10-Q: CISO Global Narrows Losses, Boosts Gross Profit

Sentiment:

Quarterly Report 14 August 2025 3:28 PM

CISO Global, Inc. reported a significant reduction in net loss and a substantial increase in gross profit for the first half of 2025, alongside a major debt restructuring.

Capital raiseFiled a shelf registration statement on Form S-3 on June 26, 2025, effective July 7, 2025, for potential offerings of common stock, preferred stock, warrants, debt securities, and units with total proceeds up to $100,000,000.Includes a sales agreement prospectus for potential ATM sales of common stock up to $10,380,600.Subject to 'baby shelf rules,' limiting sales to one-third of public float in any 12-calendar month period if public float is below $75 million.Management is actively pursuing additional debt and/or equity financing through discussions with investment bankers and private investors.

Better than expectedGross profit more than doubled to $3,418,442 for the six months ended June 30, 2025, indicating significant improvement in profitability per unit of revenue.Loss from operations was reduced by over $5 million, demonstrating enhanced operational efficiency and cost control.Net loss decreased by over $6.6 million, reflecting a substantial improvement in the company's bottom line.Total current liabilities were reduced by over $7.1 million, and the working capital deficit improved by over $7 million, significantly strengthening the balance sheet.The post-period conversion of nearly $9.3 million in convertible notes to preferred stock substantially reduces debt and mitigates the going concern risk.

Summary

Total revenue for the six months ended June 30, 2025, decreased by 12% to $13,875,909 from $15,833,839 in the prior year period.
Security managed services revenue decreased by $1,746,776, or 12%, primarily due to lower annual contract values among newly acquired customers.
Professional services revenue decreased by $306,096, or 22%, due to fewer customer projects.
Cybersecurity software revenue increased by $94,942, or 48%, driven by the initial launch of internally developed software products.
Total gross profit more than doubled to $3,418,442 for the six months ended June 30, 2025, up from $1,640,131 in the same period last year.
Loss from operations significantly narrowed to $4,039,132 for the six months ended June 30, 2025, compared to $9,138,506 in the prior year.
Net loss for the six months ended June 30, 2025, was $8,389,525, a substantial improvement from $15,046,075 in the comparable 2024 period.
Total current liabilities were reduced by $7,153,067 to $17,802,580 as of June 30, 2025, from $24,955,647 at December 31, 2024.
The working capital deficit improved to $(14,460,071) as of June 30, 2025, from $(21,474,576) at December 31, 2024.
Cash and cash equivalents decreased to $760,754 at June 30, 2025, from $992,589 at December 31, 2024.
Cash used in operating activities increased to $5,303,332 for the six months ended June 30, 2025, from $2,679,622 in the prior year.
Interest expense surged to $8,949,180 for the six months ended June 30, 2025, up from $1,373,766, primarily due to accretion of convertible notes and amortization of debt issuance costs.
One customer accounted for 10% of total revenue for the three and six months ended June 30, 2025.

Sentiment

Score: 6

Explanation: While the company faces significant challenges, including revenue decline and a going concern warning, the substantial improvements in gross profit, operating loss, and net loss, coupled with a strong reduction in current liabilities and a major debt-to-equity conversion post-period, indicate a positive trajectory in financial management and operational efficiency. The ongoing cash burn and need for capital raise temper the overall sentiment.

Positives

Total gross profit increased significantly by 108% to $3,418,442 for the six months ended June 30, 2025, indicating improved cost management relative to revenue.
Loss from operations was reduced by over 55% to $4,039,132 for the six months ended June 30, 2025, demonstrating progress in operational efficiency.
Net loss decreased substantially by over 44% to $8,389,525 for the six months ended June 30, 2025, reflecting overall financial improvement.
Total current liabilities were reduced by $7,153,067, significantly strengthening the balance sheet.
The working capital deficit improved by over $7 million, indicating better short-term financial health.
Cybersecurity software revenue grew by 48%, highlighting success in the initial launch of internally developed products.
Post-period, $9,297,894 in convertible notes and accrued interest were exchanged for Series A Preferred Stock, significantly reducing debt and addressing going concern issues.

Negatives

Total revenue decreased by 12% for the six months ended June 30, 2025, primarily due to lower contract values and fewer customer projects in managed and professional services.
Cash and cash equivalents declined by $231,835 from December 31, 2024, indicating continued cash burn.
Net cash used in operating activities increased to $5,303,332, suggesting higher operational cash outflow.
Interest expense increased dramatically by $7,575,414, largely due to non-cash accretion and amortization related to convertible notes.
A substantial doubt about the ability to continue as a going concern exists due to incurred losses, cash used in operations, and a working capital deficit.
One customer represented 10% of total revenue for the three and six months ended June 30, 2025, indicating customer concentration risk.

Risks

Ability to maintain an effective system of internal controls and accurately report financial results.
Substantial doubt about the ability to continue as a going concern due to historical losses, cash used in operations, and a working capital deficit.
Inability to obtain additional liquidity when needed or under acceptable terms, which could prevent funding future operations.
Potential for substantial dilution to existing stockholders if additional equity financing is pursued.
Possible imposition of operational restrictions if debt financing is secured.
Uncertainty regarding indirect tax liabilities and potential changes in domestic and international indirect taxation laws.
Reliance on management estimates, judgments, and assumptions in financial statements, which could differ from actual results.

Future Outlook

Management expects to incur further losses through the end of 2025. The company plans to improve liquidity by reducing overhead costs and actively pursuing additional debt and/or equity financing. It will continually seek to identify and acquire cybersecurity talent to expand service scope and geographical coverage.

Management Comments

We continually seek to identify and acquire cybersecurity talent to expand our service scope and geographical coverage to provide the best possible service for our clients.
We believe that our cash and cash equivalents as of the date of this filing, together with anticipated revenues, will be sufficient to meet our anticipated cash requirement for the near term.
Our efforts are focused on developing our business, reducing overhead cost, and capital raising.
Our plan is to improve our liquidity by a planned reduction in overhead costs and actively pursuing additional debt and /or equity financing through discussions with investment bankers and private investors.
We expect that we will incur further losses through the end of 2025.

Industry Context

The company operates in the cybersecurity industry, which is characterized by a chronic lack of highly skilled professionals. CISO Global aims to differentiate itself by remaining technology agnostic and focusing on accumulating topic experts, offering a holistic MCCP+ (Managed Compliance & Cybersecurity Provider + Culture) solution. The increase in cybersecurity software revenue suggests a positive trend in the adoption of proprietary software solutions within the industry, aligning with a shift towards integrated security platforms.

Comparison to Industry Standards

The significant increase in gross profit margin (from 10.36% to 24.64% for the six months ended June 30) suggests improved operational efficiency and cost management, potentially outperforming some competitors struggling with talent acquisition costs.
The substantial reduction in operating loss and net loss indicates a positive trajectory towards profitability, which is crucial in a competitive and evolving cybersecurity market where many smaller players struggle with sustained losses.
The decline in revenue for managed and professional services, while offset by software growth, suggests a need to re-evaluate customer acquisition strategies or pricing models in these segments, especially compared to larger, more established cybersecurity firms that may have more stable recurring revenue streams.
The high interest expense and ongoing 'going concern' warning, despite recent debt restructuring, indicate a higher financial risk profile compared to industry leaders with stronger balance sheets and access to lower-cost capital.
The customer concentration (one customer representing 10% of revenue) is a vulnerability that could be higher than industry averages for diversified cybersecurity providers, posing a risk to revenue stability.

Related Party Transactions

Managed Services Agreement with Hensley Beverage Company (affiliated with director Andy McCain): Received $279,594 for services for the six months ended June 30, 2025, down from $1,175,914 in the prior year. Had an outstanding receivable balance of $90,632 as of June 30, 2025.
Convertible Note Payable with Hensley & Company (affiliated with director Andy McCain): $5,000,000 principal, 10% interest, maturity extended to March 20, 2026. Accrued interest payable of $1,138,888 as of June 30, 2025.
Post-period, on August 4, 2025, the Hensley & Company convertible note (principal and accrued interest totaling approximately $9,297,894) was exchanged for Series A Preferred Stock.

Stakeholder Impact

Shareholders: Potential for significant dilution from future equity financing, but also benefit from improved financial metrics and reduced debt burden (especially from the post-period conversion to preferred stock).
Employees: Headcount reductions in 2024 led to lower payroll costs in 2025, indicating potential job insecurity, but the focus on acquiring cybersecurity talent suggests opportunities for skilled professionals.
Customers: Lower annual contract values for newly acquired customers and fewer professional service projects suggest potential pricing pressures or reduced demand in certain segments, but increased cybersecurity software subscriptions indicate growth in that area.
Creditors: Significant reduction in current liabilities and the conversion of convertible notes to preferred stock improve the company's ability to meet its obligations, reducing creditor risk.

Next Steps

Continue efforts to develop the business, reduce overhead costs, and raise capital.
Actively pursue additional debt and/or equity financing through discussions with investment bankers and private investors.
Continually seek to identify and acquire cybersecurity talent to expand service scope and geographical coverage.
Monitor the effectiveness of the July 2025 Registration Statement for funding current and future operations.

Key Dates

Date	Description
2022-06-14	Date of At-the-Market (ATM) sales agreement with B. Riley Securities, Inc., Stifel, Nicolaus & Company, Incorporated and Boustead Securities, LLC.
2023-03-20	Original maturity date of the $5,000,000 convertible note payable to Hensley & Company.
2023-03-25	Amendment Number One to the Hensley & Company convertible note, extending maturity to March 20, 2026.
2023-06-07	Original maturity date of the $1,050,000 unsecured convertible note payable to JC Associates.
2023-10-12	Original maturity date of the $1,000,000 unsecured convertible note payable to JC Associates.
2023-11-30	Date of business loan and security agreement for $2,200,000 loan.
2024-01-30	Maturity Date of the 2024 Loan and Security Agreement with Aion.
2024-01-31	Date of Loan and Security Agreement (2024 Loan and Security Agreement) with Aion.
2024-03-26	Repayment in full of the Restructured Loan with LendSpark Corporation.
2024-03-28	Date of Business Loan and Security Agreement (Restructured Loan) with LendSpark Corporation and Fee Agreement.
2024-04-05	Commencement date of weekly installments for the Restructured Loan.
2024-06-15	Extended maturity date of the $1,050,000 unsecured convertible note payable to JC Associates (Amendment #1).
2024-06-15	Extended maturity date of the $1,000,000 unsecured convertible note payable to JC Associates (Amendment #1).
2024-09-30	Due date for repayment of all accrued, but unpaid interest on the $1,050,000 and $1,000,000 convertible notes payable to JC Associates as of June 30, 2024.
2024-11-30	Maturity date of the Promissory Note for reacquiring vCISO, LLC.
2024-12-01	Initial funding date for the Securities Purchase Agreement with several purchasers.
2024-12-15	Extended maturity date of the $1,050,000 unsecured convertible note payable to JC Associates (Amendment #2).
2024-12-15	Extended maturity date of the $1,000,000 unsecured convertible note payable to JC Associates (Amendment #2).
2024-12-31	Due date for repayment of $25,000 of accrued interest on the $1,050,000 and $1,000,000 convertible notes payable to JC Associates.
2025-01-01	Maturity date of the Note Purchase Agreement loan for $540,000.
2025-01-07	Effective date of change in majority of directors, triggering remaining $5,000,000 funding under Securities Purchase Agreement.
2025-03-31	Due date for remaining accrued interest on the $1,050,000 and $1,000,000 convertible notes payable to JC Associates.
2025-04-14	Date of Loan and Security Agreement (2025 Loan and Security Agreement) with Aion, replacing the 2024 agreement.
2025-06-13	Date of grant for 1,550,000 Restricted Stock Units (RSUs).
2025-06-26	Filing date of shelf registration statement on Form S-3.
2025-06-30	End of the quarterly reporting period.
2025-07-07	Effective date of the July 2025 Registration Statement on Form S-3.
2025-08-04	Date of Exchange Agreements with Hensley & Company and J C Associates, Inc. to exchange convertible notes for Series A Preferred Stock.
2025-08-08	Date common stock shares outstanding were reported.
2025-08-14	Date of signing of the Quarterly Report on Form 10-Q by CEO and CFO.
2026-03-20	Extended maturity date of the Hensley & Company convertible note.
2026-04-14	Maturity Date of the 2025 Loan and Security Agreement with Aion.
2026-12-15	Extended maturity date of the $1,050,000 and $1,000,000 unsecured convertible notes payable to JC Associates.

Recommendation

hold

CISO Global's Q2 2025 filing presents a mixed but improving picture. The substantial improvements in gross profit, operating loss, and net loss, coupled with a significant reduction in current liabilities and working capital deficit, demonstrate effective cost management and balance sheet strengthening. The post-period conversion of nearly $9.3 million in convertible notes to preferred stock is a critical positive step, significantly reducing debt and mitigating the 'going concern' risk. However, the continued decline in overall revenue, increased cash burn from operations, and the ongoing 'going concern' warning (despite mitigation) warrant caution. While the company is actively pursuing capital raises and strategic talent acquisition, the path to sustained profitability and positive cash flow remains challenging. For a seasoned investor, the operational improvements and debt restructuring are encouraging signs of a potential turnaround, but the revenue headwinds and continued need for external financing suggest a 'hold' position is prudent until more consistent revenue growth and positive operating cash flow are demonstrated.

Keywords

Cybersecurity, Managed Security Services, Professional Services, Cybersecurity Software, SEC Filing, 10-Q, Financial Results, Going Concern, Debt Restructuring, Capital Raise, Nasdaq, CISO Global

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