Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

Third Quarter 2025 Highlights

Our operating results for the nine months ended September 30, 2025 included the following:

	●	Total current liabilities reduced by $16,585,255 to $8,370,392 as compared to December 31, 2024 of $24,955,647.
	●	Total gross profit increased to $5,025,756 for the nine months ended September 30, 2025 as compared to $2,674,199 for the nine months ended September 30, 2024.
	●	Reduced our loss from operations to $6,673,139 for the nine months ended September 30, 2025, as compared to $12,657,510 for the nine months ended September 30, 2024.

Results of Operations

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

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

		Three Months Ended September 30,
		2025				2024				Variance
Revenue:
Security managed services		$	5,835,909			$	6,965,518			$	(1,129,609	)
Professional services			480,351				437,209				43,142
Cybersecurity software			145,538				108,570				36,968
Total revenue			6,461,798				7,511,297				(1,049,499	)
Cost of revenue:
Security managed services			1,889,615				2,319,234				(429,619	)
Professional services			45,720				84,947				(39,227	)
Cybersecurity software			54,716				29,939				24,777
Cost of payroll			2,539,826				2,982,871				(443,045	)
Stock-based compensation			324,607				1,060,238				(735,631	)
Total cost of revenue			4,854,484				6,477,229				(1,622,745	)
Total gross profit			1,607,314				1,034,068				573,246
Operating expenses:
Professional fees			416,504				223,149				193,355
Advertising and marketing			311,911				1,339				310,572
Selling, general, and administrative			2,572,001				3,083,920				(511,919	)
Stock-based compensation			940,905				1,244,664				(303,759	)
Total operating expenses			4,241,321				4,553,072				(311,751	)
Loss from operations			(2,634,007	)			(3,519,004	)			884,997
Gain on extinguishment of convertible notes			5,296,103				-				5,296,103
Interest expense			(127,213	)			(1,237,301	)			1,110,088
Other (expense) income, net			(2,455	)			917,852				(920,307	)
Income (loss) from continuing operations		$	2,532,428			$	(3,838,453	)		$	6,370,881

Revenue

Security managed services revenue decreased by $1,129,609, or 16%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to lower annual contract values among newly acquired customers.

Professional services revenue increased by $43,142, or 10%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to more customer projects.

Cybersecurity software revenue increased by $36,968, or 34%, for the three months ended September 30, 2025 as compared to the three months ended September 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 $429,619, or 19%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to lower costs associated with existing client base.

Professional services cost of revenue decreased by $39,227, or 46%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, due to decreased use of consultants.

Cybersecurity software cost of revenue increased by $24,777, or 83%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to our increase in Checklight subscriptions.

Cost of payroll decreased by $443,045, or 15%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to headcount reductions.

Stock-based compensation expenses decreased by $735,631, or 69%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, due to the forfeiture of options by terminated employees and options that contractually expired.

Operating Expenses

Professional fees increased by $193,355, or 87%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, due to an increase in legal and accounting fees.

Advertising and marketing expenses increased by $310,572 for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, due to investment into marketing efforts.

Selling, general, and administrative expenses decreased by $511,919, or 17%, for the three months ended September 30, 2025 as compared to the three months ended September 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 $303,759, or 24%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to the forfeiture of options by terminated employees, fewer grants granted, and options that contractually expired.

Other Income (Expense)

The gain on extinguishment of convertible notes increased by $5,296,103 for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 due to the conversion of certain convertible notes into shares of Series A Preferred Stock during 2025. No such conversion occurred in 2024.

Interest expense decreased by $1,110,088 for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to the extinguishment of convertible notes payable.

Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024

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

		Nine Months Ended September 30,
		2025				2024				Variance
Revenue:
Security managed services		$	18,328,092			$	21,204,477			$	(2,876,385	)
Professional services			1,572,978				1,835,932				(262,954	)
Cybersecurity software			436,637				304,727				131,910
Total revenue			20,337,707				23,345,136				(3,007,429	)
Cost of revenue:
Security managed services			5,702,790				7,207,886				(1,505,096	)
Professional services			168,459				375,111				(206,652	)
Cybersecurity software			146,761				88,708				58,053
Cost of payroll			7,950,829				9,641,597				(1,690,768	)
Stock-based compensation			1,343,112				3,357,635				(2,014,523	)
Total cost of revenue			15,311,951				20,670,937				(5,358,986	)
Total gross profit			5,025,756				2,674,199				2,351,557
Operating expenses:
Professional fees			1,096,361				1,025,410				70,951
Advertising and marketing			840,943				34,099				806,844
Selling, general, and administrative			7,858,988				10,667,794				(2,808,806	)
Stock-based compensation			1,902,603				3,604,406				(1,701,803	)
Total operating expenses			11,698,895				15,331,709				(3,632,814	)
Loss from operations			(6,673,139	)			(12,657,510	)			5,984,371
Gain on extinguishment of convertible notes, net			4,432,434				-				4,432,434
Change in fair value of derivative liability			5,467,610				-				5,467,610
Interest expense			(9,076,393	)			(2,611,067	)			(6,465,326	)
Other (expense) income, net			(7,609	)			882,934				(890,543	)
Loss from continuing operations		$	(5,857,097	)		$	(14,385,643	)		$	8,528,546

Revenue

Security managed services revenue decreased by $2,876,385, or 14%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to lower annual contract values among newly acquired customers.

Professional services revenue decreased by $262,954, or 14%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to lower customer projects.

Cybersecurity software revenue increased by $131,910, or 43%, for the nine months ended September 30, 2025 as compared to the nine months ended September 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 $1,505,096, or 21%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to lower costs associated with existing client base.

Professional services cost of revenue decreased by $206,652, or 55%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, due to our decreased use of consultants.

Cybersecurity software cost of revenue increased by $58,053, or 65%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

Cost of payroll decreased by $1,690,768, or 18%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to headcount reductions.

Stock-based compensation expenses decreased by $2,014,523, or 60%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, due to the forfeiture of options by terminated employees and options that contractually expired.

Operating Expenses

Professional fees increased by $70,951, or 7%, for the nine months ended September 30, 2025 as compared to nine months ended September 30, 2024, due to an increase in legal and accounting fees.

Advertising and marketing expenses increased by $806,844 for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, due to marketing efforts initiated in 2025.

Selling, general, and administrative expenses decreased by $2,808,806, or 26%, for the nine months ended September 30, 2025 as compared to the nine months ended September 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 $1,701,803, or 47%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to the forfeiture of options by terminated employees, fewer grants granted, and options that contractually expired.

Other Income (Expense)

The gain on extinguishment of convertible notes increased by $4,432,434 for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 due to the conversion of certain convertible notes into shares of our Common Stock and Series A Preferred Stock during 2025. No such conversion occurred in 2024.

Change in fair value of derivative liability increased by $5,467,610 for the nine months ended September 30, 2025 as compared to the nine months ended September 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 $6,456,326 for the nine months ended September 30, 2025 as compared to the nine months ended September 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 nine months ended September 30, 2025, we incurred a net loss of $5,857,097, reported cash used in operations of $6,180,042 and expect to incur further losses through the end of 2025. Further, we have a working capital deficit of $5,376,502 as of September 30, 2025. As a result, substantial doubt about our ability to continue as a going concern exists. The Company's 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.

Series A Preferred Stock

On August 4, 2025, we entered into Exchange Agreements (each, an "Exchange Agreement," and collectively, the "Exchange Agreements") with each of Hensley & Company, d/b/a Hensley Beverage Company ("Hensley"), an entity affiliated with Andrew K. McCain, a director of our company, and JC Associates, Inc. ("J C Associates," an unrelated party, and collectively with Hensley, the "Holders"). Pursuant to the Exchange Agreements, the Holders exchange certain outstanding convertible notes payable with aggregate principal and accrued interest of approximately $9,297,894 (collectively, the "Exchange Notes") for an aggregate of 9,297,894 newly authorized shares of Series A Preferred Stock, par value $0.00001 per share ("Series A Preferred Stock"). Upon the closing of the transactions contemplated by the Exchange Agreements, the Exchange Notes were cancelled, and the Holders relinquished all rights, powers, privileges, remedies, or interest under such securities. The Series A Preferred Stock is entitled to cumulative dividends at a rate of 10% per annum, accruing daily and compounding quarterly, whether or not declared by the Board of Directors, based on the original issuance price plus any previously accrued and unpaid dividends. As of September 30, 2025, cumulative dividends in arrears on the Series A Preferred Stock totaled $145,200; no dividends were declared during the period.

As a result of this transaction, during the three and nine months ended September 30, 2025, the Company recognized a gain on troubled debt restructuring of $5,296,103, which reflects the difference between the carrying value of the Exchange Notes and the estimated fair value of the Series A Preferred Stock issued.

Series B Preferred Stock

On September 24, 2025, we entered into a Preferred Equity Purchase Agreement (the "Purchase Agreement") with B. Riley Principal Capital I ("B. Riley"), an affiliate of B. Riley Securities, Inc. ("BRS"), pursuant to which we will have the right to issue and sell to B. Riley, and B. Riley must purchase from us, up to $15.0 million shares of our newly authorized Series B Convertible Preferred Stock, par value $0.00001 per share (the "Series B Preferred Stock"). Such sales of Series B Preferred Stock by us to B. Riley, if any, will be subject to certain limitations and conditions set forth in the Purchase Agreement, and may occur from time to time, at our sole discretion, over the 18-month period commencing September 24, 2025 and terminating on the earliest of (i) March 24, 2027, (ii) the date on which B. Riley shall have made payment of the aggregate purchase price equal to $15.0 million, (iii) if we have not obtained approval by our stockholders by September 24, 2026, such date as there ceases to be a sufficient number of authorized but unissued shares of Common Stock of the Company, par value $0.00001 (the "Common Stock") remaining under the Exchange Cap. In no event may we issue or sell to B. Riley under the Purchase Agreement shares of our Series B Preferred Stock that are convertible into an aggregate number of shares of Common Stock exceeding a customary 9.99% beneficial ownership limitation, as well as a conversion limitation equal to 6,821,115 (representing 19.99% of the aggregate number of shares of Common Stock issued and outstanding as of September 24, 2025 and subject to adjustment for any stock splits, combinations or the like) pursuant to applicable Nasdaq Listing Rules (the "Exchange Cap") until approval has been obtained from our stockholders. As of September 30, 2025, no shares of Series B Preferred Stock were sold to B. Riley pursuant to the Purchase Agreement.

July 2025 Prospectus

On June 26, 2025, we renewed our shelf registration statement on Form S-3 (that was deemed effective on July 7, 2025) ("July 2025 Prospectus") that 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.

Upon the renewal of our shelf registration statement on Form S-3, we had $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 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, and our shelf registration statement on Form S-3 is 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

The Company's material cash requirements included the following contractual obligations as of September 30, 2025:

Indebtedness

As of September 30, 2025, the carrying value of our outstanding debt obligations was $2,053,884, substantially all of which is scheduled to mature during the remainder of 2025 and during 2026.

Leases

As of September 30, 2025, the carrying value of our outstanding operating lease obligations was $483,192.

Sources of Funding to Satisfy Material Cash Requirements

Our principal sources of liquidity are our cash on hand, cash provided by operations, the Purchase Agreement discussed above, and our shelf registration statement on Form S-3 discussed above. Our current cash on hand is not sufficient to satisfy our operating cash needs for the 12 months from the filing of this Quarterly Report on Form 10-Q. 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 September 30, 2025 in comparison to our working capital deficit as of December 31, 2024, is summarized as follows:

		September 30,				December 31,
		2025				2024
Current assets		$	2,993,890			$	3,481,071
Current liabilities			8,370,392				24,955,647
Working capital deficit		$	(5,376,502	)		$	(21,474,576	)

The decrease in current assets is primarily due to the $176,198 increase in prepaid expenses and other current assets being more than offset by decreases in accounts receivable and prepaid cost of revenue of $539,177 and $248,355, respectively. 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 $4,128,590, $9,637,106, and $2,102,927, respectively. During the nine months ended September 30, 2025, we paid down accounts payable and loans payable outstanding, certain convertible notes payable were converted into shares of our Common Stock and preferred stock, and the derivative liability was derecognized as a result of the conversion of the notes payable.

Cash Flows

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

		Nine Months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(6,180,042	)		$	(3,582,726	)
Net cash provided by investing activities			-				916,905
Net cash provided by financing activities			6,299,182				2,105,679
Effect of exchange rates on cash and cash equivalents			-				(59,214	)
Net increase (decrease) in cash and cash equivalents		$	119,140			$	(619,356	)

Operating Activities

Net cash used in operating activities was $6,180,042 for the nine months ended September 30, 2025 and was primarily due to cash used to fund a net loss of $5,857,097 (which includes non-cash expenses in the aggregate of $4,044,057), a decrease in accounts payable and accrued expenses and a decrease in deferred revenue. Net cash used in operating activities was $3,582,726 for the nine months ended September 30, 2024 and was primarily due to cash used to fund a net loss of $18,723,961, adjusted for non-cash expenses in the aggregate of $11,704,296 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 provided by investing activities of $916,905 for the nine months ended September 30, 2024 was primarily due to the sale of our subsidiary vCISO.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $6,299,182, which was primarily due to $2,816,075 from the sale of our Common Stock, $1,547,999 from the exercise of warrants, cash received from borrowings on our convertible loans payable and line of credit (net of debt issuance costs) of $16,276,483, offset by $14,344,167 in repayments of our loans payable and line of credit. Net cash provided by financing activities for the nine months ended September 30, 2024 was $2,105,679, which was primarily due to cash received from borrowings on our loans payable and lines of credit, net of debt issuance cost, of $6,694,412, offset by $4,743,680 in repayments of our loans payable and lines 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.