CISO Global, Inc.

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 – spanning all four pillars of security: 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, 2026. 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, 2025, as amended (“2025 Form 10-K”). The December 31, 2025 condensed consolidated balance sheet included herein is derived from the audited consolidated financial statements included in the 2025 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. Our 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. However, we may be unable to access further equity or debt financing when needed. As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

On September 24, 2025, we entered into a Preferred Equity Purchase Agreement (the “Purchase Agreement”) with B. Riley Principal Capital I (“B. Riley”) pursuant to which we may sell up to $15.0 million of shares of our Series B Convertible Preferred Stock (the “Series B Preferred Stock”). B. Riley purchased $2.3 million (2,396 shares) of the Series B Preferred Stock, of which 618 shares have been converted into shares of our Common Stock prior to April 1, 2026.

On April 1, 2026, B. Riley delivered a conversion notice for the remaining 1,778 shares of Series B Preferred Stock. In connection with the conversion of all outstanding Series B Preferred Stock, we are obligated to make cash payments of approximately $155,575 per month through May 2027, for an aggregate obligation of $1,866,900. These required cash payments increase our near-term liquidity needs, and we intend to satisfy them through a combination of operating cash flows and additional financing; however, there can be no assurance that sufficient funds will be available on acceptable terms, if at all.

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:

If our public float remains below $75 million, our sales under the shelf are limited to no more than one-third of our public float in any 12-month period.

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 of Nasdaq notifying us 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 did not meet 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 were provided an initial 180 calendar day compliance period, or until June 29, 2026, to regain compliance. To regain compliance during that initial compliance period, the closing bid price of our Common Stock was required to be at least $1.00 per share for a minimum of 10 consecutive business days.

On June 30, 2026, the staff notified us that we were eligible for an additional 180 calendar day period, or until December 28, 2026, to regain compliance. The staff’s determination was based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market with the exception of the bid price requirement, and our written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

If at any time during this second 180-day compliance period, the closing bid price of our Common Stock is at least $1.00 per share for a minimum of ten consecutive business days, Nasdaq will provide written confirmation of compliance. If we choose to implement a reverse stock split, we must complete the split no later than ten business days prior to the expiration date in order to timely regain compliance. If compliance cannot be demonstrated by December 28, 2026, the Staff will provide written notification that our Common Stock will be delisted. At that time, we may appeal the staff’s determination to a hearings panel.

The Nasdaq notice has no immediate impact on the listing of our Common Stock, which will continue to be listed and traded on The Nasdaq Capital Market, subject to our compliance with the other listing requirements of The Nasdaq Capital Market. Although we will use all reasonable efforts to achieve compliance with Rule 5550(a)(2), there can be no assurance that we will be able to regain compliance with that rule or will otherwise be in compliance with other listing criteria of The Nasdaq Capital Market.

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 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 2025 Form 10-K.

Contract Liabilities

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. We generally invoice customers in advance or in milestone-based installments.

We recognized revenue of $543,106 and $739,730 for the six months ended June 30, 2026 and 2025, respectively, which was included in the corresponding deferred revenue balance at the beginning of the period.

Changes in deferred revenue were as follows:

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, 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 shares of 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 and 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:

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 June 30, 2026 and December 31, 2025, our net deferred tax assets have 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 – Adopted

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient to measure credit losses on current accounts receivable and current contract assets under Accounting Standards Codification 606, Revenue from Contracts with Customers. The practical expedient assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. For public business entities, ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Effective January 1, 2026, our company adopted ASU 2025-05 regarding the practical expedient for expected credit loss and the adoption did not have a material impact on our company’s condensed consolidated financial statements.

Recent Accounting Pronouncements – Not Yet Adopted

In December 2023, the FASB issued 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), we have elected to adopt the standard based on the effective dates applicable to non-public business entities. Accordingly, we 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 condensed 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. Our company is currently evaluating the impact of this standard on its condensed consolidated financial statements and disclosures.

NOTE 3 –PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

NOTE 4 –PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following:

Depreciation expense was $49,805 and $76,680 for the three months ended June 30, 2026 and 2025, respectively, and $100,931 and $155,734 for the six months ended June 30, 2026 and 2025, respectively.

NOTE 5 –INTANGIBLE ASSETS AND GOODWILL

Goodwill

The following table presents the goodwill balance and accumulated impairment losses as of June 30, 2026 and December 31, 2025:

Intangible Assets

Intangible assets, net are summarized as follows:

The weighted average remaining useful life of finite-lived intangible assets is 1.50 years as of June 30, 2026.

Amortization expense for the three months ended June 30, 2026 and 2025 was $186,869 and $233,170, respectively, and $373,739 and $466,340 for the six months ended June 30, 2026 and 2025, respectively.

Based on the balance of intangible assets at June 30, 2026, expected future amortization expense is as follows:

NOTE 6 –ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

NOTE 7 –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 provides for an original term through December 31, 2021, the agreement will continue until terminated by either party. For the three months ended June 30, 2026 and 2025, we received $274,718 and $93,377, respectively, and for the six months ended June 30, 2026 and 2025, we received $790,685 and $279,594, respectively, from Hensley Beverage Company for contracted services, and had an outstanding receivable balance of $220,005 and $125,215 as of June 30, 2026 and December 31, 2025, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company, d/b/a/ Hensley Beverage Company.

Convertible Note Payable with Hensley & Company

In March 2023, we issued an unsecured convertible note 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 Number One 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. During the three months ended June 30, 2025, we recorded interest expense of $125,000, and during the six months ended June 30, 2025, we recorded interest expense of $250,000. 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 $222,815 in accrued and unpaid dividends to shares of our Common Stock.

Note 8 -STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY

Equity Transactions

For the three and six months ended June 30, 2026, we did not have any sales transaction for Common Stock under our registration statement on Form S-3 that was declared effective on July 7, 2025.

For the three and six months ended June 30, 2025, we sold 1,123,876 and 4,933,395 shares, respectively, of our Common Stock for proceeds of $965,198 (net of $35,052 of offering costs) 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.

Series A Preferred Stock

On August 4, 2025, we entered into the Exchange Agreements with Hensley & Company, an entity affiliated with Andrew K. McCain, a director of our company, and JC Associates, Inc. (the “Exchange Agreements”). 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.

On November 6, 2025, Hensley and JC Associates 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.

Series B Preferred Stock

On September 24, 2025, we entered into the Purchase Agreement with B. Riley, pursuant to which we may sell up to $15.0 million of shares of our 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, we 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 were classified as temporary equity in our company’s condensed consolidated balance sheet, because they were redeemable upon the occurrence of an event that is not solely within the control of our company, and subsequent to issuance their carrying value was adjusted to redemption value. During the year ended December 31, 2025, B. Riley converted 315 shares of Series B Preferred Stock into 624,795 shares of Common Stock. During the six months ended June 30, 2026, B. Riley converted 303 shares of Series B Preferred Stock into 641,700 shares of Common Stock. During the same period, we recognized a $14,200 decrease to the carrying value of Series B Preferred Stock to measure it at its redemption value with a corresponding increase to additional paid-in capital. On April 1, 2026, B. Riley delivered a conversion notice for the remaining 1,778 shares of Series B Preferred Stock. Because the notice was delivered at a time when the volume-weighted average price of our Common Stock was below the minimum conversion price of $0.40 per share for ten consecutive trading days, we became obligated to redeem the remaining Series B Preferred Stock and make monthly payments beginning May 1, 2026 equal to one-twelfth of 105% of the $1,778,000 stated value (aggregate $1,866,900, or $155,575 per month).

As of June 30, 2026, we had made one redemption payment of $155,575 with respect to the Series B Preferred Stock. Although upon delivery of the redemption notice, we became obligated to redeem all outstanding shares of Series B Preferred Stock held by B. Riley, we show 1,778 shares of Series B Preferred Stock outstanding as of June 30, 2026 because the redemption has not yet been reflected in the transfer agent report provided by Securities Transfer Corporation, our transfer agent of record.

Warrants

The following table summarizes warrant activity for the six months ended June 30, 2026:

NOTE 9 –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.

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.

The following table summarizes stock option activity for the six months ended June 30, 2026:

The aggregate intrinsic value for stock options outstanding and exercisable is defined as the total 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 $201,029 and $1,076,251 for the three months ended June 30, 2026 and 2025, respectively, and $479,476 and $1,927,243 for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, there was unrecognized compensation expense of $1,128,756 with a weighted average recognition period of 1.70 years related to the stock options. The total intrinsic value of options exercised during the three months ended June 30, 2026 and 2025, waszero. The total intrinsic value of options exercised during the six months ended June 30, 2026 and 2025, waszero.

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2026 and 2025 was $0.33 and $0.86, respectively. During the three and six months ended June 30, 2026,921,210 and 1,039,631 options vested, net of forfeitures, 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 our 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. During the three and six months ended June 30, 2026, zero and 400,000 RSUs were forfeited due to employee termination, respectively. During the three and six months ended June 30, 2026,287,500 RSUs were exercised. At June 30, 2026,862,500 RSUs were outstanding. Total stock-based compensation expense related to the RSUs was $68,998 and $83,924 for the three and six months ended June 30, 2026. As of June 30, 2026, there was unrecognized compensation expense of $814,202 with a weighted average recognition period of 2.95 years related to the RSUs.

NOTE 10 –COMMITMENTS AND CONTINGENCIES

Legal Claims

We are not aware of any 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 June 30, 2026 and December 31, 2025, our accrual for estimated indirect tax liabilities was $32,936 and $30,486, 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 as of June 30, 2026 and December 31, 2025.

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

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 was limited to 85% of our eligible accounts receivable. The 2025 Loan and Security Agreement had an interest 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, was due on April 14, 2026 (the “Maturity Date”). The 2025 Loan and Security Agreement was secured by our assets and provided for a default interest rate of 29.25% per annum following an event of default.

On May 15, 2026, we entered into a Loan and Security Agreement (the “2026 Loan and Security Agreement”) with Aion to replace the 2025 Loan and Security Agreement on substantially the same terms as the 2025 Loan and Security Agreement. The 2026 Loan and Security Agreement, together with accrued and unpaid interest thereon, is due on May 15, 2027 (the “Maturity Date”). Upon the occurrence of an “Event of Default” (as defined in the 2026 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, and increase the interest rate to 26% per annum. The 2026 Loan and Security Agreement is secured by our assets.

In relation to the Loan and Security Agreements, we recorded interest expense of $80,033 and $72,371 for the three months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025, we recorded interest expense of $149,617 and $158,847, respectively. Accrued interest payable as of June 30, 2026 and December 31, 2025 was $1,000 and $1,086, respectively. As of June 30, 2026 and December 31, 2025, the Loan and Security Agreements outstanding balance was $1,995,941 and $2,172,667, respectively.

Loans Payable

As of June 30, 2026 and December 31, 2025, loans payable were comprised of the following:

On June 5, 2026, we entered into a term loan with Aion pursuant to which we borrowed $350,000. The term loan bears interest at 16.50% per annum and is repayable in 12 monthly installments of $31,839. We incurred debt issuance costs of $5,250 in connection with the term loan. As of June 30, 2026, the outstanding principal balance was $350,000. The interest expense and amortization of debt issuance costs for the three and six months ended June 30, 2026 was immaterial.

As discussed in Note 8, on April 1, 2026, B. Riley delivered a conversion notice for the remaining 1,778 shares of Series B Preferred Stock. Because the notice was delivered at a time when the volume-weighted average price of our Common Stock was below the minimum conversion price of $0.40 per share for ten consecutive trading days, we are obligated to redeem the remaining Series B Preferred Stock and make payments beginning May 1, 2026 equal to 105% of the $1,778,000 stated value, or $1,866,900. As of June 30, 2026, the remaining balance due was $1,711,325.

At June 30, 2026, the principal payments due under the above loans payable and line of credit were as follows:

NOTE 12 –CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

For each of the three and six months ended June 30, 2026, one customer represented approximately 12% of our total revenue as presented in the condensed consolidated statements of operations and comprehensive loss. For each of the three and six months ended June 30, 2025, one customer represented 10% or more of our total revenue as presented in the condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2026, the same customer that represented approximately 12% of total revenue accounted for approximately 15% of our accounts receivable balance. In addition, a related party accounted for approximately 14% of our accounts receivable balance as of June 30, 2026. As of June 30, 2025, the same customer that represented approximately 10% or more of total revenue accounted for approximately 15% of our accounts receivable balance.

NOTE 13 –SUBSEQUENT EVENT

We have evaluated subsequent events through the date of issuance of these condensed consolidated financial statements.