8-K: CISO Global Secures $15M Equity Facility for Growth

CISO Global has secured a $15 million convertible preferred equity facility from B. Riley to fund expansion initiatives and strengthen its balance sheet.

Summary

• CISO Global entered into a Preferred Equity Purchase Agreement with B. Riley Principal Capital I for up to $15.0 million of newly authorized Series B Convertible Preferred Stock.
• The company has the right, at its sole discretion, to issue and sell shares to B. Riley over an 18-month period, commencing September 24, 2025, and terminating on March 24, 2027, or earlier under certain conditions.
• The initial purchase will be for $2.3 million of Series B Preferred Stock, with subsequent purchases in increments of $100,000, up to a maximum of $500,000 weekly.
• The Series B Preferred Stock has a purchase price of $960 per share, representing a 4% original issue discount from its stated value of $1,000 per share.
• Proceeds from sales are expected to be used for working capital, general corporate purposes, payment of debt obligations, and funding expansion initiatives, particularly scaling the AI-powered cybersecurity software business in the insurance channel through CAGI.
• Conversion of Series B Preferred Stock into common stock is subject to a beneficial ownership limitation of 9.99% and a Nasdaq Listing Rule Exchange Cap of 19.99% (6,821,115 shares as of September 24, 2025) until stockholder approval is obtained.
• The company is required to use reasonable best efforts to obtain stockholder approval within 90 days of entering the Purchase Agreement (by December 23, 2025).
• B. Riley, as placement agent, will receive a 3.5% cash fee in connection with the sale and issuance of Series B Preferred Stock.
• The company has agreed not to effect certain 'Variable Rate Transactions' or issue common stock or equivalents until October 23, 2025, without B. Riley's prior written consent (with exceptions).
• The company may terminate the Purchase Agreement at any time by paying $1.0 million as liquidated damages.

Sentiment

Score: 7

Explanation: The filing announces a significant capital raise that provides substantial liquidity and funding for strategic growth initiatives, particularly in the high-growth cybersecurity software sector. While there are potential dilution risks and costs associated with the financing, the company maintains control over the capital deployment and has no mandatory drawdowns, indicating a proactive and flexible approach to funding. The strengthening of the balance sheet is a clear positive.

Positives

• Secured access to up to $15.0 million in capital, providing significant liquidity for operations and growth.
• The company retains full control over the timing and amount of capital draws, with no obligation to utilize the full facility and no penalties for non-use.
• The Series B Preferred Stock bears no preferred return or preferred dividends, reducing immediate cash outflow requirements.
• Proceeds are earmarked for strategic expansion initiatives, including scaling the AI-powered cybersecurity software business in the insurance channel, which could drive future revenue growth.
• The financing is expected to strengthen the balance sheet and provide additional liquidity, following a previously announced debt-to-preferred equity exchange.
• Management highlights a long-standing relationship with B. Riley Securities, indicating a trusted partnership.

Negatives

• The Series B Preferred Stock is sold at a 4% original issue discount ($960 purchase price for $1,000 stated value), representing a cost of capital.
• B. Riley, as placement agent, receives a 3.5% cash fee, further increasing the cost of capital.
• Conversion of Series B Preferred Stock into common stock could cause significant dilution to existing shareholders, especially if the common stock price declines due to the VWAP-based conversion price mechanism (95% of lowest VWAP for most conversions, with a $0.40 floor).
• Full utilization of the facility and conversion of all preferred shares requires stockholder approval for issuances exceeding the 19.99% Nasdaq Exchange Cap; failure to obtain this by September 24, 2026, could limit capital access or terminate the agreement.
• The Series B Preferred Stock ranks senior to common stock in liquidation, potentially impacting common shareholders in a dissolution event.
• The company is restricted from effecting certain 'Variable Rate Transactions' without B. Riley's prior written consent, limiting future financing flexibility.
• A $1.0 million liquidated damages fee is payable if the company terminates the agreement early.

Risks

• **Dilution Risk**: Conversion of Series B Preferred Stock into common stock could significantly increase the outstanding number of common shares, diluting the ownership and value of existing common stock.
• **Stockholder Approval Risk**: Failure to obtain stockholder approval for conversions exceeding the 19.99% Nasdaq Exchange Cap by September 24, 2026, could limit the company's ability to fully utilize the $15.0 million facility or lead to its termination.
• **Market Conditions Risk**: The actual frequency and amount of sales of Series B Preferred Stock to B. Riley will depend on market conditions and the trading price of the common stock, which are outside the company's control.
• **Redemption Risk**: Under certain circumstances, such as a prolonged suspension of common stock trading or delisting from Nasdaq, the company may be required to redeem the Series B Preferred Stock for cash, potentially straining liquidity.
• **Operational Execution Risk**: The successful deployment of capital for expansion initiatives and scaling the cybersecurity software business is subject to operational and market execution risks.
• **Financial Performance Risk**: The company's ability to sustain profitability and execute its plan from a position of financial strength, as stated by management, is subject to various business and economic factors.

Future Outlook

The company expects to use the net proceeds from the facility for working capital, general corporate purposes, and payment of debt obligations. A key focus is funding expansion initiatives, particularly scaling its AI-powered cybersecurity software business in the insurance channel through its strategic relationship with CAGI. Management anticipates that this financing, combined with a previous debt-to-preferred equity exchange, will further enhance the company's balance sheet and provide additional liquidity to pursue strategic growth opportunities, enabling a focus on executing its plan from a position of financial strength.

Management Comments

• "This investment represents an important step forward for CISO Global and enables us to accelerate the growth of our software business and further execute on our strategic vision." David Jemmett, CEO of CISO Global.
• "We have a long relationship with B. Riley Securities and greatly appreciate their support for this next phase of our growth." David Jemmett, CEO of CISO Global.
• "With this facility in place, we have strengthened our balance sheet. We are now focused on executing our plan from a position of financial strength." Deb Smith, CFO of CISO Global.

Industry Context

CISO Global operates in the dynamic and growing AI-powered cybersecurity software and compliance services industry. This financing arrangement positions the company to capitalize on market opportunities, particularly by expanding its software business within the insurance channel. The strategic focus on a specific vertical (insurance) suggests an effort to deepen market penetration and leverage specialized solutions. The ongoing efforts to optimize the capital structure, including this preferred equity facility and a prior debt-to-preferred equity exchange, are common strategies for growth-oriented technology companies seeking to fund expansion while managing debt levels in a competitive landscape.

Comparison to Industry Standards

• The 4% original issue discount and 3.5% placement agent fee are generally within the typical range for convertible preferred equity financings of this nature, reflecting the cost of capital for a growth-stage company.
• The conversion price mechanism, which is VWAP-based with a $0.40 floor, is a standard structure designed to provide investors with participation in potential upside while offering some downside protection, comparable to similar financing instruments in the market.
• The beneficial ownership limitation of 9.99% and the Nasdaq Exchange Cap of 19.99% are standard regulatory compliance measures, ensuring the company adheres to exchange rules regarding large equity issuances and avoids triggering immediate shareholder approval requirements for significant ownership changes.
• The 18-month term for the facility provides a reasonable timeframe for the company to access capital incrementally, aligning with typical growth cycles and strategic planning horizons for technology firms.

Corporate Governance

Related Party Transactions

• The Preferred Equity Purchase Agreement is with B. Riley Principal Capital I, a fund managed by B. Riley Securities Holdings, Inc.
• B. Riley Securities, Inc. also acted as the Sole Placement Agent for this transaction and has an existing at-the-market offering program with the company.

Stakeholder Impact

• **Shareholders**: Potential for significant dilution upon conversion of Series B Preferred Stock into common stock. However, the capital raise supports growth initiatives that could enhance long-term shareholder value. Stockholder approval is required for conversions exceeding 19.99% of outstanding common stock.
• **Employees**: Funding for expansion initiatives could lead to job creation or increased job stability as the company scales its operations.
• **Customers**: Enhanced ability to scale the cybersecurity software business and expand offerings, potentially leading to improved or more comprehensive services.
• **Creditors**: Proceeds may be used for payment of debt obligations, which could improve the company's overall credit profile and financial stability.

Next Steps

• File a Registration Statement covering the resale of Conversion Shares by October 4, 2025.
• Use commercially reasonable efforts to have the Registration Statement declared effective by the SEC as soon as practicable (within 12-90 days depending on SEC review).
• Use reasonable best efforts to obtain stockholder approval for conversions exceeding the 19.99% Nasdaq Exchange Cap within 90 days of the agreement date (by December 23, 2025).
• Hold additional stockholder meetings every 90 days thereafter if stockholder approval is not obtained.
• Draw funds from the facility as needed for working capital, general corporate purposes, debt obligations, and expansion initiatives, particularly scaling the cybersecurity software business.

Key Dates

Recommendation

The capital raise provides crucial funding for CISO Global's expansion, particularly in its AI-powered cybersecurity software business, and strengthens its balance sheet. This is a positive step for growth and liquidity. However, the financing structure involves potential significant dilution for existing common shareholders upon conversion of the preferred stock, especially given the VWAP-based conversion price and the need for shareholder approval for full utilization. The 4% OID and 3.5% placement fee also represent a cost of capital. While the company has flexibility in drawing funds, the long-term impact on shareholder value will depend on the effective deployment of this capital and the company's ability to achieve its growth targets and manage dilution. Given the mixed implications of growth funding versus potential dilution, a 'hold' recommendation is appropriate for investors to observe the execution of the growth strategy and the actual impact of dilution.

Keywords

Cybersecurity, AI-powered software, Convertible Preferred Stock, Equity Facility, Capital Raise, Financing, B. Riley, Nasdaq, Dilution, Liquidity, Expansion Initiatives, Corporate Governance