CISO (CISO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q2 2025 financials show decreased revenue and net loss, with reduced liabilities, but going concern doubt persists Condensed Consolidated Balance Sheets Assets slightly decreased to $25.8 million, liabilities significantly reduced to $18.2 million, improving equity to $7.6 million Condensed Consolidated Balance Sheet Highlights (in USD) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $25,789,188 | $26,654,456 | | Cash and cash equivalents | $760,754 | $992,589 | | Goodwill | $19,900,550 | $19,900,550 | | Total Liabilities | $18,236,545 | $25,505,392 | | Total Current Liabilities | $17,802,580 | $24,955,647 | | Derivative liability | $0 | $2,102,927 | | Total Stockholders' Equity | $7,552,643 | $1,149,064 | Condensed Consolidated Statements of Operations and Comprehensive Loss Revenue decreased in Q2 2025, but significant cost reductions improved gross profit and reduced net loss for both the quarter and six-month period Three Months Ended June 30, (in USD) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $6,713,587 | $7,808,425 | | Total Gross Profit | $1,636,840 | $933,909 | | Loss from Operations | $(2,329,387) | $(4,241,607) | | Net Loss | $(3,009,921) | $(8,436,887) | | Net Loss per Share | $(0.09) | $(0.69) | Six Months Ended June 30, (in USD) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $13,875,909 | $15,833,839 | | Total Gross Profit | $3,418,442 | $1,640,131 | | Loss from Operations | $(4,039,132) | $(9,138,506) | | Net Loss | $(8,389,525) | $(15,046,075) | | Net Loss per Share | $(0.36) | $(1.24) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $5.3 million in H1 2025, partially offset by $5.1 million from financing, resulting in a net cash decrease Six Months Ended June 30, Cash Flow Summary (in USD) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,303,332) | $(2,679,622) | | Net cash used in investing activities | $0 | $(83,095) | | Net cash provided by financing activities | $5,071,497 | $3,068,338 | | Net (decrease) increase in cash | $(231,835) | $246,407 | Notes to Condensed Consolidated Financial Statements Notes detail the company's cybersecurity business, ongoing going concern doubt, debt instruments, and a significant post-quarter debt-to-equity conversion - The company has substantial doubt about its ability to continue as a going concern due to recurring losses, cash used in operations, and a working capital deficit. Its continuation is highly dependent on raising additional capital[31] - In December 2024 and January 2025, the company issued convertible notes with an effective interest rate exceeding 100% per annum. These notes were fully converted into common stock during the six months ended June 30, 2025, resulting in the derecognition of a related derivative liability[90][94] - Subsequent to the quarter end, on August 4, 2025, the company exchanged approximately $9.3 million of outstanding convertible notes (principal and interest) for newly authorized Series A Preferred Stock, significantly altering its capital structure[100][102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased revenue but improved gross profit due to cost reductions, while liquidity remains a major concern with ongoing going concern doubt - For the first half of 2025, total gross profit more than doubled to $3.4 million from $1.6 million in H1 2024, despite a revenue decline. This was driven by significant cost-cutting measures[106][116] - The company's working capital deficit improved to $(14.5) million from $(21.5) million at year-end 2024, mainly due to the reduction of debt and accounts payable[135] - The company is subject to "baby shelf" rules for its S-3 registration, limiting its ability to sell securities to no more than one-third of its public float (which is below $75 million) in any 12-month period, constraining its capital-raising ability[129] Results of Operations Q2 2025 revenue fell 14%, but cost reductions led to a 75% increase in gross profit and a significantly smaller operating loss for the quarter and six-month period Revenue Comparison - Three Months Ended June 30 (in USD) | Revenue Stream | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Security managed services | $6,046,950 | $7,080,326 | -15% | | Professional services | $522,804 | $632,225 | -17% | | Cybersecurity software | $143,833 | $95,874 | +50% | | Total Revenue | $6,713,587 | $7,808,425 | -14% | - For Q2 2025, selling, general, and administrative (SG&A) expenses decreased by 27% YoY, and stock-based compensation fell by 49%, primarily due to headcount reductions made in 2024[114][115] - For the six months ended June 30, 2025, interest expense increased dramatically to $8.9 million from $1.4 million in the prior year, mainly due to the accretion of convertible notes issued in late 2024 and early 2025[116][127] Liquidity and Capital Resources Significant liquidity challenges persist with a $14.5 million working capital deficit and going concern doubt, necessitating capital raises via its S-3 shelf registration - The company reported a net loss of $8.4 million and cash used in operations of $5.3 million for the first six months of 2025, highlighting the ongoing cash burn[128] - Financing activities provided $5.1 million in cash during H1 2025, primarily from stock sales ($2.7 million), warrant exercises ($0.7 million), and net borrowings, which were used to fund operations and repay other debt[141] - A significant portion of the company's debt as of June 30, 2025, was addressed post-quarter via an exchange agreement, converting approximately $9.3 million of convertible notes and accrued interest into Series A Preferred Stock[132] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, CISO Global, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[143] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[146] - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[147] PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[150] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - The company states there have been no material changes from the risk factors disclosed in its 2024 Annual Report on Form 10-K[151] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading plans during Q2 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading plans during the quarter ended June 30, 2025[155]