CISO Global, Inc.: Form 10-Q for the period ended Jun 30, 2025

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:

20

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:

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:

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:

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.

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.

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.