CISO Global, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –NATURE OF THE ORGANIZATION AND BUSINESS

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

Nature 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.

NOTE 2 –LIQUIDITY AND GOING CONCERN CONSIDERATIONS

The accompanying 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 the 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. 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 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.

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”). As of the issuance of these consolidated financial statements, B. Riley has purchased $2.3 million of the $15.0 million of shares of 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. 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.

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.

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 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.

On December 30, 2025, we received a letter from the listing qualifications staff (the “Staff”) of Nasdaq providing notification that the bid price of our Common Stock had closed below $1.00 per share for the previous 33 consecutive business days and our Common Stock no longer meets the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days or until June 29, 2026, to regain compliance. To regain compliance, the closing bid price of our Common Stock must be $1.00 per share or more for a minimum of 10 consecutive business days at any time before June 29, 2026.

If we do not regain compliance with Rule 5550(a)(2) by June 29, 2026, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify us that our securities would be subject to delisting. In the event of such notification, we may appeal the Staff’s determination to delist our securities, but there can be no assurance the Staff would grant our request for continued listing.

The Nasdaq notification has no immediate effect on the listing of our Common Stock on the Nasdaq Capital Market. We intend to actively monitor the bid price of our Common Stock and our minimum market value of listed securities and will consider options available to us to achieve compliance with the Nasdaq listing rules. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with the other listing standards for the Nasdaq Capital Market.

NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied in the presentation of the consolidated financial statements.

Reverse Stock Split

On February 29, 2024, our board of directors approved a 1-for-15 reverse stock split of our Common Stock. The record date for the reverse stock split was the close of business on March 7, 2024, with share distribution occurring on March 8, 2024. As a result of the reverse stock split, stockholders receivedone share of CISO Common Stock, par value $0.00001, for each 15 shares they held as of the record date. All share and per share amounts have been retroactively restated for the effects of this reverse stock split. Common Stock underlying our outstanding warrants, convertible notes, and options have been adjusted, and the conversion and exercise prices have also been adjusted.

Consolidation

The accompanying consolidated financial statements present the financial position, results of operations and cash flows of CISO and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Prior Period Reclassifications

Reclassification of certain immaterial prior period amounts have been made to conform to the current period presentation.

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 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 and Series B Preferred Stock, 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.

Segment Information

The Company operates and manages its business as one reportable and operating 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 consolidated statements of operations and comprehensive loss, to facilitate analysis of our financial trends, review budgeted versus actual results and for planning purposes. Significant segment expenses are presented in our consolidated statements of operations and comprehensive loss.

Geographic Information

All of our revenue and long-lived assets are located within the United States.

Revenue

The Company recognizes revenue in accordance with FASB Accounting Standards Codification Topic 606,Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

ASC 606 requires the Company to apply a five-step model to all customer arrangements (i) identify the contract(s) with the customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s); and (v) recognize revenue when (or as) a performance obligation is satisfied. The Company applies this framework when a substantive contract exists and the collectability of the related consideration is deemed probable.

The Company applies significant judgment in determining the appropriate accounting for contracts with customers. These judgments include identifying performance obligations in contracts, determining whether promised goods and services are distinct, determining whether revenue should be recognized over time or at a point in time, and assessing whether the Company acts as principal or agent in transactions involving third-party hardware or software solutions.

The transaction price is determined based on the consideration to which the Company is expected to be entitled in exchange for transferring services to the customer. The Company’s contracts generally contain a single performance obligation, and the entire transaction price is allocated to that obligation. The Company’s contracts generally do not include variable considerations such as discounts, rebates, refunds, credits, price concessions (explicit or implicit), incentives, performance bonuses, or penalties.

Our revenue is derived from and disaggregated in our consolidated statements of operations and comprehensive loss into, the following three major types of products and services: security managed services, professional services, and cybersecurity software.

Security Managed Services

Security managed services revenue primarily consists of risk compliance, cyber defense operations, and secured managed services. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.

Professional Services

Professional services revenue primarily consists of security testing and training, and incident response and digital forensics. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

Cybersecurity Software

Cybersecurity software revenue primarily consists of our internally developed cybersecurity software designed to provide a security management platform, protect users from untrusted and malicious online threats, provide proactive security monitoring, and deliver continuous security assessments. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

Contract Assets and Liabilities

Contract assets represent revenue recognized in advance of the Company’s right to invoice. As of December 31, 2025 and 2024, the contract asset balance was $91,956 and $179,093, respectively, primarily related to services performed in advance of billing.

The Company’s contracts generally do not contain a significant financing component.

Contract liabilities consist of deferred revenue and primarily include amounts billed or payments received in advance of revenue recognition. These amounts relate to services not yet performed or annual software licenses for which revenue will be recognized as the services are delivered or ratably over the license term. The Company generally invoices customers in advance or in milestone-based installments.

The Company recognized revenue of $1,274,007 and $1,598,670 for the years ended December 31, 2025 and 2024, respectively, which was included in the corresponding deferred revenue balance at the beginning of the period.

Changes in deferred revenue were as follows:

Contract Acquisition Costs

The Company pays sales commissions to obtain contracts with its customers. However, because the Company’s contracts generally have original terms of one year or less, the Company has elected the practical expedient to expense sales commissions as incurred, which are recorded as selling expenses.

Remaining Performance Obligations

The Company’s contracts generally have original terms of one year or less, and the Company has elected the practical expedient to exclude disclosures about remaining performance obligations for contracts with an original expected duration of one year or less.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Accounts Receivable

Accounts receivable are generally unsecured, non-interest bearing and reported at their outstanding unpaid principal balances, net of allowances for credit losses. We provide for allowances for credit losses based on our estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. We write off accounts receivable against the allowance for credit losses when a balance is determined to be uncollectible.

Changes in the allowance for credit losses were as follows:

Prepaid Cost of Revenue

Prepaid cost of revenue represents amounts charged by our vendors for licenses that we resell to our customers. These amounts are amortized to cost of revenue over the same period revenue is recognized for the related contract with our customers.

Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally between three and five years. Expenditures that enhance the useful lives of the assets are capitalized and depreciated.

Property and equipment are depreciated over the following estimated useful lives using the straight-line method as follows:

Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

Intangible Assets

Intangible assets are amortized over the following estimated useful lives:

Our intangible assets are amortized on a straight-line basis. We annually evaluate the estimated remaining useful lives of our intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization.

We review long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows of the asset group to which the assets relate to the carrying amount. If the undiscounted cash flows are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of such assets exceeds their fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. If we determine the fair value of an asset is less than the carrying value, an impairment loss is recognized in operating income or loss in the consolidated statements of operations during the period incurred. During the years ended December 31, 2025 and 2024, we didnot record a loss on impairment.

Goodwill

Goodwill is not amortized but is assessed for impairment annually in the fourth quarter, or more frequently, if events occur that would indicate a potential reduction in the fair value of a reporting unit below its carrying value. We perform our annual impairment review of goodwill at the reporting unit level. If we determine the fair value of the reporting unit’s goodwill is less than their carrying value as a result of an annual or interim test, an impairment loss is recognized and reflected in operating income or loss in the consolidated statements of operations during the period incurred. We perform our impairment assessment based on a quantitative analysis performed for our reporting unit.

During the years ended December 31, 2025 and 2024, we recognizedno impairment of goodwill.

Advertising and Marketing Costs

We expense advertising and marketing costs as they are incurred. Advertising and marketing expenses were $1,012,140 and $0 for the years ended December 31, 2025 and 2024, respectively, and are recorded in operating expenses on the consolidated statements of operations.

Fair Value Measurements

As defined in ASC 820,Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that 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 can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values, based on the short-term maturity of these instruments. The carrying amount of loans and notes payable approximate the estimated fair value for this financial instrument as management believes that interest payable on the notes approximates our incremental borrowing rate.

Net Loss per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net 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 B 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 B 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 loss per share computations for the periods presented:

The following is a reconciliation of the numerators and denominators of the diluted net 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:

Stock-Based Compensation

We apply the provisions of ASC 718,Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and nonemployees in the consolidated statements of operations.

For stock options issued to employees and members of our Board of Directors for their services, we estimate the grant date fair value of each option using the Black-Scholes-Merton option pricing model. The use of the Black-Scholes-Merton option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of our Common Stock consistent with the expected life of the option, risk-free interest rates, and expected dividend yields of the Common Stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred. We used the average of historical share prices of our Common Stock to calculate volatility for use in the Black-Scholes-Merton option pricing model. New shares are issued upon the exercise of stock options.

We issued shares of our stock to vendors and nonemployee for services provided. We recognize the accounting grant date fair value of the stock award as compensation expense over the required service period of each award. Shares issued for services are measured based on the fair market value of the underlying Common Stock on their respective accounting grant dates.

Derivatives

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815,Derivatives and Hedging. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Foreign Currency

Our functional and reporting currency is the U.S. dollar. For certain of our former foreign subsidiaries whose functional currency were other than the U.S. dollar, we translated revenue and expense transactions at average exchange rates. We translated assets and liabilities at period-end exchange rates and include foreign currency translation gains and losses as a component of accumulated other comprehensive loss.

Leases

We determine if an arrangement contains a lease at inception. We exclude leases with an original term of one year or less at the commencement date from our consolidated balance sheets. Leases in which our company is the lessee are comprised of our corporate office and one additional office, which is immaterial to our operations. All of the leases are classified as operating leases.

Right-of-use (“ROU”) assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that we will exercise that option. Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate based on information available at the lease commencement date to determine the present value of the future lease payments.

In accordance with ASC 842,Leases, we recognized a ROU asset and corresponding lease liability on our consolidated balance sheet for long-term office leases and a vehicle operating lease agreement. See Note 14, “Leases,” for further discussion, including the impact on our consolidated financial statements and related disclosures.

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 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. As of December 31, 2025 and 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 consolidated financial statements. Our practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations when a determination is made that such expense is likely.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. We expect to use the extended transition period for any new or revised accounting standards during the period which we remain an emerging growth company.

Recently Issued Accounting Standards

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. As an emerging growth company (EGC), the Company has elected to adopt the standard based on the effective dates applicable to non-public business entities. Accordingly, the Company will adopt ASU 2023-09 for annual periods beginning after December 15, 2025. We expect this to result in additional disclosures in 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 year ended December 31, 2025 (with an effective date of January 1, 2025), which did not have a material impact on our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” The purpose of this ASU is to modernize the accounting guidance for the costs to develop software for internal use by removing all references to prescriptive and sequential software development project stages and providing further guidance on when an entity is required to start capitalizing eligible costs. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027. Early adoption is permitted and the new guidance should be applied either on a prospective transition, a modified transition or a retrospective transition approach. The company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.

NOTE 4 –DISPOSITIONS

Latin America

On July 1, 2024, we entered into a Stock Purchase Agreement with Southford Equities, Inc. (the “Arkavia SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiary Ocean Point Equities, Inc. in exchange for 194,267 shares of our Common Stock owned by the owners of Southford Equities, Inc. and nominal cash consideration ($1.00 dollar).

On July 1, 2024, we entered into a Stock Purchase Agreement with CT Group, LP, Datadeck LP, Woodface, LP, VMT Technologies, LP and Quijote Ventures,LP (the “CUATROi SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiaries Servicios Informaticos CUATROi SpA, Comercializadora CUATROi SpA, CUATROi Peru, SAC, and CUATROi SAS in exchange for 135,795 shares of our Common Stock owned by the owners of CT Group, LP, DatadeckLP, Woodface, LP, VMT Technologies, LP and Quijote Ventures, LP and nominal cash consideration ($5.00 dollars).

On July 1, 2024, we entered into a Stock Purchase Agreement with Itada Equities, Inc. (the “NLT SPA”) to sell 100% of the outstandings shares of our wholly owned subsidiaries NLT Networks, S.P.A., NLT Technologias, Limitada, NLT Servicios Profesionales, S.P.A. and White and Blue Solutions LLC. in exchange for 172,075 shares of our Common Stock owned by the owners of Itada Equities, Inc. and nominal cash consideration ($1.00 dollar).

We committed to a formal plan to sell our former Latin America subsidiaries to focus on our U.S.-based operations and development and marketing of our internally developed cybersecurity software. The operating results of our former Latin America subsidiaries are reported within discontinued operations on our consolidated statements of operation through July 1, 2024. As a result of the sale, we recorded loss from discontinued operations of $4,338,318, which includes the release of associated accumulated translation adjustment from the net assets disposed of.

The table below provides the total revenue and loss of the discontinued operations presented in our statements of operations.

Net cash provided by operating activities of discontinued operations was $223,831 for the year ended December 31, 2024. Net cash used in investing activities of discontinued operations was $83,095 for the year ended December 31, 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.

We also retained the right to buy back the intellectual property at a price of $1,500,000, if repurchased within six months from the date of the agreement, $1,750,000 if repurchased within six to twelve months, or at an agreed upon purchase price if repurchased after twelve months.

In November 2024, certain prospective investors required us, as a condition of securing their investment, to have direct and full ownership of the intellectual property disposed of when we sold vCISO. As a result, we entered into an Intellectual Property Buy-Back Purchase Agreement in which we reacquired vCISO and all intellectual property we previously owned, in exchange for a Promissory Note with a principal amount of $1,020,000.

vCISO did not hold any assets or liabilities reported in our consolidated financial statements, as a result, we initially recorded a $1,000,000 gain on the disposition of vCISO. The repurchase of vCISO would result in the recognition of an asset on our consolidated balance sheet. The economic substance of these two transactions resulted in us receiving $1,000,000 of cash in exchange for a Promissory Note. Due to the close proximity in execution of these agreement, the second which was not previously contemplated, and their economic substance for the year-ended December 31, 2024, we netted the previously recorded gain on the sale of vCISO in the repurchase transaction to make our consolidated financial statements reflect the ultimate economics of these transactions.

NOTE 5 –PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

NOTE 6 –PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following:

Total depreciation expense was $286,147 and $322,126 for the years ended December 31, 2025 and 2024, respectively.

NOTE 7 –INTANGIBLE ASSETS AND GOODWILL

Goodwill

The following table presents the goodwill balance and accumulated impairment losses as of December 31, 2025 and 2024:

Intangible Assets

Intangible assets, net are summarized as follows:

Amortization expense of identifiable intangible assets was $921,139 and $1,744,366, for the years ended December 31, 2025 and 2024, respectively. The weighted average remaining useful life of intangible assets was 1.62 years as of December 31, 2025.

Based on the balance of intangibles assets at December 31, 2025, expected future amortization expense is as follows:

NOTE 8 –ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

Note 9 -RELATED PARTY TRANSACTIONS

Independent Consulting Agreement with Stephen Scott

In July 2023, we entered into an Independent Consulting Agreement with Stephen Scott, as amended in July 2024, to provide, on a non-exclusive basis, advisory and consulting services relating to our strategic and business development, intellectual property development, banking relationships, and strategic mergers and acquisitions for a period of one year. Mr. Scott received a consulting fee of $15,000 per month for such services under the terms of this agreement. During the year ended December 31, 2024, we paid consulting fees to Mr. Scott totaling $180,000. After the first quarter of 2025, Mr. Scott wasno longer considered a related party of the 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. 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 Stock and the convertible note was fully extinguished. On November 6, 2025, Hensley & Company converted all outstanding shares of Series A Preferred Stock together with $148,111 in accrued and unpaid dividends to shares of our Common Stock.

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 years ended December 31, 2025 and 2024, we received $1,019,567 and $2,283,995, respectively, from Hensley Beverage Company for contracted services, and had an outstanding accounts receivable balance of $125,215 and $0 as of December 31, 2025 and 2024, respectively. Mr. McCain, a director of the Company, is President and Chief Executive Officer of Hensley & Company, the parent company of Hensley Beverage Company.

Note 10 -STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY

Equity Transactions

For the year ended December 31, 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 year ended December 31, 2025, we sold 4,933,395 shares of our Common Stock for proceeds of $2,684,754 (net of $97,517 of offering costs), under our registration statement on Form S-3 that was declared effective on June 27, 2022.

For the year ended December 31, 2024, we sold 126,688 shares of our Common Stock for proceeds of $154,947 (net of $5,777 of offering costs), under our registration statement on Form S-3 that was declared effective on June 27, 2022.

On August 4, 2025, we filed a Certificate of Designations, Preferences and Rights of Series A Preferred Stock of CISO (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 & Company, an entity affiliated with Andrew K. McCain, a director of the Company, and JC Associates, Inc.. Pursuant to the Exchange Agreements, the Holders exchanged 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 was 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 a result of this transaction, for the year ended December 31, 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.

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, into 9,520,709 shares of Common 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 (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 into the Purchase Agreement with B. Riley Principal Capital, LLC (“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 and (ii) the date on which B. Riley shall have made payment of the aggregate purchase price equal to $15.0 million. 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.

During the year ended December 31, 2025, the Company issued 2,396 shares of Series B Preferred Stock to B. Riley pursuant to the Purchase Agreement for cash proceeds of $1,774,935 (net of $525,065 of offering costs). Such shares are classified as temporary equity in the company’s consolidated balance sheet, because they are redeemable upon the occurrence of an event that is not solely within the control of the company, and subsequent to issuance their carrying value is adjusted to redemption value. For the year ended December 31, 2025, the Company recognized $699,445 of accretion of the carrying value of Series B Preferred Stock to its redemption value with a corresponding decrease to additional paid-in capital. As of December 31, 2025,315 shares of Series B Preferred Stock had been converted into 624,795 shares of Common Stock, with 2,081 shares remaining outstanding. Any additional future issuances of shares of Series B Preferred Stock to B. Riley pursuant to the Purchase Agreement are subject to certain conditions, including (i) the lowest daily VWAP for each of the five (5) consecutive trading days prior to the put notice date and (ii) the closing sale price on the trading day prior to the put notice date shall equal or exceed 150% of the Minimum Conversion Price then in effect.

Warrants

During the years ended December 31, 2025 and 2024, we issued warrants to the Purchasers and the Placement Agent of the Securities Purchase Agreement to purchase 500,000 shares of our Common Stock. The warrants issued to the Purchasers and Placement Agent are exercisable for a period offive years from the date of issuance with an exercise price of $1.15 per share.

The following table summarizes warrant activity for the years ended December 31, 2025 and 2024:

Note 11 –STOCK-BASED COMPENSATION

2023 Equity Incentive Plan

Our 2023 Equity Incentive Plan (the “2023 Plan”), which replaced our 2019 Equity Incentive Plan (the “2019 Plan”), became effective on September 13, 2023. On December 10, 2025, our stockholders approved an amendment to our 2023 Plan to increase the number of shares of our Common Stock, par value $0.00001 per share, available for issuance under the 2023 Plan by ten million (10,000,000) shares (the “Plan Amendment”). The Plan Amendment was previously adopted by our Board of Directors on October 31, 2025. As of December 31, 2025,735,841 shares were available for issuance under the 2023 Plan. The additional shares approved under the Plan Amendment are not reflected as of December 31, 2025, as the related Form S-8 was filed on February 13, 2026.

Stock Options

We grant 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, which is generally 1 to 4 years. Stock options expire 10 years from the date of grant.

In applying the Black-Scholes option pricing model to stock options granted, we used the following assumptions:

The following table summarizes stock option activity for the year ended December 31, 2025:

The aggregate intrinsic value for stock options outstanding and exercisable is defined as the positive difference between the fair market value of our Common Stock and the exercise price of the stock options.

Total stock-based compensation expense related to the stock options was $3,301,782 and $8,956,571 for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, there was unrecognized compensation expense of $2,026,186 with a weighted average recognition period of 1.95 years related to the stock options. The total intrinsic value of options exercised during the years ended December 31, 2025 and 2024, was $2,986 andzero, respectively.

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2025 and 2024 was $0.86 and $1.34, respectively. During the year-ended December 31, 2025,79,733 options vested, net of forfeitures.

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 $205,874 for the year ended December 31, 2025. As of December 31, 2025, there was unrecognized compensation expense of $1,282,126 with a weighted average recognition period of 3.45 years related to the RSUs.

NOTE 12 –COMMITMENTS AND CONTINGENCIES

Legal Claims

From time-to-time, we are a party to litigation and subject to claims, suits, regulatory and government investigation, other proceedings, and consent decrees in the ordinary course of business. We investigate claims as they arise and accrue estimates for resolutions of legal and other contingencies when losses are probable and reasonably estimable.

There are no material pending legal proceedings in which we or any of our subsidiaries is 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. While the results of such normal course claims and legal proceedings, regardless of the underlying nature of the claims, cannot be predicted with certainty, management believes, based on current knowledge and the likely timing of resolution of various matters, any additional reasonably possible potential losses above the amounts accrued for such matters would not be material. However, the outcome of claims, legals proceedings, or investigations are inherently unpredictable and subject to uncertainty, and may have an adverse effect on us because of defense costs, diversion of management resources, and other factors that are not known to us or cannot be quantified at this time. We may also receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. The final outcome of any current or future claims or lawsuits could adversely affect our business, financial condition, or results of operations. We periodically evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued or the reasonably possible losses that we have disclosed, and make adjustments as appropriate.

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 December 31, 2025 and 2024, our accrual for estimated indirect tax liabilities was $30,486 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 certain customers, subject to certain 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 consolidated financial statements as of December 31, 2025 and 2024.

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

NOTE 13 –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 $54,561 and $1,179,938 for the years ended December 31, 2025 and 2024, 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 year ended December 31, 2024, we recorded interest expense of $1,026,058. 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 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 was scheduled to mature in November 2025. 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 10, Stockholders’ Equity and Temporary Equity, for further discussion. For the years of December 31, 2025 and 2024, we recorded interest expense of $66,404 and $11,136, respectively. Accrued interest payable as of December 31, 2025 and 2024, was $0 and $11,136, respectively.

As of December 31, 2025 and 2024, term loans were 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 $308,485 and $374,521 during the years ended December 31, 2025 and 2024, respectively. Accrued interest payable as of December 31, 2025 and 2024 was $1,086 and $0, respectively. As of December 31, 2025 and 2024, the Loan and Security Agreement outstanding balance was $2,172,667 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 shares of Series A Preferred Stock, and the convertible note was fully extinguished. Refer to Note 9, “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.

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. 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 10, “Stockholders’ Equity and Temporary Equity,” for further discussion. We recorded interest expense of $110,070 and $156,314 for the years ended December 31, 2025 and 2024, respectively. Accrued interest payable as of December 31, 2025 and 2024 was $0 and $163,165, respectively.

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.

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. 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 10, “Stockholders’ Equity and Temporary Equity,” for further discussion. We recorded interest expense of $81,083 and $137,220 for the years ended December 31, 2025 and 2024, respectively. Accrued interest payable as of December 31, 2025 and 2024 was $0 and $164,307, respectively.

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. 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. 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 consolidated statements of operations and comprehensive loss in change in fair value of derivative liability.

During the year ended December 31, 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 year ended December 31, 2025, which is the intrinsic value of the shares issued upon conversion. For the year ended December 31, 2025, we recognized interest expense of $7,898,323 related to the accretion of the convertible notes payable and the amortization of debt issuance costs. As of December 31, 2025, no convertible notes payable issued under the Agreement remained outstanding and the derivative liability has been derecognized.

At December 31, 2025, the principal payments due under the above term loans and line of credit were as follows:

NOTE 14 –LEASES

During the years ended December 31, 2025 and 2024, we recognized additional ROU assets and lease liabilities of $0 and $60,215, respectively. When measuring lease liabilities for leases that were classified as operating leases, we discounted lease payments using its estimated incremental borrowing rate. The weighted average incremental borrowing rate applied was 11.54% for the years ended December 31, 2025 and 2024. As of December 31, 2025 and 2024, our leases had a remaining weighted average term of 2.22 years and 3.22 years, respectively.

The following table presents net lease cost and other supplemental lease information:

Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the year ended December 31, 2025, are as follows:

NOTE 15 –FAIR VALUE MEASUREMENT

The estimated fair value of the conversion feature of the derivative liability was based on Monte Carlo simulations, a valuation model. The derivative liability component of the convertible notes was classified as Level 3 due to significant unobservable inputs.

During the year ended December 31, 2025, the derivative liability was derecognized following the conversion of the convertible notes into shares of Common Stock.

The following table sets forth as of December 31, 2024 the carrying value of the derivative liability that was measured and recorded at fair value on a recurring basis:

NOTE 16 –INCOME TAXES

No current or deferred income tax benefit or expense was recognized in the years ended December 31, 2025 and 2024.

A reconciliation of the statutory federal income tax benefit to actual tax benefit for the years ended December 31, 2025 and 2024 is as follows:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows as of December 31, 2025 and 2024:

We account for deferred taxes under ASC 740,Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, legislative developments, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified.

We have provided a valuation allowance for our net deferred tax assets at December 31, 2025 and 2024, due to the uncertainty surrounding the future realization of such assets and the cumulative losses we have generated. Therefore, no benefit has been recognized in the financial statements for the net operating loss carryforwards and other deferred tax assets. During the years ended December 31, 2025 and 2024, respectively, the valuation allowance decreased by $556,913 and increased by $4,712,900, respectively.

As of December 31, 2025, we had approximately $43,757,603 of consolidated federal net operating loss carryforwards and $41,699,531 of apportioned state net operating loss carryforwards available to offset future taxable income, respectively. If unused, the federal and state net operating loss carryforwards will begin to expire in 2034.

Utilization of net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (“IRC”), and similar state provisions. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC has occurred or will occur. We will perform an analysis as soon as is practicable to determine the extent of limitations. It is possible that additional limitations may arise in future years, even after an analysis is completed, due to future changes in the ownership of our Company.

We file federal and state income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, we are no longer subject to federal or state income tax examinations by tax authorities for tax years prior to 2023 and 2022, respectively. We believe our income tax filing positions and deductions are more likely than not to be sustained on audit. Therefore, no liabilities for uncertain tax positions have been recorded.

As of the date of this filing, we have not filed our 2025 federal and state income tax returns. We expect to file these documents as soon as practicable.

NOTE 17 –DEFINED CONTRIBUTION PLAN

We sponsor a defined contribution 401(k) plans covering eligible U.S. employees, who may contribute up to 80% of their compensation, subject to limitations established by the Internal Revenue Code. We amended our plan in 2024 to remove any matching feature. No matching contributions were made for the years ended December 31, 2025 and 2024.

NOTE 18 –CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Cash Deposits

Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Although we deposit cash with multiple banks, these deposits may exceed the amount of insurance provided on such deposits. These deposits may generally be redeemed upon demand and bear minimal risk.

Revenue and Accounts Receivable

For the year ended December 31, 2025, the Company had one customer that represented approximately 10% of total revenue. For the year ended December 31, 2024, no customer represented 10% or more of total revenue.

As of December 31, 2025, the Company had one customer that represented approximately 17% of our accounts receivable balance. As of December 31, 2024, two customers represented approximately 13% and 11%, respectively, of our accounts receivable balance.

NOTE 19 –ACCUMULATED OTHER COMPREHENSIVE LOSS

NOTE 20 –SUBSEQUENT EVENTS

On January 12, 2026, we filed a Certificate of Amendment with the Secretary of State of the State of Delaware to our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Amendment”), to increase the number of authorized shares of our Common Stock, par value $0.00001 per share, from 300,000,000 to 1,300,000,000. The Certificate of Amendment was approved by our stockholders at the 2025 Annual Meeting of Stockholders held on December 10, 2025, as reported on the Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 16, 2025.

On February 13, 2026, we filed a Form S-8 Registration Statement with the SEC to register an aggregate of 10,000,000 additional shares of our common stock available for issuance under our 2023 Equity Incentive Plan, as amended (the “Plan”). The additional shares are being registered in addition to our common stock previously registered for issuance under the Plan pursuant to our Registration Statement on Form S-8 filed with the Commission on October 31, 2023.