UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended June 30, 2025

 

or

 

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

 

For the Transition Period from _________ to _________

 

Commission file number: 001-41227

 

CISO GLOBAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		83-4210278
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

 

6900 E. Camelback Road, Suite 900, Scottsdale, Arizona		85251
(Address of Principal Executive Offices)		(Zip Code)

 

(480) 389-3444

(Registrant’s telephone number, including area code)

 

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

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.00001 par value		CISO		The Nasdaq Stock Market LLC

 

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

 

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

 

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

 

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

 

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

 

As of August 8, 2025, there were 33,408,105 shares of the registrant’s common stock outstanding.

 

 

 

CISO GLOBAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025 (unaudited)

 

TABLE OF CONTENTS

 

		Page
PART I. FINANCIAL INFORMATION		4
ITEM 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	26
ITEM 4.	Controls and Procedures	26
PART II. OTHER INFORMATION		27
ITEM 1.	Legal Proceedings	27
ITEM 1A.	Risk Factors	27
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 3.	Defaults Upon Senior Securities	27
ITEM 4.	Mine Safety Disclosures	27
ITEM 5.	Other Information	27
ITEM 6.	Exhibits	27
SIGNATURES		28

 

 

FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

 

●	our ability to maintain an effective system of internal controls and accurately report our financial results;
●	that we will continually seek to identify and acquire cybersecurity talent to expand our service scope and geographical coverage to provide the best possible service for our clients;
●	our belief that our cash and cash equivalents as of the date of this filing, together with anticipated revenues, will be sufficient to meet our anticipated cash requirement for the near term;
●	the doubt about our ability to continue as a going concern;
●	our efforts to developing our business, reducing overhead cost, and capital raising;
●	our plan to improve our liquidity by a planned reduction in overhead costs and actively pursuing additional debt and /or equity financing through discussions with investment bankers and private investors;
●	our estimate for indirect tax liabilities; and
●	our expectation that we will incur further losses through the end of 2025.

 

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, any of which may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.

 

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

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

 

CISO GLOBAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		June 30,				December 31,
		2025				2024
ASSETS
Current Assets:
Cash and cash equivalents		$	760,754			$	992,589
Accounts receivable, net of allowance for credit losses of $136,348 and $124,434 at June 30, 2025 and December 31, 2024, respectively			1,594,739				1,837,521
Prepaid cost of revenue			181,820				334,143
Prepaid expenses and other current assets			590,712				137,725
Contract assets			214,484				179,093
Total Current Assets			3,342,509				3,481,071
Property and equipment, net			573,026				730,511
Operating lease right-of-use assets, net			453,759				537,173
Intangible assets, net			1,335,874				1,802,214
Goodwill			19,900,550				19,900,550
Prepaid cost of revenue, net of current portion			51,505				73,021
Other assets			131,965				129,916
Total Assets		$	25,789,188			$	26,654,456
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses		$	6,824,616			$	9,635,086
Deferred revenue			918,119				1,365,315
Lease liabilities			168,512				170,289
Loans payable			1,086,427				2,674,090
Line of credit			1,754,906				1,957,938
Derivative liability			-				2,102,927
Convertible notes payable			2,050,000				2,050,002
Convertible note payable, related party			5,000,000				5,000,000
Convertible notes payable			5,000,000				5,000,000
Total Current Liabilities			17,802,580				24,955,647
Deferred revenue, net of current portion			57,827				84,403
Loans payable, net of current portion			21,483				37,272
Lease liabilities, net of current portion			354,655				428,070
Total Liabilities			18,236,545				25,505,392
Commitments and Contingencies (Note 10)			-				-
Stockholders’ Equity:
Common stock, $.00001 par value; 300,000,000 shares authorized; 33,167,604 and 12,324,003 shares issued at June 30, 2025 and December 31, 2024, respectively; 32,665,467 and 11,821,866 shares outstanding at June 30, 2025 and December 31, 2024, respectively			331				123
Preferred stock, $.00001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2025 and December 31, 2024			-				-
Additional paid-in capital			198,497,240				183,707,063
Treasury stock, at cost (502,137 shares)			(290,737	)			(290,737	)
Accumulated other comprehensive loss			(2,060	)			(4,779	)
Accumulated deficit			(190,652,131	)			(182,262,606	)
Total Stockholders’ Equity			7,552,643				1,149,064
Total Liabilities and Stockholders’ Equity		$	25,789,188			$	26,654,456

 

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

 

 

CISO GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

		2025				2024				2025				2024
		Three Months Ended June 30,								Six Months Ended June 30,
		2025				2024				2025				2024
Revenue:
Security managed services		$	6,046,950			$	7,080,326			$	12,492,183			$	14,238,959
Professional services			522,804				632,225				1,092,627				1,398,723
Cybersecurity software			143,833				95,874				291,099				196,157
Total revenue			6,713,587				7,808,425				13,875,909				15,833,839
Cost of revenue:
Security managed services			1,809,328				2,334,703				3,813,175				4,888,652
Professional services			72,547				134,584				122,739				290,164
Cybersecurity software			58,815				28,264				92,045				58,769
Cost of payroll			2,658,957				3,176,818				5,411,003				6,658,726
Stock-based compensation			477,100				1,200,147				1,018,505				2,297,397
Total cost of revenue			5,076,747				6,874,516				10,457,467				14,193,708
Total gross profit			1,636,840				933,909				3,418,442				1,640,131
Operating expenses:
Professional fees			166,178				311,194				679,857				802,261
Advertising and marketing			525,302				6,322				529,032				32,760
Selling, general and administrative			2,630,096				3,605,280				5,286,987				7,583,874
Stock-based compensation			644,651				1,252,720				961,698				2,359,742
Total operating expenses			3,966,227				5,175,516				7,457,574				10,778,637
Loss from operations			(2,329,387	)			(4,241,607	)			(4,039,132	)			(9,138,506	)
Loss on extinguishment of convertible notes			(24,518	)			-				(863,669	)			-
Change in fair value of derivative liability			79,919				-				5,467,610				-
Interest expense			(736,309	)			(623,941	)			(8,949,180	)			(1,373,766	)
Other income (expense), net			374				(73,810	)			(5,154	)			(34,918	)
Loss from continuing operations before income taxes			(3,009,921	)			(4,939,358	)			(8,389,525	)			(10,547,190	)
Provision for income taxes			-				-				-				-
Loss from continuing operations			(3,009,921	)			(4,939,358	)			(8,389,525	)			(10,547,190	)
Loss from discontinued operations, net of income taxes (1)			-				(3,497,529	)			-				(4,498,885	)
Net loss		$	(3,009,921	)		$	(8,436,887	)		$	(8,389,525	)		$	(15,046,075	)
Net loss per common share, basic and diluted:
Continuing operations		$	(0.09	)		$	(0.40	)		$	(0.36	)		$	(0.87	)
Discontinued operations			-				(0.29	)			-				(0.37	)
		$	(0.09	)		$	(0.69	)		$	(0.36	)		$	(1.24	)
Weighted-average shares used in computing net loss per share, basic and diluted:			31,834,324				12,213,362				23,084,015				12,089,673
Other comprehensive (loss) income:
Foreign currency translation adjustments		$	(1,487	)		$	253,414			$	2,719			$	(403,760	)
Other comprehensive (loss) income			(1,487	)			253,414				2,719				(403,760	)
Comprehensive loss		$	(3,011,408	)		$	(8,183,473	)		$	(8,386,806	)		$	(15,449,835	)

 

(1)

Includes recognized loss on assets held for sale of $3,349,799 for the three and six months ended June 30, 2024.

 

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

 

 

CISO GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

  

		Shares				Amount				Shares				Amount				Capital				Loss				Deficit				Total
		Six Months Ended June 30, 2025
																						Accumulated
																		Additional				Other
		Common Stock								Treasury Stock								Paid-in				Comprehensive				Accumulated
		Shares				Amount				Shares				Amount				Capital				Loss				Deficit				Total
Balance at December 31, 2024			12,324,003			$	123				(502,137	)		$	(290,737	)		$	183,707,063			$	(4,779	)		$	(182,262,606	)		$	1,149,064
Stock-based compensation - stock options			-				-				-				-				1,927,243				-				-				1,927,243
Issuance of common stock for services			100,000				1				-				-				90,999				-				-				91,000
Issuance of common stock			4,933,395				49				-				-				2,684,705				-				-				2,684,754
Conversion of convertible notes			15,151,706				152				-				-				8,988,517				-				-				8,988,669
Issuance of warrants			-				-				-				-				441,548				-				-				441,548
Exercise of warrants			655,000				6				-				-				654,994				-				-				655,000
Exercise of stock options			3,500				-				-				-				2,171				-				-				2,171
Other comprehensive income			-				-				-				-				-				2,719				-				2,719
Net loss			-				-				-				-				-				-				(8,389,525	)			(8,389,525	)
Balance at June 30, 2025			33,167,604			$	331				(502,137	)		$	(290,737	)		$	198,497,240			$	(2,060	)		$	(190,652,131	)		$	7,552,643

 

		Six Months Ended June 30, 2024
																						Accumulated
																		Additional				Other
		Common Stock								Treasury Stock								Paid-in				Comprehensive				Accumulated
		Shares				Amount				Shares				Amount				Capital				Income				Deficit				Total
Balance at December 31, 2023			11,949,959			$	119				-			$	-			$	172,837,842			$	1,320,177			$	(158,018,687	)		$	16,139,451
Balance			11,949,959			$	119				-			$	-			$	172,837,842			$	1,320,177			$	(158,018,687	)		$	16,139,451
Stock-based compensation - stock options			-				-				-				-				4,657,139				-				-				4,657,139
Issuance of common stock			126,688				2				-				-				154,945				-				-				154,947
Stock issued as lending discount			100,000				1				-				-				121,999				-				-				122,000
Stock adjustment after reverse stock split			47,356				-				-				-				-				-				-				-
Other comprehensive loss			-				-				-				-				-				(403,760	)			-				(403,760	)
Other comprehensive income (loss)			-				-				-				-				-				(403,760	)			-				(403,760	)
Net loss			-				-				-				-				-				-				(15,046,075	)			(15,046,075	)
Balance at June 30, 2024			12,224,003			$	122				-			$	-			$	177,771,925			$	916,417			$	(173,064,762	)		$	5,623,702
Balance			12,224,003			$	122				-			$	-			$	177,771,925			$	916,417			$	(173,064,762	)		$	5,623,702

 

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

 

 

CISO GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		2025				2024
		Six Months Ended June 30,
		2025				2024
Cash flows from operating activities:
Net loss		$	(8,389,525	)		$	(15,046,075	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation - stock options			1,927,243				4,657,139
Stock-based compensation - stock issued for services			52,960				-
Non-cash interest expense			8,364,805				189,613
Depreciation and amortization			622,074				1,469,119
Non-cash operating lease costs			83,414				115,843
Bad debt expense			72,563				14,464
Loss on assets held for sale			-				3,349,799
Change in fair value of derivative liability			(5,467,610	)			-
Loss on extinguishment of convertible notes			863,669				-
Other			1,751				117,066
Changes in operating assets and liabilities:
Accounts receivable			170,219				2,084,860
Inventory			-				161,586
Contract assets			(35,391	)			42,942
Prepaid expenses and other assets			(243,157	)			144,392
Accounts payable and accrued expenses			(2,777,383	)			(433,905	)
Lease liabilities			(75,192	)			(97,850	)
Deferred revenue			(473,772	)			551,385
Net cash used in operating activities			(5,303,332	)			(2,679,622	)
Cash flows from investing activities:
Purchases of property and equipment			-				(83,095	)
Net cash used in investing activities			-				(83,095	)
Cash flows from financing activities:
Proceeds from sales of common stock, net of offering costs			2,684,754				154,947
Proceeds from stock option exercises			2,171				-
Proceeds from exercises of warrants			655,000				-
Proceeds from loans payable			-				4,273,823
Proceeds from convertible notes payable			5,000,000				-
Proceeds from line of credit			6,270,625				2,564,589
Payments on line of credit			(6,473,657	)			(374,483	)
Payments on loans payable			(1,658,754	)			(3,406,538	)
Payments of debt issuance costs			(1,408,642	)			(144,000	)
Net cash provided by financing activities			5,071,497				3,068,338
Effect of exchange rates on cash and cash equivalents			-				(59,214	)
Net (decrease) increase in cash and cash equivalents			(231,835	)			246,407
Cash and cash equivalents - beginning of the period			992,589				1,062,442
Cash and cash equivalents - end of the period		$	760,754			$	1,308,849
Reconciliation of cash and cash equivalents:
Cash and cash equivalents from continuing operations		$	760,754			$	1,118,282
Cash and cash equivalents included in assets of business held for sale			-				190,567
Total cash and cash equivalents, end of period		$	760,754			$	1,308,849
Supplemental cash flow information:
Cash paid for:
Interest		$	556,679			$	1,083,769
Income taxes		$	-			$	-
Supplemental disclosures of non-cash investing and financing activities:
Common stock issued in exchange for services		$	91,000			$	-
Common stock issued as a lending discount		$	-			$	122,000
Conversion of convertible notes		$	8,988,669			$	-

 

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

 

 

CISO GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to CISO Global, Inc., a Delaware corporation and its wholly owned subsidiaries. Unless otherwise specified, all dollar amounts are expressed in United States dollars.

 

NOTE 1 – ORGANIZATION OF BUSINESS AND GOING CONCERN

 

Description of the Business

 

We are a leading cybersecurity, compliance, and software company comprised of highly trained and seasoned security professionals who work with clients to enhance or create a better cyber posture in their organization. We provide a full range of cybersecurity consulting, related services, and cybersecurity software, encompassing all four pillars of proprietary software stack, compliance, cybersecurity, and organizational culture. Our comprehensive cybersecurity services include managed security, compliance services, security operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, certified forensics, technical assessments, and cybersecurity training. We believe that culture is the foundation of every successful cybersecurity and compliance program. To deliver that outcome, we developed our unique offering of MCCP+ (“Managed Compliance & Cybersecurity Provider + Culture”), which is a holistic solution that provides all four of these pillars under one roof from a dedicated team of subject matter experts. In contrast to the majority of cybersecurity firms that are focused on a specific technology or service, we seek to differentiate ourselves by remaining technology agnostic, focusing on accumulating highly sought-after topic experts. We continually seek to identify and acquire cybersecurity talent to expand our service scope and geographical coverage to provide the best possible service for our clients. We believe that bringing together a world-class team of technological experts with multi-faceted expertise in the critical aspects of cybersecurity is key to providing technology-agnostic solutions to our clients in a business environment that has suffered from a chronic lack of highly skilled professionals, thereby setting us apart from competitors and in-house security teams. Our goal is to create a culture of security and to help quantify, define, and capture a return on investment from information technology and cybersecurity spending.

 

Basis of Presentation

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q pursuant to rules and regulations of the SEC, and include our accounts and the accounts of our subsidiaries. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the SEC’s rules and regulations, although, we believe that the disclosures made are adequate to make the information not misleading. All material intercompany accounts and transactions have been eliminated.

 

Our interim financial statements are unaudited, and in our opinion, include all adjustments of a normal recurring nature necessary for the fair presentation of the periods presented. The results for the interim periods are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2025. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”). The December 31, 2024 condensed consolidated balance sheet included herein is derived from the audited consolidated financial statements included in the 2024 Form 10-K but does not include all disclosures required by GAAP.

 

Reclassifications

 

Reclassifications of certain immaterial prior period amounts have been made to conform to the current period presentation.

 

 

Going Concern

 

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, due to losses incurred, cash used in operations and the existence of a working capital deficit, substantial doubt about our ability to continue as a going concern exists. Our ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles. We are evaluating strategies to obtain the required additional funding for future operations. These strategies may include obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring operations to grow revenues and decrease expenses.

 

On June 26, 2025, we filed a shelf registration statement on Form S-3, which was deemed effective on July 7, 2025 (“July 2025 Registration Statement”) to replace our existing shelf registration statement on Form S-3. The July 2025 Registration Statement contains two prospectuses:

 

	1)	a base prospectus that covers the potential offering, issuance, and sale from time to time of our common stock, preferred stock, warrants, debt securities, and units in one or more offerings with total proceeds of up to $100,000,000; and
	2)	a sales agreement prospectus covering the potential offering, issuance, and sale from time to time of shares of our common stock having aggregate gross sales proceeds of up to $10,380,600 pursuant to our At-the-Market (“ATM”) sales agreement, dated June 14, 2022, with B. Riley Securities, Inc., Stifel, Nicolaus & Company, Incorporated and Boustead Securities, LLC.

 

In no event will we sell securities under this registration statement with a value exceeding more than one-third of our “public float” (the aggregate market value of our common stock and any other equity securities that we may issue in the future that are held by non-affiliates) in any 12-calendar month period so long as our public float remains below $75 million.

 

However, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all. As such, we may be unable to access further equity or debt financing when needed. The ability for us to continue as a going concern is dependent upon our ability to successfully implement our strategies and eventually attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments to the carrying amounts or classification of assets, liabilities, and reported expenses that may be necessary if we are unable to continue as a going concern.

 

Segment Information

 

We have a single reportable segment. Our chief operating decision maker (“CODM”) is our Chief Executive Officer. The CODM is regularly provided with financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Our CODM uses consolidated net loss, as reported in our condensed consolidated statements of operations and comprehensive loss, to measure segment profit or loss. Net loss is used by the CODM to facilitate analysis of our financial trends, review budgeted versus actual results and for planning purposes. Significant segment expenses are presented in our condensed consolidated statements of operations and comprehensive loss. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.

 

Geographic Information

 

Substantially all of our revenue is from customers located within the United States. Less than 1% of our total revenue is from customers located outside of the United States. All of our property and equipment is located within the United States.

 

Use of Estimates

 

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

 

Material estimates include the allowance for credit losses, the carrying value of intangible assets and goodwill, our deferred tax assets and valuation allowance, the valuation of our convertible notes payable and derivative liability, the adequacy of insurance reserves, and assumptions used in the Black-Scholes option pricing model, such as expected term, stock price volatility and risk-free interest rate.

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

There have been no significant changes to our accounting policies disclosed in our 2024 Form 10-K.

 

Net Loss per Common Share

 

Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For dilutive securities, all outstanding stock options and warrants are considered potentially outstanding common stock. The dilutive effect, if any, of stock options and warrants is calculated using the treasury stock method. All outstanding convertible notes payable are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method.

 

The following potentially dilutive securities were excluded from the computation of diluted net loss per common share because their inclusion would have been anti-dilutive:

 SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE 

		2025				2024				2025				2024
		Three Months Ended June 30,								Six Months Ended June 30,
		2025				2024				2025				2024
Stock options			4,342,493				1,847,780				4,342,493				1,847,780
Restricted stock units			1,550,000				-				1,550,000				-
Warrants			6,394,614				49,614				6,394,614				49,614
Convertible notes payable			909,394				881,616				909,394				881,616
Total			13,196,501				2,779,010				13,196,501				2,779,010

 

Deferred Revenue

 

Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the services provided to our customers or annual licenses and is recognized as services are performed or ratably over the life of the license. We generally invoice customers in advance or in milestone-based installments.

 

Deferred revenue consisted of the following:

 SCHEDULE OF DEFERRED REVENUE 

		June 30, 2025				December 31, 2024
Current:
Security managed services		$	160,021			$	461,599
Professional services			625,703				631,241
Cybersecurity software			132,395				272,475
Total deferred revenue - current		$	918,119			$	1,365,315
Long-term:
Security managed services		$	57,827			$	84,403
Total deferred revenue – long term		$	57,827			$	84,403

 

We recognized revenue of $739,730 and $957,839 for the six months ended June 30, 2025 and 2024, respectively, which was included in the corresponding deferred revenue balance at the beginning of the period. The deferred revenue balance as of June 30, 2025 represents our remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied and is expected to be recognized in revenue as follows:

 SCHEDULE OF PERFORMANCE OBLIGATIONS EXPECTED TO RECOGNIZED REVENUE 

		Remainder of 2025				2026				2027				2028				2029				Total
Security managed services		$	79,240			$	104,935			$	25,297			$	5,290			$	3,086			$	217,848
Professional services			625,703				-				-				-				-				625,703
Cybersecurity software			131,840				555				-				-				-				132,395
Total deferred revenue		$	836,783			$	105,490			$	25,297			$	5,290			$	3,086			$	975,946

 

 

Income Taxes

 

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

 

We utilize Accounting Standards Codification Topic 740 (ASC 740), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. We account for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At June 30, 2025 and December 31, 2024, our net deferred tax asset has been fully reserved.

 

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

 

Recent Accounting Pronouncements

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires additional disaggregated disclosures on an entity’s effective tax rate reconciliation and additional details on income taxes paid. ASU 2023-09 is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2024 and early adoption is permitted. The adoption of ASU 2023-09 is expected to result in additional tax-related disclosures in the notes to our consolidated financial statements.

 

In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public entities to provide disaggregated disclosure of expenses included within relevant income statement expense captions, as well as additional disclosures about selling expenses. This update is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The adoption of ASU 2024-03 is expected to result in additional disclosures in our consolidated financial statements.

 

In November 2024, the FASB issued ASU 2024-04, “Debt (Subtopic 470-20): Debt with Conversion and Other Options.” ASU 2024-04 clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. ASU 2024-04 is effective for reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted for entities that have adopted ASU 2020-06. We do not expect the adoption of ASU 2024-04 to have a material impact on our consolidated financial statements.

 

 

 

NOTE 3 – DISCONTINUED OPERATIONS

 

The operating results of our former Latin America subsidiaries, which we disposed of to focus on our U.S.-based operations and the development and marketing of our internally developed cybersecurity software, are reported within discontinued operations on our condensed consolidated statements of operations and comprehensive loss through July 1, 2024. Our loss from discontinued operations, net of tax, and our loss on assets held for sale, net of tax, which are presented in total as discontinued operations, net of income tax, on our condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024, were as follows:

 SCHEDULE OF DISCONTINUED OPERATIONS

		Three Months Ended June 30,				Six Months Ended June 30,
		2024				2024
Revenue		$	4,579,249			$	8,387,171
Cost of revenue			3,567,711				7,092,426
Operating expenses			971,312				2,097,362
Other expense			187,956				346,469
Loss from discontinued operations before income taxes			(147,730	)			(1,149,086	)
Benefit from income taxes			-				-
Loss from assets held for sale, net of tax			(3,349,799	)			(3,349,799	)
Loss from discontinued operations		$	(3,497,529	)		$	(4,498,885	)

 

Net cash provided by operating activities of discontinued operations was $223,831 for the six months ended June 30, 2024. Net cash used in investing activities of discontinued operations was $83,095 for the six months ended June 30, 2024.

 

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consisted of the following:

 SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

		June 30, 2025				December 31, 2024
Prepaid expenses		$	558,545			$	97,706
Prepaid insurance			32,167				40,019
Total prepaid expenses and other current assets		$	590,712			$	137,725

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment, net consisted of the following:

 SCHEDULE OF PROPERTY AND EQUIPMENT

		June 30, 2025				December 31, 2024
Computer equipment		$	367,584			$	414,214
Leasehold improvements			25,791				25,791
Furniture and fixtures			72,511				75,698
Software			866,254				879,642
Property and equipment gross			1,332,140				1,395,345
Less: accumulated depreciation			(759,114	)			(664,834	)
Total property and equipment, net		$	573,026			$	730,511

 

Depreciation expense was $76,680 and $79,482 for the three months ended June 30, 2025 and 2024, respectively, and $155,734 and $163,294 for the six months ended June 30, 2025 and 2024, respectively.

 

 

NOTE 6 – INTANGIBLE ASSETS AND GOODWILL

 

Goodwill

 

The following table summarizes the goodwill balances as of June 30, 2025 and December 31, 2024:

 SCHEDULE OF CHANGES IN GOODWILL

Balance at June 30, 2025
Goodwill		$	71,525,609
Accumulated impairment losses			(51,625,059	)
Total goodwill		$	19,900,550
Balance at December 31, 2024
Goodwill		$	71,525,609
Accumulated impairment losses			(51,625,059	)
Total goodwill		$	19,900,550

 

Intangible Assets

 

Intangible assets, net are summarized as follows:

 SCHEDULE OF INTANGIBLE ASSETS

		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
		June 30, 2025
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Tradenames – trademarks		$	3,835,981			$	(3,298,186	)		$	537,795
Customer base			572,048				(354,890	)			217,158
Non-compete agreements			487,400				(487,400	)			-
Intellectual property/technology			2,455,879				(1,874,958	)			580,921
Total intangible assets		$	7,351,308			$	(6,015,434	)		$	1,335,874

 

		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
		December 31, 2024
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Tradenames – trademarks		$	3,835,981			$	(3,123,766	)		$	712,215
Customer base			572,048				(319,587	)			252,461
Non-compete agreements			487,400				(484,120	)			3,280
Intellectual property/technology			2,455,879				(1,621,621	)			834,258
Total intangible assets		$	7,351,308			$	(5,549,094	)		$	1,802,214

 

The weighted average remaining useful life of finite-lived intangible assets is 1.88 years as of June 30, 2025.

 

Amortization expense for the three months ended June 30, 2025 and 2024 was $233,170 and $474,562, respectively, and $466,340 and $951,719 for the six months ended June 30, 2025 and 2024, respectively.

 

Based on the balance of intangible assets at June 30, 2025, expected future amortization expense is as follows:

 SCHEDULE OF FUTURE AMORTIZATION EXPENSE

2025 (remainder of)		$	454,799
2026			709,464
2027			73,211
2028			49,200
2029			49,200
Total		$	1,335,874

 

 

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following:

 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

		June 30, 2025				December 31, 2024
Accounts payable		$	3,752,296			$	6,109,150
Accrued payroll and bonuses			710,908				750,410
Accrued expenses			1,024,867				1,477,846
Accrued commissions			48,500				37,847
Indirect taxes payable			33,475				32,959
Accrued interest			1,254,570				1,226,874
Total accounts payable and accrued expenses		$	6,824,616			$	9,635,086

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

Managed Services Agreement with Hensley Beverage Company – Related Party

 

In July 2021, we entered into a 1-year Managed Services Agreement with Hensley Beverage Company to provide secured managed services. We also may be engaged by Hensley Beverage Company from time to time to provide other related services outside the scope of the Managed Services Agreement. While the agreement provided for an original term through December 31, 2021, the agreement will continue until terminated by either party. For the three months ended June 30, 2025 and 2024, we received $93,377 and $52,592, respectively, and for the six months ended June 30, 2025 and 2024, we received $279,594 and $1,175,914, respectively, from Hensley Beverage Company for contracted services, and had an outstanding receivable balance of $90,632 and $0 as of June 30, 2025 and December 31, 2024, respectively. Andy McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company, the parent company of Hensley Beverage Company.

 

Convertible Note Payable with Hensley & Company

 

In March 2023, we issued an unsecured convertible note payable to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest was due on March 20, 2025. On March 25, 2025, we entered into Amendment Number One to this convertible note, which extended the maturity date of the convertible note to March 20, 2026. At any time prior to, or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share. During each of the three months ended June 30, 2025 and 2024, we recorded interest expense of $125,000 and during each of the six months ended June 30, 2025 and 2024, we recorded interest expense of $250,000. As of June 30, 2025 and December 31, 2024, we had accrued interest payable of $1,138,888 and $888,888, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company. Refer to Note 11, “Debt,” and Note 15, “Subsequent Events,” for further details regarding this convertible note.

 

 

NOTE 9 – STOCKHOLDERS’ EQUITY

 

For the three and six months ended June 30, 2025, we sold 1,123,876 and 4,933,395 shares, respectively, of our common stock for proceeds of $965,198 (net of $35,052 of offering costs) and $2,684,754 (net of $97,517 of offering costs), respectively, under our registration statement on Form S-3 dated June 14, 2022.

 

For the three and six months ended June 30, 2024, we sold 85,434 and 126,688 shares, respectively, of our common stock for proceeds of $106,860 (net of $3,987 of offering costs) and $154,947 (net of $5,777 of offering costs), respectively, under our registration statement on Form S-3 dated June 14, 2022.

 

Stock Options

 

We granted stock options vesting solely upon the continued service of the recipient. We recognize the accounting grant date fair value of equity-based awards as compensation expense over the required service period of each award.

 

The following table summarizes stock option activity for the six months ended June 30, 2025:

 SCHEDULE OF STOCK OPTION ACTIVITY

		Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in years)				Aggregate Intrinsic Value
Outstanding at December 31, 2024			1,523,691			$	37.34				4.43			$	254,206
Granted			3,192,166				0.92
Exercised			(3,500	)			0.62
Expired or cancelled			(369,864	)			35.28
Outstanding at June 30, 2025			4,342,493			$	10.80				8.27			$	837,403
Exercisable at June 30, 2025			1,400,433			$	30.53				4.97			$	157,315

 

Total stock-based compensation expense related to the stock options was $1,076,251 and $2,452,867 for the three months ended June 30, 2025 and 2024, respectively, and $1,927,243 and $4,657,139 for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, there was future compensation expense of $3,380,382 with a weighted average recognition period of 1.93 years related to the stock options.

 

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2025 and 2024 was $0.86 and $1.34, respectively.

 

Restricted Stock Units

 

We granted restricted stock units (“RSUs”) that only contain a service-based vesting condition that is typically satisfied over four years. We recognize the accounting grant date fair value of equity-based awards as compensation expense over the requisite service period. The fair value of RSUs is determined by the closing price of the Company’s common stock on the grant date. On June 13, 2025, we granted 1,550,000 RSUs with a weighted-average grant date fair value of $0.96. Total stock-based compensation expense related to the RSUs was not material for all periods presented in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2025, there was future compensation expense of $1,488,000 with a weighted average recognition period of 3.95 years related to the RSUs.

 

Warrant Activity Summary

 

The following table summarizes warrant activity for the six months ended June 30, 2025:

 SCHEDULE OF STOCK WARRANT ACTIVITY

		Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in years)				Aggregate Intrinsic Value
Outstanding at December 31, 2024			6,774,559			$	1.14				4.93			$	-
Granted			275,055				1.15
Exercised			(655,000	)			1.00
Expired or cancelled			-				-
Outstanding at June 30, 2025			6,394,614			$	1.14				4.43			$	876,750
Exercisable at June 30, 2025			6,394,614			$	1.14				4.43			$	876,750

 

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Legal Claims

 

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

 

Indirect Taxes

 

We are subject to indirect taxation in some, but not all, of the various states and foreign jurisdictions in which we conduct business. Laws and regulations attempting to subject commerce conducted over the Internet to various indirect taxes are becoming more prevalent, both in the United States and internationally, and may impose additional burdens on us in the future. Increased regulation could negatively affect our business directly, as well as the business of our customers. Taxing authorities may impose indirect taxes on the Internet-related revenue we generated based on regulations currently being applied to similar, but not directly comparable industries. There are many transactions and calculations where the ultimate indirect tax determination is uncertain. In addition, domestic and international indirect taxation laws are complex and subject to change. We may be audited in the future, which could result in changes to our indirect tax estimates. We continually evaluate those jurisdictions in which nexus exists and believe we maintain adequate indirect tax accruals.

 

As of June 30, 2025 and December 31, 2024, our accrual for estimated indirect tax liabilities was $33,475 and $32,959, respectively, reflecting our best estimate of the potential liability based on an analysis of our business activities, revenues subject to indirect taxes, and applicable regulations. Although we believe our indirect tax estimates and associated liabilities are reasonable, the final determination of indirect tax audits, litigation, or settlements could be materially different than the amounts established for indirect tax contingencies.

 

Warranties

 

Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances.

 

We offer a limited warranty to select customers, subject to various conditions, to cover certain costs incurred by the customer in case of a security breach. We have entered into an insurance policy to cover our potential liability arising from this limited warranty arrangement. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the unaudited condensed consolidated financial statements.

 

In addition, we also indemnify certain of our directors and executive officers against certain liabilities that may arise while they are serving in good faith in their company capacities. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid.

 

 

NOTE 11 – DEBT

 

Term Loans

 

In November 2023, we entered into a business loan and security agreement, pursuant to which we obtained a loan with a principal amount of $2,200,000 and paid an origination fee of $44,000. The business loan carried an interest rate of 53.44% per annum and was payable in 52 weekly installments of $53,731. On March 28, 2024, under a troubled debt restructuring, we entered into a Business Loan and Security Agreement (the “Loan Agreement”) with LendSpark Corporation (the “Lender”), pursuant to which we obtained a restructured loan with a principal amount of $2,200,000 (the “Restructured Loan”) from the Lender. In connection with the Restructured Loan, we entered into a Fee Agreement with the Lender, pursuant to which we issued 100,000 shares of our common stock, as partial consideration for the Lender’s agreement to enter into the Loan Agreement and extend credit to us. The Restructured Loan bore interest at a rate of 51.73% per annum and was payable in 52 weekly installments of $53,308, commencing on April 5, 2024. We recorded interest expense of $0 and $304,670 for the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, we recorded interest expense of $54,561 and $869,199, respectively. The Restructured Loan was repaid in full on March 26, 2025.

 

In June 2024, we entered into a Subordinated Business Loan and Security Agreement (“Subordinated Business Loan Agreement”) with Agile Capital Funding, LLC (“Agile”), pursuant to which we obtained a loan with a principal amount of $2,000,000 plus an administrative agent fee paid of $100,000 (“Subordinated Business Loan”). The Subordinated Business Loan was in excess of 100% per annum and was payable in 30 weekly installments. The first four installments due were $75,000 followed by 26 installments of $103,154. The interest expense recorded in our condensed consolidated statements of operations and comprehensive loss was not material for all periods presented. This loan was repaid in full in February 2025.

 

In November 2024, we entered into a Note Purchase Agreement, pursuant to which we obtained a loan with a principal amount of $540,000 and paid an original issue discount of $140,000. The effective interest rate on the Note Purchase Agreement exceeded 100% per annum. This loan matured on January 1, 2025 and was repaid in full.

 

In November 2024, we entered into an Intellectual Property Buy-Back Purchase Agreement, pursuant to which we reacquired vCISO, LLC in exchange for a Promissory Note with a face value of $1,020,000 and interest of 8.00% per annum. The Promissory Note matures in November 2025. We may not prepay any principal amount due under this Promissory Note without the consent of the holder. For the three and six months ended June 30, 2025, we recorded interest expense of $25,407 and $50,675, respectively. Accrued interest payable as of June 30, 2025 and December 31, 2024, was $19,930 and $11,136, respectively.

 

As of June 30, 2025 and December 31, 2024, term loans comprised of the following:

 SCHEDULE OF TERM LOANS

		Effective Interest Rates				Maturities		June 30, 2025				December 31, 2024
Term loans			4.68% to 8.00 %			2025 - 2027		$	1,107,910			$	2,711,362
Less: current portion									(1,086,427	)			(2,674,090	)
Loans payable, net of current portion								$	21,483			$	37,272

 

Line of Credit

 

On January 31, 2024, we entered into a Loan and Security Agreement (the “2024 Loan and Security Agreement”) with Aion, pursuant to which we may borrow up to $3,500,000. The amount available for borrowing at any one time was limited to 80% of our eligible accounts receivable. The 2024 Loan and Security Agreement had an interest rate of 19.25% per annum (based on a 360-day year), payable on the first business day of each month following the accrual thereof. The 2024 Loan and Security Agreement, together with accrued and unpaid interest thereon, was due on January 30, 2025 (the “Maturity Date”).

 

On April 14, 2025, we entered into a Loan and Security Agreement (the “2025 Loan and Security Agreement”) with Aion to replace the 2024 Loan and Security Agreement, pursuant to which we may borrow up to $3,500,000. The amount available for borrowing at any one time is limited to 85% of our eligible accounts receivable. The 2025 Loan and Security Agreement bears interest at a rate of 18.00% per annum (based on a 360-day year), payable on the first business day of each month following the accrual thereof. The 2025 Loan and Security Agreement, together with accrued and unpaid interest thereon, is due on April 14, 2026 (the “Maturity Date”). Upon providing 30 days written notice, we may terminate the 2025 Loan and Security Agreement, subject to an early termination fee of $35,000. Upon the occurrence of an “Event of Default” (as defined in the 2025 Loan Security Agreement and including the failure to make required payments when due after specified grace periods, certain breaches and certain specified insolvency events), Aion would have the right to accelerate payments due, which from after such acceleration would bear interest at a default rate of 29.25% per annum. The 2025 Loan and Security Agreement is secured by our assets.

 

In relation to the Loan and Security Agreements, we recorded interest expense of $72,371 and $139,785 for the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, we recorded interest expense of $158,847 and $154,659, respectively. Accrued interest payable as of June 30, 2025 and December 31, 2024 was zero.

 

 

Convertible Notes Payable

 

Hensley & Company Convertible Note

 

In March 2023, we issued an unsecured convertible note payable to Hensley & Company in the principal amount of $5,000,000. On March 25, 2025, we entered into Amendment Number One to this convertible note, which extended the maturity date of the convertible note to March 20, 2026. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company. Refer to Note 8, “Related Party Transactions” for further details regarding this convertible note. Refer to Note 15, “Subsequent Events,” for further details regarding this convertible note.

 

JC Associates Convertible Notes

 

In June 2023, we issued an unsecured convertible note payable in the principal amount of $1,050,000 bearing an interest rate of 10.00% per annum, payable monthly. The principal amount, together with accrued and unpaid interest, was due on June 7, 2024. At any time prior to or on the maturity date, the holder is permitted to convert all of the outstanding principal amount into 4.20% of the authorized units of our wholly owned subsidiary, vCISO, LLC.

 

In June 2024, we entered into Amendment #1 to extend the maturity date of the $1,050,000 unsecured convertible note payable to December 15, 2024. In exchange for an extension of the maturity date, we agreed to repay on September 30, 2024, all accrued, but unpaid interest as of June 30, 2024 on the convertible note payable. All remaining accrued, but unpaid interest was due at maturity on December 15, 2024.

 

In December 2024, we entered into Amendment #2 to extend the maturity date of the $1,050,000 unsecured convertible note payable to December 15, 2025. In exchange for the extension of the maturity date, interest beginning from the date of Amendment #2 increased to 12.00% per annum and $25,000 of accrued interest was to be repaid on or before December 31, 2024, with the remaining accrued interest due on or before March 31, 2025. We recorded interest expense of $32,533 and $20,857 for the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024 we recorded interest expense of $64,062 and $48,460, respectively. Accrued interest payable as of June 30, 2025 and December 31, 2024 was $35,881 and $163,165, respectively.

 

In October 2023, we issued an unsecured convertible note payable in the principal amount of $1,000,000 bearing an interest rate of 12.00% per annum, payable monthly. The principal amount, together with accrued and unpaid interest was due on October 12, 2024. At any time prior to or on the maturity date, the holder is permitted to convert all of the outstanding principal amount into shares of our common stock at a conversion price of $1.7595 per share.

 

In June 2024, we entered into Amendment #1 to extend the maturity date of the $1,000,000 unsecured convertible note payable to December 15, 2024. In exchange for an extension of the maturity date, we agreed to repay on September 30, 2024, all accrued, but unpaid interest as of June 30, 2024 on the convertible note payable. All remaining accrued, but unpaid interest was due at maturity on December 15, 2024.

 

In December 2024, we entered into Amendment #2 to extend the maturity date of the $1,000,000 unsecured convertible note payable to December 15, 2025. In exchange for the extension of the maturity date, $25,000 of accrued interest was to be repaid on or before December 31, 2024, with remaining accrued interest due on or before March 31, 2025. We recorded interest expense of $30,833 and $32,131 for the three months ended June 30, 2025 and 2024, respectively, and we recorded interest expense of $65,663 and $63,315 for the six months ended June 30, 2025 and 2024, respectively. Accrued interest payable as of June 30, 2025 and December 31, 2024 was $51,529 and $164,307, respectively. Refer to Note 15, “Subsequent Events,” for further details regarding these convertible notes.

 

Convertible Notes Payable and Warrants

 

In December 2024, we entered into a Securities Purchase Agreement (the “Agreement”) with several purchasers (the “Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase an aggregate of up to $8,125,000 of convertible notes payable and warrants to purchase our common stock. The convertible notes payable had a face value of up to $8,125,000 and were subject to an original issue discount of 20%. The convertible notes payable did not bear a stated rate of interest and matured one year from the date of issuance. The effective interest rate of these convertible notes exceeded 100% per annum. At any time prior to or on the maturity date, the Purchasers, could in part or in whole convert the outstanding principal amount into shares of our common stock at a conversion price equal to 90% of the lowest volume weighed average price of our common stock during the ten trading day period immediately preceding the conversion date. At no time could the conversion price be below $0.394 per share.

 

The Agreement initially funded us with gross proceeds (prior to the 20% original issue discount) of $3,125,000 in December 2024, and the remaining $5,000,000 (prior to the 20% original issue discount) was funded upon the effectiveness of a change in a majority of our directors, which occurred on January 7, 2025. Pursuant to the Agreement, we issued warrants to the Purchasers to purchase up to 6,500,000 shares of our common stock with an exercise price of $1.00 per share.

 

We recorded these convertible notes payable at fair value and recognized the fair value of the conversion feature as a derivative liability upon each tranche of funding. The allocation of fair value to the convertible notes and warrants was made on a relative fair value basis as the free-standing warrants are equity classified.

 

The conversion feature of the notes payable was determined to be an embedded derivative requiring bifurcation accounting as (1) the feature is not clearly and closely related to the debt host and (2) the feature meets the definition of a derivative under ASC 815. Changes in the fair value of the embedded derivative were recognized in the condensed consolidated statements of operations and comprehensive loss in change in fair value of derivative liability.

 

During the three months ended June 30, 2025, $420,000 of the convertible notes payable issued under the Agreement were converted into 1,065,990 shares of our common stock. During the six months ended June 30, 2025, $8,125,000 of the convertible notes payable issued under the Agreement were converted into 15,151,706 shares of our common stock. We recognized losses on the conversion of the convertible notes of $24,518 and $863,669 for the three and six months ended June 30, 2025, respectively, which is the intrinsic value of the shares issued upon conversion. For the three and six months ended June 30, 2025, we recognized interest expense of $0 and $7,898,323, respectively, related to the accretion of the convertible notes payable and the amortization of debt issuance costs. As of June 30, 2025, no convertible notes payable issued under the Agreement remained outstanding and the derivative liability has been derecognized.

 

The proceeds from the Agreement were used to repay outstanding principal amounts of short-term indebtedness and for general corporate purposes, which included working capital and research and development.

 

At June 30, 2025, the principal payments due under the above term loans, line of credit, and convertible notes payable were as follows:

 SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT

2025 (remainder of)		$	3,129,135
2026			6,788,401
2027			3,615
Total future principal payments			9,921,151
Less: unamortized debt discount			(8,335	)
Carrying value of debt			9,912,816
Less: current portion of debt			(9,891,333	)
Debt, net of current portion		$	21,483

 

 

NOTE 12 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

 

For each of the three and six months ended June 30, 2025, one customer represented 10% of our total revenue as presented in the condensed consolidated statements of operations and comprehensive loss. For the three and six months ended June 30, 2024, there were no customers that represented 10% or more of our total revenue as presented in the condensed consolidated statements of operations and comprehensive loss.

 

NOTE 13 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

Reclassification adjustments out of accumulated other comprehensive income (loss) (“AOCI” or “AOCL”) and into net loss were not material for all periods presented.

 

For the six months ended June 30, 2025, changes in AOCL were not material. For the six months ended June 30, 2024, changes in AOCI were as follows:

 SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE INCOME

Foreign Currency Translation Adjustments [Member]		Foreign Currency Translation Adjustments				Total AOCI
		Six Months Ended June 30, 2024
		Foreign Currency Translation Adjustments				Total AOCI
Balance at December 31, 2023		$	1,320,177			$	1,320,177
Beginning Balance		$	1,320,177			$	1,320,177
Other comprehensive loss			(403,760	)			(403,760	)
Amounts reclassified from AOCI			-				-
Balance at June 30, 2024		$	916,417			$	916,417
Ending Balance		$	916,417			$	916,417

 

NOTE 14 – FAIR VALUE MEASUREMENTS

 

Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy:

 

	●	Level 1 – Inputs are based on quoted prices in active markets for identical assets and liabilities.
	●	Level 2 – Inputs are based on observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.
	●	Level 3 – One or more inputs are unobservable and significant.

 

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

We did not have any financial assets or liabilities measured and recorded at fair value on a recurring basis as of June 30, 2025. The following table presents our financial assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2024:

 SCHEDULE OF FAIR VALUE MEASUREMENT

		Level 1				Level 2				Level 3
		December 31, 2024
		Level 1				Level 2				Level 3
Current liabilities
Derivative liability		$	-			$	-			$	2,102,927
Total liabilities measured at fair value		$	-			$	-			$	2,102,927

 

The estimated fair value of the derivative liability (conversion feature of our convertible notes payable) is based on Monte Carlo simulations, a traditional valuation model and represents a Level 3 fair value measurement due to significant unobservable inputs. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of June 30, 2025 and December 31, 2024 because of the relatively short duration of these instruments.

 

NOTE 15 – SUBSEQUENT EVENT

 

On August 4, 2025, we entered into Exchange Agreements (each, an “Exchange Agreement,” and collectively, the “Exchange Agreements”) with each of Hensley & Company, d/b/a Hensley Beverage Company (“Hensley”), an entity affiliated with Andrew K. McCain, a director of our company, and J C Associates, Inc. (“J C Associates,” and collectively with Hensley, the “Holders”), an entity affiliated with a member of our advisory board. Pursuant to the Exchange Agreements, the Holders exchanged certain outstanding convertible notes, as amended from time to time, with aggregate principal and accrued interest of approximately $9,297,894 (collectively, the “Exchange Notes”) for an aggregate of 9,297,894 newly authorized shares of Series A Preferred Stock, par value $0.00001 per share (“Series A Preferred Stock”). Upon the closing of the transactions contemplated by the Exchange Agreements, the Exchange Notes were cancelled, and the Holders relinquished all rights, powers, privileges, remedies, or interest under such securities.

 

 

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

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

 

Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to CISO Global, Inc., a Delaware corporation, and its wholly owned subsidiaries. Unless otherwise specified, all dollar amounts are expressed in U.S. dollars.

 

First Half 2025 Highlights

 

Our operating results for the six months ended June 30, 2025 included the following:

 

	●	Total current liabilities reduced by $7,153,067 to $17,802,580 as compared to December 31, 2024 of $24,955,647.
	●	Total gross profit increased to $3,418,442 for the six months ended June 30, 2025 as compared to $1,640,131 for the six months ended June 30, 2024.
	●	Reduced our loss from operations to $4,039,132 for the six months ended June 30, 2025 as compared to $9,138,506 for the six months ended June 30, 2024.

 

Results of Operations

 

Comparison of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024

 

Our financial results for the three months ended June 30, 2025 are summarized as follows in comparison to the three months ended June 30, 2024:

 

		Three Months Ended June 30,
		2025				2024				Variance
Revenue:
Security managed services		$	6,046,950			$	7,080,326			$	(1,033,376	)
Professional services			522,804				632,225				(109,421	)
Cybersecurity software			143,833				95,874				47,959
Total revenue			6,713,587				7,808,425				(1,094,838	)
Cost of revenue:
Security managed services			1,809,328				2,334,703				(525,375	)
Professional services			72,547				134,584				(62,037	)
Cybersecurity software			58,815				28,264				30,551
Cost of payroll			2,658,957				3,176,818				(517,861	)
Stock-based compensation			477,100				1,200,147				(723,047	)
Total cost of revenue			5,076,747				6,874,516				(1,797,769	)
Total gross profit			1,636,840				933,909				702,931
Operating expenses:
Professional fees			166,178				311,194				(145,016	)
Advertising and marketing			525,302				6,322				518,980
Selling, general, and administrative			2,630,096				3,605,280				(975,184	)
Stock-based compensation			644,651				1,252,720				(608,069	)
Total operating expenses			3,966,227				5,175,516				(1,209,289	)
Loss from operations			(2,329,387	)			(4,241,607	)			1,912,220
Loss on extinguishment of convertible notes			(24,518	)			-				(24,518	)
Change in fair value of derivative liability			79,919				-				79,919
Interest expense			(736,309	)			(623,941	)			(112,368	)
Other income (expense), net			374				(73,810	)			74,184
Loss from continuing operations		$	(3,009,921	)		$	(4,939,358	)		$	1,929,437

 

 

Revenue

 

Security managed services revenue decreased by $1,033,376, or 15%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to lower annual contract values among newly acquired customers.

 

Professional services revenue decreased by $109,421, or 17%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to fewer customer projects.

 

Cybersecurity software revenue increased by $47,959, or 50%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to an increase in subscriptions for our Checklight cybersecurity software.

 

Expenses

 

Cost of Revenue

 

Security managed services cost of revenue decreased by $525,375, or 23%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to lower costs associated with our existing client base.

 

Professional services cost of revenue decreased by $62,037, or 46%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to decreased use of consultants.

 

Cybersecurity software cost of revenue increased by $30,551, or 108%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to our increase in Checklight subscriptions.

 

Cost of payroll decreased by $517,861, or 16%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to headcount reductions in 2024.

 

Stock-based compensation expenses decreased by $723,047, or 60%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to forfeiture of options by terminated employees and options that contractually expired.

 

Operating Expenses

 

Professional fees decreased by $145,016, or 47%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to a decrease in legal and accounting fees.

 

Advertising and marketing expenses increased by $518,980 for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to investment into marketing efforts.

 

Selling, general, and administrative expenses decreased by $975,184, or 27%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to reductions in headcount during 2024 resulting in lower costs for compensation, insurance, and leases in 2025.

 

Stock-based compensation expenses decreased by $608,069, or 49%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to forfeiture of options by terminated employees and options that contractually expired.

 

  

Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024

 

Our financial results for the six months ended June 30, 2025 are summarized as follows in comparison to the six months ended June 30, 2024:

 

		Six Months Ended June 30,
		2025				2024				Variance
Revenue:
Security managed services		$	12,492,183			$	14,238,959			$	(1,746,776	)
Professional services			1,092,627				1,398,723				(306,096	)
Cybersecurity software			291,099				196,157				94,942
Total revenue			13,875,909				15,833,839				(1,957,930	)
Cost of revenue:
Security managed services			3,813,175				4,888,652				(1,075,477	)
Professional services			122,739				290,164				(167,425	)
Cybersecurity software			92,045				58,769				33,276
Cost of payroll			5,411,003				6,658,726				(1,247,723	)
Stock-based compensation			1,018,505				2,297,397				(1,278,892	)
Total cost of revenue			10,457,467				14,193,708				(3,736,241	)
Total gross profit			3,418,442				1,640,131				1,778,311
Operating expenses:
Professional fees			679,857				802,261				(122,404	)
Advertising and marketing			529,032				32,760				496,272
Selling, general, and administrative			5,286,987				7,583,874				(2,296,887	)
Stock-based compensation			961,698				2,359,742				(1,398,044	)
Total operating expenses			7,457,574				10,778,637				(3,321,063	)
Loss from operations			(4,039,132	)			(9,138,506	)			5,099,374
Loss on extinguishment of convertible notes			(863,669	)			-				(863,669	)
Change in fair value of derivative liability			5,467,610				-				5,467,610
Interest expense			(8,949,180	)			(1,373,766	)			(7,575,414	)
Other expense, net			(5,154	)			(34,918	)			29,764
Loss from continuing operations		$	(8,389,525	)		$	(10,547,190	)		$	2,157,665

 

Revenue

 

Security managed services revenue decreased by $1,746,776, or 12%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to lower annual contract values among newly acquired customers.

 

Professional services revenue decreased by $306,096, or 22%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to lower customer projects.

 

Cybersecurity software revenue increased by $94,942, or 48%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

 

Expenses

 

Cost of Revenue

 

Security managed services cost of revenue decreased by $1,075,477, or 22%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to lower costs associated with existing client base.

 

Professional services cost of revenue decreased by $167,425, or 58%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, due to our decreased use of consultants.

 

Cybersecurity software cost of revenue increased by $33,276, or 57%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

 

Cost of payroll decreased by $1,247,723, or 19%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to headcount reductions.

 

Stock-based compensation expenses decreased by $1,278,892, or 56%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, due to the forfeiture of options by terminated employees and options that contractually expired.

 

 

Operating Expenses

 

Professional fees decreased by $122,404, or 15%, for the six months ended June 30, 2025 as compared to six months ended June 30, 2024, due to a decrease in legal and accounting fees.

 

Advertising and marketing expenses increased by $496,272 for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, due to marketing efforts initiated in 2025.

 

Selling, general, and administrative expenses decreased by $2,296,887, or 30%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to reductions in headcount during 2024 resulting in lower costs for compensation, insurance, and leases in 2025.

 

Stock-based compensation expenses decreased by $1,398,044, or 59%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to the forfeiture of options by terminated employees and options that contractually expired.

 

Other Income (Expense)

 

The loss on extinguishment of convertible notes increased by $863,669 for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 due to the conversion of certain convertible notes into shares of our common stock during 2025. No such conversion occurred in 2024.

 

Change in fair value of derivative liability increased by $5,467,610 for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 due to changes in the fair value of the derivative liability since the issuance of the related convertible notes payable during December 2024 and January 2025.

 

Interest expense increased by $7,575,414 for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to the accretion of convertible notes payable and the amortization of debt issuance costs associated with the issuance of certain convertible notes payable during December 2024 and January 2025.

 

Liquidity and Capital Resources

 

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the six months ended June 30, 2025, we incurred a net loss of $8,389,525, reported cash used in operations of $5,303,332, and expect to incur further losses through the end of 2025. Further, we have a working capital deficit of $14,460,071 as of June 30, 2025. As a result, substantial doubt about our ability to continue as a going concern exists. Our ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles. We are evaluating strategies to obtain the required additional funding for future operations. These strategies may include obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring operations to grow revenues and decrease expenses.

 

On June 26, 2025, we filed a shelf registration statement on Form S-3, which was deemed effective on July 7, 2025 (“July 2025 Registration Statement”), to replace our expiring shelf registration statement on Form S-3. The July 2025 Registration Statement contains two prospectuses:

 

	1)	a base prospectus that covers the potential offering, issuance, and sale from time to time of our common stock, preferred stock, warrants, debt securities, and units in one or more offerings with total proceeds of up to $100,000,000; and
	2)	a sales agreement prospectus covering the potential offering, issuance, and sale from time to time of shares of our common stock having aggregate gross sales proceeds of up to $10,380,600 pursuant to our At-the-Market (“ATM”) sales agreement, dated June 14, 2022, with B. Riley Securities, Inc., Stifel, Nicolaus & Company, Incorporated and Boustead Securities, LLC.

 

The July 2025 Registration Statement provides for up to $100,000,000 available funding from which we may issue our securities to fund current and future operations, assuming there is adequate demand for our securities. Although we have access to the July 2025 Registration Statement, based on our public float, as of the filing date of our Annual Report on Form 10-K for the year ended December 31, 2024, we are subject to Instruction I.B.6 to Form S-3, which is referred to as the “baby shelf” rules. For so long as our public float is less than $75,000,000, we may not sell more than the equivalent of one-third of our public float during any twelve consecutive months pursuant to the “baby shelf” rules. While alternative public and private transaction structures may be available, these may require additional time and costs, may result in substantial dilution to existing stockholders, in light of our current stock price, may impose operational restrictions on us, and may not be available on attractive terms or at all.

 

There can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all. As such, we may be unable to access further equity or debt financing when needed. The ability for us to continue as a going concern is dependent upon our ability to successfully implement our strategies and eventually attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments to the carrying amounts or classification of assets, liabilities, and reported expenses that may be necessary if we are unable to continue as a going concern.

 

 

Material Cash Requirements

 

Our material cash requirements included the following contractual obligations as of June 30, 2025:

 

Indebtedness

 

As of June 30, 2025, the carrying value of our outstanding debt obligations was $9,912,816, substantially all of which was scheduled to mature during the remainder of 2025 and during 2026. However, on August 4, 2025, we entered into Exchange Agreements to exchange certain outstanding convertible notes with aggregate principal of $8,070,000 and accrued interest of approximately $1,227,894 (collectively, the “Exchange Notes”) for an aggregate of 9,297,894 newly authorized shares of Series A Preferred Stock, par value $0.00001 per share. Upon the closing of the transactions contemplated by the Exchange Agreements, the Exchange Notes were cancelled. Refer to Note 15 in the accompanying unaudited condensed consolidated financial statements for further information.

 

Leases

 

As of June 30, 2025, the carrying value of our outstanding operating lease obligations was $523,167.

 

Sources of Funding to Satisfy Material Cash Requirements

 

Our principal sources of liquidity are our cash on hand, cash provided by operations, and our shelf registration statement on Form S-3 discussed above. However, we expect to incur further losses through the end of 2025, and there can be no assurance that we will be able to obtain additional liquidity from the shelf registration statement on Form S-3 when needed or under acceptable terms, if at all.

 

Working Capital Deficit

 

Our working capital deficit as of June 30, 2025 in comparison to our working capital deficit as of December 31, 2024, is summarized as follows:

 

		June 30,				December 31,
		2025				2024
Current assets		$	3,342,509			$	3,481,071
Current liabilities			17,802,580				24,955,647
Working capital deficit		$	(14,460,071	)		$	(21,474,576	)

 

The decrease in current assets is primarily due to the $452,987 increase in prepaid expenses and other current assets being more than offset by decreases in cash and cash equivalents and accounts receivable of $231,835 and $242,782, respectively. Cash and cash equivalents decreased due to the pay down of debt and accounts payable. Accounts receivable decreased due to collection efforts. Prepaid expenses increased due to increased prepaid marketing expenses.

 

The decrease in current liabilities is primarily due to decreases in accounts payable and accrued expenses, debt obligations, and the derivative liability of $2,810,470, $1,790,697, and $2,102,927, respectively. During the six months ended June 30, 2025, we paid down accounts payable and loans payable outstanding, certain convertible notes payable were converted into shares of our common stock, and the derivative liability was derecognized as a result of the conversion of the notes payable.

 

 

Cash Flows

 

Our cash flows for the six months ended June 30, 2025 in comparison to our cash flows for the six months ended June 30, 2024, are summarized as follows:

 

		Six Months Ended June 30,
		2025				2024
Net cash used in operating activities		$	(5,303,332	)		$	(2,679,622	)
Net cash used in investing activities			-				(83,095	)
Net cash provided by financing activities			5,071,497				3,068,338
Effect of exchange rates on cash and cash equivalents			-				(59,214	)
Net (decrease) increase in cash and cash equivalents		$	(231,835	)		$	246,407

 

Operating Activities

 

Net cash used in operating activities was $5,303,332 for the six months ended June 30, 2025 and was primarily due to cash used to fund a net loss of $8,389,525 (which includes non-cash expenses in the aggregate of $6,520,869), a decrease in accounts payable and accrued expenses and a decrease in deferred revenue. Net cash used in operating activities was $2,679,622 for the six months ended June 30, 2024 and was primarily due to cash used to fund a net loss of $15,046,075 (which includes non-cash expenses in the aggregate of $9,913,043), offset by a decrease in accounts receivable and an increase in deferred revenue.

 

Investing Activities

 

Net cash used in investing activities of $83,095 for the six months ended June 30, 2024 was due to purchases of property and equipment.

 

Financing Activities

 

Net cash provided by financing activities for the six months ended June 30, 2025 was $5,071,497, which was primarily due to $2,684,754 from the sale of our common stock, $655,000 from the exercise of warrants, cash received from borrowings on our convertible loans payable and line of credit (net of debt issuance costs) of $9,861,983, offset by $8,132,411 in repayments of our loans payable and line of credit. Net cash provided by financing activities for the six months ended June 30, 2024 was $3,068,338, which was primarily due to cash received from borrowings on our loans payable and line of credit (net of debt issuance costs) of $6,694,412, offset by $3,781,021 in repayments of our loans payable and line of credit.

 

Critical Accounting Estimates

 

Our critical accounting estimates are more fully described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 31, 2025. There have been no material changes to our critical accounting estimates described in our 2024 Annual Report on Form 10-K.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

 

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as June 30, 2025, our disclosure controls and procedures were effective. This does not include an evaluation by our independent registered public accounting firm regarding our internal control over financial reporting.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are currently not a party to any material legal proceedings.

 

ITEM 1A. RISK FACTORS

 

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025, risk factors that materially affect our business, financial condition, or results of operations. There have been no material changes from the risk factors previously disclosed.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

During the quarter ended June 30, 2025, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading agreement” or a “non-Rule 10b5-1 trading agreement” (in each case, defined in Item 408 of Regulation S-K).

 

ITEM 6. EXHIBITS

 

				Incorporated by Reference
Exhibit Number		Exhibit Description		Form		Exhibit		Filing Date
3.1		Certificate of Designations, Preferences and Rights of Series A Preferred Stock of the Registrant		Form 8-K		3.1		8/5/2025
10.1		Exchange Agreement, dated August 4, 2025, by and between the Registrant and Hensley & Company, d/b/a Hensley Beverage Company		Form 8-K		10.1		8/5/2025
10.2		Exchange Agreement, dated August 4, 2025, by and between the Registrant and J C Associates, Inc.		Form 8-K		10.2		8/5/2025
31.1*		Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2*		Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
32.1*		Section 1350 Certification of Principal Executive Officer
32.2*		Section 1350 Certification of Principal Financial Officer
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*Filed/furnished herewith.

 

 

SIGNATURES

 

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

 

CISO GLOBAL, INC.
By:	/s/ David G. Jemmett
	David G. Jemmett
	Chief Executive Officer
	(Principal Executive Officer)
Date:	August 14, 2025
By:	/s/ Debra L. Smith
	Debra L. Smith
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
Date:	August 14, 2025