CISO 10-K & 10-Q changes, risk factors and insider trading
CISO Global, Inc. · Nasdaq · Services-Management Consulting Services · CIK 1777319 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our dependence on a significant customer for a material portion of our revenue and accounts receivable exposes us to risks that could have a material adverse effect on our business, financial condition, and results of operations.”
New heading “We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.”
New heading “The use of AI technology in our IT infrastructure could improve internal process but poses security and privacy risks.”
New heading “Our ability to access the full amount available under the purchase agreement with B. Riley is not guaranteed, and our broad discretion over the use of any proceeds we receive may not result in improved financial performance or stockholder value.”
New heading “The issuance and potential conversion of Series B Preferred Stock may adversely affect our common stockholders and the market price of our common stock, and our obligation to redeem shares of Series B Preferred Stock upon certain triggering events could materially harm our liquidity and financial condition.”
Removed heading “Following a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.”
Largest changes
“The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. …”see in full comparison
As a public company, we are subject to the reporting requirements of the Exchange Act, and the corporate governance standards of the Sarbanes-Oxley Act and Nasdaq. We have a limited operating history as a public company, and these requirements may place a strain on our management, systems, and resources. In addition, we have incurred, and expect to continue to incur, significant legal, accounting, insurance, and other expenses. The Exchange Act requires us to file annual, quarterly, and current reports with respect to our business and financial condition within specified time periods and to prepare a proxy statement with respect to our annual meeting of stockholders. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. Nasdaq requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting and comply with the Exchange Act and Nasdaq requirements, significant resources and management oversight are required. This may divert management’s attention from other business concerns and lead to significant costs associated with compliance, which could have a material adverse effect on us and the market price of our common stock. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors or its committees or as our executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action, and potentially civil litigation.see in full comparison
“The Series B Preferred Stock issued under the purchase agreement to B. Riley carries rights, preferences, and privileges senior to those of our common stock, including with respect to dividends, liquidation, and other matters, which may adversely affect the rights and economic interests of our common stockholders. …”see in full comparison
“The adoption of AI in internal processes presents an opportunity to bolster decision making, productivity and customer satisfaction, but the new technology poses risks. AI can be exploited by hackers and malicious actors to develop advanced cyberattacks, bypass security measures, and exploit system vulnerabilities including potentially identifying weaknesses in our systems before we become aware of or can remediate them. The use of AI involves handling large amounts of data. …”see in full comparison
“The issuance and potential conversion of Series B Preferred Stock may adversely affect our common stockholders and the market price of our common stock, and our obligation to redeem shares of Series B Preferred Stock upon certain triggering events could materially harm our liquidity and financial condition.”see in full comparison
“Following a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.”see in full comparison
Full comparison: every changed paragraph (48)
We incurred losses from operations of $8,785,052 and $14,589,635 for the years ended December 31, 2025 and December 31, 2024, respectively, and net losses of $8,073,930 and $24,243,919 for those same periods. As of December 31, 2025, we had cash and cash equivalents of $1,695,994, current assets of $3,264,224, and current liabilities of $7,738,489, resulting in a working capital deficit of $4,474,265. Our limited cash position and working capital deficit present meaningful constraints on our ability to fund operations, pursue strategic opportunities, or respond to unanticipated adverse business developments. We cannot predict with certainty when, or whether, we will achieve sustained positive cash flow from operations or profitability. Our strategy to address these losses includes strengthening revenue and improving operational efficiencies across the business, but there can be no assurance these measures will be sufficient or successful. Our cash balance of $1,695,994 may be insufficient to fund operations for an extended period, particularly if revenue growth does not materialize as anticipated or if unexpected expenses arise. Any future financing may involve significant dilution to existing stockholders or impose restrictive covenants that limit our operational flexibility. Our constrained liquidity position could also prevent us from pursuing strategic opportunities or retaining key personnel critical to executing our business plan.
We
are unable to predict if and when we will be able to generate significant positive cash flow or achieve profitability. Our plan regarding
these matters is to strengthen our revenue and continue improving operational efficiencies across the business. There can be no assurances
that we will be successful in increasing revenue, improving operational efficiencies or that financing will be available or, if available,
that such financing will be available under favorable terms. In the event that we are unable to generate adequate revenue to cover expenses
and cannot obtain additional financing, we may need to cut back or curtail our expansion plans.
At present, we do not maintain key man insurance for any members of our senior management or key personnel. The competition for qualified management and personnel, particularly those with specialized expertise in the cybersecurity industry, is intense. If we were to lose the services of any of our key executives, or if we are unable to successfully recruit, retain, and develop personnel with the necessary skills and industry knowledge, our ability to continue executing on our acquisition strategy and service program development could be adversely impacted. Furthermore, such a loss could have a significant effect on our ability to maintain and grow client relationships, which may negatively impact our financial performance and long-term prospects. We recognize the critical importance of having a strong and capable leadership team to execute our business strategy. As such, we continue to explore options for mitigating these risks, including potential investments in succession planning and talent development. However, there can be no assurance that we will be successful in securing or retaining the right talent, and any failure to do so may materially affect our ability to achieve our objectives.
We recognize the critical importance of having a strong and capable leadership team to execute our business strategy.
As such, we continue to explore options for mitigating these risks, including potential investments in succession planning and talent
development. However, there can be no assurance that we will be successful in securing or retaining the right talent, and any failure
to do so may materially affect our ability to achieve our objectives.
WeWhile
we are not dependent on any one contractor, we currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent
organizations, advisors,
and consultants to provide certain services. There can be no assurance that the services of these independent
organizations, advisors,
and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified
replacements. In addition,
if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services
provided by consultants
is compromised for any reason, some of our business activities may be delayed or terminated, and we may not be
able to mitigate negative
impacts or otherwise advance our business. There can be no assurance that we will be able to manage our existing
consultants or find
other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able
to effectively expand
our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be
able to successfully
implement the tasks necessary to further expand and, accordingly, may not achieve our business goals.
We
have recently acquired multiple businesses. Our growth strategy is driven by successful acquisitions and integration of additional businesses
that provide comparable or complementary services.
Any
business acquisition creates risks such as, among others: (i) the need to integrate and manage the businesses acquired with our own business;
(ii) additional demands on our resources, systems, procedures, and controls; (iii) disruption of our ongoing business; and (iv) diversion
of management’s attention from other business concerns. Moreover, these transactions could involve: (a) substantial investment
of funds or financings by issuance of debt or equity securities; (b) substantial investment with respect to technology transfers and
operational integration; andor (c) the acquisition or disposition of lines of businesses. Also, such activities could result in one-time
charges and expenses and have the potential to either dilute the interests of our existing stockholders or result in the issuance of,
or assumption of debt. Such acquisitions, investments, joint ventures, or other business collaborations may involve significant commitments
of financial and other resources. Any such activities may not be successful in generating revenue, income, or other returns, and any
resources we committed to such activities will not be available to us for other purposes. Moreover, if we are unable to access the capital
markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than
optimal capital structure. Our inability to take advantage of growth opportunities or address risks associated with acquisitions or investments
in businesses may negatively affect our operating results. Additionally, any impairment of goodwill or other intangible assets acquired
in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially
reduce our earnings. Future acquisitions or joint ventures may not result in their anticipated benefits and we may not be able to properly
integrate acquired technologies or businesses with our existing operations or successfully combine personnel and cultures. Failure to
do so could deprive us of the intended benefits of those acquisitions.
Additionally,
any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated
with any acquisition or investment activity, may materially reduce our earnings. Future acquisitions or joint ventures may not result
in their anticipated benefits and we may not be able to properly integrate acquired technologies or businesses with our existing operations
or successfully combine personnel and cultures. Failure to do so could deprive us of the intended benefits of those acquisitions.
Our dependence on a significant customer for a material portion of our revenue and accounts receivable exposes us to risks that could have a material adverse effect on our business, financial condition, and results of operations.
For the year ended December 31, 2025, one customer accounted for approximately 10% of our total revenue as reflected in our consolidated statements of operations and comprehensive loss, and that same customer represented approximately 17% of our accounts receivable balance as of December 31, 2025. We may be unable to retain a significant customer if it determines to switch to a competitor offering lower prices or more favorable terms, elects to bring in-house the products or services we currently provide, or experiences a deterioration in its own financial condition or business operations that reduces its demand for our offerings. A significant customer may also seek to renegotiate its contractual arrangements with us on terms less favorable to us, including seeking price reductions or extended payment terms, which could adversely affect our revenue and margins. If a significant customer were acquired by, or merged with, another company, the acquiring entity may have existing vendor relationships that displace ours, further reducing or eliminating revenue from that customer. A loss of or significant reduction in business from a significant customer would likely cause an immediate and material decline in our revenue and operating results, and we may be unable to replace that revenue in a timely manner or at all given the lead time typically required to onboard new customers of comparable size. The concentration of accounts receivable from a single customer further increases our exposure to credit risk, as any failure by that customer to pay amounts owed to us could materially adversely affect our cash flow and liquidity.
We
recognize revenue
from customer subscriptions ratably over the term of their agreement, which generally spansspan one to three years. As a
result, a significant
portion of the revenue we report in any given period is derived from the recognition of deferred revenue related
to agreements entered
into in prior periods. This model presents the following risks:
Additionally,
our solutions may be used by our customers and other third parties who obtain access to our solutions for purposes other than for which
our solutions was intended. We maintain insurance to protect against certain claims associated with the use of our solutions,products and services, but our insurance
insurance coverage may not adequately cover the claims asserted against us. In addition, even claims that ultimately are unsuccessful
could result
in our expenditure of funds in litigation, divert management’s time and other resources, and harm our business and reputation.
reputation. We have offered some of our customers of CHECKLIGHT® a limited financial warranty, subject to certain conditions. Any failure
or refusal of our insurance
providers to provide the expected insurance benefits to us after we have remediated warranty claims would
cause us to incur significant
expense or cause us to cease offering warranties which could damage our reputation, cause us to lose customers,
expose us to liability
claims by our customers, negatively impact our sales and marketing efforts, and have an adverse effect on our
business, operating results,
and financial condition. Further, although the terms of the warranty do not allow those customers to use
warranty claim payments to fund
payments to persons on the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC),
list of Specially Designated Nationals
and Blocked Persons or who are otherwise subject to U.S. sanctions, we cannot assure you that
all of our customers will comply with our
warranty terms or refrain from taking actions, in violation of our warranty and applicable
law.
Our
growth strategy includes expanding
operations in emerging markets, particularly in regions such as South America and Europe.markets. While these markets present significant growth
opportunities, they
also introduce a variety of risks that could adversely affect our business and financial results. The key risks associated
with our expansion
in emerging markets include:
We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.
AI presents new risks and challenges that may affect our business. We have made, and expect to continue to make, investments to integrate AI and ML technology into our solutions. AI presents risks, challenges, and potentially unintended consequences that could impact our ability to effectively use AI successfully in our business. Given the nature of AI technology, we face an evolving regulatory landscape and significant competition from other companies. Our AI efforts may not be successful, and our competitors may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively, reduce demand for our products and services and adversely affect our financial results. Increased competition from other companies implementing AI more effectively or rapidly could impact customer preferences and reduce demand for our products or services. Data practices by us or others, AI governance, AI development and validation practices that result in controversy could also impair the acceptance of AI solutions. This in turn could undermine confidence in the decisions, predictions, analysis, and effectiveness of our AI-related initiatives. In addition, vulnerabilities within our AI systems or solutions may be identified by competitors, researchers, or malicious actors before we detect or remediate them, which could result in security incidents, reputational damage, or loss of customer confidence.
The rapid evolution of AI, including potential government regulation of AI, may require significant additional resources related to AI in our solutions. Our AI-related initiatives may result in new or enhanced governmental or regulatory scrutiny, including regarding the use of AI in our solutions and the marketing of products using AI, litigation, customer reporting or documentation requirements, ethical or social concerns, or other complications The use of AI also brings ethical issues related to privacy, surveillance and consent of use, as well as potential for bias and discrimination. Any of the foregoing could adversely affect our business, reputation, or financial results.
The use of AI technology in our IT infrastructure could improve internal process but poses security and privacy risks.
The adoption of AI in internal processes presents an opportunity to bolster decision making, productivity and customer satisfaction, but the new technology poses risks. AI can be exploited by hackers and malicious actors to develop advanced cyberattacks, bypass security measures, and exploit system vulnerabilities including potentially identifying weaknesses in our systems before we become aware of or can remediate them. The use of AI involves handling large amounts of data. If the security measures around the usage of AI are insufficient, there’s risk of data breaches, leading to unauthorized access to sensitive information. Failure to comply with data protection regulations can result in legal consequences. The intellectual property risks associated with AI include uncertainties around the ownership of AI-generated works, potential infringement of existing patents and copyrights, unauthorized use of third-party data, and exposure of proprietary algorithms or trade secrets. Dependence on AI systems or AI vendors means that any downtime or outages can disrupt business operations. Usage of our confidential data to train AI models by us or our vendors could result in legal risk, especially if it involves customer data. Other risks that have been observed in AI models and documentation, include risks related to bias, discrimination, job displacements and violating human rights.
We
have entered into
service level agreements (“SLAs”) with many of our managed services clients, under which we guarantee specified
levels of service availability.
These arrangements require us to estimate and meet service delivery standards, including uptime and system
performance, to ensure client
satisfaction. The following risks are associated with thesethe SLAs:
As a public company, we are subject to the reporting requirements of the Exchange Act, and the corporate governance standards of the Sarbanes-Oxley Act and Nasdaq. We have a limited operating history as a public company, and these requirements may place a strain on our management, systems, and resources. In addition, we have incurred, and expect to continue to incur, significant legal, accounting, insurance, and other expenses. The Exchange Act requires us to file annual, quarterly, and current reports with respect to our business and financial condition within specified time periods and to prepare a proxy statement with respect to our annual meeting of stockholders. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. Nasdaq requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting and comply with the Exchange Act and Nasdaq requirements, significant resources and management oversight are required. This may divert management’s attention from other business concerns and lead to significant costs associated with compliance, which could have a material adverse effect on us and the market price of our common stock. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors or its committees or as our executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action, and potentially civil litigation.
The
expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these
rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming
and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain
qualified persons to serve on our Board of Directors or its committees or as our executive officers. Advocacy efforts by stockholders
and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount
of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company,
we could be subject to delisting of our common stock, fines, sanctions, other regulatory action, and potentially civil litigation.
We
had an aggregate of 11,821,86644,671,637 issued and outstanding shares of common stock as of December 31, 2024.2025. Approximately 4,838,61829,099,985
shares shares
were held in street name. The remainder of the outstanding shares may be sold, subject to certain volume limitations,
pursuant to Rule 144
or other available exemptions. Also, in the future, we may issue additional securities in connection with
financings and acquisitions.
The amount of our common stock issued in connection with an investment or acquisition could constitute
a material portion of our then
outstanding stock. Due to these factors, sales of a substantial number of shares of our common stock
in the public market could occur
at any time. These sales, or the perception in the market that the holders of a large number of
shares intend to sell shares, could reduce
the market price of our common stock.
Provisions
of our amended and restated certificate of incorporation, our amended and restated by-laws, and Delaware law may have the effect of deterring
unsolicited takeovers or delaying
or preventing a change in control of our company or changes in our management, including transactions
in which our stockholders might
otherwise receive a premium for their shares over then current market prices. In addition, these provisions
may limit the ability of
stockholders to approve transactions that they may deem to be in their best interests. These provisions include
the ability of our Board
of Directors to designate the terms of and issue new series of preferred stock without stockholder approval,
which could include the
right to approve an acquisition or other change in our control or could be used to institute a rights plan, also
known as a poison pill,
that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions
that have not been approved
by our Board of Directors. The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might
be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing
the likelihood that an investor in our company could receive a premium for their common stock in an acquisition.
The
existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future
for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that an investor
in our company could receive a premium for their common stock in an acquisition.
Our ability to access the full amount available under the purchase agreement with B. Riley is not guaranteed, and our broad discretion over the use of any proceeds we receive may not result in improved financial performance or stockholder value.
On September 24, 2025, we entered into a purchase agreement with B. Riley Principal Capital, LLC (“B. Riley”), pursuant to which we have the right to sell up to $15.0 million of our Series B Preferred Stock over an eighteen-month period. Our ability to sell shares of Series B Preferred Stock under the purchase agreement is subject to a number of conditions and limitations, and there can be no assurance that we will be able to satisfy such conditions or that such limitations will not prevent us from accessing all or a meaningful portion of the $15.0 million available. As of March 20, 2026, we have sold to B. Riley 2,396 shares of Series B Preferred Stock, or $2.3 million. If we are unable to continue accessing capital under the purchase agreement, we may be required to seek alternative financing arrangements, curtail or delay our operations, or otherwise be unable to execute our business plan, any of which could have a material adverse effect on our business, financial condition, and results of operations.
The issuance and potential conversion of Series B Preferred Stock may adversely affect our common stockholders and the market price of our common stock, and our obligation to redeem shares of Series B Preferred Stock upon certain triggering events could materially harm our liquidity and financial condition.
The Series B Preferred Stock issued under the purchase agreement to B. Riley carries rights, preferences, and privileges senior to those of our common stock, including with respect to dividends, liquidation, and other matters, which may adversely affect the rights and economic interests of our common stockholders. The ongoing potential for conversion of Series B Preferred Stock into common stock may create downward pressure on the market price of our common stock, and anti-dilution or other protective provisions associated with the Series B Preferred Stock could further dilute the holdings of existing common stockholders. Potential investors may perceive the overhang of shares issuable upon conversion as a negative factor, which could reduce demand for and depress the trading price of our common stock. Under the terms of our Series B Certificate of Designations, we are required to redeem all or a portion of the outstanding shares of Series B Preferred Stock upon the occurrence of certain triggering events, including if our common stock is delisted or suspended from Nasdaq, if the holder is prohibited from converting any portion of the Series B Preferred Stock for eighteen months following issuance due to the Exchange Cap (as defined in the purchase agreement), or if the market price of our common stock falls and remains below $0.40, the minimum conversion price, for ten consecutive trading days. Our obligation to make such redemptions could require us to use a substantial portion of our available cash or to seek additional sources of financing on potentially unfavorable terms. If we do not have sufficient cash on hand or are unable to obtain adequate financing, we may be unable to meet our redemption obligations, which could result in a default under the Series B Certificate of Designations and may have other material adverse consequences. The requirement to redeem shares of Series B Preferred Stock may also limit our ability to deploy cash for other purposes, such as funding operations, investing in our business, or pursuing strategic opportunities, and could negatively impact our financial condition, results of operations, and the market value of our common stock.
OurOn
amendedJanuary and12, restated2026, we filed a certificate of incorporationamendment authorizeswith the Secretary of State of the State of Delaware to amend our certificate of
incorporation to increase the number of authorized shares of common stock from 300,000 to 1,300,000,000. We have also authorized the
issuance of up to 300,000,00050,000,000 shares of our common stock and up to 50,000,000
shares of preferred stock. Our Board of Directors may choose to issue some or all of such shares to acquire
one or more companies and
to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book
value per share and may
contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any
such additional shares,
such issuance will reduce the proportionate ownership and voting power of all current stockholders. Further,
such issuance may result
in a change of control of our company.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to take advantage of the extended transition period for complying with the revised accounting standards. As a result, our financial statements may not be comparable to companies that comply with effective dates generally applicable to public companies. Investors may find our common stock less attractive because we may rely on these exemptions, reduced reporting requirements, and extended transition periods. If investors find our common stock less attractive as a result of any of the foregoing, there may be a less active trading market for our common stock and our stock price may be more volatile or may decrease.
In
addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided
in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates
for public and private companies until those standards apply to private companies. We have elected to take advantage of the extended
transition period for complying with the revised accounting standards. As a result, our financial statements may not be comparable to
companies that comply with effective dates generally applicable to public companies.
Investors
may find our common stock less attractive because we may rely on these exemptions, reduced reporting requirements, and extended transition
periods. If investors find our common stock less attractive as a result of any of the foregoing, there may be a less active trading market
for our common stock and our stock price may be more volatile or may decrease.
Our
directors, a former directordirector, a consultant and an executive officersofficer beneficially own a substantial majority of our outstanding
capital stock and will
have the ability to control our affairs.
Our
current directors and executive officers, anddirectors, a former directordirector, a consultant, and an executive officer, beneficially own approximately 31.55%34.47% of
our outstanding capital stock.
By virtue of these holdings, they effectively control the election of the members of our Board of
Directors, our management, and our
affairs and may prevent us from consummating corporate transactions such as mergers,
consolidations, or the sale of all or substantially
all of our assets that may be favorable from our standpoint or that of our other
stockholders.
On December 30, 2025, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price of our common stock had closed below $1.00 per share for the previous 33 consecutive business days and our common stock no longer meets the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days or until June 29, 2026, to regain compliance. To regain compliance, the closing bid price of our common stock must be $1.00 per share or more for a minimum of 10 consecutive business days at any time before June 29, 2026.
If we do not regain compliance with Rule 5550(a)(2) by June 29, 2026, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify us that our securities would be subject to delisting. In the event of such notification, we may appeal the staff’s determination to delist our securities, but there can be no assurance the staff would grant our request for continued listing.
The Nasdaq notification has no immediate effect on the listing of our common stock on the Nasdaq Capital Market. We intend to actively monitor the bid price of our common stock and our minimum market value of listed securities and will consider options available to us to achieve compliance with the Nasdaq listing rules. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with the other listing standards for the Nasdaq Capital Market.
If
we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing
bid price requirement, Nasdaq may take steps to delist our common stock. On March 29, 2023, we received a letter from the listing qualifications
staff of Nasdaq providing notification that the bid price for our common stock had closed below $1.00 per share for the previous 30 consecutive
business days and our common stock no longer met 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 had an initial period of 180 calendar days to regain compliance. To regain compliance,
the closing bid price of our common stock had to be $1.00 per share or more for a minimum of 10 consecutive business days at any time
before the expiration of the initial compliance period. We were unable to regain compliance with Rule 5550(a)(2) during the initial compliance
period, but pursuant to Nasdaq rules we were eligible for an additional 180 calendar day compliance period. To qualify, we needed to
meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq
Capital Market, with the exception of the minimum bid price requirement, and we were required to provide written notice of our intention
to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. Subsequently, on December
28, 2023, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price for our common
stock had closed below $0.10 per share for the previous 10 consecutive trading days and our common stock no longer met the minimum bid
price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). Accordingly we were subject to the provisions contemplated
under Nasdaq Listing Rule 5810(c)(3)(A)(iii), and as a result, Nasdaq determined to delist our securities. We were granted an appeal
with Nasdaq’s Hearings Panel on March 28, 2024. On March 8, 2024, our 1-for-15 reverse split became effective, increasing the bid
price for our common stock above $1.00 per share. On March 22, 2024, we received notification from Nasdaq that we had regained compliance
with the bid price requirements as set forth under Nasdaq Listing Rule 550(a)(2). As a result of regaining compliance, our appeal with
Nasdaq’s Hearing Panel was cancelled.
We
must continue to maintain a minimum closing bid price over $1.00 per share pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If our closing
bid price falls below $1.00 per share for more than 30 consecutive trading days, we may again be deemed noncompliant with Nasdaq’s
continued listing requirements.
The liquidity of the shares of our common stock may be affected adversely by the reverse stock split undertaken to
address such compliance failure, given the reduced number of shares that are outstanding following a reverse stock split. In addition,
reverse stock splits may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the
potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
On January 10,
2025, we received a notification letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”)
indicating that, since we have not yet held an annual meeting of stockholders within twelve months of the end of its December 31,
2023 fiscal year, we are out of compliance with the Nasdaq rules for continued listing (Listing Rules 5620(a) and 5810(c)(2)(G)).
The notification letter has no immediate effect on the listing of our securities on the Nasdaq Capital Market.
Under the applicable Nasdaq rules,
we had 45 calendar days to submit a plan to regain compliance. If Nasdaq accepted our plan, Nasdaq can grant an exception of up to 180
calendar days from our most recent fiscal year end, or until June 30, 2025, to regain compliance.
We filed a definitive proxy statement on March 5, 2025 for an annual meeting to be held on April 25, 2025 to regain
compliance with the applicable Nasdaq Listing Rules.
In the event that we again become non-compliant with Rule 5550(a)(2) and cannot re-establish compliance within the required timeframe, or we otherwise cannot comply with the continued listing standards of Nasdaq, our common stock could be delisted from Nasdaq, which could have a material adverse effect on our financial condition, and which would cause the value of our common stock to decline. If our common stock is not eligible for listing or quotation on another market or exchange, trading of our common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it would become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely be a reduction in our coverage by security analysts and the news media, which could cause the price of our common stock to decline further. In addition, it may be difficult for us to raise additional capital if we are not listed on a national securities exchange.
Following
a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors,
and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.
Although
we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance
that our reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition,
there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a
result, the trading liquidity of our common stock may not necessarily improve.
We have never paid any cash dividends, and currently do not intend to pay any dividends on our common stock for the foreseeable future. We intend to retain any future earnings to the extent necessary to develop and expand our business. Payment of cash dividends, if any, will depend, among other factors, on our earnings, capital requirements, and the general operating and financial condition, and will be subject to legal limitations on the payment of dividends out of paid-in capital. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock price. This may never happen, and investors may lose all of their investment.
The
trading price of our common stock is likely to be highly volatile and these fluctuations could cause you to lose all or part of your
investment in our common stock. Since shares of our common stock were sold in our initial public offering (IPO) in January 2022 at a price
price of $75.00 per share, the reported high and low sales prices of our common stock ranged from $0.26 to $138.15 per share through March
March20, 24, 2025.2026. Factors that may cause the market price of our common stock to fluctuate include:
Management's Discussion & Analysis (MD&A)
New heading “Liquidity and Capital Resources”
New heading “Series A Preferred Stock”
New heading “Series B Preferred Stock”
New heading “July 2025 Prospectus”
Removed heading “Use of Estimates”
Removed heading “Goodwill and Indefinite-Lived Intangible Assets”
Removed heading “Reimbursed Expenses”
Removed heading “Cost of Revenue”
Removed heading “Volatility in Stock-Based Compensation”
Removed heading “Change in fair value of derivative liability”
Largest changes
“The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended December 31, 2025, we incurred a net loss of $8,073,930, reported cash used in operations of $7,971,902, and expect to incur further losses through the end of 2026. Further, we have a working capital deficit of $4,474,265 as of December 31, 2025. As a result, substantial doubt about our ability to continue as a going concern exists. …”see in full comparison
“Goodwill and Indefinite-Lived Intangible Assets”see in full comparison
“We are actively evaluating strategies to obtain the necessary additional funding for future operations. These strategies may include, obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring of operations to grow revenues and decrease expenses. However, we may be unable to access further equity or debt financing when needed. Consequently, there is no assurance that we will be able to obtain the necessary liquidity when needed or under acceptable terms, if at all.”see in full comparison
“The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. …”see in full comparison
“If we do not regain compliance with Rule 5550(a)(2) by June 29, 2026, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. …”see in full comparison
Full comparison: every changed paragraph (73)
Security
managed services revenue decreased by $2,550,301,$3,986,159, or 8%,14%, for the year ended December 31, 2024,2025, as compared to the year ended December
31, 2024,2025, primarily due to lowerloss hardwareof andseveral softwarehigher-revenue sales.customers, partially offset by newly acquired customers.
Professional
services revenue decreased by $1,080,952,$309,958, or 30%,12%, for the year ended December 31, 2024,2025, as compared to the year ended December 31, 2023,2024,
primarily due to lowerfewer customer projects.
Cybersecurity
software revenue increased by $440,809,$151,420, or 100%,34%, for the year ended December 31, 2024,2025, as compared to the year ended December 31, 2023,2024,
primarily due to ourthe initial launch of our suite of internally developed cybersecurity software products.
Security
managed services cost of revenue decreased by $654,975,$1,973,745, or 7%,21%, for the year ended December 31, 2024,2025, as compared to the year ended
December December
31, 2023,2024, primarily due primarily to lower hardwarepersonnel andrelated softwarecosts sales.resulting from a reduction in headcount, as well as reduced costs related
to the management of service vendors associated with our existing client base.
Cybersecurity
software cost of revenue increased by $119,900,$82,820, or 100%,69%, for the year ended December 31, 2024,2025, as compared to the year ended December 31,
31, 2023,2024, primarily due to ourthe initial launch of our suite of internally developed cybersecurity software products.
Cost
of payroll decreased by $3,968,854,$1,590,759, or 25%,13%, for the year ended December 31, 2024,2025, as compared to the year ended December 31, 2023,2024, due
to headcount reduction.reductions.
Stock-based
compensation decreased by $486,022,$2,740,547, or 10%,63%, for the year ended December 31, 2024,2025, as compared to the year ended December 31, 2023,2024,
primarily due
to significantly lower grant date fair values on equity awards issued during the timingyear, of recognition of the reversal of expense for options forfeited by former employees,despite a decrease in thehigher number of grants.
The decrease also reflects the impact of forfeitures of options
granted inby 2024terminated andemployees, certainwhich optionreduced grantsrecognized that had fully vested.expense.
Professional
fees decreasedincreased by $1,871,615,$311,611, or 58%,23%, for the year ended December 31, 2024,2025, as compared to the year ended December 31, 2023,2024, due to an
a decreaseincrease in accounting, legal and otheraccounting professional fees incurred related to our periodic SEC filings and our efforts to raise
additional capital.fees.
Advertising
and marketing expenses decreasedincreased by $449,231,$1,012,140, or 100%, for the year ended December 31, 2024,2025, as compared to December 31, 2023,2024, due
to
utilizing internal resources for advertising and marketing activities.efforts initiated in 2025.
Selling,
general, and administrative expenses decreased $5,156,190,$2,488,649, or 28%,19%, for the year ended December 31, 2024,2025, as compared to the year ended
December 31, 2023,2024, primarily due to ourreductions analysis of our carrying amount of intangible assets being impaired for the year ended December 31, 2023, reductions
in headheadcount count,during and2024 resulting in lower costs for insurancecompensation and leaseleases expensesin for the year ended December 31, 2024.2025.
Stock-based
compensation expenses decreased by $3,036,007,$2,327,353, or 39%,50%, for the year ended December 31, 2024,2025, as compared to the year ended December 31,
2023,2024, primarily due to significantly lower grant date fair values on equity awards issued during the timingyear, despite a higher number of
grants. The decrease also reflects the impact of recognitionforfeitures of the reversal of expense for options forfeited by former employees, a decrease in the number
of options grantedby interminated 2024employees, andwhich certainreduced optionrecognized grants that had fully vested.expense.
Impairment
of goodwill decreased by $35,933,364, or 100%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023,
due to our analysis of our carrying amount of goodwill being impaired in 2023.
The gain on extinguishment of convertible notes was $4,432,434 for the year ended December 31, 2025 due to the conversion of certain convertible notes into shares of our common stock and Series A Preferred Stock during 2025.
Interest
expense, net increased by $1,317,599, or 58%, during the year ended December 31, 2024, as compared to the year ended December 31,
2023, due to an increase in our debt assumed and the effective interest rate on such debt.
LossThe
loss on issuance of convertible notes increasedwas by $1,022,650, or 100%,$1,022,650 during the year ended December 31, 2024, as compared to the year ended
December 31, 2023,2024 due to our costs associated with issuing
the convertible notes exceeding the fair value of such convertible notes.
The change in fair value of derivative liability increased by $6,060,693 during the year ended December 31, 2025, as compared to the year ended December 31, 2024. This increase was primarily due to changes in significant valuation inputs—such as the market price of CISO common stock—used in estimating the fair value of the derivative liability following the issuance of the related convertible notes payable in December 2024 and January 2025, as well as the subsequent conversion of certain convertible notes into shares of our common stock in 2025. The estimated fair value of the conversion feature of the derivative liability is based on Monte Carlo simulations, a valuation model.
Interest expense increased by $5,616,622 for the year ended December 31, 2025, as compared to the year December 31, 2024, 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.
Change
in fair value of derivative liability increased by $593,083, or 100%, during the year ended December 31, 2024, as compared to the year
ended December 31, 2023, due to an increase in the share price of our common stock to $3.47 per share on December 31, 2024, providing
more value as of December 31, 2024 to the holders of the convertible note if they were converted at such time.
The decrease in current assets is primarily due to the $67,272 increase in prepaid expenses and other current assets being more than offset by decreases in accounts receivable and prepaid cost of revenue of $636,460 and $263,927, respectively. Accounts receivable and prepaid cost of revenue decreased due to collection efforts and lower revenue in 2025. Prepaid expenses increased due to increased prepaid marketing expenses.
The decrease in current liabilities is primarily due to decreases in accounts payable, accrued expenses and other current liabilities, debt obligations, and the derivative liability of $5,359,450, $9,425,380, and $2,102,927, respectively. During the year ended December 31, 2025, we paid down accounts payable, accrued expenses, other current liabilities and loans payable outstanding, certain convertible notes payable were converted into shares of our common stock and Series A Preferred Stock, and the derivative liability was derecognized as a result of the conversion of the notes payable.
The
decrease in current assets is primarily due to an increase in cash and cash equivalents and prepaid cost of revenues of $750,946 and
$89,445, respectively, offset by decreases to accounts receivable and prepaid expenses and other current assets of $962,688 and $68,194
respectively. The increase in current liabilities is primarily due to the increase in accounts payable and accrued expenses, loans payable,
line of credit, derivative liability, and convertible notes payable of $2,037,617, $817,845, $1,957,938, $2,102,927, and $5,000,002, respectively.
Net cash used in operating activities was $7,971,902 for the year ended December 31, 2025 and was primarily due to cash used to fund a net loss of $8,073,930, adjusted for non-cash expenses in the aggregate of $5,070,143 and additional cash decreases from changes in the levels of operating assets and liabilities in the aggregate of $4,968,115, primarily as a result of a decrease in accounts payable, accrued expenses, and other current liabilities. Net cash used in operating activities was $3,841,706 for the year ended December 31, 2024 and was primarily due to cash used to fund a net loss of $24,243,919, adjusted for non-cash expenses in the aggregate of $17,100,898 and additional cash increases from changes in the levels of operating assets and liabilities in the aggregate of $3,301,315, primarily as a result of an increase in accounts receivable, accounts payable and accrued expenses, and deferred revenue.
Net
cash used in operating activities was $3,841,706 for the year ended December 31, 2024 and was primarily due to cash used to fund a
net loss of $24,243,919, adjusted for non-cash expenses in the aggregate of $17,013,753 and additional cash increases from changes
in the levels of operating assets and liabilities in the aggregate of $3,388,460, primarily as a result of an increase in accounts
receivable, accounts payable and accrued expenses, and deferred revenue. Net cash used in operating activities was $5,920,112 for
the year ended December 31, 2023 and was primarily due to cash used to fund a net loss of $80,231,083, adjusted for non-cash
expenses in the aggregate of $64,085,528 and additional cash increases from changes in the levels of operating assets and
liabilities in the aggregate of $10,225,443, primarily as a result of an increase in accounts receivable, accounts payable and
accrued expenses, and deferred revenue.
Net
cash used in investing activities ofwere $7,491 and $83,095 for the yearyears ended December 31, 2025 and 2024, wasrespectively, primarilywhich were due
to cash paid to purchase property
and equipment. Net cash used in investing activities of $160,158 for the year ended December 31, 2023, was primarily due to cash paid
to purchase property and equipment.
Net cash provided by financing activities for the year ended December 31, 2025 was $8,682,798, which was primarily due to $2,816,075 cash received from the sale of our common stock, $1,774,935 cash received from the sale of our Series B Preferred Stock, $1,949,999 from the exercise of warrants, cash received from borrowings on our convertible loans payable and line of credit (net of debt issuance costs) of $23,072,983, offset by $20,934,296 in repayments of our loans payable and line of credit.
Net cash provided by financing activities for the year ended December 31, 2024 was $3,914,162, which was primarily due to $154,947 cash received from the sale of our common stock, cash received from borrowings on our loans, line of credit, and convertible notes payable (net of debt issuance costs) of $10,984,412, offset by $7,225,197 in repayment of our loans payable and line of credit.
Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended December 31, 2025, we incurred a net loss of $8,073,930, reported cash used in operations of $7,971,902, and expect to incur further losses through the end of 2026. Further, we have a working capital deficit of $4,474,265 as of December 31, 2025. As a result, substantial doubt about our ability to continue as a going concern exists. The Company’s ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles. We are evaluating strategies to obtain the required additional funding for future operations. These strategies may include obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring operations to grow revenues and decrease expenses.
Series A Preferred Stock
On August 4, 2025, we entered into Exchange Agreements with each of the Holders. Pursuant to the Exchange Agreements, the Holders exchange certain outstanding convertible notes payable with aggregate principal and accrued interest of approximately $9,297,894 (collectively, the “Exchange Notes”) for an aggregate of 9,297,894 newly authorized shares of Series A Preferred Stock. Upon the closing of the transactions contemplated by the Exchange Agreements, the Exchange Notes were cancelled, and the Holders relinquished all rights, powers, privileges, remedies, or interest under such securities. On November 6, 2025, we converted all 9,297,894 outstanding shares of Series A Preferred Stock, together with $222,815 in accrued and unpaid dividends to 9,520,709 shares of common stock.
Series B Preferred Stock
On September 24, 2025, we entered into a Preferred Equity Purchase Agreement (the “Purchase Agreement”) with B. Riley Principal Capital I (“B. Riley”), an affiliate of B.Riley Securities, Inc. (“BRS”), pursuant to which we will have the right to issue and sell to B. Riley, and B. Riley must purchase from us, up to $15.0 million of shares of our newly authorized Series B Convertible Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”). As of the issuance of these consolidated financial statements, B. Riley has purchased $2.3 million of the $15.0 million of shares of Series B Preferred Stock. Such sales of Series B Preferred Stock by us to B. Riley, if any, will be subject to certain limitations and conditions set forth in the Purchase Agreement, and may occur from time to time, at our sole discretion, over the 18-month period commencing September 24, 2025 and terminating on the earliest of (i) March 24, 2027, (ii) the date on which B. Riley shall have made payment of the aggregate purchase price equal to $15.0 million. In no event may we issue or sell to B. Riley under the Purchase Agreement shares of our Series B Preferred Stock that are convertible into an aggregate number of shares of common stock exceeding a customary 9.99% beneficial ownership limitation.
July 2025 Prospectus
On June 26, 2025, we filed a replacement shelf registration statement on Form S-3 (that was deemed effective on July 7, 2025) (“July 2025 Prospectus”) that contains two prospectuses:
In no event will we sell securities under this registration statement with a value exceeding more than one-third of our “public float” (the aggregate market value of our common stock and any other equity securities that we may issue in the future that are held by non-affiliates) in any 12-calendar month period so long as our public float remains below $75 million.
Net
cash provided by financing activities for the year ended December 31, 2024 was $3,914,162, which was primarily due to cash received
from the sale of our common stock, net proceeds from loans and lines of credit, and convertible notes payable of $154,947,
$8,919,412, and $2,065,000, respectively, and offset by the payment of loans and convertible notes payable, and lines of credit of
$6,157,484 and $1,067,713, respectively. Net cash provided by financing activities for the year ended December 31, 2023 was
$6,193,046, which was primarily due to cash received from the sale of our common stock, and net proceeds from loans and convertible
notes payable of $6,655,493 and $11,975,631, respectively, and offset by the payment of loans and convertible notes payable of
$12,929,931.
Liquidity
The
accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which
contemplates realization of assets and satisfying liabilities in the normal course of business. At December 31, 2024, we had an
accumulated deficit of $182,262,606 and working capital deficit of $21,474,576. For the year ended December 31, 2024, we had
negative cash flows from operations of $3,841,706. Although our company is showing positive operating cash flows and gross profit
trends, we expect to incur further losses through the end of 2025.
To
date, we have funded operations primarily through the sale of equity in public offerings, private placements, loan proceeds, and revenue
generated by our services. During the year ended December 31, 2024, we received $154,947 from public and private offerings of our common
stock and $3,759,215 in net proceeds from our loans and convertible notes payable. On June 27, 2022, our Registration Statement on Form
S-3 was declared effective, and we may offer and sell from time to time, in one or more series, any of our securities, for total gross
proceeds up to $300,000,000. As of December 31, 2024, we had $291,190,324 of available funding from our S-3 Registration Statement from
which we may issue our securities to fund current and future operations.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which assumes the realization of assets and
satisfaction of liabilities in the normal course of business. However, due to losses incurred, substantial doubt about the
Company’s ability to continue as a going concern exists.
We
are actively evaluating strategies to obtain the necessary additional funding for future operations. These strategies may include,
obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring of operations to grow
revenues and decrease expenses. However, we may be unable to access further equity or debt financing when needed. Consequently,
there is no assurance that we will be able to obtain the necessary liquidity when needed or under acceptable terms, if at
all.
OurThere 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 dependsis ondependent upon our ability to successfully executing the plan outlined inimplement our Growth Strategystrategies and
eventually achievingattain profitable operations. The accompanying
consolidated financial statements do not include any adjustments to the carrying
amounts andor classification of assets, liabilities, and
reported expenses that may be necessary if thewe Company wereare unable to
continue as a going concern.
On December 30, 2025, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price of our common stock had closed below $1.00 per share for the previous 33 consecutive business days and our common stock no longer meets the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days or until June 29, 2026, to regain compliance. To regain compliance, the closing bid price of our common stock must be $1.00 per share or more for a minimum of 10 consecutive business days at any time before June 29, 2026.
If we do not regain compliance with Rule 5550(a)(2) by June 29, 2026, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify us that our securities would be subject to delisting. In the event of such notification, we may appeal the staff’s determination to delist our securities, but there can be no assurance the Staff would grant our request for continued listing.
The Nasdaq notification has no immediate effect on the listing of our common stock on the Nasdaq Capital Market. We intend to actively monitor the bid price of our common stock and our minimum market value of listed securities and will consider options available to us to achieve compliance with the Nasdaq listing rules. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with the other listing standards for the Nasdaq Capital Market.
Critical
Accounting Policies and Estimates
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported
amounts of revenue and expenses during the periods. Our significant estimates include the allowance for credit losses, the carrying value of intangible assets and goodwill,
deferred tax asset and valuation allowance, the valuation of convertible notes, derivative liabilities, the estimated fair value of assets
acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes-Merton pricing model,
such as expected volatility, risk-free interest rate, share price, expected dividend rate, and the adequacy of insurance reserves, could be affected by external conditions, including those unique to
us and general economic conditions. It is reasonably possible that these external factors could have an effect on our estimates and could
cause actual results to differ from those estimates.
Fair
Value MeasurementMeasurements
The automatic discounted share-settlement feature of our convertible notes issued in December 2024 was an embedded derivative requiring bifurcation accounting as (1) the feature was not clearly and closely related to the debt host and (2) the feature met the definition of a derivative under ASC 815, Derivatives and Hedging.
The bifurcated embedded features were initially recorded on the balance sheet at their fair value on the date of issuance. After the initial recognition, the fair value of the embedded derivative liability changed over time due to changes in the share price of our common stock. The change in fair value has been included in our statement of operations. The embedded derivative liability and related convertible notes payable were extinguished during the year ended December 31, 2025.
Business
CombinationCombinations
Goodwill
Goodwill and Indefinite-Lived Intangible Assets
Goodwill
and indefinite-lived intangible assets areis 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 or other indefinite-lived intangible
assets is less than their carrying value as a result of an annual or interim
test, an impairment loss is recognized and reflected in
operating income or loss in the consolidated statements of operations during
the period incurred. We perform our impairment assessment
based on a quantitative analysis performed for our reporting unit.
We
review finite-lived intangible assets for impairment whenever an event occurs or circumstances change that indicate that the carrying
amount of such assets may not be fully recoverable. Recoverability is determined based on an estimate of undiscounted future cash flows
resulting from the use of an asset and its eventual disposition. Should an asset not be recoverable, an impairment loss is measured by
comparing the fair value of the asset to its carrying value. If we determine the fair value of an asset is less than the carrying value,
an impairment loss is recognized in operating income or loss in the consolidated statements of operations during the period incurred.
We
performed our annual impairment assessment forof 2024goodwill as of December 31, 2025 and concluded that no impairment of goodwill was indicated.
As of December 31,
2024, 2025, we believe such assets are recoverable, however, there can be no assurance that these assets will not be impaired
in future
periods. Any future impairment charges could adversely impact our results of operations.
See
Notes 3 and 7 to our financial statements for additional information regarding goodwill and indefinite-lived assets.
We review finite-lived intangible assets for impairment whenever an event occurs or circumstances change that indicate that the carrying amount of an asset group may not be fully recoverable. Recoverability is determined based on an estimate of undiscounted future cash flows resulting from the use of an asset group and its eventual disposition. Should an asset group not be recoverable, an impairment loss is measured by comparing the fair value of the asset group to its carrying value. If we determine the fair value of an asset group is less than the carrying value, an impairment loss is recognized in operating income or loss in the consolidated statements of operations during the period incurred.
What changed in the latest 10-Q
Risk Factors
New heading “If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.”
Removed heading “We have substantial doubt about our ability to continue as a going concern and may be required to make significant cash payments to redeem our Series B Preferred Stock, which could exacerbate our liquidity constraints.”
Largest changes
“We have substantial doubt about our ability to continue as a going concern and may be required to make significant cash payments to redeem our Series B Preferred Stock, which could exacerbate our liquidity constraints.”see in full comparison
“If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.”see in full comparison
“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. …”see in full comparison
As ofsee in full comparisonMarchJune31,30, 2026, we had cash and cash equivalents of$640,075$721,771 and a working capital deficit of$5,523,902,$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. Inaddition,connectionunderwith thetermsconversion ofourallSeries B Preferred Stock, a conversion notice delivered on April 1, 2026 triggered a requirement that we redeem the remainingoutstanding Series B Preferred Stockandon April 1, 2026, we are required to make monthly cash paymentsbeginningof approximately $155,575 through May1,2027,2026fortotalinganapproximatelyaggregate$1,866,900obligationoverofeleven months.$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.
Full comparison: every changed paragraph (4)
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.
We
have substantial doubt about our ability to continue as a going concern and may be required to make significant cash payments to redeem
our Series B Preferred Stock, which could exacerbate our liquidity constraints.
As
of MarchJune 31,30, 2026, we had cash and cash equivalents of $640,075$721,771 and a working capital deficit of $5,523,902,$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 addition,connection
underwith the termsconversion of ourall Series B Preferred Stock, a conversion notice delivered on April 1, 2026 triggered a requirement that we redeem
the remainingoutstanding Series B Preferred Stock andon April 1, 2026, we are required to make monthly cash payments beginningof approximately
$155,575 through May 1,2027, 2026for totalingan approximatelyaggregate $1,866,900obligation overof eleven
months.$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.
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025”
Largest changes
see in full comparisonIfOnwe do not regain compliance with Rule 5550(a)(2) byJune29,30, 2026, the staff notified us that wemay bewere eligible for an additional 180 calendar daycomplianceperiod,period. Toorqualify,untilweDecemberwould28,need2026, to regainmeetcompliance. 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 listingstandardsforontheThe Nasdaq CapitalMarket,Market with the exception of theminimumbid price requirement, andwould need to provideour written notice of our intention to cure the deficiency during the second complianceperiod,period by effecting a reverse stock split, if necessary.However, if it appears to the staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify us that our securities would be subject to delisting. In the event of such notification, we may appeal the staff’s determination to delist our securities, but there can be no assurance the Staff would grant our request for continued listing.
“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. …”see in full comparison
“Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025”see in full comparison
“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. …”see in full comparison
Net cash used in operating activities wassee in full comparison$879,816$948,415 for thethreesix months endedMarchJune31,30, 2026 and was primarily due to cash used to fund a netnetloss of$1,588,906,$3,201,611adjusted(whichforincludes non-cash expenses in the aggregate of$572,414,$1,120,801),andpartiallyadditional cash inflowoffset bychanges in the levels of operating assets and liabilities, primarily due toan increase in accounts payable ofand accounts receivable and a decrease in prepaid expenses and other current assets and deferred revenue.$1,120,061. Net cash used in operating activities was$2,953,508$5,303,332 for thethreesix months endedMarch 31,June 30, 2025 and was primarily due to cash used to fund a net loss of$5,379,604,$8,389,525adjusted(whichforincludes non-cash expenses in the aggregate of$4,622,938 and additional cash outflow by changes in the levels of operating assets and liabilities, primarily as a result of$6,520,869), a decrease in accounts payablepayable,andan increase in prepaidaccrued expenses andotheracurrentdecreaseassets.in deferred revenue.
The Nasdaqsee in full comparisonnotificationnotice has no immediateeffectimpact on the listing of our CommonStockStock, 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.WeAlthoughintend to actively monitor the bid price of our Common Stock and our minimum market value of listed securities andwe willconsideruseoptionsallavailable to usreasonable efforts to achieve compliance withtheRuleNasdaq5550(a)(2),listing rules. Therethere can be no assurance that we will be able to regain compliance withthethatminimumrule priorbid price requirement or will otherwise be in compliance withto theotherDecemberlisting28,standards2026for the Nasdaq Capital Market.deadline.
Full comparison: every changed paragraph (72)
First
QuarterHalf of 2026 Highlights
Our
operating results for the threesix months ended MarchJune 31,30, 2026 included the following:
Comparison
of the Three Months Ended MarchJune 31,30, 2026 to the Three Months Ended MarchJune 31,30, 2025
Our
financial results for the three months ended MarchJune 31,30, 2026 are summarized as follows in comparison to the three months ended MarchJune 31,30,
2025:
Security
managed services revenue decreased by $904,885,$914,120, or 14%,15%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended
MarchJune 31,30, 2025, primarily due to the loss of several higher-revenue customers, partially offset by newlynew acquiredcustomer customers.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 $84,852,$58,279, or 15%,11%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 30,
31, 2025, primarily due to fewer customer projects.
Cybersecurity
software revenue increased by $47,740,$50,300, or 32%,35%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 30,
31, 2025, primarily due to thean launchincrease ofin licenses for our suite of internally developed cybersecurity software products.software.
Security
managed services cost of revenue decreased by $363,893,$51,984, or 18%,3%, for the three months ended MarchJune 31,30, 2026 as compared to the three months
ended MarchJune 31,30, 2025, primarily due to lower third-party costs associated with service vendors supportingfor our existing client base.
Professional
services cost of revenue decreased by $10,822,$8,001, or 22%,11%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended
MarchJune 31,30, 2025, primarily due to decreased use of outside consultants.
Cybersecurity
software cost of revenue increaseddecreased by $23,113,$2,186, or 70%,4%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended June
March 31,30, 2025, primarily due to additional development costs incurred in the launchthree ofmonths ourended suiteJune of30, internally developed cybersecurity software products.2025.
Cost
of payroll decreased by $166,747,$213,349, or 6%,8%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025,
primarily due to headcount reductions.
Stock-based
compensation expenses decreased by $466,153,$432,503, or 86%,91%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended June
March 31,30, 2025, due to significantly lower grant date fair values offewer equity awards issued, despite a higher number of grants.issued. The decrease
also reflects the impact of forfeitures of awards by terminated employees,
which reduced recognized expense.
Professional
fees increased by $175,487, or 34%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, due
to an increase in accounting and consultant fees, including Customer Advisory Board costs, partially offset by lower audit and legal
fees.
AdvertisingProfessional
and marketing expensesfees increased by $8,832$161,088, or 97%, for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,
30, 2025, due
to increasedan marketingincrease spend.in accounting fees.
Selling,
general, and administrative expenses decreased by $308,583, or 12%, for the three months ended March 31, 2026 as compared to the three
months ended March 31, 2025, primarily due to lower bad debt expense, insurance, and company-used
software.
Stock-based
compensation expense decreased by $98,926, or 31%, for the three months ended March 31, 2026 as compared to the three months ended March
31, 2025, primarily due to significantly lower grant date fair values on equity awards issued, despite a higher number of grants. The
decrease also reflects the impact of forfeitures of awards by terminated employees, which reduced recognized expense.
Other
Expense
Change
in fair value of derivative liability decreased by $5,387,691 for the three months ended March 31, 2026 as compared to the three months
ended March 31, 2025 due to the conversion of certain convertible notes into shares of our Common Stock in 2025.
The
loss on extinguishment of convertible notes payable decreased by $839,151 for the three months ended March 31, 2026 as compared to the
three months ended March 31, 2025 due to the conversion of all remaining convertible notes payable into Common Stock or Series A Preferred
Stock during 2025.
Interest
expense decreased by $8,085,820 for the three months ended March 31, 2026 as compared to the three months ended March 31, 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 during 2025.
OtherAdvertising
expenseand increasedmarketing expenses decreased by $12,277$523,360 for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31, 30,
2025, primarily
due to unrealizedtransitioning foreignmarketing exchangefunctions losses.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:
Revenue
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.
Expenses
Cost of Revenue
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.
Operating Expenses
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.
Other (Expense) Income
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.
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 threesix months ended MarchJune 31,30, 2026, we incurred
incurred a net loss of $1,588,906,$3,201,611 reported cash used in operations of $879,816$948,415 and expect to incur further losses through the end of
2026. Further,
we have a working capital deficit of $5,523,902$8,518,124 as of MarchJune 31,30, 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
funding for future operations. These strategies may include obtaining equity financing, issuing debt or entering into other financing arrangements,
arrangements, and restructuring operations to grow revenues and decrease expenses.
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.
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 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, Stock and had converted 618 of which 618such shares have been converted into shares of our Common Stock. Additional issuances under the Purchase Agreement are
subject to customary conditions, including market-price/VWAP thresholds and a 9.99% beneficial ownership limitation, and therefore may
not be available when needed.
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 arebecame obligated to redeem the remaining Series B Preferred Stock and make monthly payments
beginning beginning
May 1, 2026 equal to one-twelfth ofequaling 105% of the $1,778,000 stated value (aggregate $1,866,900,value, or $1,866,900. As of June 30, 2026, we had made one redemption payment
of $155,575 perwith month)respect overto eleventhe months.
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.
On
December 30, 2025, we received a letter from the listing qualifications staff of Nasdaq providingnotifying notificationus 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 nodid longernot meets
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 haveprovided an initial 180 calendar daysday compliance period, or until June 29, 2026, to regain compliance. To regain compliance,compliance during
that initial compliance period, the closing bid price of
our Common Stock mustwas required to be at least $1.00 per share or more for a minimum of
10 consecutive business days at any time before June 29, 2026.days.
IfOn
we do not regain compliance with Rule 5550(a)(2) by June 29,30, 2026, the staff notified us that we may bewere eligible for an additional 180 calendar day complianceperiod, period.
Toor qualify,until weDecember would28, need2026, to
regain meetcompliance. 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
standards foron theThe Nasdaq Capital Market,Market with the exception of the minimum bid price
requirement, and would need to provideour written notice
of our intention to cure the deficiency during the second compliance period,period by effecting a reverse
stock split, if necessary. However,
if it appears to the staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify
us that our securities would be subject to delisting. In the event of such notification, we may appeal the staff’s determination
to delist our securities, but there can be no assurance the Staff would grant our request for continued listing.
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 notificationnotice has no immediate effectimpact on the listing of our Common StockStock, 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. WeAlthough intend to actively monitor
the bid price of our Common Stock and our minimum market value of listed securities andwe will consideruse optionsall available to usreasonable
efforts to achieve
compliance with theRule Nasdaq5550(a)(2), listing rules. Therethere can be no assurance that we will be able to regain compliance with thethat minimumrule
prior bid price
requirement or will otherwise be in compliance withto the otherDecember listing28, standards2026 for the Nasdaq Capital Market.deadline.
Our
material cash requirements included the following contractual obligations as of MarchJune 31,30, 2026:
CISO insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-14 | Jemmett David Grant |
Shares withheld for tax | 12,258 | $0.25 | $3.1K |
| 2026-09-14 | Jemmett David Grant |
Option exercise | 46,875 | — | — |
| 2026-09-14 | Smith Debra Lou |
Shares withheld for tax | 6,538 | $0.25 | $1.6K |
| 2026-09-14 | Smith Debra Lou |
Option exercise | 25,000 | — | — |
| 2026-06-13 | Jemmett David Grant |
Shares withheld for tax | 49,032 | $0.29 | $14.2K |
| 2026-06-13 | Jemmett David Grant |
Option exercise | 187,500 | — | — |
| 2026-06-13 | Smith Debra Lou |
Shares withheld for tax | 26,150 | $0.29 | $7.6K |
| 2026-06-13 | Smith Debra Lou |
Option exercise | 100,000 | — | — |
| 2026-06-13 | Smith Debra Lou |
Option exercise | 73,850 | $0.29 | $21.4K |
| 2026-06-13 | Jemmett David Grant |
Option exercise | 138,468 | $0.29 | $40.2K |
Well-known investors holding CISO (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 496,974 | $137.7K | 0.0% | Added 346% |