UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
For the Quarterly Period Ended June 30, 2026
or
For the Transition Period from _________ to _________
Commission file number: 001-41227
CISO GLOBAL, INC.
(Exact name of registrant as specified in its charter)
(State or other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
(480)389-3444
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 12, 2026, there were 45,525,655 shares of the registrant’s Common Stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2026 (unaudited)
TABLE OF CONTENTS
21
FORWARD-LOOKING STATEMENTS
The information contained in this report should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q. Certain statements made in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based upon beliefs of, and information currently available to, us as of the date hereof, as well as estimates and assumptions made by us. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions identify forward-looking statements. Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to our business, industry, and our operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Forward-looking statements made in this Quarterly Report on Form 10-Q include statements about:
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as amended, any of which may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time they are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Series B
Preferred Stock
Additional
Paid-in
Accumulated
Other Comprehensive
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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:
SCHEDULE OF CHANGES IN DEFERRED REVENUE
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:
SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE
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:
SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE
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:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
June 30,
2026
December 31,
2025
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
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:
SCHEDULE OF CHANGES IN GOODWILL
Intangible Assets
Intangible assets, net are summarized as follows:
SCHEDULE OF INTANGIBLE ASSETS
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:
SCHEDULE OF FUTURE AMORTIZATION EXPENSE
NOTE 6 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
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 $9,297,894for 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 $222,815in 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 customary9.99% beneficial ownership limitation.
During the year ended December 31, 2025, we issued 2,396shares of Series B Preferred Stock to B. Riley pursuant to the Purchase Agreement for cash proceeds of $1,774,935(net of $525,065of 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 315shares of Series B Preferred Stock into 624,795shares of Common Stock. During the six months ended June 30, 2026, B. Riley converted 303shares of Series B Preferred Stock into 641,700shares of Common Stock. During the same period, we recognized a $14,200decrease 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 1,778shares 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 $0.40per 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 $1,778,000stated value (aggregate $1,866,900, or $155,575per 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:
SCHEDULE OF STOCK WARRANT ACTIVITY
Weighted
Average
Exercise
Price
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic
Value
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:
SCHEDULE OF STOCK OPTION ACTIVITY
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, was zero. The total intrinsic value of options exercised during the six months ended June 30, 2026 and 2025, was zero.
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 granted1,550,000 RSUs with a weighted-average grant date fair value of $0.96. During the three and six months ended June 30, 2026, zero and400,000 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 $68,998and $83,924 for the three and six months ended June 30, 2026. As of June 30, 2026, there was unrecognized compensation expense of $814,202with 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 or beneficially 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:
SCHEDULE OF LOANS PAYABLE
Effective
Interest Rates
December 31, 2025
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:
SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT
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.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as amended.
Unless otherwise indicated or the context requires otherwise, the terms “we,” “us,” “our,” and “our company” refer to CISO Global, Inc., a Delaware corporation, and its wholly owned subsidiaries. Unless otherwise specified, all dollar amounts are expressed in U.S. dollars.
First Half of 2026 Highlights
Our operating results for the six months ended June 30, 2026 included the following:
Results of Operations
Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025
Our financial results for the three months ended June 30, 2026 are summarized as follows in comparison to the three months ended June 30, 2025:
Revenue
Security managed services revenue decreased by $914,120, or 15%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to the loss of several higher-revenue customers, partially offset by new customer engagements. While we have added new customers, we cannot assure that new engagements will fully offset lost revenue in the near term or that new customer contracts will be comparable in size, duration, or profitability. We are focused on improving retention and expanding our pipeline, but continued customer attrition or delays in onboarding new customers could materially impact revenue and liquidity.
Professional services revenue decreased by $58,279, or 11%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to fewer customer projects.
Cybersecurity software revenue increased by $50,300, or 35%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to an increase in licenses for our cybersecurity software.
Expenses
Cost of Revenue
Security managed services cost of revenue decreased by $51,984, or 3%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to lower third-party costs for our existing client base.
Professional services cost of revenue decreased by $8,001, or 11%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, due to decreased use of consultants.
Cybersecurity software cost of revenue decreased by $2,186, or 4%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to additional development costs incurred in the three months ended June 30, 2025.
Cost of payroll decreased by $213,349, or 8%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to headcount reductions.
Stock-based compensation expenses decreased by $432,503, or 91%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, due to fewer equity awards issued. The decrease also reflects the impact of forfeitures of awards by terminated employees, which reduced recognized expense.
Operating Expenses
Professional fees increased by $161,088, or 97%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, due to an increase in accounting fees.
Advertising and marketing expenses decreased by $523,360 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, due to transitioning marketing functions from external service providers to internal resources in 2026.
Selling, general, and administrative expenses decreased by $274,884, or 10%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to lower payroll costs, amortization expense, and credit card fees.
Stock-based compensation expenses decreased by $419,221, or 65%, for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, due to fewer equity awards issued. The decrease also reflects the impact of forfeitures of awards by terminated employees, which reduced recognized expense.
Other (Expense) Income
Change in fair value of derivative liability decreased by $79,919 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 due to the conversion of certain convertible notes into shares of our Common Stock during the year ended December 31, 2025.
The loss on extinguishment of convertible notes decreased by $24,518 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 due to the conversion of all remaining convertible notes payable into Common Stock or Series A Preferred Stock during the year ended December 31, 2025.
Interest expense decreased by $608,368 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to the accretion of convertible notes payable and the amortization of debt issuance costs associated with the issuance of certain convertible notes payable during December 2024 and January 2025, which were largely eliminated following the conversion of the remaining convertible notes payable during the year ended December 31, 2025.
Other income increased by $1,948 for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to unrealized foreign exchange gains.
Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025
Our financial results for the six months ended June 30, 2026 are summarized as follows in comparison to the six months ended June 30, 2025:
Security managed services revenue decreased by $1,819,005, or 15%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to the loss of several higher-revenue customers, partially offset by new customer engagements. While we have added new customers, we cannot assure that new engagements will fully offset lost revenue in the near term or that new customer contracts will be comparable in size, duration, or profitability. We are focused on improving retention and expanding our pipeline, but continued customer attrition or delays in onboarding new customers could materially impact revenue and liquidity.
Professional services revenue decreased by $143,131, or 13%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to fewer customer projects.
Cybersecurity software revenue increased by $98,040, or 34%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to an increase in licenses for our cybersecurity software.
Security managed services cost of revenue decreased by $415,877, or 11%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to lower costs associated with service vendors supporting our existing client base.
Professional services cost of revenue decreased by $18,823, or 15%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to decreased use of outside consultants.
Cybersecurity software cost of revenue increased by $20,927, or 23%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to the launch of our suite of internally developed cybersecurity software products.
Cost of payroll decreased by $380,096, or 7%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to headcount reductions.
Stock-based compensation expenses decreased by $898,656, or 88%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to fewer equity awards issued. The decrease also reflects the impact of forfeitures of awards by terminated employees, which reduced recognized expense.
Professional fees increased by $336,575, or 50%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to an increase in accounting and consultant fees.
Advertising and marketing expenses decreased by $514,528, or 97% for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to transitioning marketing functions from external service providers to internal resources in 2026.
Selling, general, and administrative expenses decreased by $583,467, or 11%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to lower payroll costs, amortization expense, and credit card fees.
Stock-based compensation expenses decreased by $518,147, or 54%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to fewer equity awards issued. The decrease also reflects the impact of forfeitures of awards by terminated employees, which reduced recognized expense.
Change in fair value of derivative liability decreased by $5,467,610 for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 due to the conversion of certain convertible notes into shares of our Common Stock during the year ended December 31, 2025.
The loss on extinguishment of convertible notes decreased by $863,669 for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 due to the conversion of all remaining convertible notes payable into Common Stock or Series A Preferred Stock during the year ended December 31, 2025.
Interest expense decreased by $8,694,188 for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to the accretion of convertible notes payable and the amortization of debt issuance costs associated with the issuance of certain convertible notes payable during December 2024 and January 2025, which were largely eliminated following the conversion of the remaining convertible notes payable during the year ended December 31, 2025.
Other expense increased by $10,329 for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to unrealized foreign exchange losses.
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the six months ended June 30, 2026, we incurred a net loss of $3,201,611 reported cash used in operations of $948,415 and expect to incur further losses through the end of 2026. Further, we have a working capital deficit of $8,518,124 as of June 30, 2026. As a result, substantial doubt about our ability to continue as a going concern exists. Our 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 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”). As of March 31, 2026, B. Riley had purchased $2.3 million (2,396 shares) of the Series B Preferred Stock and had converted 618 of such shares into shares of our Common Stock.
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 equaling 105% of the $1,778,000 stated value, or $1,866,900. As of June 30, 2026, we had made one redemption payment of $155,575 with respect to the Series B Preferred Stock. 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.
July 2025 Prospectus
On June 26, 2025, we renewed our shelf registration statement on Form S-3 (that was deemed effective on July 7, 2025) (“July 2025 Prospectus”) that contains two prospectuses:
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. Our ability to raise capital under the shelf or ATM may be limited by our public float, market conditions, and the trading price and volume of our Common Stock.
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 prior to the December 28, 2026 deadline.
Material Cash Requirements
Our material cash requirements included the following contractual obligations as of June 30, 2026:
Indebtedness
As of June 30, 2026, the carrying value of our outstanding debt obligations was $4,132,061, substantially all of which is scheduled to mature during the remainder of 2026 and the first six months of 2027.
Leases
As of June 30, 2026, the carrying value of our outstanding operating lease obligations was $354,655.
Sources of Funding to Satisfy Material Cash Requirements
Our principal sources of liquidity are our cash on hand, cash provided by operations, the Purchase Agreement discussed above, and our shelf registration statement on Form S-3 discussed above. Our current cash on hand is not sufficient to satisfy our operating cash needs for the 12 months from the filing of this Quarterly Report on Form 10-Q. We expect to incur further losses through the end of 2026, and there can be no assurance that we will be able to obtain additional liquidity from the Purchase Agreement or our shelf registration statement on Form S-3 or elsewhere when needed or under acceptable terms, if at all.
Working Capital Deficit
Our working capital deficit as of June 30, 2026 in comparison to our working capital deficit as of December 31, 2025, is summarized as follows:
The decrease in current assets is primarily due to the increase in accounts receivable of $207,844, being more than offset by the decrease in cash and cash equivalents of $974,223. Cash and cash equivalents decreased primarily due to the use of cash in operations. Accounts receivable increased due to timing of collection.
The increase in current liabilities is primarily due to the new debt obligations to B. Riley and Aion discussed above.
Cash Flows
Our cash flows for the six months ended June 30, 2026 in comparison to our cash flows for the six months ended June 30, 2025, are summarized as follows:
Operating Activities
Net cash used in operating activities was $948,415 for the six months ended June 30, 2026 and was primarily due to cash used to fund a net loss of $3,201,611 (which includes non-cash expenses in the aggregate of $1,120,801), partially offset by an increase in accounts payable of $1,120,061. Net cash used in operating activities was $5,303,332 for the six months ended June 30, 2025 and was primarily due to cash used to fund a net loss of $8,389,525 (which includes non-cash expenses in the aggregate of $6,520,869), a decrease in accounts payable and accrued expenses and a decrease in deferred revenue.
Investing Activities
Net cash used in investing activities of $8,911 for the six months ended June 30, 2026 was due to purchases of property and equipment.
Financing Activities
Net cash used in financing activities for the six months ended June 30, 2026 was $16,897, which was primarily due to cash received from borrowings on our loans payable and line of credit (net of debt issuance costs) of $12,225,050, offset by $12,220,144 in repayments of our loans payable and line of credit. Net cash provided by financing activities for the six months ended June 30, 2025 was $5,071,497, which was primarily due to $2,684,754 from the sale of our Common Stock, $655,000 from the exercise of warrants, cash received from borrowings on our convertible loans payable and line of credit (net of debt issuance costs) of $9,861,983, offset by $8,132,411 in repayments of our loans payable and line of credit.
Critical Accounting Estimates
Our critical accounting estimates are more fully described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 30, 2026, and amended on April 2, 2026. There have been no material changes to our critical accounting estimates described in our 2025 Annual Report on Form 10-K, except as discussed below.
Goodwill is assessed for impairment annually, 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 its 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.
The price of our Common Stock has continued to decrease subsequent to June 30, 2026. As of June 30, 2026, a 1% decrease in our stock price and resulting market capitalization would have resulted in the fair value of our reporting unit to be less than its carrying value. As a result, there is increased risk that goodwill impairment charges could be recorded in the future. Any future impairment charges could adversely impact our financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because we are a smaller reporting company, we are not required to provide the information called for by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2026, our disclosure controls and procedures were effective. This does not include an evaluation by our independent registered public accounting firm regarding our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2026, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are currently not a party to any material legal proceedings.
ITEM 1A. RISK FACTORS
We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 30, 2026, and amended on April 2, 2026, risk factors that materially affect our business, financial condition, or results of operations. Except as disclosed below, there have been no material changes from the risk factors previously disclosed.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.
We test goodwill for impairment at least annually, and we review goodwill and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Factors that could result in an impairment include, among others, declines in our stock price or market capitalization, lower-than-expected operating results, reduced future cash flow estimates, adverse changes in our business or industry, or other changes in market or economic conditions. If we determine that any of our goodwill or intangible assets are impaired, we may be required to record a significant charge to earnings in the period in which the impairment is determined, which could adversely affect our results of operations and financial condition.
As of June 30, 2026, we had cash and cash equivalents of $721,771 and a working capital deficit of $8,518,124, and we incurred net losses and negative operating cash flows. These conditions raise substantial doubt about our ability to continue as a going concern. In connection with the conversion of all outstanding Series B Preferred Stock on April 1, 2026, we are required to make monthly cash payments of approximately $155,575 through May 2027, for an aggregate obligation of $1,866,900. We expect to require additional capital to fund operations and meet these obligations. If we are unable to raise capital on acceptable terms, or at all, we may be forced to reduce or curtail operations, delay strategic initiatives, or pursue restructuring alternatives.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended June 30, 2026, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading agreement” or a “non-Rule 10b5-1 trading agreement” (in each case, defined in Item 408 of Regulation S-K).
ITEM 6. EXHIBITS
*Filed/furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.