Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as amended.

Unless otherwise indicated or the context requires otherwise, the terms "we," "us," "our," and "our company" refer to CISO Global, Inc., a Delaware corporation, and its wholly owned subsidiaries. Unless otherwise specified, all dollar amounts are expressed in U.S. dollars.

First Quarter 2026 Highlights

Our operating results for the three months ended March 31, 2026 included the following:

	●	Total gross profit increased by $42,505 to $1,824,107 for the three months ended March 31, 2026 as compared to $1,781,602 for the three months ended March 31, 2025.
	●	Loss from continuing operations improved to $1,588,906 for the three months ended March 31, 2026 as compared to $5,379,604 for the three months ended March 31, 2025.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025

Our financial results for the three months ended March 31, 2026 are summarized as follows in comparison to the three months ended March 31, 2025:

		Three Months Ended March 31,
		2026				2025				Variance
Revenue:
Security managed services		$	5,540,348			$	6,445,233			$	(904,885	)
Professional services			484,971				569,823				(84,852	)
Cybersecurity software			195,006				147,266				47,740
Total revenue			6,220,325				7,162,322				(941,997	)
Cost of revenue:
Security managed services			1,639,954				2,003,847				(363,893	)
Professional services			39,370				50,192				(10,822	)
Cybersecurity software			56,343				33,230				23,113
Cost of payroll			2,585,299				2,752,046				(166,747	)
Stock-based compensation			75,252				541,405				(466,153	)
Total cost of revenue			4,396,218				5,380,720				(984,502	)
Total gross profit			1,824,107				1,781,602				42,505
Operating expenses:
Professional fees			689,166				513,679				175,487
Advertising and marketing			12,562				3,730				8,832
Selling, general, and administrative			2,348,308				2,656,891				(308,583	)
Stock-based compensation			218,121				317,047				(98,926	)
Total operating expenses			3,268,157				3,491,347				(223,190	)
Loss from operations			(1,444,050	)			(1,709,745	)			265,695
Other (expense) income:
Change in fair value of derivative liability			-				5,387,691				(5,387,691	)
Loss on extinguishment of convertible notes			-				(839,151	)			839,151
Interest expense, net			(127,051	)			(8,212,871	)			8,085,820
Other expense			(17,805	)			(5,528	)			(12,277	)
Total other expense			(144,856	)			(3,669,859	)			3,525,003
Loss from continuing operations		$	(1,588,906	)		$	(5,379,604	)		$	3,790,698

Revenue

Security managed services revenue decreased by $904,885, or 14%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the loss of several higher-revenue customers, partially offset by newly acquired customers. 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, or 15%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to fewer customer projects.

Cybersecurity software revenue increased by $47,740, or 32%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the launch of our suite of internally developed cybersecurity software products.

Expenses

Cost of Revenue

Security managed services cost of revenue decreased by $363,893, or 18%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to lower costs associated with service vendors supporting our existing client base.

Professional services cost of revenue decreased by $10,822, or 22%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to decreased use of outside consultants.

Cybersecurity software cost of revenue increased by $23,113, or 70%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the launch of our suite of internally developed cybersecurity software products.

Cost of payroll decreased by $166,747, or 6%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, due to headcount reductions.

Stock-based compensation expenses decreased by $466,153, or 86%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, due to significantly lower grant date fair values of 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.

Operating Expenses

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.

Advertising and marketing expenses increased by $8,832 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, due to increased marketing spend.

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.

Other expense increased by $12,277 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to unrealized foreign exchange losses.

Liquidity and Capital Resources

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2026, we incurred a net loss of $1,588,906, reported cash used in operations of $879,816 and expect to incur further losses through the end of 2026. Further, we have a working capital deficit of $5,523,902 as of March 31, 2026. As a result, substantial doubt about our ability to continue as a going concern exists. Our ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles. We are evaluating strategies to obtain the required additional funding for future operations. These strategies may include obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring operations to grow revenues and decrease expenses.

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")pursuant to which we may sell up to $15.0 million of shares of our Series B Convertible Preferred Stock (the "Series B Preferred Stock"). As of March 31, 2026, B. Riley purchased $2.3 million (2,396 shares) of the Series B Preferred Stock, of which 618 shares have been converted into shares of our Common Stock. 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 are obligated to redeem the remaining Series B Preferred Stock and make monthly payments beginning May 1, 2026 equal to one-twelfth of 105% of the $1,778,000 stated value (aggregate $1,866,900, or $155,575 per month) over eleven months. These required cash payments increase our near-term liquidity needs, and we intend to satisfy them through a combination of operating cash flows and additional financing; however, there can be no assurance that sufficient funds will be available on acceptable terms, if at all.

July 2025 Prospectus

On June 26, 2025, we renewed our shelf registration statement on Form S-3 (that was deemed effective on July 7, 2025) ("July 2025 Prospectus") that contains two prospectuses:

	1)	a base prospectus that covers the potential offering, issuance, and sale from time to time of our Common Stock, preferred stock, warrants, debt securities, and units in one or more offerings with total proceeds of up to $100,000,000; and
	2)	a sales agreement prospectus covering the potential offering, issuance, and sale from time to time of shares of our Common Stock having aggregate gross sales proceeds of up to $10,380,600 pursuant to our At-the-Market ("ATM") sales agreement, dated June 14, 2022, with B. Riley Securities, Inc., Stifel, Nicolaus & Company, Incorporated and Boustead Securities, LLC.

If our public float remains below $75 million, our sales under the shelf are limited to no more than one-third of our public float in any 12-month period. Our ability to raise capital under the shelf or ATM may be limited by our public float, market conditions, and the trading price and volume of our Common Stock.

There can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all. As such, we may be unable to access further equity or debt financing when needed. The ability for us to continue as a going concern is dependent upon our ability to successfully implement our strategies and eventually attain profitable operations. The accompanying consolidated financial statements do not include any adjustments to the carrying amounts or classification of assets, liabilities, and reported expenses that may be necessary if we are unable to continue as a going concern.

On December 30, 2025, we received a letter from the listing qualifications staff of Nasdaq 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.

Material Cash Requirements

Our material cash requirements included the following contractual obligations as of March 31, 2026:

Indebtedness

As of March 31, 2026, the carrying value of our outstanding debt obligations was $2,093,063, substantially all of which is scheduled to mature during the remainder of 2026 and during 2027.

Leases

As of March 31, 2026, the carrying value of our outstanding operating lease obligations was $399,707.

Sources of Funding to Satisfy Material Cash Requirements

Our principal sources of liquidity are our cash on hand, cash provided by operations, the Purchase Agreement discussed above, and our shelf registration statement on Form S-3 discussed above. Our current cash on hand is not sufficient to satisfy our operating cash needs for the 12 months from the filing of this Quarterly Report on Form 10-Q. We expect to incur further losses through the end of 2026, and there can be no assurance that we will be able to obtain additional liquidity from the Purchase Agreement or our shelf registration statement on Form S-3 when needed or under acceptable terms, if at all.

Working Capital Deficit

Our working capital deficit as of March 31, 2026 in comparison to our working capital deficit as of December 31, 2025, is summarized as follows:

		As of
		March 31,				December 31,
		2026				2025
Current assets		$	2,325,832			$	3,264,224
Current liabilities			7,849,734				7,738,489
Working capital deficit		$	(5,523,902	)		$	(4,474,265	)

The decrease in current assets is primarily due to a decrease in cash and cash equivalents of $1,055,919. The increase in current liabilities is primarily due to an increase in accounts payable of $492,203, offset by a decrease in accrued expenses and other current liabilities, deferred revenue and line of credit of $93,036, $129,292, and $162,679, respectively.

Cash Flows

Our cash flows for the three months ended March 31, 2026 in comparison to our cash flows for the three months ended March 31, 2025, can be summarized as follows:

		Three Months ended March 31,
		2026				2025
Net cash used in operating activities		$	(879,816	)		$	(2,953,508	)
Net cash used in investing activities			(8,911	)			-
Net cash (used in) provided by financing activities			(167,192	)			3,747,779
Net (decrease) increase in cash and cash equivalents		$	(1,055,919	)		$	794,271

Operating Activities

Net cash used in operating activities was $879,816 for the three months ended March 31, 2026 and was primarily due to cash used to fund a net loss of $1,588,906, adjusted for non-cash expenses in the aggregate of $572,414, and additional cash inflow by changes in the levels of operating assets and liabilities, primarily due to an increase in accounts payable and accounts receivable and a decrease in prepaid expenses and other current assets and deferred revenue. Net cash used in operating activities was $2,953,508 for the three months ended March 31, 2025 and was primarily due to cash used to fund a net loss of $5,379,604, adjusted for 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 a decrease in accounts payable, and an increase in prepaid expenses and other current assets.

Investing Activities

Net cash used in investing activities of $8,911 for the three months ended March 31, 2026, was due to purchases of property and equipment. There were no investing activities for the three months ended March 31, 2025.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 was $167,192, which was primarily due to cash received from borrowings on our line of credit of $6,019,500, offset by $6,182,179 in repayments of our lines of credit. Net cash provided by financing activities for the three months ended March 31, 2025 was $3,747,779, which was primarily due to $1,719,556 from the sale of our Common Stock, cash received from borrowings on our convertible loans payable and line of credit, net of debt issuance costs, of $4,591,358, offset by $2,563,135 in repayments of our loans payable and line of credit.

Critical Accounting Policies and Estimates

Our critical accounting estimates are more fully described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 30, 2026, and amended on April 2, 2026. There have been no material changes to our critical accounting estimates described in our 2025 Annual Report on Form 10-K, except as discussed below.

Goodwill

Goodwill is assessed for impairment annually, or more frequently, if events occur that would indicate a potential reduction in the fair value of a reporting unit below its carrying value. We perform our annual impairment review of goodwill at the reporting unit level. If we determine the fair value of the reporting unit's goodwill is less than its carrying value as a result of an annual or interim test, an impairment loss is recognized and reflected in operating income or loss in the consolidated statements of operations during the period incurred.

The price of our Common Stock has continued to decrease subsequent to March 31, 2026. As a result, there is increased risk that goodwill impairment charges could be recorded in the future. Any future impairment charges could adversely impact our financial condition and results of operations.