UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period
Ended
or
For the Transition Period from _________ to _________
Commission file number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
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
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Indicate by check mark whether
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| ☒ | Smaller reporting company | ||
| Emerging growth company |
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As of May 13, 2025, there were shares of the registrant’s common stock outstanding.
CISO GLOBAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025 (unaudited)
TABLE OF CONTENTS
| 2 |
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 balance 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. These risks may cause our or our industry’s actual results, levels of activity, or performance to be materially different from any future results, levels of activity, or performance 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. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
| 3 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CISO GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid cost of revenue | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Contract asset | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Prepaid cost of revenue, net of current portion | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Deferred revenue | ||||||||
| Lease liability | ||||||||
| Loans payable | ||||||||
| Line of credit | ||||||||
| Derivative liability | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable, related party | ||||||||
| Total Current Liabilities | ||||||||
| Long-term Liabilities: | ||||||||
| Deferred revenue, net of current portion | ||||||||
| Loans payable, net of current portion | ||||||||
| Lease liability, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding on March 31, 2025 and December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost ( shares) | ( | ) | ( | ) | ||||
| Accumulated translation adjustment | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
CISO GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| Quarter Ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Revenue: | ||||||||
| Security managed services | $ | $ | ||||||
| Professional services | ||||||||
| Cybersecurity software | ||||||||
| Total revenue | ||||||||
| Cost of revenue: | ||||||||
| Security managed services | ||||||||
| Professional services | ||||||||
| Cybersecurity software | ||||||||
| Cost of payroll | ||||||||
| Stock based compensation | ||||||||
| Total cost of revenue | ||||||||
| Total gross profit | ||||||||
| Operating expenses: | ||||||||
| Professional fees | ||||||||
| Advertising and marketing | ||||||||
| Selling, general and administrative | ||||||||
| Stock based compensation | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Other income (expense) | ( | ) | ||||||
| Loss on extinguishment of convertible notes | ( | ) | ||||||
| Change in fair value of derivative liability | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ||||
| Benefit from income taxes | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Loss from discontinued operations, net of income taxes | ( | ) | ||||||
| Net Loss | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share - basic and diluted: | ||||||||
| Continuing operations | $ | ) | $ | ) | ||||
| Discontinued operations | ) | |||||||
| $ | ) | $ | ) | |||||
| Weighted average shares outstanding - basic | ||||||||
| Weighted average shares outstanding - diluted | ||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
CISO GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-in | Treasury | Comprehensive | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Gain/(Loss) | Deficit | Total | ||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Stock based compensation - stock options | - | - | ||||||||||||||||||||||||||||||||||
| Stock based compensation - common stock | - | |||||||||||||||||||||||||||||||||||
| Stock issued for cash | - | |||||||||||||||||||||||||||||||||||
| Conversion of convertible notes | - | |||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | ||||||||||||||||||||||||||||||||||
| Stock issued for cash | - | |||||||||||||||||||||||||||||||||||
| Stock issued as lending discount | - | |||||||||||||||||||||||||||||||||||
| Stock adjustment after reverse stock split | - | |||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
CISO GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| March 31, 2025 | March 31, 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation - stock options | ||||||||
| Stock based compensation - common stock | ||||||||
| Non-cash interest expense | ||||||||
| Depreciation and amortization | ||||||||
| Right of use amortization | ||||||||
| Other | ||||||||
| Loss on extinguishment of convertible notes | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Contract assets | ( | ) | ||||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Lease liability | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from loan payable | ||||||||
| Proceeds from convertible notes payable, related party | ||||||||
| Proceeds from lines of credit | ||||||||
| Payment on lines of credit | ( | ) | ( | ) | ||||
| Payment on loans payable | ( | ) | ( | ) | ||||
| Payment of convertible note payable | ||||||||
| Payment of debt issuance cost | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents - beginning of the period | ||||||||
| Cash and cash equivalents - end of the period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash transactions: | ||||||||
| Common stock issued in exchange for services | $ | $ | ||||||
| Common stock issued as a lending discount | $ | $ | ||||||
| Debt conversion to equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
CISO GLOBAL, INC. and subsidiaries
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”), the instructions to Form 10-Q pursuant to 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 those 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 for the year ended December 31, 2024.
Going Concern
The accompanying 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, substantial doubt about our ability to continue as a going concern exists.
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. However, we may be unable to access further equity or debt financing when needed. As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.
| 8 |
The ability for us to continue as a going concern is dependent upon our ability to successfully accomplish the plan and eventually attain profitable operations. The condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we are unable to continue as a going concern.
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements. We periodically evaluate our estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results could materially differ.
We believe the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements. Material estimates include the allowance for credit losses, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the valuation of convertible notes, derivative liabilities, the adequacy of insurance reserves, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue
Our revenue is derived from three major types of services to clients: security managed services, professional services, and software. With respect to security managed services, we provide culture education and enablement, tools and technology provisioning, data and privacy monitoring, regulations and compliance monitoring, remote infrastructure administration, and cybersecurity services, including, but not limited to, antivirus and patch management. With respect to professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.
Our revenue is categorized and disaggregated as reflected in our unaudited condensed consolidated statement of operations as follows:
Security Managed Services
Security managed services revenue primarily consists of risk compliance, cyber defense operations, and secured managed services. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.
Professional Services
Professional services revenue primarily consists of security testing and training, and incident response and digital forensics. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.
Cybersecurity Software
Cybersecurity software revenue primarily consists of our internally developed cybersecurity software designed to provide a security management platform, protect users from untrusted and malicious online threats, provide proactive security monitoring, and deliver continuous security assessments. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.
| 9 |
Accounts Receivable
Accounts receivable are reported
at their outstanding unpaid principal balances, net of allowances for credit losses. We periodically assess our accounts and other receivables
for collectability on a specific identification basis. We provide for allowances for credit losses based on management’s estimate
of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due
within 30 days of invoice. We write off accounts receivable against the allowance for credit losses when a balance is determined to be
uncollectible. As of March 31, 2025 and December 31, 2024, our allowance for credit losses was $
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 options and warrants are considered potentially outstanding common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents are anti-dilutive with respect to losses, the options, warrants, and shares issuable upon conversion thereof have been excluded from our computation of net loss per common share for the three months ended March 31, 2025 and 2024, as follows:
| March 31, 2025 | March 31, 2024 | |||||||
| Stock options | ||||||||
| Warrants | ||||||||
| Convertible debt | ||||||||
| Total | ||||||||
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:
March 31, 2025 | December 31, 2024 | |||||||
| Current: | ||||||||
| Security managed services | $ | $ | ||||||
| Professional services | ||||||||
| Software | ||||||||
| Total deferred revenue - current | $ | $ | ||||||
| Long-term: | ||||||||
| Security managed services | $ | $ | ||||||
| Total deferred revenue – long term | $ | $ | ||||||
| 10 |
The increase in the deferred revenue
balance is primarily driven by payments received in advance of satisfying our performance obligations, offset by $
| Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | Total | |||||||||||||||||||
| Security managed services | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Professional services | ||||||||||||||||||||||||
| Software | ||||||||||||||||||||||||
| Total deferred revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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 March 31, 2025, 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 Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740), to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this guidance require additional disclosures about income taxes, primarily focused on the disclosures of income taxes paid and the rate reconciliation table. The new guidance will be effective for the 2025 fiscal year, with early adoption permitted. The adoption of ASU 2023-09 is not expected to have a material impact on our disclosures within our condensed 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 is effective prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. Adoption of this guidance will result in additional disclosures, but we do not expect that the adoption of ASU 2024-03 will impact our condensed consolidated financial position, results of operations, or cash flows.
NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of:
March 31, 2025 | December 31, 2024 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| 11 |
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Computer equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Furniture and fixtures | ||||||||
| Software | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Total depreciation expense was
$
NOTE 5 – INTANGIBLE ASSETS AND GOODWILL
Goodwill
The following table summarizes the net goodwill as of March 31, 2025 and December 31, 2024:
| Balance as of December 31, 2024 | ||||
| Goodwill | $ | |||
| Accumulated impairment losses | ( | ) | ||
| Balance March 31, 2025 | ||||
| Goodwill | ||||
| Accumulated impairment losses | ( | ) | ||
| $ |
Intangible Assets
Intangible assets, net are summarized as follows:
| March 31, 2025 | ||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Tradenames – trademarks | $ | $ | ( | ) | $ | |||||||
| Customer base | ( | ) | ||||||||||
| Non-compete agreements | ( | ) | ||||||||||
| Intellectual property/technology | ( | ) | ||||||||||
| $ | $ | ( | ) | $ | ||||||||
| December 31, 2024 | ||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Tradenames – trademarks | $ | $ | ( | ) | $ | |||||||
| Customer base | ( | ) | ||||||||||
| Non-compete agreements | ( | ) | ||||||||||
| Intellectual property/technology | ( | ) | ||||||||||
| $ | $ | ( | ) | $ | ||||||||
| 12 |
The weighted average remaining
useful life of identifiable amortizable intangible assets is
Amortization of identifiable intangible
assets for the three months ended March 31, 2025 and 2024 was $
Based on the balance of intangible assets at March 31, 2025, expected future amortization expense is as follows:
| 2025 (remainder of) | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| $ |
NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following amounts:
| March 31, 2025 | December 31, 2024 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll and bonuses | ||||||||
| Accrued expenses | ||||||||
| Accrued commissions | ||||||||
| Indirect taxes payable | ||||||||
| Accrued interest | ||||||||
| Total accounts payable and accrued expenses | $ | $ | ||||||
Note 7 – 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 provides for an original term through December 31, 2021, the agreement will continue until terminated by either
party. For the three months ended March 31, 2025 and 2024, we received $
Convertible Note Payable with Hensley & Company
In March 2023, we issued an unsecured
convertible note to Hensley & Company in the principal amount of $
| 13 |
Note 8 – STOCKHOLDERS’ EQUITY
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.
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2025 | $ | - | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired or cancelled | ( | ) | - | - | ||||||||||||
| Outstanding at March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2025 | $ | $ | ||||||||||||||
Total compensation expense related to the options was $ and $ for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, there was future compensation expense of $ with a weighted average recognition period of years related to the options.
The weighted-average grant-date fair value of options granted during the three months ended March 31, 2025 was $. The total intrinsic value of options exercised during the three months ended March 31, 2025 was.
During the three months ended March 31, 2025, options vested, net of forfeitures.
Warrant Activity Summary
The following table summarizes warrant activity:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2025 | $ | |||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired or cancelled | - | - | ||||||||||||||
| Outstanding at March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2025 | $ | $ | ||||||||||||||
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NOTE 9 – 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
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 March 31, 2025 and December
31, 2024, our accrual for estimated indirect tax liabilities was $
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 as of March 31, 2025 and December 31, 2024.
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 10 – LOANS PAYABLE AND LINES OF CREDIT
Loans Payable
Loans payable was as follows:
| Effective Interest Rates | Maturities | March 31, 2025 | December 31, 2024 | |||||||||||
| Term loans | ||||||||||||||
| Less, current portion | ( | ) | ( | ) | ||||||||||
| Long term loans payable | $ | $ | ||||||||||||
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Term Loans
Our subsidiaries are borrowers under certain term loans. These term loans require weekly or monthly principal and interest payments. These term loans are secured by various assets owned by our subsidiaries.
In November
2023, we entered into a business loan and security agreement, pursuant to which we obtained a loan with a principal amount of $
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 $
Pursuant to the Loan Agreement, we granted the Lender a security interest in all of our assets and the assets of our U.S. subsidiaries (the “Collateral”) that was secondary to the security interest held by Aion Financial Technologies, Inc. (“Aion”). Upon the occurrence of an event of default, the Lender was permitted to, among other things, accelerate the Loan and declare all obligations immediately due and payable or take possession of the Collateral.
In connection
with the Restructured Loan, we entered into a Fee Agreement (the “Fee Agreement”) with the Lender, pursuant to which we
issued
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 Fee Agreement contained customary representations, warranties, agreements, and obligations of the parties. For the
three months ended March 31, 2025, we recorded interest expense of $
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 $
Pursuant to the Subordinated Business Loan, we granted Agile a security interest in the Collateral that was tertiary to the security interest held by Aion and LendSpark. Upon the occurrence of an event of default, Agile was permitted to, among other things, accelerate the Subordinated Business Loan and declare all obligations immediately due and payable or take possession of the Collateral. We used proceeds from the Subordinated Business Loan for general corporate purposes, which included working capital, capital expenditures, and repayment of debt. 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 $
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 $
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 $
| 16 |
We used proceeds
from the 2024 Loan and Security Agreement to repay outstanding debt and may use for general corporate purposes, which includes
working capital, capital expenditures, and repayment of debt. For the three months ended March 31, 2025 and 2024, we recorded
interest expense of $
Convertible Notes Payable
In March 2023, we issued an unsecured
convertible note to Hensley & Company in the principal amount of $
In June 2023, we
issued an unsecured convertible note in the principal amount of $
In June 2024, we entered into
Amendment #1 to extend the maturity date of the $
In December 2024, we entered into Amendment #2 to extend
the maturity date of the $
In October 2023,
we issued an unsecured convertible note in the principal amount of $
In June 2024, we entered into Amendment #1 to extend
the maturity date of the $
In December 2024, we entered into Amendment #2 to extend the maturity date
of the $
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 $
The Agreement
initially funded us with gross proceeds of $
We recorded these convertible notes at fair value and recognized the fair value of a derivative liability upon each tranche of funding. The allocation of fair value to the convertible notes was made on a relative fair value basis as the free-standing warrants issued in 2024 in connection with the Agreement are equity classified.
The conversion feature of the Agreement 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 and has been record at fair value on our balance sheet. Subsequent changes in the fair value of embedded derivative flows through the statements of operations.
During the
quarter-end March 31, 2025, $
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.
Future minimum payments under the above loans payable, line of credit, and convertible notes payable due as of March 31, 2025 were as follows:
| 2025 (remainder of) | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total future minimum payments | ||||
| Less: discount | ( | ) | ||
| Less: current | ( | ) | ||
| $ |
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NOTE 11 – LEASES
We have entered into various non-cancellable operating lease agreements for certain offices. These leases currently have lease periods expiring through 2028. The lease agreements may include one or more options to renew. Renewals were not assumed in our determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, weighted-average lease term, and discount rates are detailed below.
When measuring lease liabilities
for leases that were classified as operating leases, we discounted lease payments using our estimated incremental borrowing rate at commencement
date of each lease. The weighted average incremental borrowing rate applied was
Operating leases are included in the unaudited condensed consolidated balance sheets as follows:
| Classification | March 31, 2025 | December 31, 2024 | ||||||||
| Lease assets | ||||||||||
| Operating lease ROU assets, net | Assets | $ | $ | |||||||
| Total lease assets | $ | $ | ||||||||
| Lease liabilities | ||||||||||
| Operating lease liabilities, current | Current liabilities | $ | $ | |||||||
| Operating lease liabilities, non-current | Liabilities | |||||||||
| Total lease liabilities | $ | $ | ||||||||
The components of lease costs, which are included in loss from operations in our unaudited condensed consolidated statements of operations, were as follows:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Leases costs | ||||||||
| Operating lease costs | $ | $ | ||||||
| Short term and variable lease costs | ||||||||
| Total lease costs | $ | $ | ||||||
Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the three months ended March 31, 2025 were as follows:
| Fiscal Year | Operating Leases | |||
| 2025 (remainder of) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Amount representing interest | ( | ) | ||
| Present value of net future minimum lease payments | $ | |||
NOTE 12 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Although we deposit cash with multiple banks, these deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may generally be redeemed upon demand and bear minimal risk.
No single customer represented
over
| 18 |
NOTE 13 – GEOGRAPHIC INFORMATION
All of our revenue and property and equipment from continuing operations is located within the United States.
NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents Accumulated Other Comprehensive Income (“AOCI”) activity in equity:
Foreign Currency Translation Adjustments | Total AOCI | |||||||
| Balance as of December 31, 2024 | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income | ||||||||
| Amounts reclassified from AOCI | ||||||||
| Balance as of March 31, 2025 | $ | ( | ) | $ | ( | ) | ||
NOTE 15 – FAIR VALUE MEASUREMENT
The following table sets forth our material liabilities measured and recorded at fair value on a recurring basis:
As of March 31, 2025 | ||||||||||||
Quoted prices in active markets for identical assets | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||
| Current liabilities | ||||||||||||
| Derivative liability | $ | $ | $ | |||||||||
| Total liabilities measured at fair value | $ | $ | $ | |||||||||
As of December 31, 2024 | ||||||||||||
Quoted prices in active markets for identical assets | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||
| Current liabilities | ||||||||||||
| Derivative liability | $ | $ | $ | |||||||||
| Total liabilities measured at fair value | $ | $ | $ | |||||||||
The estimated fair value of the conversion feature of the derivative liability is based on Monte Carlo simulations, a traditional valuation model. The derivative liability component of the convertible notes are classified as Level 3 due to significant unobservable inputs.
NOTE 16 – SEGMENT INFORMATION
We report our operating results through one reportable segment.
Our Chief Operating Decision Maker (“CODM”), as of March 31, 2025, was our Chief Executive Officer. Our CODM evaluates the performance of and allocates resources to our segment based on our consolidated net loss and earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment EBITDA is defined as segment revenue less operating costs and expenses, excluding depreciation and amortization interest income or expense (net), provision or benefit for income taxes, change in fair value of derivative liabilities, loss on extinguishment of debt, impairment of goodwill and intangible assets, and stock-based compensation expense (“Segment EBITDA”). We believe Segment EBITDA serves as a measure that assists our CODM and our investors in comparing our segment performance on a consistent basis.
Net loss and Segment EBITDA are used to monitor budgeted versus actual results. Additionally, review of budgeted versus actual results is used in assessing performance of the segment.
Our CODM does not use assets by segment to evaluate performance or allocate resources; therefore, we do not provide disclosure of assets by segment.
The following table presents our
segment information for the periods indicated and, because we currently only have
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Loss on extinguishment of debt | ||||||||
| Interest expense, net | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Segment EBITDA | $ | ( | ) | $ | ( | ) | ||
NOTE 17 – SUBSEQUENT EVENTS
On April 1, 2025, the remaining $
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 $
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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 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 Quarter 2025 Highlights
Our operating results for the three months ended March 31, 2025 included the following:
|
● ● |
Repayment of two term loans with interest rates exceeding 100% Conversion of $7.7 million of convertible debt into shares of common stock | |
| ● | Total gross profit increased to $1.8 million for the three months ended March 31, 2025, as compared to $0.7 million for the three months ended March 31, 2024. |
Results of Operations
Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024
Our financial results for the three months ended March 31, 2025 are summarized as follows in comparison to the three months ended March 31, 2024:
| Three Months Ended March, 31 | ||||||||||||
| 2025 | 2024 | Variance | ||||||||||
| Revenue: | ||||||||||||
| Security managed services | $ | 6,445,233 | $ | 7,158,633 | $ | (713,400 | ) | |||||
| Professional services | 569,823 | 766,498 | (196,675 | ) | ||||||||
| Cybersecurity software | 147,266 | 100,283 | 46,983 | |||||||||
| Total revenue | 7,162,322 | 8,025,414 | (863,092 | ) | ||||||||
| Cost of revenue: | ||||||||||||
| Security managed services | 2,003,847 | 2,553,949 | (550,102 | ) | ||||||||
| Professional services | 50,192 | 155,580 | (105,388 | ) | ||||||||
| Cybersecurity software | 33,230 | 30,505 | 2,725 | |||||||||
| Cost of payroll | 2,752,046 | 3,481,908 | (729,862 | ) | ||||||||
| Stock based compensation | 541,405 | 1,097,250 | (555,845 | ) | ||||||||
| Total cost of revenue | 5,380,720 | 7,319,192 | (1,938,472 | ) | ||||||||
| Total gross profit | 1,781,602 | 706,222 | 1,075,380 | |||||||||
| Operating expenses: | ||||||||||||
| Professional fees | 513,679 | 491,067 | 22,612 | |||||||||
| Advertising and marketing | 3,730 | 26,438 | (22,708 | ) | ||||||||
| Selling, general, and administrative | 2,656,891 | 3,978,594 | (1,321,703 | ) | ||||||||
| Stock-based compensation | 317,047 | 1,107,222 | (790,175 | ) | ||||||||
| Total operating expenses | 3,491,347 | 5,603,321 | (2,111,974 | ) | ||||||||
| Loss from operations | (1,709,745 | ) | (4,897,099 | ) | 3,187,354 | |||||||
| Other income (expense): | ||||||||||||
| Other income (expense) | (5,528 | ) | 38,892 | (44,420 | ) | |||||||
| Loss on extinguishment of convertible notes | (839,151 | ) | - | (839,151 | ) | |||||||
| Change in fair value of derivative liability | 5,387,691 | - | 5,387,691 | |||||||||
| Interest expense, net | (8,212,871 | ) | (749,825 | ) | (7,463,046 | ) | ||||||
| Total other income (expense) | (3,669,859 | ) | (710,933 | ) | (2,958,926 | ) | ||||||
| Loss from continuing operations | $ | (5,379,604 | ) | $ | (5,608,032 | ) | $ | 228,428 | ||||
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Revenue
Security managed services revenue decreased by $713,400, or 10%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to lower hardware and software sales.
Professional services revenue decreased by $196,675, or 26%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to fewer customer projects.
Cybersecurity software revenue increased by $46,983, or 47%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 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 $550,102, or 22%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to lower hardware and software sales.
Professional services cost of revenue decreased by $105,388, or 68%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a decreased use of consultants.
Cybersecurity software cost of revenue increased by $2,725, or 9%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to our increase in Checklight subscriptions.
Cost of payroll decreased by $729,862, or 21%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to headcount reductions in 2024.
Stock-based compensation expenses decreased by $555,845, or 51%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, due to the forfeiture of options by terminated employees and options that contractually expired.
Operating Expenses
Professional fees increased by $22,612, or 5%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, due to an increase in legal and accounting fees offset by a decrease in consultant fees.
Advertising and marketing expenses decreased by $22,708, or 86%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, due to utilizing internal resources for advertising and marketing activities.
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Selling, general, and administrative expenses decreased by $1,321,703, or 33%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 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 $790,175, or 71%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to the forfeiture of options by terminated employees and options that contractually expired.
Liquidity and Capital Resources
The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfying liabilities in the normal course of business. For the three months ended March 31, 2025, we incurred a net loss of $5,379,604 and negative cash flows from operations of $2,953,508 and expect to incur further losses through the end of 2025. In the report accompanying our financial statements for the year ended December 31, 2024, our independent registered public accounting firm stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so based on our recurring losses from operations and need to raise additional capital. These condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.
As of March 31, 2025, we had $289,409,103 of available funding under our Shelf Registration Statement on Form S-3 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 our Shelf Registration Statement on Form S-3, 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 only permitted to utilize a “shelf” registration statement for primary offerings, including the Shelf Registration Statement, 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.
Working Capital Deficit
Our working capital deficit as of March 31, 2025 in comparison to our working capital deficit as of December 31, 2024, is summarized as follows:
| As of | ||||||||
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Current assets | $ | 5,010,286 | $ | 3,481,071 | ||||
| Current liabilities | 20,357,544 | 24,955,647 | ||||||
| Working capital deficit | $ | (15,347,258 | ) | $ | (21,474,576 | ) | ||
The increase in current assets is primarily due to an increase in cash and cash equivalents and prepaid expenses and other current assets of $794,271 and $944,858, respectively, offset by a decrease in accounts receivable, net, and prepaid cost of revenue of $95,814 and $114,135, respectively. The decrease in current liabilities is primarily due to a decrease in accounts payable and accrued expenses, loans payable, and derivative liability of $1,338,235, $1,629,647, and $2,023,008, respectively.
| 22 |
Cash Flows
Our cash flows for the three months ended March 31, 2025 in comparison to our cash flows for the three months ended March 31, 2024, can be summarized as follows:
| Three Months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (2,953,508 | ) | $ | (1,408,633 | ) | ||
| Net cash used in investing activities | - | (75,571 | ) | |||||
| Net cash provided by financing activities | 3,747,779 | 2,014,034 | ||||||
| Effect of exchange rates on cash and cash equivalents | - | (75,283 | ) | |||||
Operating Activities
Net cash used in operating activities was $2,953,508 for the three months ended March 31, 2025 and was primarily due to cash used to fund a net loss of $5,379,604, adjusted for non-cash expenses in the aggregate of $4,563,916 and additional cash inflow by changes in the levels of operating assets and liabilities, primarily as a result of a decrease in accounts payable and accrued expenses, and prepaids and other current assets. Net cash used in operating activities was $1,408,633 for the three months ended March 31, 2024 and was primarily due to cash used to fund a net loss of $6,609,199, adjusted for non-cash expenses in the aggregate of $3,207,036 and additional cash inflow by changes in the levels of operating assets and liabilities, primarily as a result of a decrease in accounts receivables, net, and an increase in deferred revenue.
Investing Activities
Net cash used in investing activities of zero and $75,571 for the three months ended March 31, 2025 and 2024, respectively, was due to purchases of property and equipment.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2025 was $3,747,779, which was primarily due to $1,719,556 from the sale of our common stock, cash received from borrowings on our convertible loans payable and line of credit, net of debt issuance cost, of $4,591,358, offset by $2,563,135 in repayments of our loans payable and lines of credit. Net cash provided by financing activities for the three months ended March 31, 2024 was $2,014,034, which was primarily due to cash received from borrowings on our loans payable and lines of credit, net of debt issuance cost, of $4,571,583, offset by $2,605,636 in repayments of our loans payable and lines of credit.
The accompanying financial statements have been prepared on a going concern basis, which assumes the realization of assets and satisfaction of liabilities in the normal course of business. However, due to losses incurred, substantial doubt about our ability to continue as a going concern exists.
We are actively evaluating strategies to obtain the necessary additional funding for future operations. These strategies may include, obtaining equity financing, issuing debt, or entering into other financing arrangements, and restructuring of operations to grow revenues and decrease expenses. However, we may be unable to access further equity or debt financing when needed. Consequently, there is no assurance that we will be able to obtain the necessary liquidity when needed or under acceptable terms, if at all.
Our ability to continue as a going concern depends on successfully executing the plan outlined in our growth strategy and eventually achieving profitable operations. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.
Critical Accounting Policies and Estimates
Our critical accounting policies are more fully described in the notes to our condensed consolidated financial statements included herein for the quarter ended March 31, 2025 and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 31, 2025.
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Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods. Our significant estimates and assumptions include the allowance for credit losses, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the valuation of convertible notes, derivative liabilities, the adequacy of insurance reserves, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate could be affected by external conditions, including those unique to us and general economic conditions. It is reasonably possible that these external factors could have an effect on our estimates and could cause actual results to differ from those estimates.
Fair Value Measurement
The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in the valuation of an asset or liability. It establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are assessed for impairment annually, or more frequently, if events occur that would indicate a potential reduction in the fair value of a reporting unit below its carrying value. We perform our annual impairment review of goodwill at the reporting unit level. If we determine the fair value of the reporting unit’s goodwill or other indefinite-lived intangible assets is less than their carrying value as a result of an annual or interim test, an impairment loss is recognized and reflected in operating income or loss in the consolidated statements of operations during the period incurred. We perform our impairment assessment based on a quantitative analysis performed for our reporting unit.
We review finite-lived intangible assets for impairment whenever an event occurs or circumstances change that indicate that the carrying amount of such assets may not be fully recoverable. Recoverability is determined based on an estimate of undiscounted future cash flows resulting from the use of an asset and its eventual disposition. Should an asset not be recoverable, an impairment loss is measured by comparing the fair value of the asset to its carrying value. If we determine the fair value of an asset is less than the carrying value, an impairment loss is recognized in operating income or loss in the consolidated statements of operations during the period incurred.
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Impairment of Long-Lived Assets
We will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily by using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.
Stock-Based Compensation
We measure and recognize compensation expense for equity-based awards based on the grant date fair values of the awards. For options with service or performance-based vesting conditions, the grant date fair value is estimated using the Black-Scholes option-pricing model, which requires management to make assumptions and apply judgment in determining the grant date fair value.
The most significant assumptions and judgments include estimating the expected option term, the expected stock price volatility, and the risk-free interest rates. The assumptions used in our option pricing model represent management’s best estimates. If factors change and different assumptions are used, our equity-based compensation expense could be materially different in the future. We record forfeitures when they occur, based on our lack of historical data available to estimate an appropriate forfeiture rate. Changes in our forfeiture rate can have a significant impact on our equity-based compensation expense since the cumulative effect of adjusting the forfeiture rate is recognized in the period in which the estimate is changed.
We will continue to use judgment in evaluating the assumptions related to our equity-based awards on a prospective basis. As we continue to accumulate additional data related to our awards, we may refine our estimates, which could materially impact our future equity-based compensation expense.
Revenue Recognition
Our agreements with clients are primarily service contracts that range in duration from a few months to three year. We recognize revenue when control of these services is transferred to the client for an amount, referred to as the transaction price, which reflects the consideration to which we are expected to be entitled in exchange for those goods or services.
A contract with a client exists only when:
| ● | the parties to the contract have approved it and are committed to perform their respective obligations; | |
| ● | we can identify each party’s rights regarding the distinct services to be transferred (“performance obligations”); | |
| ● | we can determine the transaction price for the services to be transferred; and | |
| ● | the contract has commercial substance, and it is probable that we will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the client. |
We do not adjust the promised amount of consideration for the effects of a significant financing component since we expect, at contract inception, that the period between the time of transfer of the promised goods or services to the client and the time the client pays for these goods or services to be generally one year or less. Our credit terms to clients generally average 30 days, although in some cases payments are required in 15 days.
We do not disclose the value of unsatisfied performance obligations for contracts with original expected duration of one year or less.
Our revenue is categorized and disaggregated as reflected in our statements of operations as follows:
Security Managed Services
Security managed services revenue primarily consists of compliance, security managed services, SOC managed services, and vCISO. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.
Professional Services
Professional services revenue primarily consists of technical assessments, incident response and forensics, training, and other cybersecurity services. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.
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Cybersecurity Software
Cybersecurity revenue primarily consists of our internally developed software products, CHECKLIGHT Endpoint Security Monitoring, ARGO Security Management, CISO Edge Cloud Security Platform, DISC Net Gen VPN, and Skanda Breach Assessment Tool. Each software offering is a single performance obligation, and we begin revenue recognition upon provisioning of our cybersecurity software to our customers and recognize ratably over the duration of the service period. We currently do not bundle our cybersecurity software with other product offerings, and as a result, judgment is not required to determine standalone selling price.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
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 of March 31, 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 March 31, 2025, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
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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
In March 2025, we issued 100,000 shares of our common stock to TraDigital Marketing Group as compensation for investor relations services provided to our company.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the quarter ended March
31, 2025, none of our directors or officers
Item 6. Exhibits
| Incorporated by Reference | ||||||||
|
Exhibit Number |
Exhibit Description | Form | Exhibit | Filing Date | ||||
| 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 herewith.
#Management contracts and compensatory plans and arrangements.
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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: | May 15, 2025 | |
| By: | /s/ Debra L. Smith | |
| Debra L. Smith | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
| Date: | May 15, 2025 | |
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