CISO Global, Inc.

(unaudited)

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

NOTE 1 –ORGANIZATION OF BUSINESS AND GOING CONCERN

Description of the Business

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

Basis of Presentation

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

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

Reclassifications

Reclassifications of certain immaterial prior period amounts have been made to conform to the current period presentation. The reclassifications had no impact on the reported results of operations.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, due to losses incurred, historical cash used in operations and the existence of a working capital deficit, 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.

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,” 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.

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 of 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 (as defined below). 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

On June 26, 2025, we renewed our expiring shelf registration statement on Form S-3 (that was deemed effective on July 7, 2025) (“July 2025 Prospectus”) that contains two prospectuses:

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

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

Segment Information

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

Geographic Information

All of our revenue and property and equipment is located within the United States.

Use of Estimates

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

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

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Net Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of Common Stock and potentially dilutive shares of Common Stock outstanding during the period.

For dilutive securities, all outstanding stock options, restricted stock units, warrants, convertible notes payable, and Series A Preferred Stock are considered potentially outstanding Common Stock. The dilutive effect, if any, of stock options, restricted stock units, and warrants is calculated using the treasury stock method. All outstanding convertible notes payable and Series A Preferred Stock are considered Common Stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method.

The following is a reconciliation of the numerators and denominators of the basic net income (loss) per share computations for the periods presented:

The following is a reconciliation of the numerators and denominators of the diluted net income (loss) per share computations for the periods presented:

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

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:

The Company recognized revenue of $1,051,138 and $1,212,483 for the nine months ended September 30, 2025 and 2024, respectively which was included in the corresponding deferred revenue balance at the beginning of the period. The deferred revenue balance as of September 30, 2025 represents our remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied, and is expected to be recognized in revenue as follows:

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 September 30, 2025 and December 31, 2024, our net deferred tax asset has been fully reserved.

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

Recent Accounting Pronouncements

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

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

In November 2024, the FASB issued ASU 2024-04, “Debt (Subtopic 470-20): Debt with Conversion and Other Options.” ASU 2024-04 clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. ASU 2024-04 is effective for reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted for entities that have adopted ASU 2020-06. We adopted ASU 2024-04 during the three months ended September 30, 2025 (with an effective date of January 1, 2025), which did not have a material impact on our consolidated financial statements.

NOTE 3 –DISCONTINUED OPERATIONS

Latin America

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

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

vCISO

In September 2024, we entered into an Intellectual Property Purchase Agreement in which we sold our wholly-owned subsidiary vCISO, LLC.(“vCISO”), for cash proceeds of $1,000,000. vCISO owns substantially all of our internally developed intellectual property currently marketed to our customers and also being developed for future deployment. As a condition of closing the Intellectual Property Purchase Agreement, we concurrently entered into a License-Back and Buy-Back Agreement which provides us with a perpetual, transferable and royalty-free license to use the intellectual property rights to sell such software to our customers. The license was exclusive for our use for the initial six months of this agreement. In exchange for these rights, we have agreed to continue development of the intellectual property at our own cost.

vCISO did not hold any assets or liabilities reported in our condensed consolidated financial statements, as a result, we recorded a $1,000,000 gain on the disposition of vCISO.

NOTE 4 –PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

NOTE 5 –PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following:

Depreciation expense was $69,761 and $79,481 for the three months ended September 30, 2025 and 2024, respectively and $225,495 and $242,775 for the nine months ended September 30, 2025 and 2024, respectively.

NOTE 6 –INTANGIBLE ASSETS AND GOODWILL

Goodwill

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

Intangible Assets

Intangible assets, net are summarized as follows:

The weighted average remaining useful life of finite-lived intangible assets is 1.74 years as of September 30, 2025.

Amortization expense for the three months ended September 30, 2025 and 2024 was $232,019 and $400,905, respectively, and $698,359 and $1,352,624 for the nine months ended September 30, 2025 and 2024, respectively.

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

NOTE 7 –ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

Note 8 –RELATED PARTY TRANSACTIONS

Managed Services Agreement with Hensley Beverage Company – Related Party

In July 2021, we entered into a 1-year Managed Services Agreement with Hensley Beverage Company to provide secured managed services. We also may be engaged by Hensley Beverage Company from time to time to provide other related services outside the scope of the Managed Services Agreement. While the agreement provided for an original term through December 31, 2021, the agreement will continue until terminated by either party. For the three months ended September 30, 2025 and 2024, we received $490,089 and $385,998, respectively, and for the nine months ended September 30, 2025 and 2024, we received $769,683 and $1,561,911, respectively, from Hensley Beverage Company for contracted services, and had an outstanding receivable balance of $8,097 and $0 as of September 30, 2025 and December 31, 2024, respectively. Andy McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company, the parent company of Hensley Beverage Company.

Convertible Note Payable with Hensley & Company

In March 2023, we issued an unsecured convertible note payable to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest was due on March 20, 2025. On March 25, 2025, we entered into Amendment #1 to this convertible note, which extended the maturity date of the convertible note to March 20, 2026. At any time prior to, or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our Common Stock at a conversion price of $18.00 per share. During each of the three months ended September 30, 2025 and 2024, we recorded interest expense of $41,667 and $125,000, respectively. During each of the nine months ended September 30, 2025 and 2024, we recorded interest expense of $291,667 and $375,000, respectively. As of September 30, 2025 and December 31, 2024, we had accrued interest payable of $0 and $888,888, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company. On August 4, 2025, the principal amount of $5,000,000 together with $1,180,554 of accrued and unpaid interest payable under the convertible note were converted into Series A Preferred Stock and the convertible note was fully extinguished. Refer to Note 9, “Stockholders’ Equity,” and Note 11, “Debt,” for further discussion.

Note 9 –STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2025, we sold 112,907 shares of our Common Stock for proceeds of $131,321 (net of $4,841 of offering costs), under our registration statement on Form S-3 that was declared effective on July 7, 2025.

For the three and nine months ended September 30, 2025, we sold 0 and 4,933,395 shares, respectively, of our Common Stock for proceeds of $0 and $2,684,754 (net of $97,517 of offering costs), respectively, under our registration statement on Form S-3 that was declared effective on June 27, 2022.

For the three and nine months ended September 30, 2024, we sold 0 and 126,688 shares, respectively, of our Common Stock for proceeds of $0 and $154,947 (net of $5,777 of offering costs), respectively, under our registration statement on Form S-3 that was declared effective on June 27, 2022.

Series A Preferred Stock

On August 4, 2025, we filed a Certificate of Designations, Preferences and Rights of Series A Preferred Stock of CISO Global, Inc. (the “Series A Certificate of Designations”). A summary of the Series A Certificate of Designations of Series A Preferred Stock is as follows:

On August 4, 2025, we entered into the Exchange Agreements with Hensley, an entity affiliated with Andrew K. McCain, a director of our company, and JC Associates. Pursuant to the Exchange Agreements, the Holders exchange certain outstanding convertible notes, as amended from time to time, with aggregate principal and accrued interest of approximately $9,297,894 for an aggregate of 9,297,894 newly authorized shares of 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 25, 2025, we filed with the Secretary of State of the State of Delaware a Certificate of Designations, Preferences and Rights of Series B Preferred Stock of CISO Global, Inc. (the “Series B Certificate of Designations”). The Series B Certificate of Designations sets forth the rights, preferences, privileges, and restrictions of the shares of Series B Preferred Stock. Following is a summary of the terms of the Series B Preferred Stock.

On September 24, 2025, we entered the Purchase Agreement with B. Riley, 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 of shares of our newly authorized 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 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 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.

Stock Options

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

The following table summarizes stock option activity for the nine months ended September 30, 2025:

Total stock-based compensation expense related to the stock options was $767,447 and $2,247,002 for the three months ended September 30, 2025 and 2024, respectively, and $2,694,690 and $6,904,141 for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, there was future compensation expense of $2,575,940 with a weighted average recognition period of 1.55 years related to the stock options.

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

Restricted Stock Units

We granted restricted stock units (“RSUs”) that only contain a service-based vesting condition that is typically satisfied over four years. We recognize the accounting grant date fair value of equity-based awards as compensation expense over the requisite service period. The fair value of RSUs is determined by the closing price of the Company’s Common Stock on the grant date. On June 13, 2025, we granted 1,550,000 RSUs with a weighted-average grant date fair value of $0.96. Total stock-based compensation expense related to the RSUs was $94,784 and $112,110 for the three and nine months ended September 30, 2025, respectively. As of September 30, 2025, there was unrecognized future compensation expense of $1,375,890 with a weighted average recognition period of 3.70 years related to the RSUs.

Warrants

The following table summarizes warrant activity for the nine months ended September 30, 2025:

NOTE 10 –COMMITMENTS AND CONTINGENCIES

Legal Claims

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

Indirect Taxes

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

As of September 30, 2025 and December 31, 2024, our accrual for estimated indirect tax liabilities was $34,331 and $32,959, respectively, reflecting our best estimate of the potential liability based on an analysis of our business activities, revenues subject to indirect taxes, and applicable regulations. Although we believe our indirect tax estimates and associated liabilities are reasonable, the final determination of indirect tax audits, litigation, or settlements could be materially different than the amounts established for indirect tax contingencies.

Warranties

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

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

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

NOTE 11 –DEBT

Term Loans

In November 2023, we entered into a business loan and security agreement, pursuant to which we obtained a loan with a principal amount of $2,200,000 and paid an origination fee of $44,000. The business loan carried an interest rate of 53.44% per annum and was payable in 52 weekly installments of $53,731. On March 28, 2024, under a troubled debt restructuring, we entered into a Business Loan and Security Agreement (the “Loan Agreement”) with LendSpark Corporation (the “Lender”), pursuant to which we obtained a restructured loan with a principal amount of $2,200,000 (the “Restructured Loan”) from the Lender. In connection with the Restructured Loan, we entered into a Fee Agreement with the Lender, pursuant to which we issued 100,000 shares of our Common Stock, as partial consideration for the Lender’s agreement to enter into the Loan Agreement and extend credit to us. The Restructured Loan bore interest at a rate of 51.73% per annum and was payable in 52 weekly installments of $53,308, commencing on April 5, 2024. We recorded interest expense of $0 and $230,904 for the three months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, we recorded interest expense of $54,561 and $1,100,103, respectively. The Restructured Loan was repaid in full on March 26, 2025.

In June 2024, we entered into a Subordinated Business Loan and Security Agreement (“Subordinated Business Loan Agreement”) with Agile Capital Funding, LLC (“Agile”), pursuant to which we obtained a loan with a principal amount of $2,000,000 plus an administrative agent fee paid of $100,000 (“Subordinated Business Loan”). The Subordinated Business Loan was in excess of 100% per annum and was payable in 30 weekly installments. The first four installments due were $75,000 followed by 26 installments of $103,154. For the three and nine months ended September 30, 2024, we recorded interest expense of $694,128. This loan was repaid in full in February 2025.

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

In November 2024, we entered into an Intellectual Property Buy-Back Purchase Agreement, pursuant to which we reacquired vCISO, LLC in exchange for a Promissory Note with a face value of $1,020,000 and interest of 8.00% per annum. The Promissory Note matures in November 2025. We may not prepay any principal amount due under this Promissory Note without the consent of the holder. For the three and nine months ended September 30, 2025, we recorded interest expense of $15,729 and $66,404, respectively. Accrued interest payable as of September 30, 2025 and December 31, 2024, was $0 and $11,136, respectively. On August 5, 2025, the Promissory Note together with $15,729 of accrued and unpaid interest were converted to Series A Preferred Stock, and the Promissory Note was fully extinguished. Refer to Note 9, “Stockholders’ Equity”, for further discussion.

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

Line of Credit

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

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

In relation to the Loan and Security Agreements, we recorded interest expense of $78,993 and $117,905 for the three months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, we recorded interest expense of $237,840 and $272,565, respectively. Accrued interest payable as of September 30, 2025 and December 31, 2024 was zero. As of September 30, 2025 and December 31, 2024, the Loan and Security Agreement outstanding balance was $1,962,061 and $1,957,938, respectively.

Convertible Notes Payable

Hensley & Company Convertible Note

In March 2023, we issued an unsecured convertible note payable to Hensley & Company in the principal amount of $5,000,000. On March 25, 2025, we entered into Amendment #1 to this convertible note, which extended the maturity date of the convertible note to March 20, 2026. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company. On August 5, 2025, the principal amount of $5,000,000, together with $1,180,554 of accrued and unpaid interest payable under the convertible note were converted into Series A Preferred, and the convertible note was fully extinguished. Refer to Note 8, “Related Party Transactions” for further details regarding this convertible note.

JC Associates Convertible Notes

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

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

In December 2024, we entered into Amendment #2 to extend the maturity date of the $1,050,000 unsecured convertible note payable to December 15, 2025. In exchange for the extension of the maturity date, interest beginning from the date of Amendment #2 increased to 12.00% per annum and $25,000 of accrued interest was to be repaid on or before December 31, 2024, with the remaining accrued interest due on or before March 31, 2025. We recorded interest expense of $46,008 and $34,349 for the three months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024 we recorded interest expense of $110,070 and $82,809, respectively. Accrued interest payable as of September 30, 2025 and December 31, 2024 was $0 and $163,165, respectively. On August 5, 2025, the principal amount of $1,050,000 convertible note payable together with $16,191 of accrued and unpaid interest payable under the convertible note were converted into Series A Preferred Stock, and the convertible note was fully extinguished. Refer to Note 9, “Stockholders’ Equity,” for further discussion.

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

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

In December 2024, we entered into Amendment #2 to extend the maturity date of the $1,000,000 unsecured convertible note payable to December 15, 2025. In exchange for the extension of the maturity date, $25,000 of accrued interest was to be repaid on or before December 31, 2024, with remaining accrued interest due on or before March 31, 2025. We recorded interest expense of $15,420 and $33,476 for the three months ended September 30, 2025 and 2024, respectively and we recorded interest expense of $81,083 and $96,791 for the nine months ended September 30, 2025 and 2024, respectively. Accrued interest payable as of September 30, 2025 and December 31, 2024 was $0 and $164,307, respectively. On August 5, 2025, the principal amount of $1,000,000 convertible note payable together with $15,420 of accrued and unpaid interest payable under the unsecured convertible note were converted into Series A Preferred Stock, and the unsecured convertible note was fully extinguished. Refer to Note 9, “Stockholders’ Equity,” for further discussion.

Convertible Notes Payable and Warrants

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

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

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

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

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

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

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

NOTE 12 –CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

For each of the three and nine months ended September 30, 2025, one customer represented 11% and 10% of our total revenue as presented in the condensed consolidated statements of operations and comprehensive loss, respectively. For the three and nine months ended September 30, 2024, there were no customers that represented 10% or more of our total revenue as presented in the condensed consolidated statements of operations and comprehensive loss.

NOTE 13 –ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

For the three and nine months ended September 30, 2025, changes in AOCI were not material. For the three and nine months ended September 30, 2024, changes in AOCI were as follows:

NOTE 14 –FAIR VALUE MEASUREMENTS

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

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

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

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

NOTE 15 –SUBSEQUENT EVENT

On October 10, 2025, the Company filed a Registration Statement on Form S-1, registering on behalf of B. Riley for resale the shares of Common Stock underlying the Series B Preferred Stock issuable pursuant to the Purchase Agreement. On October 21, 2025, the Company filed an amendment to the Registration Statement on Form S-1, which went effective on November 10, 2025. As of the date of this Quarterly Report on Form 10-Q, no shares of Series B Preferred Stock have been sold to B. Riley under the Purchase Agreement.

On November 6, 2025, we converted all 9,297,894 outstanding shares of Series A Preferred Stock, together with$222,815 in accrued and unpaid dividends to 9,520,709 shares of Common Stock.