsecured note payable to Jemmett Enterprises, an entity controlled by David G. Jemmett, our CEO. The promissory note had an original principal amount of $200,000, bears interest at 6% per annum and is due on June 30, 2020.

 

We do not have a policy or procedures in place for the review, approval or ratification of any related-party transaction, other than approval by the unrelated members of the Board of Directors or stockholders, or written consent in lieu of the meeting of the Board of Directors or stockholders, as the case may be, for the given transaction. The related party transaction described above was approved by the Board of Directors.

 

Director Independence

 

The Board has determined which members of the Board meet the definition of independent director as defined in the rules of The Nasdaq Stock Market and has reviewed any relationships with each director that would potentially interfere with his exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined that each of Messrs. Scott, Holbrook and McCain, and Ret. General Oaks, constituting a majority of the Board, are independent under the rules of the Nasdaq Stock Market, including for purposes of service on an audit committee.

Item 8.  Legal Proceedings.

We may become involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material negative impact on our results of operations, balance sheets and cash flows due to defense costs, and divert management resources. Currently, we are not involved in any arbitration and/or other legal proceeding that could have a material effect on our business, financial condition, results of operations and cash flows.

 

Item 9.  Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

Market Information

 

There is no established public trading market in our common stock. Our securities are not listed for trading on any securities exchange nor are bid or asked quotations reported in any over-the-counter quotation service. Upon effectiveness of this registration statement, we intend to file application to make our shares of common stock eligible for quotation on the OTC Market. No assurance can be given that an active market will exist for our common stock.

 

Equity Compensation Plans

 

We expect that in the future we will file a registration statement on Form S-8 under the Securities Act registering the common stock subject to issuance pursuant to an equity compensation plan. That registration statement will become effective immediately upon filing, and shares covered by that registration statement will thereupon be eligible for sale in the public markets, subject to grant of the underlying awards, vesting provisions and Rule 144 limitations applicable to our affiliates.

 

Holders

 

As of May 22, 2019, there were 102,000,000 shares of common stock outstanding, which were held by approximately 675 record holders.

 

Dividends

 

We have never paid cash dividends on any of our capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. We do not intend to pay cash dividends to holders of our common stock in the foreseeable future.

 

Stock Not Registered under the Securities Act; Rule 144 Eligibility

 

Our common stock has not been registered under the Securities Act. However, the 2,000,000 Plan Shares issued in connection with the VCAB merger were exempt from the registration requirements of the Securities Act, pursuant to Section 1145 of the US Bankruptcy Code and may be resold without registration pursuant to Section 4(1) of the Securities Act, provided that the reseller is not an underwriter within the meaning of Section 1145(b) of the US Bankruptcy Code. Our remaining issued and outstanding shares of common stock are restricted securities and may not be resold absent registration under the Securities Act and applicable state securities laws or an available exemption thereunder.

 

Rule 144

Shares of our common stock that are restricted securities will be eligible for resale in compliance with Rule 144 or Rule 701 of the Securities Act, subject to the requirements described below. “Restricted securities,” as defined under Rule 144, were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. These shares may be sold in the public market only if registered or if they qualify for an exemption from registration, such as Rule 144 or Rule 701. Below is a summary of the requirements for sales of our common stock pursuant to Rule 144, after the effectiveness of this Registration Statement.

 

Beginning 90 days after the effectiveness of this Registration Statement, a person who is our affiliate or who was our affiliate at any time during the preceding three months and who has beneficially owned restricted securities for at least six months, will generally be entitled to sell within any three month period a number of shares that does not exceed one percent of the number of shares of our common stock then outstanding. Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

 

Persons who may be deemed to be our affiliates generally include individuals or entities that control, or are controlled by, or are under common control with, us and may include our directors and officers, as well as our significant stockholders.

 

For a person who has not been deemed to have been one of our affiliates at any time during the 90 days preceding a sale, sales of our shares of common stock held longer than six months, but less than one year, will be subject only to the current public information requirement and can be sold under Rule 144 beginning 90 days after the effectiveness of this Registration Statement without restriction. A person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least one year, is entitled to sell his or her shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

 

We expect approximately _______________ shares of our common stock will be eligible for sale under Rule 144 90 days following the effective date of this Registration Statement, subject to applicable volume limitations. On _______________, approximately _______________ additional shares will become eligible for sale under Rule 144, subject to applicable volume limitations.

 

Rule 701

 

Rule 701 under the Securities Act permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement and the volume and public information requirements. Any of our employees, consultants or advisors, other than our affiliates, who acquired shares from us under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the effective date of this Registration Statement before selling their shares under Rule 701. As of May 20, 2019, no shares have been issued pursuant to Rule 701.

Item 10.  Recent Sales of Unregistered Securities.

Since its formation, the Company issued a total of 102,000,000 shares of common stock, all of which were issued in connection with VCAB merger, in connection with the formation of the Company, or in connection with the acquisition of GenResults. The Company relied on Section 4(a)(2) of the Securities Act. We believe that Section 4(a)(2) was available because none of such issuances involved underwriters, underwriting discounts or commissions; restrictive legends were placed on the certificates representing the shares purchases; and none of such sales were made by general solicitation.

 

On April 15, 2019, VCAB merged with and into the Company, and the separate existence of VCAB ceased. Pursuant to the merger, the Company issued an aggregate of 2,000,000 Plan Shares to VCAB’s holders of Class 5 Claims and HFG Capital Investments, LLC (“HFG”). The issuance of the Plan Shares was in reliance on the exemption provided by Section 1145 of the United States Bankruptcy Code.

 

The Company believes that HFG is not a promoter of the Company, as that term is defined in Rule 405 under the Securities Act, because HFG did not (i) directly or indirectly take initiative in founding or organizing the Company or (ii) receive 10% or more of any class of securities of the Company or 10% or more of the proceeds from the sale of any class of securities.

 

Item 11.  Description of Registrant’s Securities to be Registered.

The following is a summary of the current material terms of our capital stock. Because it is only a summary, it does not contain all information that may be important to you. Therefore, you should read carefully the more detailed provisions of our certificate of formation and bylaws. For information on how to obtain copies of our certificate of formation and bylaws, see “Reports”, below.

 

General

 

As of the date of this Registration Statement, our authorized capital stock consists of 250,000,000 shares of common stock, par value $0.00001 per share. No other classes of stock are authorized or expected to be authorized under our certificate of formation. The issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable.

 

Common Stock

 

Each holder of shares of our common stock is entitled to one vote for each share of common stock held of record by such holder. Holders of our common stock, voting as a single class, are entitled to elect all of the directors of the Company. Matters submitted for stockholder approval generally require a majority vote. Holders of our common stock are entitled to receive ratably such dividends as may be declared by our board out of funds legally available therefor. Upon our liquidation, dissolution or winding up, holders of our common stock would be entitled to share ratably in our net assets. Holders of our common stock have no preemptive, redemption, conversion or other subscription rights.

 

The registrar and transfer agent for our common stock is Securities Transfer Corporation, 2901 Dallas Parkway, Suite 380, Plano, Texas 75034-8543, (469) 633-0101.

 

Exclusive Forum Provision

 

Our bylaws provide that unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Arizona sitting in Phoenix, Arizona, or, if such court lacks jurisdiction, the state district court of Maricopa County, Arizona, shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders; (c) any action asserting a claim against us or any of our directors, officers, or other employees pursuant to any provision of our certificate of formation or bylaws or the Delaware General Corporation Law; and (d) any action asserting a claim against us or any of our directors, officers or other employees relating to our internal affairs. Any person or entity purchasing or otherwise acquiring or holding any interest in our stock shall be deemed to have notice of and to have consented to jurisdiction and venue in the United States District Court for the District of Arizona sitting in Phoenix, Arizona, and the state district court of Maricopa County, Arizona. If any action within the scope of this provision is filed in violation of such provision (a “violating action”), the violating party shall be deemed to have consented to (a) the personal jurisdiction of such Arizona state and federal courts in connection with any action brought in any such court to enforce such provision and (b) having service of process made upon the violating party in any such action by service upon the violating party’s counsel in the violating action as agent for such shareholder. This provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us and our directors, officers or other employees, and may discourage lawsuits with respect to such claims. The foregoing summary is subject to the full text of our bylaws.

 

Reports

 

We will be required to file reports with the SEC under section 15(d) of the Securities Act and the reports will be filed electronically.  The reports we will be required to file are Forms 10-K, 10-Q, and 8-K.  You may read copies of any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet site that will contain copies of the reports we file electronically.  The address for the Internet site is www.sec.gov.

 

Item 12.  Indemnification of Directors and Officers.

The Company’s certificate of incorporation provides that, to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”), no director of the Company will be personally liable to the Company or any of its stockholders for monetary damages arising from the director’s breach of fiduciary duty as a director.

 

Pursuant to the DGCL, every Delaware corporation has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving in such a capacity at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise, against any and all expenses, judgments, fines and amounts paid in settlement and reasonably incurred in connection with such action, suit or proceeding.  The power to indemnify applies only if such person acted in good faith and in a manner such person reasonably believed to be in the best interests, or not opposed to the best interests, of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

The power to indemnify applies to actions brought by or in the right of the corporation as well, but only to the extent of defense and settlement expenses and not to any satisfaction of a judgment or settlement of the claim itself, and with the further limitation that in such actions no indemnification shall be made in the event of any adjudication of negligence or misconduct unless the court, in its discretion, believes that in light of all the circumstances indemnification should apply.

 

The Registrant’s Certificate of Incorporation contains provisions authorizing it to indemnify its officers and directors to the fullest extent permitted by the DGCL.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Item 13.  Financial Statements and Supplementary Data.

Our financial statements included in this Registration Statement begin on page F-1 hereof.

 

Item 14.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure.

 

Item 15.  Financial Statements and Exhibits.

Financial Statements

 

The financial statements and related notes listed on page F-1 are included as part of this Registration Statement. 

Exhibits

 

Exhibit	Exhibit Description
2.5	Certificate of Compliance with Merger, Combination or Acquisition Requirements, filed April 15, 2019
3.1	Certificate of Formation of Cerberus Cyber Sentinel Corporation filed March 5, 2019
3.2	Amendment to Certificate of Formation of Cerberus Cyber Sentinel Corporation filed April 12, 2019
3.3	By-laws of Cerberus Cyber Sentinel Corporation
10.1	Agreement for the Purchase and Sale of Limited Liability Company Interests of GenResults, LLC, made as of April 12, 2019, between David G. Jemmett and Jemmett Enterprises, LLC, and Cerberus Cyber Sentinel Corporation
23.1	Consent of Independent Registered Public Accounting Firm

 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 24, 2019			Cerberus Cyber Sentinel Corporation
		By:	/s/ David G. Jemmett
			David G. Jemmett
			Chief Executive Officer

 

FINANCIAL STATEMENTS AND EXHIBITS

 

 

Financial Statements – December 31, 2018 and 2017

 

Report of Independent Registered Public Accounting Firm	F-3
Balance Sheets as of December 31, 2018 and 2017	F-4
Statements of Operations for years ended December 31, 2018 and 2017	F-5
Statements of Changes in Member’s Equity for years ended December 31, 2018 and 2017	F-6
Statement of Cash Flows for years ended December 31, 2018 and 2017	F-7
Notes to Financial Statements	F-8

 

Condensed Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	F-14
Condensed Statements of Operations for the three months ended March 31, 2019 and 2018 (unaudited)	F-15
Condensed Statements of Changes in Member’s Equity for three months ended March 31, 2019 and 2018 (unaudited)	F-16
Condensed Statements of Cash Flows for the three months ended March 31, 2019 and 2018 (unaudited)	F-17
Notes to Condensed Financial Statements (unaudited)	F-18

 

Exhibit 2.5

Exhibit 3.1

 

 

State of Deleware

Secretary of State

Office of Corporations

Delivered 01:12 PM 03/05/2019

Filed 01:12 PM 03/05/2019

SR 20191759396 - File Number 7179154

 

CERTIFICATE OF INCORPORATION

OF

CERBERUS CYBER SENTINEL CORPORATION

ARTICLE I

The name of the corporation is Cerberus Cyber Sentine1 Corporation (the "Corporation").

ARTICLE II

The address of the Corporation's registered office in the state of Delaware is c/o Agents and Corporations, Inc., 1201 Orange Street, Suite 600, Wilmington, New Castle County, Delaware I 9801. The name of its registered agent at such address is Agents and Corporations, Inc., 1201 Orange Street, Suite 600, Wilmington, New Castle County, Delaware 19801.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.

ARTICLE IV

The aggregate number of shares which the Corporation shall have authority to issue is Two Hundred Million (200,000,000) shares of capital stock all of which shall be designated "Common Stock" and have a par value of $0.00001 per share.

ARTICLE V

The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Elections of directors need not be by written ballot unless otherwise provided in the Bylaws of the Corporation. In furtherance of and not in limitation of the powers conferred by the laws of the state of Delaware, the Board of Directors of the Corporation is expressly authorized to make, amend or repeal By]aws of the Corporation.

Distributions by the Corporation may be made without regard to "preferential dividends arrears amount" or any "preferential rights," as such terms may be used in Section 500 of the California Corporations Code (to the extent applicable).

ARTICLE VI

To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personal1y liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

1

 

The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation.

Neither any amendment nor repeal of this Article VI, nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this Article VI, shall eliminate or reduce the effect of this Article VI in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VI, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE VII

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any derivative action or proceeding asserting a claim on behalf of the Corporation, (B) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or agent of the Corporation to the Corporation or the Corporation's stockholders, (C) any action or proceeding asserting a claim against the Corporation arising pursuant to any provision of the Delaware General Corporation Law or the Corporation's Certificate of Incorporation or Bylaws, (D) any action or proceeding asserting a claim as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery of the State of Delaware, or (E) any action or proceeding asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

ARTICLE VIII

The name and mailing address of the incorporator are as follows:

David G. Jemmett

2700 North Central, Suite 900

Phoenix, Arizona 85004

 

Executed on March 4, 2019.

 

	/s/ David G. Jemmett
	David G. Jemmett
	Incorporator

 

 

 

 

 

 

 

 

 

 

 

2

12/4/2018

Division of Corporations - Filing

 

 

 

Reservation Number		Entity Name		Entity Type		Cost ($)		Status		Expiration Date
7179154		Cerberus Cyber Sentinel CORPORATION		Corporation		$75.00		Reserved		4/4/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

https://lcls.corp.delaware.gov/ecorp/NameReserv/NameReservSfatusPF.aspx

1/1

Exhibit 3.2 

 

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

CERBERUS CYBER SENTINEL CORPORATION

 

 

 

The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

 

FIRST: The name of the corporation is Cerberus Cyber Sentinel Corporation (the "Corporation").

 

SECOND: That the certificate of incorporation of the Corporation was originally filed with the Delaware Secretary of State on March 5, 2019 (the "Certificate of Incorporation").

 

THIRD: The Board of Directors of the Corporation, by unanimous written consent pursuant to the General Corporation Law of the State of Delaware, duly adopted the following amendments to the Certificate of Incorporation:

 

RESOLVED, that Article III of the Certificate of Incorporation is hereby deleted in its entirety and replaced with the following:

 

"ARTICLE III

 

The aggregate number of shares which the Corporation shall have authority to issue is Two Hundred Fifty Million (250,000,000) shares of capital stock all of which shall be designated "Common Stock" and have a par value of $0.00001 per share."

 

FOURTH: that, by written consent executed in accordance with the General Corporation Law of the State of Delaware, the holders of a majority of the outstanding stock of the Corporation entitled to vote thereon, was given written notice of the proposed amendment to the Certificate of Incorporation and voted in favor of the adoption of the amendment to the Certificate of Incorporation. The necessary numbers of shares, as required by statute, were voted in favor of the amendment.

 

FIFTH: That said amendment was duly adopted in accordance with the provisions of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this April 12, 2019.

 

	/s/ David G. Jemmett
	David G. Jemmett
	Authorized Officer

 

Exhibit 3.3

 

BY-LAWS OF

CERBERUS CYBER SENTINEL CORPORATION

 

A Delaware Corporation

 

ARTICLE I OFFICES

 

Section 1.1      PRINCIPAL OFFICE. The principal office of the corporation in the State of Arizona shall be located at 2700 N Central Ave # 900, Phoenix, Arizona 85004 or in such other location as the Board of Directors from time to time determine or the business of the corporation may require. The corporation may have such other offices, either within or without the State of Arizona, as Board of Directors of the corporation (the “Board of Directors”) may designate or as the business of the corporation may require from time to time.

 

Section 1.2      REGISTERED OFFICE. The registered office of the corporation in the State of Delaware shall be 1201 Orange Street, Suite 600, City of Wilmington, County of New Castle County, New Castle County or in such other location as the Board of Directors from time to time determine or the business of the corporation may require.

 

ARTICLE II SHAREHOLDERS

 

Section 2.1      ANNUAL MEETING. The annual meeting of the shareholders shall be held on such day as shall be fixed by the Board of Directors, commencing with the year following the date of Incorporation at a time to be fixed by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Delaware, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient.

 

Section 2.2      SPECIAL MEETINGS. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chief Executive Officer or by the Board of Directors, and shall be called by the Chief Executive Officer at the request of the holders of not less than one-tenth of all outstanding shares of the corporation entitled to vote at the meeting.

 

Section 2.3      PLACE OF MEETINGS. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors or the Chief Executive Officer. If no designation is made, or if a special meeting is otherwise called, the place of meeting shall be the principal office of the corporation in the State of Delaware. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (the “DGCL”).

 

Section 2.4      NOTICE OF MEETING. Written notice stating the place, day and hour of the meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the Chief Executive Officer, the Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting; provided, however, that if the authorized shares of the corporation are to be increased, at least thirty days' notice shall be given, and if sale of all or substantially all assets are to be voted upon, at

least twenty days' notice shall be given to each shareholder of record. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.

 

Section 2.5      CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose

of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.

 

Section 2.6      VOTING RECORD. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of shareholders, a complete record of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of, and the number of shares held by, each. The record, for a period of ten days before such meeting, shall be kept on file at the principal office of the corporation, whether within or without the State of Delaware, and shall be subject to inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours. Such record shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for any purpose germane to the meeting. The original stock transfer books shall be the prima facie evidence as to who are the shareholders entitled to examine such record or transfer books or to vote at any meeting of shareholders.

 

Section 2.7      QUORUM. One-third of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at, any meeting of shareholders. If a quorum is not represented at any meeting of the shareholders, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed sixty days without further notice. At such adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

 

Section 2.8      MANNER OF ACTING. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater proportion or number of voting by classes is otherwise required by the DGCL or the Certificate of Incorporation.

 

Section 2.9      PROXIES. At all meetings of shareholders, a shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

 

Section 2.10     VOTING OF SHARES. Unless otherwise provided in the Certificate of Incorporation, each outstanding share, regardless of class, is entitled to one vote on each matter submitted to a vote at a

meeting of shareholders, and each fractional share is entitled to a corresponding fractional vote on each such matter.

 

Section 2.11     VOTING OF SHARES BY CERTAIN SHAREHOLDERS. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such other corporation may determine.

 

Shares held by an administrator, executor, guardian or conservator, may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.

 

Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed.

 

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

 

Neither treasury shares nor shares held by another corporation if the majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation shall be voted, directly or indirectly, at any meeting or counted in determining the total number of outstanding shares at any given time.

 

Redeemable shares which have been called for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders of the shares upon surrender of certificates therefor.

 

Section 2.12     VOTING BY BALLOT. Voting on any question or in any election may be by voice vote unless the presiding officer shall order, or any shareholder shall demand, that voting be by ballot.

 

Section 2.13     VOTING FOR DIRECTORS. At each election for directors every shareholder entitled to vote at such election has the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has the right to vote.

 

Section 2.14     NO CUMULATIVE VOTING. No shareholder shall be permitted to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares equals, or by distributing such votes on the same principal among any number of candidates.

 

ARTICLE III BOARD OF DIRECTORS

 

Section 3.1      GENERAL POWERS. The business and affairs of the corporation shall be managed by its Board of Directors.

 

Section 3.2      PERFORMANCE OF DUTIES. A director of the corporation shall perform his duties as a director, including his duties as member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interest of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. In performing his duties, a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by persons and

groups listed in paragraphs (a), (b), and (c) of this Section 3.2; but he shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A person who so performs his duties shall not have any liability by reason of being or having been a director of the corporation. Those persons and groups on whose information, opinions, reports, and statements a director is entitled to rely are:

 

(a)                One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

 

(b)                Counsel, public accountants, or other persons as to matters which the director reasonably believes to be within such persons' professional or expert competence; or

 

(c)                A committee of the Board of Directors upon which he does not serve, duly designated in accordance with the provision of the Certificate of Incorporation or the by-laws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

 

Section 3.3      NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be fixed from time to time by resolution of the Board of Directors. There may not be fewer than three directors, unless the outstanding shares of the corporation are held of record by fewer than three shareholders, in which event there need be only as many directors as there are shareholders. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified. Directors shall be natural persons of the age of eighteen years or older, but need not be residents of the State of Delaware or shareholders of the corporation, except as provided below in this section.

 

There may be a Chairman of the Board, who has been elected from among the directors. If elected, he shall preside at all meetings of the shareholders and of the Board of Directors. He shall have such other powers and duties as may be prescribed by the Board of Directors.

 

Section 3.4      REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this by-law immediately after, and at the same place as the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Delaware, for the holding of additional regular meetings without other notice than such resolution.

 

Section 3.5      SPECIAL MEETING. Special meetings of the Board of Directors may be called by or at the request of the Chief Executive Officer or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Delaware, as the place for holding any special meeting of the Board of Directors called by them.

 

Section 3.6      NOTICE. Written notice of any special meeting of directors shall be given by mail to each director at his business address at least three days prior to the meeting, or by personal delivery or telegram at least twenty-four hours prior to the meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday or holiday, to the residence address of each director. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid. If notice is given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at any meeting constitutes a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

Section 3.7      QUORUM. A majority of the number of directors determined pursuant to Section 3.3 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

 

Section 3.8      MANNER OF ACTING. Except as otherwise required by the DGCL or by the Certificate of Incorporation, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

 

Section 3.9      PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent is entered in the minutes of the meeting or unless he files his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or forwards such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

 

Section 3.10    INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of the directors.

 

Section 3.11    PARTICIPATION BY ELECTRONIC MEANS. Members of the Board of Directors may participate in a meeting of the Board of Directors by means of telephone conference or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting.

 

Section 3.12    VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of a majority of the directors then in office or by an election at an annual meeting or at a special meeting called for that purpose. A director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified.

 

Section 3.13     RESIGNATION. Any director of the corporation may resign at any time by giving written notice to the Chief Executive Officer or the Secretary of the corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

 

Section 3.14     REMOVAL. Any director or directors of the corporation may be removed at any time, with or without cause, by a vote of the holders of the majority of the shares then entitled to vote at an election of directors.

 

Section 3.15     COMPENSATION. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including (but not limited to), if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

 

Section 4.1      APPOINTMENT. The Board of Directors by resolution adopted by a majority of the full Board of Directors, may designate from among its members an Executive Committee and one or more other committees. Neither the designation of any such committee, the delegation of authority to such committee, nor any action by such committee pursuant to its authority shall alone constitute compliance by any member of the Board of Directors, not a member of the committee in question, with his responsibility to act in good faith, in a manner he reasonably believes to be in the best interest of the corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances.

 

Section 4.2      AUTHORITY. The Executive Committee and/or any other committee shall have such authority in the management of the corporation as the Board of Directors designates, except that no such committee shall have the authority to:

 

(i)

declare dividends or distributions;

 

(ii)

approve or recommend to shareholders actions or proposals required by the DGCL to be approved by shareholders;

 

(iii)

fill vacancies on the Board of Directors or any committee thereof;

 

(iv)

amend the by-laws;

 

(v)

approve a plan of merger not requiring shareholder approval;

 

(vi)

reduce earned or capital surplus;

 

(vii)

authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or

 

(viii)

authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares and except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares or any contract therefor and in the case of a series, the designation thereof, may, pursuant to a general formula or method specified by the Board of Directors by resolution or by adoption of a stock option or other plan authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation the price, the dividend rate, provisions for redemption, sinking fund, conversion, or voting or preferential rights, and provisions for other features of a class of shares or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all terms thereof and to authorize the statement of the terms of a series for filing with the Secretary of State under the DGCL.

 

Section 4.3     TENURE AND QUALIFICATIONS. Each member of the Executive Committee and/or any other committees shall hold office until the next regular annual meeting of the Board of Directors following his designation and until his successor is designated as a member of the Executive Committee or such other committee and is elected and qualified.

 

Section 4.4     MEETINGS. Regular meetings of the Executive Committee or any other committee may be held without notice at such time and place as the Executive Committee or any other committee may fix from time to time by resolution. Special meetings of the Executive Committee or any other committee may be called by any member thereof upon not less than one day's notice stating the place, date and hour of the meeting, which notice may be written or oral; provided, however, that if mailed, notice must be given at least three days before the meeting and it shall be deemed to be delivered when deposited in the United States mail addressed to the member of the Executive Committee or other committee at his business address.

If notice is given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any member of the Executive Committee or other committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. Attendance of a director at a meeting constitutes a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. The notice of a meeting of the Executive Committee or other committee need not state the business proposed to be transacted at the meeting.

 

Section 4.5     QUORUM. A majority of the members of the Executive Committee or other committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the Executive Committee or other committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

 

Section 4.6      INFORMAL ACTION BY COMMITTEE. Any action required or permitted to be taken by the Executive Committee or other committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof Such consent shall have the same force and effect as a unanimous vote of the committee members.

 

Section 4.7      PARTICIPATION BY ELECTRONIC MEANS. Members of any committee designated by the Board of Directors may participate in a meeting of such committee by means of telephone conference or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting.

 

Section 4.8      VACANCIES. Any vacancy in the Executive Committee or other committee may be filled by a resolution adopted by a majority of the full Board of Directors.

 

Section 4.9     RESIGNATIONS AND REMOVAL. Any member of the Executive Committee or other committee may be removed at any time with or without cause by resolution adopted by a majority of the full Board of Directors. Any member of the Executive Committee or other committee may resign from such committee at any time by giving written notice to the Chief Executive Officer or Secretary of the corporation, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

Section 4.10    PROCEDURE. The Executive Committee or other committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these by-laws.

 

ARTICLE V OFFICERS

 

Section 5.1      NUMBER. The officers of the corporation shall be a Chief Executive Officer, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person, except the offices of Chief Executive Officer and Secretary. The officers of the corporation shall be natural persons of the age of eighteen years or older.

 

Section 5.2      ELECTION AND TERM OF OFFICE. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors, commencing at the first meeting of the Board of Directors, after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and qualified or until his death or until he resigns or has been removed in the manner hereinafter provided.

Section 5.3     REMOVAL. Any officer or agent may be removed by the Board of Directors, or by the Executive Committee, if any, whenever in its judgment the best interest of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

 

Section 5.4     VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

 

Section 5.5     CHIEF EXECUTIVE OFFICER. The Chief Executive Officer is the chief executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. He/she shall, when present, and in the absence of a Chairman of the Board, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the corporation authorized by the Board of Directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to the executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time.

 

Section 5.6     THE VICE PRESIDENTS. If elected or appointed by the Board of Directors, the Vice President (or in the event there is more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) to the extent authorized by the Board of Directors, shall, in the absence of the Chief Executive Officer or in the event of his death, inability or refusal to act, perform all duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. Any Vice President may sign, with the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him by the Chief Executive Officer or by the Board of Directors.

 

Section 5.7    THE SECRETARY. The Secretary shall: (a) keep the minutes of the proceedings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the Chairman or Vice Chairman of the Board of Directors, or the Chief Executive Officer, or Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Chief Executive Officer or by the Board of Directors.

 

Section 5.8      THE TREASURER. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article VIII of these by-laws; (c) sign with the Chairman or Vice Chairman of the Board of Directors, Chief Executive Officer or Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and (d) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chief Executive Officer or by the Board of Directors.

 

Section 5.9      ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant

Secretaries or Assistant Treasurers, when authorized by the Board of Directors, may sign with the Chief

Executive Officer or a Vice President certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the Chief Executive Officer or the Board of Directors.

 

Section 5.10    BONDS. If the Board of Directors by resolution shall so require, any officer or agent of the corporation shall give bond to the corporation in such amount and with such surety as the Board of Directors may deem sufficient, conditioned upon the faithful performance of their respective duties and offices.

 

Section 5.11    SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation.

 

ARTICLE VI

CONTRACTS WITH INTERESTED DIRECTORS

 

No contract or other transaction between the corporation and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are director or officer or are financially interested shall be either void or voidable solely because of such relationship or interest or solely because such directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction or solely because their votes are counted for such purpose if:

 

(a)

The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves, or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or

 

(b)

The fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve, or ratify such contract or transaction by vote or written consent; or

 

(c)

The contract or transaction is fair and reasonable to the corporation.

 

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction.

 

ARTICLE VII INDEMNIFICATION

 

The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee, fiduciary or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorney fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in the best interest of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in the best interest of the corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorney fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in the best interest of the corporation; but no indemnification shall be made in respect of any claim, issue, or matter as to which such person has been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought determines upon application that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which such court deems proper.

 

To the extent that a director, officer, employee, fiduciary or agent of the corporation has been successful on the merits in defense of any action, suit, or proceeding referred to in the first two paragraphs of this Article VII or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including attorney fees) actually and reasonably incurred by him in connection therewith.

 

Any indemnification under the first two paragraphs of this Article VII (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, fiduciary or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in said first two paragraphs. Such determination shall be made by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or, if such quorum is not obtainable or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion or by the shareholders.

 

Expenses (including attorney fees) incurred in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding as authorized in this Article VII upon receipt of an undertaking by or on behalf of the director, officer, employee, fiduciary or agent to repay such amount unless it is ultimately determined that he is entitled to be indemnified by the corporation as authorized in this Article VII.

 

The indemnification provided by this Article VII shall not be deemed exclusive of any other rights to which those indemnified may be entitled under the Certificate of Incorporation, any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, and any procedure provided for by any of the foregoing, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, fiduciary or agent and shall inure to the benefit of heirs, executors, and administrators of such a person.

 

A corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the corporation or who is or was serving at the request of the corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VII,

 

ARTICLE VIII

CONTRACTS, LOANS, CHECKS AND DEPOSITS

 

Section 8.1      CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

Section 8.2     LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.

 

Section 8.3      CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents, of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.

 

Section 8.4      DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select.

 

ARTICLE IX

SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES

 

Section 9.1     REGULATION. The Board of Directors may make such rules and regulations as it may deem appropriate concerning the issuance, transfer and registration of certificates for shares of the corporation, including the appointment of transfer agents and registrars.

 

Section 9.2   CERTIFICATES FOR SHARES. The shares of the corporation shall be represented by certificates, or shall be uncertificated. Certificates representing shares of the corporation, if any, shall be numbered serially for each class of shares, or series thereof, as they are issued, and shall be signed by the Chairman or Vice Chairman of the Board of Directors or by the Chief Executive Officer, or the Chief Executive Officer, and by the Treasurer or by the Secretary. Any or all of the signatures upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar other than the corporation itself or an employee of the corporation. The corporate seal shall not be required on any certificate.

 

Each certificate representing shares shall state upon the face thereof: the name of the corporation; that the corporation is organized under the laws of the State of Delaware; the name of the person to whom issued; the date of issue; the number and class of shares and the designation of series, if any, which such certificate represents; and the par value of each share represented by such certificate, or a statement that the shares are without par value.

 

Each certificate representing shares issued by the corporation shall set forth upon the face or back of the certificate or shall state that the corporation will furnish to any shareholder upon request and without charge a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and the variations in the relative rights and preferences between the shares of each series of preferred or special class of shares, so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series.

 

Each certificate shall be otherwise in such form as may be prescribed by the Board of Directors and as shall conform to the rules of any stock exchange on which the shares may be listed.

 

No certificate shall be issued for any shares until such share is fully paid.

 

Section 9.3     CANCELLATION OF CERTIFICATES. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificates shall be issued in lieu thereof until the former certificate for a like number of shares shall have been surrendered and cancelled, except as herein provided with respect to lost, stolen or destroyed certificates.

 

Section 9.4     LOST, STOLEN OR DESTROYED CERTIFICATES. Any shareholder claiming that his certificate for shares is lost, stolen or destroyed may make an affidavit or affirmation of that fact and lodge

the same with the Secretary of the corporation, accompanied by a signed application for a new certificate. Thereupon, and upon the giving of a satisfactory bond of indemnity to the corporation not exceeding an amount double the value of the shares as represented by such certificate (the necessity for such bond and the amount required to be determined by the Chief Executive Officer and Treasurer of the corporation), a new certificate may be issued of the same tenor and representing the same number, class and series of shares as were represented by the certificate alleged to be lost, stolen or destroyed.

 

Section 9.5      TRANSFER OF SHARES. Subject to the terms of any shareholder agreement relating to the transfer of shares or other transfer restrictions contained in the Certificate of Incorporation or authorized therein, shares of the corporation shall be transferable on the books of the corporation by the holder thereof in person or by his duly authorized attorney, upon the surrender and cancellation of a certificate or certificates for a like number of shares. Upon presentation and surrender of a certificate for shares properly endorsed and payment of all taxes therefor, the transferee shall be entitled to a new certificate or certificates in lieu thereof. As against the corporation, a transfer of shares can be made only on the books of the corporation and in the manner herein above provided, and the corporation shall be entitled to treat the holder of record of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Delaware.

 

ARTICLE X FISCAL YEAR

 

The fiscal year of the corporation shall be determined from time to time by resolutions of the Board of Directors.

 

ARTICLE XI DIVIDENDS

 

The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation.

 

ARTICLE XII CORPORATE SEAL

 

The Board of Directors may, but is not required to, provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the word "SEAL."

 

ARTICLE XIII WAIVER OF NOTICE

 

Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the Certificate of Incorporation or under the provisions of the DGCL, or otherwise, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice.

 

ARTICLE XIV AMENDMENTS

 

Subject to repeal or change by action of the shareholders, these by-laws may be altered, amended or repealed and new by-laws may be adopted by a majority of the directors present at any meeting of the Board of Directors of the corporation at which meeting a quorum is present.

ARTICLE XV EMERGENCY BY-LAWS

 

The Emergency By-laws provided in this Article XV shall be operative during any emergency in the conduct of the business of the corporation resulting from an attack on the United States or any nuclear or atomic disaster, notwithstanding any different provision in the preceding articles of the by-laws or in the Certificate of Incorporation of the corporation or in the DGCL. To the extent not inconsistent with the provisions of this Article, the By-laws provided in the preceding articles shall remain in effect during such emergency and upon its termination the Emergency By-laws shall cease to be operative.

 

During any such emergency:

 

(a)                A meeting of the Board of Directors may be called by any officer or director of the corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting.

 

(b)                At any such meeting of the Board of Directors, a quorum shall consist of the number of directors in attendance at such meeting.

 

(c)                The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the principal office or designate several alternative principal offices or regional offices, or authorize the officers to do so.

 

(d)              The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties.

 

(e)                No officer, director or employee acting in accordance with these Emergency By-laws shall be liable except for willful misconduct. No officer, director or employee shall be liable for any action taken by him in good faith in such emergency in furtherance of the ordinary business affairs of the corporation even though not authorized by the by-laws then in effect.

 

(f)                 These Emergency By-laws shall be subject to repeal or change by further action of the Board of Directors or by action of the shareholders, but no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action taken prior to the time of such repeal or change. Any amendment of these Emergency By-laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.

Exhibit 10.1

 

AGREEMENT FOR THE PURCHASE AND SALE OF LIMITED LIABILITY COMPANY INTERESTS OF GENRESULTS, LLC

 

This Agreement for the Purchase and Sale of Limited Liability Company Interests ("Agreement") is made as of April 12, 2019, between David G. Jemmett and Jemmett Enterprises, LLC, an Arizona limited liability company (collectively, the "Seller") and Cerberus Cyber Sentinel Corporation, a Delaware corporation (the "Purchaser”).

 

WHEREAS, Seller is the owner of 100% of the legal and beneficial equity interests (the “Equity Interests”) in GenResults, LLC, an Arizona limited liability company (the "Company");

 

WHEREAS, Seller desires to sell and Purchaser desires to purchase the Equity Interests, currently owned by Seller.

 

NOW, THEREFORE, the parties hereto agree as follows: Section 1. Purchase and Sale.

1.1               Pursuant to the terms and conditions of this Agreement, Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from Seller, the Equity Interests.

 

1.2               In consideration of the Equity Interests at the Closing Purchaser shall issue to Seller One Million (1,000,000) shares of Purchaser’s common stock (the "Purchase Price").

 

Section 2. Closing.

 

2.1               The closing shall take place, subject to the conditions set forth in Section 2.2 hereof at 10:00 A.M. on April 12, 2019 (“Closing”), at the offices of the Company or such other time or place as the parties hereto may mutually agree.

 

2.2               All profits and liabilities of Seller through and including close of business on the Effective Date (as hereinafter defined) shall accrue to Seller, and thereafter shall be for the account of Purchaser. All prorations to be made hereunder will be made as of the close of business on the Effective Date.

 

2.2               The obligation of the Seller to sell the Equity Interests, and the obligation of the Purchaser to purchase the Equity Interests, is subject to the conditions set forth below being complied with to the satisfaction of, or waived by, the Seller or the Purchaser, as the case may be, on or before the Closing.

 

2.2.1                      Delivery of Equity Interests. The Seller shall deliver to Purchaser evidence satisfactory to Purchaser transferring the Equity Interests to Purchaser.

 

2.2.2                      Delivery of Purchase Price. The Seller shall have received the Purchase Price, as evidenced by stock certificates or ledger entry.

2.2.3                      Representations of Warranties. The representations and warranties of Seller contained in this Agreement shall be true and correct as of the Closing.

 

2.2.4                      Purchasers Representations and Warranties. The representations and warranties of the Purchaser contained in this Agreement shall be true and correct as of the Closing.

 

Section 3. Seller’s Representations and Warranties.

 

Seller represents and warrants to Purchaser that:

 

3.1                               Organization, Good Standing, etc. The Company is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Arizona and is duly qualified to do business, and is in good standing, in every jurisdiction in which the nature of its business requires it to be so qualified. The Company has all requisite corporate power and authority to carry on its business as now conducted. The equity interests in the Company are not now, and have never been, certificated.

 

3.2                               No Conflict. The execution, delivery and performance by the Seller of this Agreement will not conflict with or result in the breach of or constitute a default under any other agreement or instrument to which the Company is a part of which it or its property may be bound, or result in the creation of any lien thereunder.

 

3.3                               Authorization. This Agreement has been duly authorized, executed and delivered by the Seller.

 

3.4                               No Violation. The execution, delivery or performance by the Seller of this Agreement does not contravene any law, regulation, order or judgment applicable to or binding on the Seller, and will not result in a breach of, or constitute a default under, or contravene any provisions of, any agreement to which the Seller is a party or by which he is bound.

 

3.5                               No Consents or Approvals. Neither the execution, delivery or performance by the Seller of this Agreement requires the consent or approval of, the giving of notice to, the registration with, the recording or filing of any documents with, or the taking of any other action in respect of, any federal, state or local governmental commission, authority, agency or body.

 

3.6                               Equity Interests. Seller is the lawful owner, of record and beneficially, of the Equity Interests and has good and merchantable title thereto, free and clear of all liens, encumbrances, options, charges, equities and claims of any kind whatsoever, and he has full right and legal capacity to transfer and sell the Equity Interests to the Purchaser under the terms and conditions contained herein and that upon Closing under this Agreement the Equity Interests the Purchaser will own legal and equitable title to the Equity Interests, free and clear of all liens, encumbrances, charges options, equities and claims of any kind. The Equity Interests represent all of the issued and outstanding equity interests of the Company.

 

3.7                               Financial Statements. The Company’s unaudited financial statements as of December 31, 2018, and the Company’s unaudited financial statements for the period ending March 31, 2019 (the “Effective Date”), which have been delivered to Purchaser, have been prepared by Seller’s

management in accordance with generally accepted accounting principles applied on a consistent basis and fairly present the financial condition of the Company as at such date and the result of its operations and the changes in financial position for the period then ended. There have been no material adverse changes in the condition or operations, financial or otherwise, of the Company since March 31, 2019. The net equity value of the Company, as reflected on the Company’s financial statements, as of the Effective Date is $10,000.

 

3.8                               Tax Returns. All appropriate federal, state and local income tax returns which are required to have been filed for all of the Company’s taxable periods either have been filed or timely extensions obtained. All taxes as shown on said returns have been paid when due. The Seller knows of no proposed material tax assessment against the Company, or of any penalty, charge, or amounts owning to taxing authorities by the Company.

 

3.9                               Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Seller, threatened against or affecting the Company, at law or in equity, or before any governmental board, agency or instrumentality or any arbitrator. The Company is not in default with respect to any material order, writ, injunction or decree of any court or governmental board, agency or other instrumentality.

 

3.10                        Accuracy of Information Provided to Purchaser. No written information, exhibit, financial statement, document, book, record or report prepared by the Company or Seller, which has been, is or to be furnished by the Company or Seller to Purchaser in connection with the transactions described in this Agreement is or shall be inaccurate in any material respect as of the date it is or shall be dated or (except as otherwise disclosed to Purchaser) at such time as of the date so furnished, or contains or shall contain any material misstatement of fact.

 

3.11                        Licenses. The Company possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, necessary to conduct its business substantially as now conducted and as presently proposed to be conducted, and the Company is not in violation of any valid rights of others with respect to any of the foregoing.

 

3.12                        ERISA. The Company is in compliance in all material respects with all laws, rules, regulations and orders of any governmental authority, including without limitation the Employee Retirement Income Security Act of 1974 ("ERISA") to the extent applicable to it and has received no notice to the contrary from the Pension Benefit Guaranty Corporation ("PBGC") or any other governmental entity, authority or agency.

 

3.13                        Material Liability. There are no liabilities of the Company, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since March 31, 2019.

 

3.14                        Other Agreements. The Company is not a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or corporate restriction which could have a material adverse effect on the business, properties, assets, operations, or conditions, financial or otherwise, of the Company. The Company is not in default in any material respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument to which it is a party.

3.15                        Ownership and Liens. The Company has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets and leasehold interest reflected in the financial statements referred to in Section 3.7 (other than any properties or assets disposed of in the ordinary course of business), and none of the properties and assets owned by the Company and none of its leasehold interests are subject to any lien, mortgage, pledge, security interest, or other charge or encumbrance of any kind.

 

Section 4. Purchaser’s Representation and Warranties.

 

The Purchaser represents and warrants to the Seller that:

 

4.1.                            No Violation. The execution, delivery or performance by the Purchaser of this Agreement does not contravene any law, regulation order or judgment applicable to or binding on the Purchaser and will not result in a breach of, or constitute a default, or contravene any provision of, any agreement to which Purchaser is a party or by which he is bound.

 

4.2.                            No Consents or Approvals. Neither the execution, delivery or performance by the Purchaser of this Agreement requires the consent or approval of, the giving of notice to, the registration with, the recording or filing of any documents with, or the taking of any other action in respect of, any federal, state or local governmental commission, authority, agency or body.

 

4.3.                            Securities Laws. The Purchaser acknowledges and agrees that the Equity Interests have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, and that the transfer of the Equity Interests may be effected only pursuant to an effective registration under the Securities Act and applicable state securities laws or an exemption therefore. The Purchaser is acquiring the Equity Interests for his own account for the purpose of investment only and not with a present intention to transfer, hypothecate, resell or otherwise distribute such Shares within the meaning of the Securities Act and applicable state securities laws.

 

4.4                            Access to Data. The Purchaser has received and reviewed information about the Company and has had an opportunity to discuss the Company’s business, management and financial affairs with its management and to review the Company’s facilities.

 

Section 5. Indemnification.

 

5.1                            By Seller. All representations, warranties, covenants and agreements of the Seller contained herein, or in any agreement, certificate or document executed by any Seller in connection herewith and all indemnification obligations set forth in this Section 5.1, will survive the Closing for a period of three (3) years from the Closing. Any claims made under this Section 5.1 will be made or asserted by Purchaser to Seller in writing within three (3) years from the Closing. Notwithstanding the above, any claim made for a breach of any representation, warranty, covenant or agreement of Seller contained in this Agreement relating to tax matters, or any liability for taxes, may be made until the expiration of the applicable statute of limitations (including any extension thereof) governing claims by the applicable governmental authority or person with respect to such matters. The Seller, jointly and severally, agree to indemnify, defend and hold harmless Purchaser and/or the Purchaser's assignee and their respective stockholders, officers, directors, members, managers, partners, employees, agents, successors and assignees (collectively, the "Purchaser Indemnitees"), from and against any and all

losses, damages, liabilities, obligations, assessments, suits, actions, proceedings, claims or demands, including costs, expenses and fees (including reasonable attorneys' fees, accountant, paralegal, and expert witness fees) incurred in connection with, suffered by any of them or asserted against any of them or the assets acquired by Purchaser hereunder (collectively, "Purchaser's Losses"), arising out of or based upon (a) the failure of any representation or warranty of Seller contained herein, or in any agreement, certificate or document executed by Seller in connection herewith, to be true and correct in all material respects when made, (b) the breach in any material respect of any material covenant or agreement of Seller contained in this Agreement, (c) any liability or obligation of Seller arising out of Seller's Business prior to the Effective Date, or (d) any arrangements or agreements made or alleged to have been made by Seller with any broker, finder or other agent in connection with the transactions contemplated hereby.

 

Section 6. Further Assurances.

 

6.1.                             By Seller. Seller will do, execute, acknowledge and deliver, or shall cause to be done, executed, acknowledged and delivered all such further acts, conveyances and assurances the Purchaser may reasonably require for accomplishment of the purposes of this Agreement.

 

6.2.                             By Purchaser. The Purchaser will do, execute, acknowledge and deliver, or shall cause to be done, executed, acknowledged and delivered, all such further acts, conveyances and assurances as Seller may reasonably require for accomplishment of the purposes of this Agreement.

 

Section 7. Miscellaneous.

 

7.1.                             Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

 

7.2.                             Amendment. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing which purports to terminate, amend, supplement, waive or modify this Agreement or any of the terms hereof and is signed by the party against which the enforcement of the termination, amendment, supplement, waiver or modification is sought.

 

7.3.                             Successors and Assigns. The terms of this Agreement shall be binding on, and inure to the benefit of, the parties hereto and their respective successors and assigns.

 

7.4.                             Governing Law. This Agreement, including all matters of construction, validity and performance, shall in all respects be governed by, and construed in accordance with, the laws of the State of Arizona.

 

7.5.                             Notices. Except as otherwise provided in this Agreement, all notices hereunder shall be in writing and shall be given by mail, personal delivery, overnight courier, telecopy or any other customary means of written communication at the addresses set forth on the signature pages hereof, or at such other addresses as may be specified by written notice to the parties hereto, and shall become effective when received by the addressees.

7.6.                             Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceable of such provision in any other jurisdiction.

 

7.7.                             Headings. The headings used herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

 

7.8.                             Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof.

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date and year first above written.

 

SELLER:	PURCHASER:
Jemmett Enterprises, LLC, an Arizona limited liability company	Cerberus Cyber Sentinel Corporation, a Delaware corporation
By: /s/ David G Jemmett	By: /s/ David G. Jemmett
Name: David G Jemmett	Name: David G Jemmett
Title: Managing Partner	Title: C.E.O.
/s/ David G. Jemmett David G. Jemmett
SELLER ADDRESS:	PURCHASER ADDRESS:
2700 N Central Ave # 900 Phoenix, Arizona 85004	2700 N Central Ave # 900 Phoenix, Arizona 85004