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Continues to Execute on Strategic Plan Through Acquisition

Austin, Texas – (November 11, 2019) – CynergisTek, Inc. (NYSE AMERICAN: CTEK), a leader in healthcare cybersecurity, privacy, and compliance, today announced financial results for the third quarter and nine months ended September 30, 2019.

Recent Operational Highlights Include:

Recent Financial Results (Compared to Prior Periods):

“CynergisTek saw 15% growth year-over-year in its core managed service offerings and completed the acquisition of Backbone Consultants,” said Caleb Barlow, President and CEO of CynergisTek. “Both of these accomplishments help CynergisTek maintain its market leading position, however, my focus in the coming month will be on the five strategic imperatives, building the team, and our go-to-market strategy to drive additional revenue growth.”

For the Three Months Ended September 30, 2019, Compared to the Three Months Ended September 30, 2018

Financial results are from the Company’s continuing operations related to security services unless specifically noted that it includes discontinued operations related to the sale of the managed print services (MPS) business. Revenue decreased by approximately $0.9 million to $4.8 million for the three months ended September 30, 2019, as compared to the same period in 2018. Managed services revenue was $3.0 million an increase of 14%, compared to $2.7 million for the same period of 2018.  Professional and consulting services revenues were $1.7 million a decrease of 43%, compared to $2.9 million for the same period of 2018 due to the near completion of a large professional services contract with a major customer that CynergisTek started in 2018. Going into 2020, CynergisTek expects revenue growth to improve as the Company benefits from its recent acquisition of Backbone. In addition, CynergisTek expects to see growth from its new service offerings and the changes being made to the sales and marketing organizations led by the Company’s new CEO.

Gross margin was 34% of revenue for the three months ended September 30, 2019 and 49% for the same period in 2018. The reduction in gross margin is reflective of the investment in attracting talented cybersecurity employees, significant increase in spending to develop new services, and the lower professional services revenue experienced this quarter. Over the next few quarters, CynergisTek expects gross margins to improve as it grows revenue, targets cost reductions, and better utlizes its workforce.

Sales and marketing expenses were $1.1 million for the three months ended September 30, 2019, as compared to $1.2 million for the same period in 2018. General and administrative (G&A) expenses increased to $1.7 million for the three months ended September 30, 2019, as compared to $1.4 million for the same period in 2018. The increase in G&A is attributable to $0.3 million in non-recurring expenses related to the onboarding of the Company’s new CEO in August 2019, while its outgoing CEO remains with the Company to assist with the transition through the end of 2019. CynergisTek expects lower G&A expenses going into next year when the transition is complete, and it has implemented some targeted cost reductions the Company recently initiated to right size the support organization with the divestiture of the managed print services business (MPS) earlier this year.

On March 20, 2019, CynergisTek sold the net assets of its MPS business. Additional charges from these discontinued operations totaled $6,500 for the three months ended September 30, 2019. This compares to the earnings from these discontinued operations in the third quarter of 2018 totaling $1.6 million.

GAAP net loss from continuing operations for the third quarter was $(1.3) million, or $(0.13) per basic and diluted share compared to a net loss of $(0.4) million, or $(0.04) per basic and diluted share for the same period of 2018. GAAP net loss for the third quarter, after adjustment from income or loss from discontinued operations, was $(1.3) million, or $(0.13) per basic and diluted share compared to net income after adjustment from income from discontinued operations, net of tax of $1.2 million, or $0.12 per basic and diluted share for the same period of 2018.

Non-GAAP adjusted EBITDA loss from continuing operations, after adding back stock-based compensation and CEO transition related costs, was $(0.4) million in the third quarter of 2019, compared to income of $0.4 million after adding back stock-based compensation for the same period in 2018.

Non-GAAP adjusted loss from continuing operations per share for the third quarter 2019 was $(0.04) per basic and diluted share, compared to breakeven or $0.00 per basic and diluted share for the same period of 2018.

CONSOLIDATED BALANCE SHEETS

STATEMENTS OF OPERATIONS UNAUDITED

RECONCILIATION OF GAAP LOSS FROM CONTINUING

Conference Call Information
Date: Monday, November 11, 2019
Time: 11:00 am Eastern Time / 8:00 am Pacific Time
U.S.: 1-888-394-8218
International: 1-323-794-2588
Conference ID: 2789768
Webcast: http://public.viavid.com/index.php?id=136715

A replay of the call will be available from 2:00 pm ET on November 11, 2019 to 11:59 pm ET on November 18, 2019. To access the replay, please dial 1-844-512-2921 from the U.S. and 1-412-317-6671 from outside the U.S. The PIN is 2789768.

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Investor Relations Contact:
CynergisTek, Inc.
Bryan Flynn
(949) 382-1419
InvestorRelations@cynergistek.com

Media Contact:
Aria Marketing
Danielle Johns
(617) 332-9999 x241
djohns@ariamarketing.com

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