10-Q: CISO Global Narrows Losses, Boosts Gross Profit in Q3

Sentiment:

Quarterly Report 13 November 2025 5:20 PM

CISO Global reported a significant reduction in net loss and improved gross profit for the nine months ended September 30, 2025, alongside strategic debt restructuring and new capital raising initiatives.

Capital raiseEntered into Exchange Agreements on August 4, 2025, converting approximately $9,297,894 of outstanding convertible notes and accrued interest into 9,297,894 shares of newly authorized Series A Preferred Stock.Entered into a Preferred Equity Purchase Agreement on September 24, 2025, with B. Riley Principal Capital I, granting the right to issue and sell up to $15.0 million of Series B Convertible Preferred Stock over an 18-month period.Renewed a shelf registration statement on Form S-3 on June 26, 2025 (effective July 7, 2025), covering potential offerings of various securities with total proceeds of up to $100,000,000.Maintains an At-the-Market (ATM) sales agreement for up to $10,380,600 of common stock, part of the renewed S-3 registration statement.

Better than expectedNet loss for the nine months ended September 30, 2025, significantly improved by $12,866,864 compared to the prior year.Gross profit for the nine months ended September 30, 2025, increased by 88%, indicating improved operational efficiency.Loss from operations for the nine months ended September 30, 2025, was reduced by $5,984,371.Current liabilities decreased by $16,585,255, and the working capital deficit improved by $16,098,074, reflecting a stronger balance sheet.The company reported net income of $2,532,428 for the three months ended September 30, 2025, a substantial positive shift from a net loss in the prior year.

Summary

Total revenue for the nine months ended September 30, 2025, decreased by 13% to $20,337,707 from $23,345,136 in the prior year, primarily due to lower annual contract values in security managed services and fewer professional service projects.
Cybersecurity software revenue increased by 43% to $436,637 for the nine months ended September 30, 2025, driven by the initial launch of internally developed software products.
Gross profit for the nine months ended September 30, 2025, significantly increased by 88% to $5,025,756, compared to $2,674,199 in the prior year, mainly due to reduced costs of revenue, including a 18% decrease in cost of payroll.
Loss from operations improved by $5,984,371, reducing to $(6,673,139) for the nine months ended September 30, 2025, from $(12,657,510) in the same period last year.
Net loss for the nine months ended September 30, 2025, substantially decreased to $(5,857,097) from $(18,723,961) in the prior year, an improvement of $12,866,864.
For the three months ended September 30, 2025, the company reported net income of $2,532,428, a significant improvement from a net loss of $(3,677,886) in the same period of 2024.
Current liabilities were reduced by $16,585,255 to $8,370,392 as of September 30, 2025, compared to $24,955,647 at December 31, 2024.
The working capital deficit improved by $16,098,074, decreasing to $(5,376,502) as of September 30, 2025, from $(21,474,576) at December 31, 2024.
Cash and cash equivalents increased to $1,111,729 at September 30, 2025, from $992,589 at December 31, 2024.
Net cash used in operating activities increased to $(6,180,042) for the nine months ended September 30, 2025, from $(3,582,726) in the prior year.
The company recognized a gain on extinguishment of convertible notes of $4,432,434 and a change in fair value of derivative liability of $5,467,610 for the nine months ended September 30, 2025.
Interest expense significantly increased to $(9,076,393) for the nine months ended September 30, 2025, from $(2,611,067) in the prior year, primarily due to the accretion of convertible notes payable and amortization of debt issuance costs.

Sentiment

Score: 6

Explanation: The sentiment is cautiously optimistic. While the company shows significant improvements in gross profit, operating loss, and net loss, and has taken steps to improve its balance sheet and secure future funding, the 'going concern' warning and increased operating cash burn remain significant concerns. The capital raises are crucial for survival but also imply dilution.

Positives

Net loss for the nine months ended September 30, 2025, significantly improved by $12,866,864 to $(5,857,097) compared to $(18,723,961) in the prior year.
Gross profit for the nine months ended September 30, 2025, increased by 88% to $5,025,756, indicating improved operational efficiency.
Loss from operations for the nine months ended September 30, 2025, was reduced by $5,984,371 to $(6,673,139).
Current liabilities decreased by $16,585,255 to $8,370,392, significantly strengthening the balance sheet.
The working capital deficit improved by $16,098,074 to $(5,376,502), reflecting better short-term financial health.
Cybersecurity software revenue grew by 43% for the nine months ended September 30, 2025, demonstrating traction in a key growth area.
Achieved net income of $2,532,428 for the three months ended September 30, 2025, a substantial turnaround from a net loss in the prior year.
Successfully converted approximately $9.3 million in outstanding convertible notes and accrued interest into Series A Preferred Stock, resulting in a gain on troubled debt restructuring of $5,296,103.
Headcount reductions in 2024 led to decreased cost of payroll and selling, general, and administrative expenses in 2025.

Negatives

Total revenue decreased by 13% for the nine months ended September 30, 2025, primarily due to lower annual contract values in security managed services and fewer professional service projects.
Net cash used in operating activities increased to $(6,180,042) for the nine months ended September 30, 2025, indicating a higher cash burn rate from operations.
Interest expense significantly increased by $6,456,326 for the nine months ended September 30, 2025, largely due to the accretion of convertible notes payable and amortization of debt issuance costs.
The company continues to operate with a working capital deficit of $(5,376,502) as of September 30, 2025.
Substantial doubt exists about the company's ability to continue as a going concern due to historical losses and cash used in operations.
One customer represented a significant portion of total revenue (11% for Q3 2025 and 10% for YTD Sep 30, 2025), indicating customer concentration risk.

Risks

Substantial doubt exists about the company's ability to continue as a going concern due to incurred losses, historical cash used in operations, and a working capital deficit.
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.
There is no assurance that the company will be able to obtain additional liquidity when needed or under acceptable terms, if at all, potentially leading to an inability to access further equity or debt financing.
The company's shelf registration statement on Form S-3 is subject to 'baby shelf rules,' limiting sales to one-third of its public float in any 12-calendar month period if the public float remains below $75 million.
Material differences between management's estimates and actual results could affect the reported amounts of assets, liabilities, revenue, and expenses.
Indirect taxation laws are complex and subject to change, and future audits could result in material differences from current indirect tax estimates and associated liabilities.
The company offers limited warranties to select customers for security breaches and indemnifies directors and executive officers, which could lead to potential liabilities.

Future Outlook

The company expects to incur further losses through the end of 2025. Its ability to fund ongoing operations is highly dependent on raising additional capital through equity or debt financing. Management believes that culture is the foundation of successful cybersecurity and compliance programs and will continue to seek and acquire cybersecurity talent to expand service scope and geographical coverage. The company aims to create a culture of security and help quantify the return on investment from information technology and cybersecurity spending.

Management Comments

We believe that culture is the foundation of every successful cybersecurity and compliance program.
We seek to differentiate ourselves by remaining technology agnostic, focusing on accumulating highly sought-after topic experts.
We will 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.
Bringing together a world-class team of technological experts with multi-faceted expertise in critical aspects of cybersecurity is key to providing technology-agnostic solutions to our clients in a business environment that has suffered from a chronic lack of highly skilled professionals.
Our goal is to create a culture of security and to help quantify, define, and capture a return on investment from information technology and cybersecurity spending.
We expect that we will incur further losses through the end of 2025.

Industry Context

The cybersecurity industry is characterized by a chronic lack of highly skilled professionals. CISO Global aims to differentiate itself by being technology-agnostic and focusing on accumulating topic experts to provide comprehensive solutions, contrasting with firms focused on specific technologies or services. The company's emphasis on 'culture of security' and quantifying ROI from cybersecurity spending addresses a critical need in the market.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
New Preferred Stock Series	Filed Certificate of Designations, Preferences and Rights of Series A Preferred Stock on August 4, 2025, designating 9,297,894 shares with specific voting, dividend, liquidation, redemption, and conversion rights.	2025-08-04	Introduces a new class of preferred stock with cumulative dividends and specific conversion/redemption features, impacting capital structure and potential future common stock dilution.
New Preferred Stock Series	Filed Certificate of Designations, Preferences and Rights of Series B Preferred Stock on September 25, 2025, designating 15,625 shares with senior rank to Common Stock, specific dividend, liquidation, redemption, and conversion rights, and subject to beneficial ownership and exchange cap limitations.	2025-09-25	Establishes another class of preferred stock, senior to common, with complex conversion terms and limitations, potentially affecting future equity raises and common shareholder value.

Legal Proceedings

Currently not a party to any material legal proceedings.

Related Party Transactions

On August 4, 2025, entered into Exchange Agreements with Hensley & Company (an entity affiliated with Andrew K. McCain, a director) and JC Associates, Inc., converting approximately $9,297,894 of outstanding convertible notes and accrued interest into Series A Preferred Stock.
Hensley & Company, d/b/a Hensley Beverage Company, an entity affiliated with director Andrew K. McCain, is a customer. For the three months ended September 30, 2025, the company received $490,089, and for the nine months ended September 30, 2025, it received $769,683 from Hensley Beverage Company for contracted services.

Stakeholder Impact

**Shareholders:** Potential for significant dilution from future equity raises (Series B Preferred Stock, ATM sales) and conversion of Series A Preferred Stock into common stock. However, debt restructuring and improved financial performance could stabilize the company, benefiting long-term shareholders.
**Creditors:** Debt restructuring and conversion of convertible notes into preferred stock have reduced current liabilities, improving the company's short-term solvency and potentially reducing risk for remaining creditors.
**Employees:** Headcount reductions in 2024 impacted employees but contributed to decreased payroll and SG&A expenses in 2025, aiming for a more sustainable operational structure. Continued focus on acquiring cybersecurity talent suggests opportunities for skilled professionals.
**Customers:** Continued investment in cybersecurity software and a focus on technology-agnostic solutions and expert talent aim to provide better service and enhance client cyber posture.
**Suppliers:** Reduced accounts payable indicate more timely payments, which could strengthen supplier relationships.

Next Steps

Obtain stockholder approval for Series B Preferred Stock conversion limitations by September 24, 2026.
Continue efforts to raise additional capital through equity or debt financing to fund ongoing operations.
Continue development of internally developed cybersecurity software products.
Monitor and manage the 'baby shelf rules' limitations on capital raising via Form S-3.

Key Dates

Date	Description
2022-06-14	Date of At-the-Market (ATM) sales agreement with BRS, Stifel, Nicolaus & Company, Incorporated and Boustead Securities, LLC.
2023-03-20	Original maturity date of the unsecured convertible note payable to Hensley & Company.
2023-06-07	Original maturity date of the unsecured convertible note payable to JC Associates (first note).
2023-10-12	Original maturity date of the unsecured convertible note payable to JC Associates (second note).
2023-11-30	Date of business loan and security agreement for $2,200,000 loan.
2024-01-31	Date of the 2024 Loan and Security Agreement with Aion for a line of credit up to $3,500,000.
2024-03-28	Date of Business Loan and Security Agreement (Restructured Loan) with LendSpark Corporation.
2024-06-14	Date of At-the-Market (ATM) sales agreement with BRS, Stifel, Nicolaus & Company, Incorporated and Boustead Securities, LLC.
2024-06-30	Repayment of first four installments of Subordinated Business Loan Agreement.
2024-07-01	Date through which operating results of former Latin America subsidiaries are reported within discontinued operations.
2024-09-30	End of quarterly period for comparative financial results.
2024-09-30	Repayment date for all accrued, but unpaid interest on the $1,050,000 and $1,000,000 convertible notes payable to JC Associates.
2024-09-30	End of quarterly period for comparative financial results.
2024-09-30	End of nine months period for comparative financial results.
2024-09-30	Sale of wholly-owned subsidiary vCISO, LLC for cash proceeds of $1,000,000.
2024-11-30	Date of Note Purchase Agreement for a $540,000 loan.
2024-11-30	Maturity date of Promissory Note for reacquisition of vCISO, LLC.
2024-12-15	Extended maturity date of the $1,050,000 and $1,000,000 unsecured convertible notes payable to JC Associates.
2024-12-31	End of fiscal year for comparative balance sheet data.
2024-12-31	Repayment date for $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 $540,000 loan from Note Purchase Agreement.
2025-01-07	Effectiveness date of a change in a majority of directors, triggering funding of remaining $5,000,000 under Securities Purchase Agreement.
2025-03-20	Extended maturity date of the unsecured convertible note payable to Hensley & Company.
2025-03-25	Date of Amendment #1 to the convertible note with Hensley & Company, extending maturity to March 20, 2026.
2025-03-26	Date the Restructured Loan with LendSpark Corporation was repaid in full.
2025-03-31	Repayment 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 the 2025 Loan and Security Agreement with Aion, replacing the 2024 agreement.
2025-06-13	Date of granting 1,550,000 Restricted Stock Units (RSUs).
2025-06-26	Renewal date of shelf registration statement on Form S-3.
2025-07-07	Effective date of renewed shelf registration statement on Form S-3 (July 2025 Prospectus).
2025-08-04	Date of Exchange Agreements with Hensley & Company and JC Associates for conversion of convertible notes into Series A Preferred Stock.
2025-08-05	Date the Promissory Note for vCISO reacquisition was converted to Series A Preferred Stock and fully extinguished.
2025-09-04	Issuance of 310,000 shares of Common Stock to FMW Media Works LLC for marketing services.
2025-09-19	Issuance of 72,927 shares of Common Stock to SB Cyber Tech for cybersecurity services.
2025-09-24	Date of Preferred Equity Purchase Agreement with B. Riley Principal Capital I for up to $15.0 million of Series B Convertible Preferred Stock.
2025-09-25	Date of filing Certificate of Designations, Preferences and Rights of Series B Preferred Stock.
2025-09-30	End of the quarterly period covered by this report.
2025-10-10	Filing of Registration Statement on Form S-1 for resale of Common Stock underlying Series B Preferred Stock.
2025-10-21	Filing of an amendment to the Registration Statement on Form S-1.
2025-11-06	Conversion of all 9,297,894 outstanding shares of Series A Preferred Stock, plus $222,815 in accrued dividends, into 9,520,709 shares of Common Stock.
2025-11-10	Effective date of the amended Registration Statement on Form S-1.
2025-11-12	Number of common shares outstanding: 44,046,343.
2025-11-13	Filing date of the Quarterly Report on Form 10-Q.
2026-03-24	Termination date of the Preferred Equity Purchase Agreement with B. Riley (if not terminated earlier).
2026-04-14	Maturity date of the 2025 Loan and Security Agreement with Aion.
2026-09-24	Deadline for stockholder approval regarding Series B Preferred Stock conversion limitations.

Recommendation

hold

While CISO Global has demonstrated significant improvements in its financial performance, including a substantial reduction in net loss and an increase in gross profit, and has taken proactive steps to restructure debt and secure capital, the 'going concern' warning remains a critical factor. The company's ability to sustain operations is still highly dependent on future capital raises, which could lead to further shareholder dilution. The increased operating cash burn also warrants caution. For a seasoned investor, the current situation presents a speculative opportunity with notable risks. A 'hold' recommendation acknowledges the positive operational and financial restructuring efforts while recognizing the ongoing liquidity challenges and the inherent risks associated with a company facing a 'going concern' qualification.

Keywords

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

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.